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Moneygram International Inc (NASDAQ:MGI)

Goldman Sachs Technology & Internet Conference Call

February 13, 2013 17:40 ET

Executives

Pam Patsley - Chairman and Chief Executive Officer

W. Alexander Holmes - Executive Vice President and Chief Financial Officer

Unidentified Analyst

Here we’re going to go in here on the IT services track. My name is (indiscernible). I am the analyst responsible for the IT services coverage. Joining us this afternoon we have Pam from MoneyGram and Alex as well, these guys run the operations, they basically are running the whole business over there. So, thank you guys for joining us today. Maybe just by way of level setting and thinking about all the different companies that we’ve seen today, just give us a little bit of background on MoneyGram, talk about kind of your core operating and then jump into some of the questions here.

Pam Patsley - Chairman and Chief Executive Officer

Sure. It’s nice to be here and thanks for the opportunity whoever is here. So MoneyGram is the second largest global provider of remittance services or money transfer services that’s the lion’s share of our business that’s really the growth engine, we also offer urgent bill pay solution here in the U.S. and in Canada and then we have in the U.S. our second reporting segment is FPP or Financial Paper Products and that’s official check for banks and money orders across the U.S. The industry we participate in a very attractive and exciting industry, the industry has been growing mid single digits and MoneyGram fortunately is growing double-digits and generally around double the industry growth. The industry is measured by the World Bank.

We think about our money transfer business in three primary categories, U.S.-to-U.S., U.S. outbound and then sends that originated outside the U.S. that could be Russia, Saudi, UK, Australia, I think you get the point. So our fastest growing of those categories is sends originated outside the U.S., for the fourth quarter those grew 18% in transactions and that has the highest RPT for us so that’s also kind of if you will double exciting and that the fastest growing category also has the highest RPT.

U.S.-to-U.S. is the lowest RPT and the flowage growing category and so U.S. outbound sits right in between and that had 15% growth for the fourth quarter and embedded in that included 24% growth U.S.-to-Mexico which beyond or the second to U.S.-to-U.S., U.S.-to-Mexico is our second largest category. So coming back to just kind of the big same points exciting and growing industry, we are growing much faster than the industry, we continue to invest in the products and services we’d like to say anyway a consumer wants to send money to anyway a consumer wants to receive money that’s the solution we’d like to have. We are in 197 countries, our network grew 16% last year, we ended the year at right at 310,000 locations around the world, a very powerful brand, very recognized among a growing population in the world which is that on and under bank.

And from a balance sheet or capital perspective lots of positive upside there in that, in third week of March we will reach the first call date on our 13.25% subordinated notes issued by that fabulous company Goldman Sachs that we are looking forward to get rid of and paying something more like 6% or under which will yield about $20 million in annual interest cost savings. It makes, how is that for some more thumbnails.

Unidentified Analyst

That’s good to know that, that’s good, that’s good. I mean I think one other thing is that, that would be helpful and you touched on it a little bit in terms of addressable market, the growth rate and maybe just total growth size I think relative to your biggest competitor your own market share just to kind of provide some perspective and this is a pretty large market result so kind of…

Pam Patsley - Chairman and Chief Executive Officer

Yep, you are right, so I looked out so as the second largest provider we have a 5% market share than the largest money transfer company has 17% market share. So, when you have number one, number two still under a quarter lots of white space, lots for both of us to grow in different quarters around the world, our businesses generally 16,000 or plus quarters when you think of all the different send and receive combinations around the world. I should also callout because you’re probably going to go there sometimes soon in your questions that within our business 5% of our money transfer revenue business is derived from what we call our self-service channels and we are really excited about that thinking about anyway a consumer wants to send money. So this is our Dotcom or our MoneyGram Online business that’s the single largest part of our self-service business.

For the fourth quarter that grew 58% in transactions and 23% in revenue growth. So if you are kind of enamored with some of the current talk and those that play in the Dotcom money transfer space maybe you could kind of turn our business a little on and have and think of us as a 50ish million dollar Dotcom business that’s going to bring with it about $1.3 billion free cash flow, positive bottom-line business and growing double-digit.

Unidentified Analyst

And still that the bank is there.

Pam Patsley - Chairman and Chief Executive Officer

Was that a message there.

Unidentified Analyst

Yeah, a couple or maybe we can just jump into the landscape and competition in sends, we’re talking little bit about this in terms of what’s happening and to just suppose a little bit about the relative market and the positioning that you are seeing versus Western Union on the one hand and then maybe the kind of the emerging competitors on the other hand if you want or think about that way. What is it that you guys have literally done to seemingly outflank your competition you guys are growing faster double the rate at the marketplace. If you look at the resurgence of MoneyGram over the course of the last couple of years probably feels like for us at least since we certainly engaged and covered the last one to two years it’s just been phenomenal the execution, the growth, the agent the expansion. Just kind of help us walk through what it has kind of gotten you to this point where your trajectory is seemingly so much faster than everybody else in this space at least your biggest competitor?

Pam Patsley - Chairman and Chief Executive Officer

Yes. Well thanks for recognizing that I mean I’m a big believer in focus and you’re not going to see you haven’t in the past and our growth by the way I want to comment is essentially all organic I mean there have been the audit instance here and there but they’ve been small businesses where we’ve kind of bought in our super-agent business and so that’s not really net new transaction but where we’ve needed to really kind of more buy them and to protect our business but that’s been very, very small initiative over the last few years couple of million dollars.

So it’s about focus, it’s about recognizing that the agent is a important component in our business and recognizing and understanding what the consumer wants I think we’ve done a great job with our brand, repositioning the brand, even kind of changing and freshening the logo, our tagline of bringing you closer appeals to our consumer around the world. And so I think we have the wind in our sales and we’re just kind of grow the agents, focus on agent productivity, focus on consumer productivity, have a brand message that resonates align our marketing message between the send and the receive and with new product launches and be very opportunistic in leveraging our brand to work with those that might have a stronger presence in the Dotcom or mobile space and we do not have a need to invent it all here kind of attitude.

Unidentified Analyst

Got it. And as you guys continue to succeed and expand your network obviously you are forcing the competition to react and part of the discussion with the 2013 outlook that you guys provided was this sort of leeway or the space that you guys want to keep yourselves for pricing in case you see some more of that. So no doubt that the competition has kind of noticed what you guys are doing, you are at a size now where it’s becoming pretty meaningful. How much will pricing kind of be the next lever to kind of continue growing, is that really where you guys need to go to continue growing at the rate that you are growing or are there other options to sort of contend with there?

Pam Patsley - Chairman and Chief Executive Officer

Yeah I mean I’ll Alex give you a little more color, he will be probably a lot more articulate than I’m particularly as it ties into our guidance but I would just call everyone’s attention that the largest competitor made some significant price moves for their business second week of November and I would say we only matched that pricing and not below matched that pricing in Wal-Mart in the U.S. and we did that about two or three weeks after they implemented their pricing and we are extremely pleased with our December quarter results our month of December month of December and as I shared on the call our month of January recognizing one month doesn’t make a quarter but I think we all learned yesterday that I’m not sure those pricing moves really generated growth I mean I wouldn’t be so excited for a couple of percent growth. So and as that – has in the guidance or other ways to think about our moves

W. Alexander Holmes - Executive Vice President and Chief Financial Officer

Yeah I mean I think as you look at the industry and look at kind of how we developed over time, our model to the consumer and to the agents has been a model of value proposition and I think we’ve gotten there two ways one is been through being a bit more flexible in the way that we partner with the agents and our approach to them and the second has been kind of in our price points to the consumer. I think what we recognize over time as we grown and strengthened in markets that some of that price point it might have been a little bit too discounted or little bit out of market and so we’ve been very careful as we’ve grown the balance and niche competition in any given market with kind of that global competition.

And I think we’ve really found out a real nice spot for us over the last several years there’s been some competitive changes here and there and I think we’ve adjusted to those very, very well. I think as you look at our price point we like where we are I think we’ve seen pricing impact on our businesses corridor mix has changed the price is very different for the market in the Middle East and say it would be in Russia or in the U.S. or in Latin America for that matter. And so as our business has grown and the corridors have changed we’ve adjusted with that.

I think when you look at the largest competitor out there in some of the pricing changes that they’ve made yeah we’re obviously very cognizant of what they’re trying to do and we need to obviously be ready to react if we need to I think what we found so far as Pam said very well since November those prices those price changes really haven’t affected us that said we have taken to our guidance for this year plans to adjust prices if we see the – our volume impacted so far we haven’t seen those and so it’s been very good to see I think it’s a testament that what we’ve done with the brand to strength the business for the network and how fast we’re moving in the market.

Unidentified Analyst

Does or those plans channel specific online versus agent or they more of a corridor how you guys thinking about where that has to translate.

W. Alexander Holmes - Executive Vice President and Chief Financial Officer

Yeah I think if you look at what we have make and that is – it is actually both I think the online pricing impacts or changes were put in place kind of mid last year we’ve made some changes that I think those changes have been very positive I think when you look at corridors it’s obviously a huge discount in the price point we are now not longer the cheapest provider to Latin America and Mexico and that’s been on the sustainable position for us released the last 90 days. I think as you look at outside of the U.S. into Europe and into broader Asia there have been a lot of corridors changes there from a pricing perspective we held most of those prices and continue to grow our business and so.

The way we built it into our guidance is really specific to what we’ve seen and then also little bit from what we feel from other competitors as well and what we think is going on in those markets. We put a lot of price changes in for the positive as I mentioned late last year and those have been sustainable we have some more opportunities to do some of that in certain areas at certain price points certain events and so that’s also they then have to do as well.

Unidentified Analyst

Just on your comment about not being the cheapest in Latin America anymore is that a traditional sort of competitor to choose my transfers or just an online compared to when you’re doing with there in terms of..

Pam Patsley - Chairman and Chief Executive Officer

Well that’s…

W. Alexander Holmes - Executive Vice President and Chief Financial Officer

That will be coming.

Pam Patsley - Chairman and Chief Executive Officer

I’ve been then responsible watch the movement price there and I would say we are cheaper than them on certain upper band.

Unidentified Analyst

Upper band for sure yeah.

Pam Patsley - Chairman and Chief Executive Officer

But for the line of share of the business there at or below our price in some cases.

Unidentified Analyst

Okay, interesting. May be just sort of can possibly they’re kind of the second part around competition as it relates to some of these emerging online channels and kind of what those guys are sort of articulating as the strategy for you guys it seems like the challenge or the risk would always be channel conflict agent versus online. Help us kind of think about little bit about whether that is something that your agent sort of kind of against the CROs or risk in terms of cannibalizing them how do you kind of manage those CROs.

Pam Patsley - Chairman and Chief Executive Officer

Yeah, that’s interesting, more people ask us that from the outside or like that so I don’t know who is kind of popping that as and this people had as an idea or maybe it’s a intuitive but that could be an issue but I’m here to tell you that’s not been a issue and in fact our largest agent is connected to us there is a link between Walmart.com and MoneyGram.com and we continue to add more agents and what we’re calling an Affiliate Referral Program or both and those are just internal names but where

our agents can link to our Dotcom site and then we’ll pay them with something lower than their stated commission for the regular face to face transaction business for us. So and I think they recognize it’s a little bit more a category expander for the whole industry and it’s again a great enhancer to our brand’s presence. I would also call out that MoneyGram.com does U.S. to U.S. transactions in addition to other two U.S. outbound. So all of our U.S. agents benefit when it’s a U.S. to U.S, Moneygram.com in that they stand to be the one where the payout was made.

Unidentified Analyst

Okay.

Pam Patsley - Chairman and Chief Executive Officer

So it’s just very different and touchwood I mean that’s not been an issue we have spend anytime on.

W. Alexander Holmes - Executive Vice President and Chief Financial Officer

Yeah, and in fact I mean just add that a little bit. If you go back about seven years I would say probably 0% of our business was really what we would call self service or online or kiosks or any other sort of paid service. That’s gone to 5% of our money transfer revenues over the last seven years and that’s not because we – it didn’t affect that and we’ve been very actively moving in that direction growing online business as Pam mentioned we grew 58% last quarter which phenomenal growth given that so I don’t really see the online spaces sort of new competition I think it’s been there all long, I think there is a little bit of excitement about that right now because people have some visibility into it given the IPO that’s about to occur. And so I think that there is a lot of in hand value in our business for those services I think you have done some great things in mobile and great things in kiosk technology had some great things in online service whether that’s in the U.S. or in a variety of countries outside of the U.S. and we intend to do more of that I think it’s very additive to our service it’s additive to what agents want to do and it’s been very successful.

Unidentified Analyst

One of the – I think just one of the distinctions in terms of online and connectivity back to bank it seems like that’s been kind of the other push in terms of having a bank ACH funded sort of situation there when you guys think about your online efforts as well I think you guys were on that path as well, how many banks you guys have connected today and how you guys look at that as being sort of a point which is wrong but..

Pam Patsley - Chairman and Chief Executive Officer

Really lots of that how many banks were connected but it’s that we offer an ACH solution with our Walmarts.com. MoneyGram.com product. And what most interesting about that (indiscernible) is that where that is a choice and side by side a debit funded a debit card or a credit cards funded transaction that’s going to be at a higher price just to cover the state of Visa Master Card interchange more people still pick the debit and the credit card option I mean the smallest component of our business online is ACH.

Unidentified Analyst

Great.

Pam Patsley - Chairman and Chief Executive Officer

Now we think there is an – yeah go ahead

Unidentified Analyst

Greater than 90% is debit card or so I mean and why does that look like

Pam Patsley - Chairman and Chief Executive Officer

I think convenience, ease-of-use a more immediacy of the service, servicing about it. Now we think there is still opportunity I mean we’re not kind of distorting a blind eye to that whole notion I think we think there is still long term opportunity for us to continue to invest and find the right solution that can attract people to that but it really speaks to the strength of our brand the strength of the payoff network and the ease-of-use that a debit and credit card brings.

Unidentified Analyst

Okay. One other sort of piece in terms of the other offerings that are always sort of been kind of circling around the traditional money transfer business has been kind of the prepaid option as well, maybe just a little bit of an update in terms of what you guys are up to on the prepaid side and what opportunities you see there

Pam Patsley - Chairman and Chief Executive Officer

Well we’re probably I had to say it not ask you a lot

Unidentified Analyst

Which was kind of…

Pam Patsley - Chairman and Chief Executive Officer

And I don’t know if that could back to one of the first things I said which was focus but there is no doubt that intuitively the prepaid card customer and it’s this customer base of all these column model line prepaid card issuers there is tremendous overlap to our customer. There is also no question that each of our large install agents offer their own prepaid card portfolio. So we have kind of taken where is the best growth opportunity where is the likelihood of most money dropping to the bottom line approach and we have a small prepaid card portfolio that I think at a lot of management time talk about and it’s not what we’re focused on that.

The other side of the prepaid card business is that I think over 200 prepaid card program can be topped up and loaded through MoneyGram at those the point of presence and online and again as a delta to other Dotcom money transfer companies having their component also not just U.S.-to-U.S money transfer but urgent bill pay and prepaid top-up with your Dotcom business is again a delta to others.

Unidentified Analyst

Got it.

Pam Patsley - Chairman and Chief Executive Officer

Or certainly to any other.

Unidentified Analyst

I think let’s go back into kind of the core business itself and help us kind of – I think you a little bit about the agent strategy from here they’re already over 300,000 what corridors are kind of the key for you as you think about the next couple of years and what is that you’re expecting on

Pam Patsley - Chairman and Chief Executive Officer

Yeah. But just before I thought of one other thing on the prepaid we have many of our agents particularly those set of banks that we play in the prepaid space so I don’t want you to take away that we are ahead of stand about that’s either but many of our agents will pay out on a prepaid card and many of our agents have chosen to brand that prepaid card a MoneyGram card because it’s a brand that resonates with their consumers so they work with us on that but we are not the issuer we’re not the holder of the float but it’s again another way for consumers to receive fund so just the kind of conflates that that’s not on prepaid. As far as agent network…

Unidentified Analyst

Well maybe just to kind of finish that thought and just that the – all of the options that you guys have with cash to cash, cash to bank account.

Pam Patsley - Chairman and Chief Executive Officer

Master Card, card to cash, card to account that’s…

Unidentified Analyst

What else, okay.

Pam Patsley - Chairman and Chief Executive Officer

Well I think.

Unidentified Analyst

Okay.

Pam Patsley - Chairman and Chief Executive Officer

Yeah, mobile online

Unidentified Analyst

Then I just think in terms of just assuming it like all the differentiated pieces that you guys do bring to tables not just sort of the agents at these locations okay, sorry.

Pam Patsley - Chairman and Chief Executive Officer

Yeah. So back to agent so we’re focused on an annual basis, we think there is still runway for agent network to grow double-digit we are very focused on activating our agents and getting productivity out of them and I think if I shared on the fourth quarter call that 24% -- 25% of our 310,000 locations have been with us less than 18 months so there this it’s making through the chain to a wide variety of degree why so some of those agents that have been with us less that 18 months have been sellers before of just in different brands that they’re going to have a faster ramp-up to productivity, those that have not been sellers of an international brand have a much slower ramp-up to productivity.

Nonetheless, when 25% of your network is with you less than 18 months there is tremendous agent productivity that could be had and coming our way. So as far as what corridors or areas that we most excited about I would say first of all I hate this question because I can’t have a flow for it there is like no place in the world that I can stay we’re just that end of a job and even if we’re kind of near great penetration in the U.S., U.S outbound still has so much growth right. So it’s a hard question to narrow the focus so Asia Pacific, Africa, Latin America, Russia CIIS and we can align that by quarters so if you really want to come back to it and say well it’s a largest received countries for the global market one of the largest spend and then look at those opportunities that way we’re on it.

Unidentified Analyst

What about just a couple of them that we kind of pick on them some of the major corridors, do you think about the efforts in India, the Philippines and…

Pam Patsley - Chairman and Chief Executive Officer

Yeah.

Unidentified Analyst

And so can you just kind of think of those guys and what you need to do there give out the positioning and work with them there…

Pam Patsley - Chairman and Chief Executive Officer

Sure. Did you say Turkey?

Unidentified Analyst

Yeah.

Pam Patsley - Chairman and Chief Executive Officer

Okay I can get only one I might think Turkey no one ever told Turkey. So India is the world’s largest..

Unidentified Analyst

Maybe before monthly data I think is the only reason why we think about it.

Pam Patsley - Chairman and Chief Executive Officer

India is the largest received market in the world we are continuing to work on growing our presence there, we’re very excited about the strides we’ve made we’re seeing our Dotcom business to India grow a healthy double-digit. We are seeing our the GCC countries to India are so important and for us we are just entering Qatar and Oman some of these are just new countries even for us so there is tremendous growth for us and we still have just one customer in Saudi and I don’t say that in a bad way it’s a fabulous customer it’s the largest retail bank national commercial banks it’s mostly in online and Dotcom business for us and it is growing widely but there is still I guess the lot of it is there is just so much more opportunity and then of course Europe and U.S. to India as well so I think our sponsorship with ICC Cricket was something that we did largely slide to that South East Asian consumer it’s just been such a positive for us and the traction we’ve got not just with our agents but with our consumers and they’re kind of tied to marketing around that similar to Philippines we have tried to bundle a launch of a new product and a focus on receive and send country marketing all together and the Philippines is a great example of that.

So we launched that you can send to a bank account in the Philippines of course we have multicurrency payout with our points of presence we worked on network first, we have about equal if not a larger network than Western Union for payout in the Philippines and then we kind of wrapped all that together with momentum with our Moneygrado campaign last year that we put a lot of marketing money behind at the Filipino celebrity which really appeals to that Diaspora and then put marketing programs then in all of the key sends markets for the Philippines around the world, Middle East, Asia – Middle East, U.S., Australia, Italy. So…

Unidentified Analyst

Okay, alright. Well just maybe give us the…

Pam Patsley - Chairman and Chief Executive Officer

I didn’t get to Turkey but..

Unidentified Analyst

That’s okay.

Pam Patsley - Chairman and Chief Executive Officer

We are new and small in Turkey and so we now have an employee there.

Unidentified Analyst

I actually said Russia for you guys actually Russia would be probably the one.

Pam Patsley - Chairman and Chief Executive Officer

Russia we are so excited because several years ago we did Sberbank the largest savings bank so we are in now of its Sberbank branches and then what’s most exciting is that for the change of kind of some bank regulations we’ve been able to sign the largest retail network that had a private label brand to now international money transfer is MoneyGram is their brand. And we turn to those agents on third quarter.

W. Alexander Holmes - Executive Vice President and Chief Financial Officer

Yeah, October, November, yeah.

Pam Patsley - Chairman and Chief Executive Officer

Versus about 10,000 locations.

W. Alexander Holmes - Executive Vice President and Chief Financial Officer

Yeah and growing yeah.

Pam Patsley - Chairman and Chief Executive Officer

Yep and growing. So that’s and that’s Russia to the CIS.

Unidentified Analyst

Okay, great. Well why don’t we go and open it up and see if there are any quick questions in the audience. Go ahead.

Question-and-Answer-Session

Unidentified Analyst

Simple question, do you know what percent of your U.S. outbound customers have their account and second question why it hasn’t priced in the quarters that your largest competitor is making price adjustment, why has that affected your business, what is it about MoneyGram has been able to keep customers or keep that business growing?

Pam Patsley

The first question was..

Unidentified Analyst

Bank accounts.

Pam Patsley

Bank account, yeah I don’t know U.S. outbound I don’t know that we even have that data segregated but what we do say is the majority of our U.S. customers have bank accounts and by some measures it’s as much as 70 plus percent. That having a bank account doesn’t mean that is how you operate or live. So and I think the latest moves, the fee structures by the current banks even where credit unions or having to say if someone doesn’t keep this much money with us they are just not profitable I think it is making more and more people even more skittish which is why I think that under bank is kind of a term of art to indicate those they have bank account but that’s not really what they use to live or operate out of and that continues to grow even here in the U.S. with 14,000 banks or whatever we have. So, to the latter part of your question I mean that was kind of being silly I don’t I think there was a lot more to it in price and I’m not sure I don’t want to be critical they are a good competitor, they are a good company and we take all competition serious. But if you really kind of pull apart what their issues were was the fixed – did they kind of give medicine for a fever when really their leg was broken I mean I don’t know. It feels a little weird right because some of their challenges to Mexico are simply because they lost network so just because you lost network in Mexico do you need to lower I mean or probably other choices for an antidote.

Unidentified Analyst

Sorry I think the other one..

Unidentified Analyst

Thanks. Just wanted to try to understand the market a little better than I do so you forgive my ignorance, but just on the online market it would seem that there is the portion which seems the bulk of it which is funded by a credit card or a debit card and that’s growing very rapidly I think for you and your major competitor for transfers online. And then there is the portion that (indiscernible) question touched on which is the ACH funded market and that also appears to be growing very rapidly. I’m just curious how you look at specifically the online market in those channels and how you think it’s going to evolve in the future in terms of which is going to grow faster why and how you think you position properly for that, does that make sense?

W. Alexander Holmes

Yeah.

Pam Patsley

That’s hard you take it.

W. Alexander Holmes

I think an important aspect of that and this is something that we are spending some time I mean I honestly I think that if you look at the ACH model it certainly is focused on bank account to bank account I think we today have a access to pretty much every bank account in the Philippines as an example and yet we still see the disproportionate number of our consumers want to pick up their receipts and cash not actually deposit into their bank account. So I think for us it’s a little bit of an interesting phenomenon and when you compare it to Xoom for example who is right now touting that all their sends go from bank account to bank account for the Philippines. So I think historically we’ve looked at a cash-based consumer I think our online business probably appeals in some way to that cash-based consumer we just talked about the number of people they do have credit cards and debit cards and so you kind of index up to that but still with the idea that they want to pick up their money relatively quickly and get that money and cash.

So I think you are looking at potentially a little bit different of a consumer demographic and so I think if you look at it from that perspective there is a large opportunity for us to move into that market in a much bigger way in a short period of time. I think we tend to look at remittances and think about it from a cash-to-cash perspective in terms of people migrating to a country to earn money and send that money back home to support somebody I think that probably discounts the number of people that are coming over there single but not supporting anybody they are actually saving money to return back home someday or they actually have a home in that country that they are continuing to pay bills on or anything you can sort of imagine to that extent. So I think when you are looking at the people that are willing to do the bank account transfers the urgency of the money getting there isn’t as prevalent they may be sending it to themselves which is a slightly different consumer that I think we’ve historically, really targeted.

And so I think it’s an opportunity for us to look at that differently. At the same time I think credit debit is going to continue to grow, we’ve just launched our service in the UK, we’ve launched our service in Germany, we’re seeing the exact same thing where the consumer is very focused on using their credit and debit card and not an ACH type model and so I think that’s and that’s a testament to sort of what our brand resonates to and the consumer resonates with. So I think that’s great I think the opportunity going forward is both models I think will continue to grow very, very well and it will be interesting to see if they have any ideas to move downstream and we’ll probably come up with some pretty good stuff to move different direction.

Pam Patsley

And I think on that last point I like our position to continue to expand our offering to include more ACH or a different, a newer flavor of an ACH because we already have kind of the strength of what customers seem to prefer versus starting the other way.

Unidentified Analyst

Alright. How do you think about the growing market share, continuing to grow market share with maintaining margins in terms of taking price in certain corridors?

W. Alexander Holmes

I take that one. No, I think absolutely there I think the – if you look at I mean we look at a couple of different metrics and certainly we look at our operating expenses in a big way, I think if you look at our operating expenses less commission expense debt as a percent of revenue has decreased every year for the past two, three years, our focus is to continue to do that as we gain scale. Our commission expense has historically ticked down a little bit, it’s actually ticked up last year and we are anticipating ticking up a little bit this year and there was a couple of reasons for that some new agents that we signed a one large contractual commitment that we have.

And then but we see that sort of stabilizing to declining after 2013 again and so a lot of it is balanced in that often and the question becomes back to the top-line in terms of how much does pricing affect you or not affect you and I think as we look over the last 18 months pricing impact has been pretty small and I think to the extent we can sustain that there is definite opportunity for margin expansion we certainly like the business that we are in and the model that we have. I think in 2013 the guidance we gave doesn’t anticipate that I’ve just given kind of a current competitive environment but hopefully we can push through that and expand. We also have some investments and compliance this year which would be a step function increase and so those costs will increase a little bit over what they traditionally have been and that of course will offset some of that expense reduction.

Unidentified Analyst

Okay. With that we’re going to have to stop there and I think you guys, no, no breakout for you guys right.

W. Alexander Holmes

No, no breakout, we got - okay.

Pam Patsley

No, we just had one-on-one and we have another one.

Unidentified Analyst

Alright, well hopefully these guys will catch you on the way out. Thank you guys so much for joining.

Pam Patsley

Thank you.

Unidentified Analyst

I appreciate your time that was great.

Pam Patsley - Chairman and Chief Executive Officer

Yes. Good to see.

W. Alexander Holmes - Executive Vice President and Chief Financial Officer

Thanks.

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