Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Alex Holmes - SVP, IR

Pam Patsley - Executive Chairman & CEO

Jean Benson - SVP, Controller

Analysts

Josh Elving - Feltl Investments

Frank Mcevoy - Craig Hallum

Bo Ladyman - Morgan Keegan

Josh Elving - Feltl Investments

MoneyGram International, Inc. (MGI) Q4 2009 Earnings Call February 4, 2010 9:00 AM ET

Operator

Good morning and welcome to the MoneyGram International fourth quarter 2009 earnings conference call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. It is now my pleasure to turn the floor over to your host, Alex Holmes.

Alex Holmes

Thank you very much. Good morning everyone. My name is Alex Holmes, Senior Vice President of Investor Relations and Corporate strategy here at MoneyGram, and I'd like to welcome you all to our fourth quarter and full year 2009 conference call. With me today are Pam Patsley, Chairman and Chief Executive Officer and Jean Benson, Senior Vice President and Corporate Controller.

If you've not yet seen our earnings release, you can find it on our website at www.MoneyGram.com. I must remind you that today's call is being recorded and that the various remarks we make about future expectations, plans and prospects constitute of forward-looking statements for 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 end on December 31, 2009 which is expected to be filed with the SEC on Monday, March 1.

Additionally, I want to note that today's remarks include certain non-GAAP financial measures including a presentation of EBITDA and adjusted EBITDA. Our earnings release includes a full reconciliation of these non-GAAP financial measures to the related GAAP financial measures.

As you may have read in our earnings release and we'll see in our 10-K, we revised our segment reporting in the fourth quarter to reflect changes and how we review our operating performance and allocate recourses. Primarily, we have moved the retail money order business out of the Global Funds Transfer segment and into a segment now called financial paper products where will be included along with our financial institution money order and official check businesses.

Our Global Funds Transfer segment now only includes our money transfer and bill payment businesses. In addition, net securities gains and losses will no longer be allocated to the segments as the investment is generating those gains, relates to MoneyGram's historical investment portfolio. Our reporting for historical results in about today's earnings release as well is in the 10-K have been adjusted to reflect these changes.

In addition, later today on our website you'll find a table that shows a revised segment information for the past eight quarters.

Finally we've also included slides in our website highlighting our key metrics for the quarter in full year. We hope you find them useful.

And now that's highlights and I can turn the rest of the call over to Pam Patsley.

Pam Patsley

Thanks Alex, good morning everyone. 2009 was a year of improvement and stabilization for MoneyGram and despite the challenging economic environment; we were able to deliver solid financial results in the quarter and for the full year in our core money transfer business. Money transfer quarterly transaction growth improved from 4% in the second quarter to 7% in the fourth quarter.

Global agent locations increased 8% from 176,000 at the end of 2008 to more than 190,000 at the end of 2009. During the quarter we also expanded the reach of our bill payment business signing new billers and diversifying our product offering which led to improved performance in the fourth quarter. We also focused diligently on our financial paper products segments to stabilize both our money order and official check businesses. The net of these activities help to increase MoneyGram's full year 2009 revenue to $1.17 billion from $927 million in 2008.

Adjusted EBITDA for 2009 was a solid $247 million. From a liquidity perspective we utilized our excess cash and free cash flow to pay down $187 million of our total outstanding debt, a reduction of 19% from 2008.

In summary, while we have many things left to do, we accomplished quite a bit in 2009 and I'm pleased with our progress and most importantly excited about our future. In the fourth quarter, our money transfer business continued to show improvement. In the quarter, transactions originating outside the US increased 13%. Spain while still weak saw improvement in the fourth quarter. Excluding Spain, transactions originating outside of the US increased a very strong 20%. Transactions originating outside of the US accounted for 32% of our money transfer volume in the quarter up from 30% in the fourth quarter of 2008. I like the direction this has met and we should continue to grow our non-US business at faster rate particularly, as we capture more of the big spend markets. Broadly this is the middle and specifically Saudi Arabia, at Russia and collectively Western Europe.

Looking at our EMEAAP business, that's Europe, Middle East, Africa, Asia Pac, the fastest growing regions during the quarter were South Eastern Central Africa, the Philippines and South Asia. Transactions then to these regions all grew at double digit rates. We are focused on Asia and it's a strong growth region for us. During the month of December India became our largest received network outside of the Americas. With locations across India reaching 22,000, the Philippines continue to perform well for us assisted by strong [send] volume from the US. During the quarter we also announced a new service in the Philippines that allows customers to deposit their MoneyGram money transfer on to a (inaudible) issued prepaid card, the benefits of which Alex is going to discuss in a bit more detail later.

During the quarter, we strengthened our received market network in the region with the resigning of our key agent [PDDM] in Mongolia and we are very excited driven out in January, the expansion of our agreement with Bank of China to bring money transfer services to the bank's 10,000 locations across China. The Bank of China is ranked in the top 20 banks in the world and is an extremely valued partner for us and it's important for those regions. Our relationship began with a pilot in 240 locations in Beijing last April and the agreement to expand to 10,000 locations is a testament to both Bank of China's and MoneyGram's commitment to the global remittance market in the region. Our rollout is already underway, the full 10,000 locations will not come on board all in 2010 but our rollout will begin in three key provinces, (inaudible) Shanghai, and [Hangzhou].

Turning now to the Middle East, despite the economic slowdown the region is beginning add meaningful growth to MoneyGram with good performance in the UAE, Saudi Arabia, and Pakistan. In the UAE, send transactions increased to the country quarters of Bangladesh, Philippines and Pakistan. Our relationship with NCB in Saudi Arabia continues to deliver strong growth and we remain very excited about our partnership and the opportunity for growth in this market. During the quarter, we expanded our presence in the region by signing the United Bank of Egypt and the Mediterranean Bank in Libya. We also signed several key renewals in the region including cash united in Lebanon, (inaudible) in the UAE and (inaudible) also at the UAE which is the leading provider of foreign exchange services there.

In early January I was in Dubai and met with many of our agents in the Middle East and this is a focused gross market for MoneyGram. The opportunity in the Middle East represents a critical growth market on both to send and receive sides and we are particularly keen to develop the send side, as transactions from this region are primarily going to Southeast Asia where we've seen tremendous network growth. Inter-regionally and I'm talking here about transactions say from Saudi Arabia and the UAE to countries like Pakistan or Egypt, this also represents a very unique growth opportunity for us.

In Europe our France regional business continues to grow both transactions and revenue at exceptional rate, and just as in the third quarter Greece transaction growth was strong driven by send to its key received markets in Eastern Europe.

The United Kingdom and Middle East saw improved transaction growth across all three of our large agents, the UK Post Office, Thomas Cook and Post Italian. The UK business experienced very strong transaction growth to India and its Eastern European quarters like Romania, Latvia and others. Transaction growth into Romania from Spain and Italy also improved. In Poland, we successfully launched our send transaction services continuing a growing trend of large receive markets also overcoming send markets.

During the quarter, we announced the expansion of multi-currency pay out to Poland, providing more choice for customers and meeting the changing migration trend now providing in (inaudible) in Euro and US dollars. We offer multi-currency across approximately 72% of the countries we serve.

During the quarter we further strengthened our presence in the growing CIS region, planning several regional banks including Ukrainian Financial Group and AsiaUniversalBank in Kazakhstan, the large bank in that country. We expanded our European network during this quarter with the addition of an important agent in Spain, Money Exchange and the renewal of our long-term agent Kosovo DMTH.

We more than doubled our network in Ethiopia and Kenya with the signing of a number of key strategic agents including Commercial Bank of Ethiopia and Kenya Commercial Bank. Also in Kenya, we renewed our agent cooperative banks, and finally earlier this month in Nigeria, we find a new agent, Intercontinental Bank.

As we discussed earlier this year, the removal of exclusivity from agent contracts and many parts of Africa has opened up tremendous opportunity for us. During 2009, we were able to find agents, which were previously unavailable to us, greatly expanding our network and enhancing opportunities across this important remittance continent.

We continue to be very excited about our prospects in Africa. Turning now to the Americas. Money transfer transactions originating in the US, but not including transactions set to Mexico increased a healthy 7% led by double digit transaction growth in our inter US business, and we continue to be excited by the performance in our LAC outbound in Caribbean receive market.

We were disappointed with our performance in Mexico where transactions declined 13% during the quarter. Clearly the US to Mexico quarter remains challenged by the US economy. In spite of this, we know we can do better and we are working with our agents to improve performance in this important quarter. Across much of the Caribbean and Latin America, we had an excellent quarter.

The Caribbean market in particular saw record [send] to the Dominican Republic in Jamaica. During the quarter, we launched agents on the islands of (inaudible) and part transaction send from the region to the Philippines exceed our expectation. Naturally, we are all very saddened by the devastation caused by the earthquake in Haiti in January.

Within 48 hours of this catastrophic event, we significantly reduced our fees globally to $1, £1, €1 etcetera and began steps to restore our service. Today about 45% of our network is operational in Haiti. We look forward to continuing to partner with our agents to support cash flow to Haiti for urgent needs and long-term recovery. Through our global giving program, we made contributions to two organization to help in the recovery efforts in Haiti.

In Latin America, transactions sent to Guyana surpassed our goals and we extended our reach across many key countries. During the quarter, we were pleased to have resigned long time agent, (inaudible) and Panama. We launched Bank of (inaudible) in Ecuador and signed Bank of Familiar in Paraguay, and we began the roll out of micro finance CRA in Columbia.

In Canada, through our expanding relationship with the Canada Post which is now surpassed 5,000 agent locations. We also got excellent transaction growth to many parts of Asia and Africa. Finally, for mid-November, until early January, we offered a $7 rollback promotion in partnership with Wal-Mart for transactions to $200.

This continued demonstration of our commitment to value leadership was well received by our consumers during the holiday period. On a bill payment front, transaction volume decreased 3% and revenue declined 5%. Economic pressure continued to effect our bill payment business especially in auto and credit card sectors. In the fourth quarter however, we did begin to see moderate improvement in the mortgage and convenience bill payment categories as we recognize positive sequential growth over the third quarter of 2009.

In addition, our prepaid categories continue to show strong growth as consumers have dropped more prepaid services. We also recently signed an agreement to allow us to accept real time mobile phone top ups for T-Mobile. Earlier today, we announced an agreement between our (inaudible) subsidiary property bridge and Bank of America, Merrill Lynch.

Treaty agreement, we're providing a state-of-the-art rent and lease payment platform to the property management client of Bank of America, Merrill Lynch, one of the nations largest lenders to the multi-family housing industry serving more than 40 of the top 50 property management companies across the U.S. our property bridge product enables residents to pay rent and other lease related bills using multiple payment types that includes credit and debit cards, ACH, check scanning and cash payments at more than 40,000 MoneyGram agent locations.

Residents can pay rent online by phone or in person, and set up a recurring payments program. We're excited about this product per lot in particularly the relationship with Bank of America, Merrill Lynch. Now I'm going to turn it back over to Alex Holmes who will give you an update on the product front.

Alex Holmes

Thanks Pam. While our traditional money transfer bill payment products are bread and butter today, a significant portion of our growth tomorrow will be generated by new product and service offerings. Our focus is on enhancing the value we provide to consumers by continuing to deliver greater solutions that helped them manage their finances with ease, reliability and convenience. We anticipate this products and services, will not only increase loyalty with that customers but also generate additional revealing new streams over the coming years.

A perfect example of this is our MoneyGram online business which had an excellent quarter. In the fourth quarter, we saw a double digit transaction of revenue growth including very strong transaction growth to Mexico and the EMEAAP region. This is an important platform, and that provide us access to a new category of customers with deeper banking relationships.

In 2010, we're trying to make significant enhancements to this service, which will improve consumer usability and operating efficiency. In other way, we're reaching new customers just through out mobile earning transfer services. The fourth quarter was very exciting very us on this front.

In November, we launched the post-mobile money transfer service in partnership with our agent post Italia and in Italy. This service enables customers of the Italian post office to perform the money transfer send transaction from a mobile phone. In December, we launched a pilot of our mobile money transfer product with the Smart Communications, the leading wireless provider in the Philippine.

This new service is making it easier and more convenient for Smart's consumers in the Philippines to receive money transfer to their Smart money account on their mobile phones. Smart is in pilot phase in Hong Kong and San Diego, and will be expanding the service in the next few weeks. This partnership gives MoneyGram access to nearly 40 million Smart subscribers in the Philippines and extends the benefits of our safe and reliable money transfer services to a new category of consumers.

While we're still in the initial stages of the news services, we're pleased with the results for both programs. We expect volumes to continue to grow steadily, as we ramp up our marketing efforts around these new products. In January, we launched the MoneyGram iPhone application called Mobile Companion allowing consumers to search for agent locations including GPS mapping and step-by-step directions.

We're also listing the agent's address, phone number and hours of operation. The MoneyGram iPhone application also includes the convenience of a fee estimator that allows consumers to determine the fee for the transaction in advance. We believe that Mobile is going to be an important channel for MoneyGram in the future. And we're continuing to explore new opportunities for several partners that will expand our mobile money transfer services to more consumers worldwide.

In addition to mobile money transfer services during the quarter, we also introduced the convenience of cash to card services in the Philippines. This service allows our consumers to like remittances from any [channel trust] ATM without added fees when using the (inaudible). Consumers may then use the card to pay for purchases at participating stores. This cash to card program is one more way MoneyGram is expanding services to consumers in this important market. Our MoneyGram reward service also continued to gain good traction during the quarter with the launch of the service in Canada, and also many of our agent locations throughout Italy.

In our previously launched rewards markets to U.S. France, Germany and Spain and enrollments continued to grow. Total active MoneyGram's rewards memberships at the end of the quarter grew 30% year-over-year, and related transaction volume was up 11%. Through the program, more than 3.7 million customers enjoying the benefits of faster transactions and notification when funds are received.

The royalty generated by our rewards program continues to exceed our expectations and contribute meaningfully to our transaction growth. Across both the product in royalty fund, we're pleased with the progress we've made in 2009. Looking ahead, we're focusing on expanding our offerings to more and more markets and on adding new products and services enhance product development and strategic partnerships.

Now I'd like to turn the call over to Jean who will walk you through the financials.

Jean Benson

Thanks Alex. Net income for the quarter was $28.1 million and EBITDA was $60 million. Both operating income and EBITDA benefited from several significant items in the quarter that netted to $2.6 million. These items include a $15.5 million gain resulting from our decision to freeze benefits on our supplemental pension and our retiree medical plans, partially offset by $7.1 million of stock based compensation and $6.1 million in asset impairment charges. During the quarter we also recorded a $20.3 million tax benefit related to the release of differed tax valuation allowances with respect to part of the net securities loses from 2008 and 2007.

While the majority of this benefit is timing related, approximately $4 million does result in a cash benefit that we expect to realize early this year. We reported $57.4 million of adjusted EBITDA in the quarter which compares to $62.4 million in the fourth quarter of 2008, primarily driven by $17 million decrease in net investment income as our average net investment margin was 57 basis points in the fourth quarter of 2009, substantially lower than the 196 basis points earned in the fourth quarter of 2008.

Turning now to revenue, total revenue in the fourth quarter was $296 million compared with $319 million in the same period last year. Fourth quarter 2008 total revenue included net securities gains and investment revenue that was $37 million more favorable compared to 2009. Fee and other revenue increased 5% to $289 million largely as a result of a 7% increase in money transfer transaction volume as well as a positive currency valuation impact. This was partially offset by lower average money transfer principal and lower average fees per transaction. Investment revenue also declined from $34 million in 2008 to $6 million in the fourth quarter of 2009.

Turning now to the segments, total revenue for the global funds transfer segment which includes money transfer and bill payment rose 5% to $264 million in the fourth quarter of 2009 from $252 million in the same period last year. The increase was driven by a 7% increase in money transfer transaction volume, partially offset by a 3% decline in our bill payment transaction volume.

While the euro to dollar currency exchange rate benefited revenue in the fourth quarter of 2009, this benefit was mostly offset by a decline in average money transfer fees as a result of lower principle sent and the pricing impact of a low fee promotion done with our largest agent. The segment reported operating income of $29 million and an operating margin of 11% in the fourth quarter.

Turning now to our Financial Paper products segment. Total net revenue for the Financial Paper product segment which includes official check and money order declined to $30.1 million in the fourth quarter of 2009 from $52.9 million in the fourth quarter of 2008 due to a decline in net investment revenue personally offset by an increase and net fee and other revenue. Net investment revenue declined by $27.1 million. $16.7 million of this is due to a lower yield earned on our investment portfolio and lower balances while $10.7 million relates to cash revived on a security that monetized in the fourth quarter of 2008.

On the positive side, net fee and other revenue increased $5.2 million from our re-pricing activities. We've re-priced a majority of our official check customers and certain of our money order customers. The segmented reported operating income of $1.4 million and had an operating margin of 4.5% in the fourth quarter of 2009. This compares to $24.1 million of operating income and 45.5% margin in the fourth quarter of 2008. These declines are largely the result of the decline in net investment revenue that I mentioned earlier.

Turning now to the balance sheet, we started the fourth quarter with assets in excess of payment service obligations of $410 million. During the quarter we have recorded adjusted EBITDA of $57 million. We made a total of 108 million in principle and interest payments on our debt. We funded $22 million of capital expenditures which includes signing bonus payments and we made an $18 million payment to FTC. This led to our ending the quarter with assets in excess to payment service obligations of $313 million. We now have outstanding debt principal of $806 million with revolver capacity of $235 million available to us for future operating needs.

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

Pam Patsley

Thanks Jean. In closing here I am very excited about MoneyGram's future. While there is still much to do, we have made excellent progress in positioning MoneyGram for significant long term profitable growth. There is tremendous opportunity and incredible value inherent in our portfolio of businesses. As a team we're focused on capturing that opportunity and unlocking the value by delivering innovative products and convenient services for our consumers in every corner of the world. In our Financial Paper product segment we've made great progress in stabilizing this business for the past two years and I remain optimistic about the meaningful contribution this segment can bring to MoneyGram.

Our bill payment business is poised for a turnaround. While this business has been heavily impacted by the U.S. economy, that slowdown has also created sizable opportunity for us. Because of declines in our previously fast growing sectors such as auto, mortgage and credit card, we have pro actively moved to diversify into other sectors such as rent payments, prepaid card load and telecom where we've signed a host of billers and relationships over the last several quarters.

These new channels in conjunction with new system improvements and new products we've recently ruled out, makes the prospect for this business very exciting. On the money transfer front we have amazing opportunity to continue to grow this business in 2010 and most certainly beyond. Globally we have a 190,000 agent locations yet many of these are less than two year old and in countries that we're just building a market presence.

To say the revenue generated in many important markets such as Western Europe, the Middle East, Russia, India, China and South America is minimal relative to the opportunity would be an understatement. Clearly MoneyGram has plenty of room to grow but let me be clear that our expansion efforts are not only about adding locations in countries. We're also very focused on increasing productivity in our existing agent locations though marketing support, customer acquisition and new product innovation.

Increasing productivity is particularly important in the U.S. where the despite the excellent double digit transaction growth far into the U.S business, there is still much to be done in improving the performance of our U.S. outbound business. Keep in mind U.S. outbound means more than just to Mexico. While that is most definitely a focus for us, it also means U.S. to Africa, U.S. to Eastern Europe, to Latin America and to Asia Pacific. We know that cash is still king for this business. We also know that consumer demand for new and innovative products will drive growth.

Consumers recognize that our business is all about convenience. So, anyway that someone wants to send money and anyway that someone wants to receive is what we're thinking about and working to deliver. Today more people have mobile phones than bank accounts and the use of mobile money transfers will continue to grow. As you have heard we are squarely competing in this emerging market with the launch of our mobile money transfer program SMART in the Philippines and Poste Italiane in Italy.

We're excited about the prospects for this service and the potential to grow this alternative remittance channel in other key quarters across our portfolio. Another alternative channel is our MoneyGram online service which continues to perform well in the U.S. We need to roll this out to more countries and we need to continue to improve the consumer experience. There is a lot of operational leverage in this business and by expanding our reach, improving our operations and capturing more share we can greatly improve both the top and the bottom line. We are transforming the way we do business at MoneyGram. In 2009 we implemented a global initiative to reduce cost to streamline our processes and become more efficient.

We have recently expanded that effort to also include projects that increase revenue from new country pairs in market, increase customer satisfaction and enhance MoneyGram's global compliance program. We're creating a global organization that is relevant, innovative and focused on profitable growth. As you can see we've built strong momentum. Longer term, our objective is to deliver double digit transaction volume and revenue growth and increase our market share in the global funds transfer segment.

In 2009 we laid the foundation for achieving these goals. We're confident that these initiatives in combination with our expansion plans and new products pipeline will transform MoneyGram and position us to capitalize on the vast opportunities in the global remittance market. I look forward to keeping you informed on our exciting progress as the year progresses. Thanks for your time today and now operator; let's open the line for questions.

Question-and-Answer Session

Operator

Thank you, Miss Patsley. (Operator Instructions). And our first question comes from Josh Elving with Feltl Investments.

Josh Elving - Feltl Investments

Just trying to understand the operating expenses a little bit better. I guess they were a little bit higher than what I was expecting specifically if you add back in the curtailment gain that probably came out of the comp and benefits line. If you look at that going forward, how do we think about that number going forward? Is that curtailment gain; is that kind of a one time item and therefore if we would add that back in that's more of a ballpark kind of run rate range?

Pam Patsley

The curtailment gain is a one time item. I'm just going to reflect back because you may get to this. Someone and it may have been you, I can't recall, asked on the last quarter call was that quarter the kitchen sank and while this goes the opposite way, a the lot of the items that we had in the third quarter, I think it's just really more evident Josh, the mindset here of kind of turning over all stones and looking at everything that we need to do to not be over market. In this case in our pay practices we need to be at market and so you will continue to see a tremendous initiative in how to improve our operations and look at everything. I don't know [Jean] if you want to give Josh any other comment on.

Jean Benson

Yeah, I would just add that also included in our expenses, we wrote off assets of about $6 million. So that's going to be included in the fourth quarter. I think if you look at our interest expenses well, when we paid down the debt we wrote off some discount in deferred financing cost and that was about $2.7 million. And then we had a small amount of executive severance on compensation. So I think when you make adjustments for those types and start to normalize our operating expenses, that gives you a little bit clearer picture and then again as Pam mentioned, we're continuing to focus on operating efficiencies and our goals so that we can better leverage the operating base.

Josh Elving - Feltl Investments

Okay. That's helpful. And so I guess just to get back to the actual comp and benefit line, is the normalized number for the fourth quarter closer to $55 million - $56 million and its kind of been in that kind of range. Should we kind of think about that range going forward, kind of a run-rate in the kind of mid-50's and growing with the business?

Jean Benson

I think that's fair.

Josh Elving - Feltl Investments

Okay. And then the agreement with the Bank of China I think is obviously a huge win or a huge development for the company and I think you've talked a little bit about how this is likely going to play out over several years. Could you talk to maybe a little bit more about, does this kind of give you a green light to essentially rollout your operations throughout China because obviously landing the first really big relationship, obviously it's kind of a sign that you probably had to negotiate that with more or less the Government of China for lack of a better term and then maybe talk a little bit about what China can do longer term as a percentage of your revenues because I know it's probably less than 5% today?

Pam Patsley

Its very, very, very small. So there is a couple of things, Josh. Let me just go through. Yes, you are right. The numbers of locations are going to rollout over a couple of years but hopefully and we're motivated and aligned with Bank of China, we're going to roll those out in areas that are most likely in the highest kind of remittance markets first. So there is going to be science to kind of the method if you will in order in which we roll that out. The other part of co-developing China is we have great relationships there and I will point out that while we're extremely excited about this particularly brand recognition of Bank of China, the consumer kind of touch and presence of Bank of China around the world, we do have a number of other large bank relationships in China, and have had those for years. Our work is also outside of China. To make these relationships successful we have to develop the spend to China as well and that of course touches many, many markets around the world. So our work is in China and it's outside of China and I think this is a great example of how we're trying to bring more focus in teams together to work in the country pairings where interests are aligned to create success for MoneyGram overall.

Josh Elving - Feltl Investments

And within this Bank of China agreement, can you do intra-country transfers? Because the intra-country market within China is immense, isn't it?

Pam Patsley

It is big, but right now I believe that is just limited to banks in China.

Josh Elving - Feltl Investments

Okay, fair enough. And then my last question has to do with some of the segment data. I think the new segments make a lot of sense. But I was wondering, are you going to provide any of the, what the quarter would have looked like under the previous segments in any like 10-Q or any kind of filing at any point?

Pam Patsley

No, we're disclosing it as a eight quarter table that will show you the new revived segments so that you can do a comparison now of the way we're doing it forward. And in our 10-K you'll see annual three years of information on the revived segment reporting.

Operator

Our next question comes from Frank Mcevoy with Craig Hallum.

Frank Mcevoy - Craig Hallum

My first question is, can you talk about what percent was Wal-Mart as a percent of revenues in the quarter? And then kind of a follow-up question is what was the impact of the pricing promotions, particularly Wal-Mart $7 holiday promotion? What impact did that have on revenue and EBITDA. And its difficult perhaps to say what it might have been otherwise but can you give us a sense of what it might have meant and kind of on a related point there, what the domestic transaction volume you mentioned? I think Pam, it was up double digits.

Pam Patsley

Yes, I did.

Frank Mcevoy - Craig Hallum

Can you be a little bit more specific and maybe give us an idea what the domestic revenues were as well because you know Western Union reported yesterday that their domestic revenue was down 20% even though they had transaction volume domestically up 5%?

Pam Patsley

I think we got all those jumped in. When we finished it didn’t we didn't get the first. First, Wal-Mart and this might be presented a little bit differently than we talked about it last quarter but I think this is the right way to think about it. Total Wal-Mart revenue to total MoneyGram revenue for the quarter was 28%. And basically on that same basis that's roughly flat to what it was in 2008. I think if you reflect back to the third quarter, we might have used the 31% and that was just to the global funds transfer segment. I think really the meaningful number here is what is Wal-Mart to the company? So that's 28% of our revenue.

Frank Mcevoy - Craig Hallum

Was it up or down sequentially, Q3 to Q4?

Pam Patsley

Q3 was 30% so yeah down.

Frank Mcevoy - Craig Hallum

But I mean in absolute dollars. Can you just go down sequentially because of a promotion or can you give us a sense of what…

Pam Patsley

Frank, actually I guess the one way I would describe it is that you think about our transaction growth and I'm just going to talk really total company. Our transaction growth was 7%. I think we talked about the fact that our constant currency revenue growth was 3%. So you got about a 4 percentage points difference there and I would say that a couple of points of that is due to the pricing promotion that we did.

Frank Mcevoy - Craig Hallum

Two points. Is that a couple of percentage points of the overall transaction growth? Was due to that and how much…

Pam Patsley

Of revenue.

Frank Mcevoy - Craig Hallum

A revenue?

Pam Patsley

Yeah.

Frank Mcevoy - Craig Hallum

So it would have been maybe a couple of percentage point's higher revenue growth?

Pam Patsley

And when you talk about, I think you also asked for more detail which I don't believe we've really been ever disclosing on the intra-U.S. So I'm sticking with double digits. I will say double digits started 10 and below 20.

Frank Mcevoy - Craig Hallum

Okay, turning to international, it sounds like, it looks like there was very strong transaction growth. You had mentioned that Spain is improving. Can you give us a feel for how Spain and Russia are kind of trending and when you think they might be positive year-over-year in terms of the comparisons and are they at a trajectory where they might be positive in Q1?

Pam Patsley

Spain, and the other one you asked about Russia okay. So Russia is positive growth. My point on Russia is the third largest send country on transaction volume, I guess second on dollar volumes and our presence is small. Its very small. So its going to be high rate of growth and small denominator and we want to see pirated growth and get a much bigger denominator.

So, that's positive. On Spain its flattening out if you will. So we're not seeing it worsening. We've got obviously just the math work that we are growing over easier compares and we're optimistic with some of the things we are doing on just even agent growth in Spain but relative to our total portfolio it still makes sense as you can see that delta between 13% and 20% for us to continue to break that out for you for now.

Frank Mcevoy - Craig Hallum

Okay and then on that balance sheet, you talked about assets in excess of payments service obligations at 313 million. How much of that cash do you think you might be able to tap to pay down debt during 2010? I guess that kind of a related question is how much help you might get from your work with meeting with the rating agencies? I understand that you're going to be meeting with them again in the near future?

Pam Patsley

Yes, we are not giving projections. Let me say it this way. Our immediate term view, near term view, whatever you want to call it on cash utilization is we generate cash, we're going to utilize our free cash flow and balances that we have as efficiently as possible to run the business and pay down debt. We think we thus can improve our credit rating which has been the added benefit of continuing to free up perhaps more cash where we have had to free fund or pledge or get surety bonds or extra cash. So there is a little bit of a circular. So that's our near term deal. I'm not projecting time frame on rating changes. I'm not projecting amount. But that's our view on how we'll use the cash.

Frank Mcevoy - Craig Hallum

Okay, thank you. I'll get back in queue.

Pam Patsley

I do want to just come back. I'm saying, I think we got kind of back and forth on questions on the inter U.S. business. Double digit transaction growth and our revenue growth for that inter U.S. business was also positive for the quarter.

Frank Mcevoy - Craig Hallum

That's very good.

Pam Patsley

Yes. I thought that would be important to know.

Operator

(Operator Instructions). Our next question is Robert Dodd with Morgan Keegan.

Bo Ladyman - Morgan Keegan

Hi guys. This is Bo Ladyman on behalf of Robert Dodd. Just a quick question here. What was the local currency revenue growth for the quarter in the co-money transfer business?

Jean Benson

Hi, this is Jean. It was 3%.

Operator

Our next question is from Mike (inaudible).

Unidentified Analyst

Pamela, can you talk a little bit about pricing in competition and just where you're seeing more, where you are seeing less of it, just in your major markets?

Pam Patsley

Yeah, I would say the U.S. is getting a lot of attention from a price perspective. I would say there is nothing too outstanding in the way of pricing outside of the US different from what the normal here and there, a little ups and downs. So the U.S clearly is seeing a lot of price competition and as a philosophy we are committed to be the value provider in this business and we like our positions. We like the strength, we like the value of the business that we've built. So that's where we stand.

Unidentified Analyst

Great, and then EBITDA margins in the fourth quarter looked a little weaker. Was there a reason for that or how should we think about that?

Jean Benson

This is Jean. Weaker in comparison to fourth quarter of '08 or ….?

Unidentified Analyst

No, second and third quarter of '09. Just sequentially.

Jean Benson

Well, I would say consistent with what we've seen in prior years, we do tend to spend a larger amount of our marketing dollars in the fourth quarter and that tends to drive our margins down a little bit in the fourth quarter. So I would say that's probably the primary factor.

Unidentified Analyst

Okay.

Pam Patsley

And then just kind of some price compression that was more exacerbated in the fourth quarter because of our roll back program.

Unidentified Analyst

Okay. And then I know you've been asked about this $313 million of assets in extent of liabilities but what is the right number there? How do you think about that number? How should we think about it? Can it go a lot lower? What do you need to operate the business at?

Jean Benson

This is Jean again. I think one thing to consider how we view that is you have to take into account that with our credit agreements we have requirements to maintain certain minimum liquidity amounts and there are certain restrictions that we have to exclude some of the assets that are included in that $313 million. Most restrictive agreement there, that would take that $313 million down to something more in line with the $117 million. So I think that, that's one way and one aspect you need to consider, and that's one thing that we take into account, obviously as we are considering how to deploy our cash and capital which gives back a little bit Jean to what I said earlier as we can improve our ratings from the agencies we again can free up more of that. There is a little bit of a circular effect.

Unidentified Analyst

It sounds like there is some more there, maybe not all $313 million, but it does sound like there's a little bit more cushion there. And then lastly, I apologize somehow I got cut off just on the phone, but Jean could you go through your explanation again for why comp and benefits was lower and why it came in at $40 million? I missed that, I'm sorry.

Pam Patsley

Sure. There are two things I would say that are impacting it. We have a curtailment gain which is $15.5 million and that's a positive impact, which is obviously reducing the expense, and then I think as you want to think about from a normalizing standpoint, included in there, it's going to be $7 million of stock-based compensation, amortization, and so I think if you normalize there, your back up to about the $55 million and obviously we're going to have the stock-based compensation going forward as well. So that range of around $55 million, I think that our previous discussion is what we've talked about.

Operator

And our last question is a follow-up question from Josh Elving with Feltl Investments.

Josh Elving - Feltl Investments

It sounds as if you talked a little bit about mobile and for the past couple of years, mobile's been highlighted as the potential real large growth opportunity within the money transfer space, and it's been a lot of questions as to whether or not it's going to cannibalize some of your other business or perhaps be a threat to your business. It sounds as if maybe the company is changing its views to a little bit more of a positive tone for the growth of mobile, and I guess when you kind of think about that internationally, my sense was that a large kind of constraint for growth of mobile money transfer had to do with certain regulatory restrictions as to how much could be sent or where it could be sent? Could you just talk a little bit about if you are in fact a little bit more positive on the likelihood that this mobile thing is for real, and maybe touch on the regulatory environment?

Pam Patsley

Yes. I don't know. I guess I can't speak to the previous feeling or thought because I would say, I view it and probably have always as a positive, I think whenever we see whether its broad payments industry, financial services, remittance, the paradigm shift that can happen because of technology enabled new solution, and what is convenient for the consumer, that creates opportunity for us. We need to be in a position to capitalize on that opportunity, not view that as threat to figure out a way to leverage the strength of the network, the brand, the innovation and the depth of experience, compliance knowledge and other things. That creates opportunity for. So I would say for me, have been and remain positive that this is just another leg, an extension of our core competencies into some new channel.

Now having said that, there are lots of regulations and they vary, so I couldn't really give you, I mean it's not going to be the same in the US as the Philippines, with India and Italy, and the presence and numbers of phones truly with mobile wallets is not as great as the number of phones that there are, but we do know from a consumer preference and convenience, in certain parts of the world this is going to move at a faster rate than other parts of the world, and I think it's our job to view this as again additive and how can we partner with our agents to make this a broader opportunity. In that we also have points of presence for cash, and we have all the electronic solutions available in our quiver if you will for solutions on the products that remittance it.

Unidentified Analyst

That's good color, and then I guess just one last numbers question. With regards to the eight quarter historical data for the new segments, I am sorry, where do we find that, and when is that going to be available?

Pam Patsley

It will be available today and it will be out on our website. I think it's under financial reports just the grouping, it will be under.

Alex Holmes

Yes, it should be out fairly soon Josh, if not there already.

Operator

We are out of time for any more further questions. So I would like to turn the conference back over to Ms. Patsley.

Pam Patsley

I'll just say thank you all for your interest and your time this morning, and look forward to continuing to visit with you and provide you updates as we move forward. Everyone, have a great day.

Operator

That does conclude today's conference. We appreciate your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: MoneyGram International, Inc. Q4 2009 Earnings Call Transcript
This Transcript
All Transcripts