MoneyGram International, Inc. (MGI) CEO Alex Holmes on Q1 2020 Results - Earnings Call Transcript
MoneyGram International, Inc. (NASDAQ:MGI) Q1 2020 Earnings Conference Call May 1, 2020 9:00 AM ET
Company Participants
Stephen Reiff - Head of Corporate Communications
Alex Holmes - Chairman and CEO
Larry Angelilli - CFO
Conference Call Participants
Kartik Mehta - Northcoast Research
Tien-Tsin Huang - J.P.Morgan
Ramsay El-Assal - Barclays
David Scharf - JMP Securities
Bob Napoli - William Blair
Rayna Kumar - Evercore ISI
Mike Grondahl - Northland Securities
Operator
Good morning, and welcome to the MoneyGram International Inc., First Quarter 2020 Earnings Release Conference Call. Today's conference is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be opened for your questions following the presentation.
It is now my pleasure to turn the floor over to your host, Stephen Reiff, Head of Corporate Communications. Please go ahead, sir.
Stephen Reiff
Good morning, and thank you for joining us today. On the call with me are Alex Holmes, Chairman and Chief Executive Officer; and Larry Angelilli, Chief Financial Officer.
On the MoneyGram Investor Relations' website you can find our earnings press release and presentation, which is intended to supplement our prepared remarks during today's call, and to provide the reconciliations between GAAP and non-GAAP financial measures.
We’ll refer to non-GAAP metrics on the call. The non-GAAP financial measures provided should not be considered as a substitute for or superior to those prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's performance, in addition to the impact that these items and events had on financial results.
Please note that today's call is being recorded. During this call we will be making forward-looking statements which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties.
Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the Risk Factor section of our Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.
And with that, I'll turn the call over to Alex.
Alex Holmes
Great. Thanks, Stephen. Good morning, and thank you for joining us. I'd like to first offer my sincere appreciation to all of our employees and partners around the world, whose tireless efforts combined with our leading digital capabilities, have enabled us to provide uninterrupted service to our customers, during these unprecedented times. Thank you for all that you do.
Though the pandemic caused sudden and significant global disruption, we had a solid quarter delivering 2% global transaction growth, with constant currency adjusted EBITDA growth of 4%. We had a very strong start to the year with transaction growth rates in all channels accelerating from the fourth quarter. Prior to the impact of COVID-19, global transaction growth of 6% was once again driven by a robust international market performance, together with strengthening demand for our digital offerings.
Notable performance during the first 75 days of the quarter included: improving transaction growth in Europe and our U.S. outbound corridors, robust growth from the Middle East and Africa, increased receive in Latin America, and impressive growth across Asia, including Pakistan and the Philippines.
As a pandemic spread and government issued shelter in place orders, our walk-in business saw a sudden and abrupt impact, beginning with many European markets around March 16. The U.S. walk-in business and the rest of the world began to see significant slowdowns a several days later.
At the worst point of crisis, thus far, we were touching year-over-year transaction declines of about 40%, with several countries reporting declines of as much as 100%, as government issued stay at home orders, inhibited business in those markets. All of this occurred as a direct result of consumers being unable to get to locations, and in some cases even leave their homes.
In response to these orders, we worked with our agents and government agencies to emphasize the critical importance of remittances, and to ensure our business was being an essential service. In many cases, our efforts led to positive results.
However, with unemployment increasing and the timing of shelter in place orders lifting still largely uncertain, the business continues to be impacted. The decline in our walk-in business was most prominent from mid-March through mid-April. Since mid-April, we've seen a slight recovery with transaction trends improving. The most notable recovery has been in the U.S. market following the Easter holiday. It does seem that the stimulus checks placed a considerable amount of money into the market, as we actually saw returned to transaction growth in the U.S. outbound business for a period of time.
Additionally, Europe has also seen some improvements, as countries like Germany begin to reopen their economy. In contrast, with the pressures placed on the walk-in business, our digital business has continued to perform extremely well throughout. MoneyGram Online, the largest component of digital delivered an impressive 60% transaction growth rates for the quarter, and began to surge even further towards the end of March and into April.
As of April 27, MoneyGram Online transaction growth has accelerated to an incredible 88% growth rate. In some countries we're now seeing growth rates exceeding 1000%, with many key markets delivering growth of over 200%. What's even more remarkable about this is that these growth rates continue to be primarily driven by the addition of new customers. In total, across all channels, global transaction volumes were down 19% for the first 27 days of April.
As the crisis unfolded, we acted quickly to support employees, customers and partners. On March 6, we assembled a COVID-19 task force, to actively manage the developing situation. And we started daily leadership calls to execute our business continuity plans and ensure employee health and safety, across our global offices.
As a result of our ongoing digital transformation and investments in our cloud-based infrastructure, our employees in over 30 offices around the world, as well as our global call center operations, were able to seamlessly transition to a work from home environment, with no impact on our ongoing operations or the customer experience.
For our customers, we shifted marketing and operational focus to our leading digital capabilities that enabled customers to send and receive money, from the safety of their own homes in over 70 countries, and the result of this have been phenomenal.
Like most companies, we’ve recognized that our customers are facing extreme hardship. The needs of their family and friends abroad have only increased, and remittances has remain vital for developing countries, as people send money home for life's daily needs, such as food and healthcare.
To support our customers in their time of need, while encouraging shelter in place policies, we've been offering account-to-account transfers for free. And for customers who may not have access to digital channels, we've been working with the World Bank and governments to ensure money transfer locations are considered to be an essential service and remained open.
From an internal expense perspective, we also took quick and proactive action to reduce our expenses and enhance our cash position to ensure financial stability and flexibility over the long-term. Larry, will go into more detail. But it's important to note that despite these actions we are not taking our foot off of the accelerator, rather we continue to execute our long-term digital transformation growth strategy, including delivering a differentiated customer experience, accelerating digital growth, aggressively signing new partnerships and developing new revenue streams.
And finally to support our communities around the world, the MoneyGram Foundation partnered with the non-profit Save the Children to support their COVID-19 relief efforts. It has certainly been a busy and challenging time, but I'm proud of the team for their hard work and thoughtful actions that have enabled us to be there for our customers and our community. We are certainly hopeful to return to normal life, as soon as possible.
Now, as I mentioned at the start, we began a year with incredible momentum and so it really has been a tale of two quarters. Prior to March 15, when COVID-19 really began to impact the business, we were on track to deliver results for the quarter that were in line with what you see here on the left-hand side of the slide, improving growth across the business with global money transfer transaction growth of 6%, international growth of 11% and digital growth nearing 60%.
We also posted strong sequential growth in our U.S. outbound business, improving from a year-over-year decline in the fourth quarter of 2019 to 5% year-over-year growth for the quarter through March 15. This return to growth was a result of our continued focus on improving U.S. market, investments in key receive markets, better than anticipated performance at Walmart, as well as an ever increasing demand for digital capabilities in the U.S. with the popularity of our app.
And that brings us to the second tail of the quarter, the dramatic shift in the business after COVID-19. At the onset of COVID-19, our digital channel continued its strong momentum, as MoneyGram Online accelerated to 66% growth. While in contrast, our walk-in business experienced a significant downturn due to global shelter in place policies.
Walk-in customers shifted from smaller stores to big box retailers and post offices. Walmart continued its better than anticipated performance. Through March 15, Walmart2World, powered by MoneyGram was showing transaction growth over the prior year, and finished the quarter flat as compared to the same period in the prior year.
Despite the current impacts from COVID-19, we remain bullish on the walk-in business, overall, and continue to invest in its growth. As an example, during the quarter we partnered with Ebix to expand our retail distribution coverage in India. We also see a significant opportunity in the growing Middle East market with both digital and physical partnerships.
Recently launching services with Etisalat, e-Wallet in UAE, Lulu Financial Holdings across key markets in the Middle East and Asia, and Al Rajhi Bank in Saudi Arabia to strengthen our leading position in that market.
Our digital business had an amazing first quarter and it's delivering even better in April. We're proud of how we built a high-growth fintech startup powered by our leading brand. Here on Slide 8, you can see the three components of our digital business, MoneyGram Online, digital partnerships and transactions sent directly into bank accounts and mobile wallets.
At quarter end, 18% of all money transfer transactions were conducted through a digital channel. Even more impressively, this percentage has grown significantly to 28% through the first 27 days in April, more than doubling the percentage from a year ago. This amazing growth has been driven by investments in market expansion to now reach over 70 countries digitally, the addition of new digital partnerships in a number of markets, a focus on new customer acquisition and retention efforts and the strong demand for our leading app.
For the quarter, our digital business reported 57% transaction growth and 17% revenue growth, marking a continued acceleration from the fourth quarter of 2019. Then, as we shifted marketing and operational focus to our digital channel as a result of the COVID-19 crisis, overall digital transaction growth further accelerated.
Through April 27, we've posted 75% digital transaction growth with very strong 25% revenue growth. MoneyGram Online is our consumer direct channel comprises over 70% of our digital business. During the quarter, it remained the most significant driver of digital growth, with transaction growth of 60% for the quarter, accelerating to an incredible 88% growth rate for the first 27 days of April.
During the quarter, we launched our online capabilities in eight new countries including Singapore, one of the largest end markets in Southeast Asia. Our aggressive rollout of digital capabilities to new markets has enabled us to provide coverage in all key markets, with our online experience resonating with consumers consistently across geographies. With triple digit growth from both U.S. outbound and international markets, we are extremely well-positioned moving forward.
Digital partnerships are another important component of our overall digital strategy and growth story. In many markets, we partnered with fintech, mobile wallets, telcos and banks to enable their customers to send money cross border from their mobile and online platforms. These partners utilize our leading API to seamlessly connect to our customer centric platform and global distribution network. Growth in these channels has been significant as well, improving from 25% direct transaction growth in the quarter to 59% transaction growth through April 27.
The third component is our account deposit and mobile wallet receive side services, which are especially important given the current global crisis. Over the quarter, we continued our efforts to expand our account deposit and wallet capabilities to more countries and to improve the quality of the service. This expansion includes the recent addition of 11 countries with Visa Direct.
As a result, during the quarter, sends to accounts and wallets increased 80% year-over-year, with growth further accelerating into the triple digits in April. MoneyGram has clearly well-positioned to continue to capture a high-growth cross border mobile P2P market. And as you can see on the next slide, the underlying trends have been especially strong.
Consumers absolutely love our digital capabilities, and especially our app, which continues to exceed expectations and deliver a strong return on investment. Mobile app downloads increased 46% in the quarter with transactions through the app increasing more than 200% year-over-year, with 83% of the transactions conducted on a mobile device. These results are simply incredible. The app is reaching a new younger customer segment, it's especially encouraging to see the data that clearly shows that once these new customers try the app, they keep coming back, because of our streamlined user experience being the best in the industry.
MoneyGram online customer retention rates are already much higher than the walk-in business, and despite, a high-base retention rates continued to improve. For the quarter, customer retention rates were up 23%, while monthly active users increased 40%. The strong growth in customers and transactions further accelerated following the onset of COVID-19, as more customers adopted digital channels.
A question that I've received quite a bit these past few weeks is, has there been a shift from walk-in to online from a customer perspective? And the answer is, yes. Well, sort of. Our analysis of our business indicates that the number of customers moving from walk-in to online has nearly doubled. Now that being said, that number still only represents about 6% of our entire online customer base, and less than 1% of our entire walk-in customer base. So while we are seeing a shift, it is still a relatively small number.
While, it's too early to determine what the lasting implications from the crisis will be. We will continue to actively analyze changes in customer behavior, and we will be responsive to their needs. In addition, we have a strong roadmap of digital initiatives, new partnerships and country expansions that we believe will be transformative for the industry and our company. All of which will enable us to continue to lead in the evolution of digital P2P payments.
And with that, I'll turn it over to Larry.
Larry Angelilli
Thanks, Alex. The tail two quarters that Alex described, also impacted our revenue. Prior to the COVID-19 crisis, our total revenue was trending ahead of expectations, primarily from the continuing strength of international business. In fact, international revenue was positive on a year-over-year basis through March 15, and ended just down 1% for the quarter. MoneyGram's total revenue for the first quarter was $291 million, down 8% from last year. On a constant currency basis, total revenue was down 7% from last year.
Another byproduct of this momentum was that our international business, also, continue to grow as a percentage of our total revenue, when compared to the full year 2019, with U.S.-to-U.S. business decreasing to less than 5% of our total revenue as of the end of the first quarter. We also expect that trend to continue.
Lower interest rates have also started having an impact on revenue, as investment income was down $4.3 million from the first quarter last year. The impact of lower rates on our investment portfolio was cushion by the fact that we share that revenue in the form of commissions to our official check banking partners. But this quarter did not include, however, was any meaningful impact from the new business that we have signed. The new walk-in agents that Alex discussed will help us later this year, but at limited impact on first quarter revenue.
Another major impact on the first quarter was the Walmart marketplace that went live in January. As Alex mentioned, we showed positive year-over-year transaction growth through the 15th of March for the Walmart2World product, and flat for the quarter. But as we described last quarter, we did see a revenue decline due to lower foreign exchange spreads on this business. We're very encouraged that we continue to see strong customer preference for our products at Walmart.
Adjusted EBITDA was $51.5 million on a reported basis for the quarter, up 3% from $50.1 million last year. On a constant currency basis, adjusted EBITDA was up 4% from last year. We improved adjusted EBITDA margin by 180 basis points to 17.7% versus 15.9% last year. What's important about this is that while we had a significant impact on revenue from COVID-19 in the quarter, there was no material impact from any of the cost reduction measures that we implemented.
In fact, none of the COVID-19 compensation and benefits changes that we made, were effective in March, and other cost reductions that we made, were only impacted for a brief portion of the month of March. We took a very proactive stance as soon as the COVID-19 impact was felt. We prioritized preserving cash, and lowering fixed costs as quickly as possible, because we didn't know how deep the revenue declines would be, or how long the impact of the crisis would be felt. We also wanted to create a significant buffer that could absorb the impact of this crisis for the remainder of the year.
In fact, we now have the ability to reduce up to $100 million in operating expenses, if necessary in 2020. We've also taken steps to bolster our cash position, such as drawing our revolving credit and implementing cash preservation opportunities enabled by the CARES Act. Even before the crisis, we continue to achieve efficiencies, as cap and benefits were down $6 million for a year-over-year basis, and transactions and operating support was down $14 million from a year ago. As a reminder, we booked Ripple fees as a negative T&O expense. So even without the $12.1 million in Ripple benefit, look to expense, we still improved T&O by $2 million or about 4%.
While we should see significant cost reductions taking hold in the second quarter, we're still uncertain about where the COVID-19 crisis goes from here. As a result, we will not be providing an outlook for next quarter. We remain confident in our ability to ramp-up new business and our ability to contain costs, but what we can't predict is the public health actions around the world and the future economic fallout from those actions. But, as I described, the steps that we've taken so far, have provided a cushion to future revenue and liquidity should this crisis continue.
The reduction in interest expense in the United States will still have an impact on reducing interest expense in the company's first lien credit facility, and revolving credit for the remainder of the year, but will have no impact on our second lien facility due to its fixed rate nature. As I mentioned, our investment portfolio will be impacted by the low interest rate environment, and will offset any interest expense benefit from lower interest costs.
The company finished the quarter with $131 million in cash and cash equivalents as of March 31. Under our revolving credit agreement, we must use cash in excess of $130 million to reduce our revolving credit balance in the following month. As a result, we paid $1 million of our revolving credit down in April and currently have a balance of $22 million on our $35 million credit facility.
Also regarding our balance sheet, we have maintained very high-credit quality in our agent receivables. Both retail and large agents continue to have historically low delinquency. This is the direct result of our efforts over the last three years to improve the credit quality and productivity of our agent portfolio.
In the quarter, we recorded a valuation allowance of $10.1 million against our deferred tax asset in accordance with GAAP. The income statement reflects the valuation allowance as an increase in our tax expense. This allowance does not, however, have any impact on our cash position, our liquidity or our future tax returns. We will continue to offset future taxable income with loss carryforwards in future periods.
And now, I'll turn the call back over to Alex.
Alex Holmes
Thanks, Larry. As our digital performance indicates consumers around the world are seeing and experiencing the new MoneyGram, modern, mobile and API driven. Our strategy remains intact and we're committed to executing, as we move from agile management through the crisis into regaining the momentum we established to start the year.
No one knows the duration of the pandemic or the shelter in place orders or what the future may bring. As a result, we continue to have concerns about unemployment, lower oil prices and a protracted recovery and/or even a resurgence of the virus at a future date.
However, I remain very bullish on our business and on the industry. We've been executing against our digital transformation for a number of years now, and have a significant competitive advantage, along with an incredible amount of underlying momentum in the business. All of which was evidenced by the company's performance for the first 75 days of the quarter, and by our amazing ongoing digital performance.
When things return to normal, I'm confident that we have the right formula to recover quickly and return MoneyGram to growth. Our core assets and strength combined with our growth strategy will enable us to seamlessly serve consumers, lead the evolution of digital P2P payments deliver strong results in the years to come.
And with that, let's turn it over to the operator, and open it up for questions.
Question-and-Answer Session
Operator
[Operator Instructions] And our first question will come from Kartik Mehta of North Coast Research.
Kartik Mehta
Good morning, Larry and Alex. Hey, Alex, I think you said during your prepared remarks that April transactions were down about 19%. A, did I hear that right? And second, how is volume trending? Is it similar to what's your transactions are trending?
Alex Holmes
Yes, it's interesting. It's a good question. Yes. So, I did say that for all channels through the first 27 days of April, collectively transactions were down 19%. And, that's going to obviously be very different by market and by channel.
We've seen a variety of different things, obviously in the early stages of the onset here back in March, we saw a lot of volatility in a number of different currencies. And, we saw lots of depreciation against the dollar and then a variety of other things in many markets. And so that influenced a variety of shifts.
We have seen the principal per transaction, the size of transactions increased in a number of markets, at least, early on. And in some cases that has been sustained. And in other cases it's dropped back down again. I think it's interesting to kind of see how different markets have weathered through this crisis and sort of the different impacts.
So, in general, I would say that in areas where we've seen increased or continued momentum and transaction growth, we have seen a little bit of an uptick in the amount of money being spent.
Kartik Mehta
And then, the growth in digital, I'm sure everybody, all the money transfer companies are witnessing that. Does that result in any more pricing competition or a change in behavior from your competitors?
Alex Holmes
From our perspective, we think we have a great pricing formula, a good marketing formula. We've entered all these markets, but I think, an incredible value proposition and one that has been very successful for us and very profitable for us as well. We feel very, very good about the way that we've positioned the business. I think the various components of it have all been successful in a variety of different ways. And in general it's just been absolutely phenomenal performance both pre and post the COVID crisis.
From a competitive perspective, I really haven’t felt any impact at all from -- on any shifts and what the competition is doing. And from all the data that we’ve done through and looked at, most of our growth is being driven by new customers coming in and then repeat customers once they've come on board. So, for us, it's just market share gains across the board and we feel really excited about what we've done and where it's going.
Kartik Mehta
And then just one last question, maybe Larry. Would the revenues in April trend in line with transactions? I'm just trying to get a feel for understanding maybe what the revenue trends that you're witnessing, at least in the money transfer business?
Larry Angelilli
I think with the increase in the growth rate of digital which carries a lower price point, you are going to see some lag between revenues and transaction growth. I think it was also evident in the first quarter. And I think that relationship will probably continue.
We've been able to compete more effectively on price, given some of this streamlining that we've done. And then also the digital business growing so rapidly is also going to move that number. So, I would say, revenue growth would lag transaction growth.
Kartik Mehta
Perfect. Thank you very much. I really appreciate it.
Alex Holmes
Thanks, Kart.
Operator
And our next question will come from Tien-Tsin Huang of JP Morgan.
Tien-Tsin Huang
Thanks so much. I hope you guys are all safe and well. Good statistics here. I'm just thinking about going into mid-March. Did you see any pull forward of growth in anticipation of things getting shut down? Did you see a little bit of a surge? And maybe as a result of that it pulled forward some impact, just trying to better understand some other dynamics as well as, ask it here with some of your agents being in the dark. Do you know what percentage of your locations were actually shut down here?
Alex Holmes
Yes, good question. Well, actually all good questions. And I am happy to try to provide a little more insight into that. I mean, we saw some interesting things. I don't know that there was sort of a preparation in terms of consumers, sending more money in advance of the potential closures of locations. I mean, maybe that occurred for a couple of days. We definitely saw surge and sends to Mexico and a few other countries, as the peso fell quite rapidly.
The result of that was that we did see some increases in volume to certain markets and some of the U.S. outbound corridors in, kind of early mid-March, which continued for a period of time. But, generally speaking, I think some markets slowed pretty much overnight. I mean it was kind of a remarkable, once -- for example, in France, once they put in the shelter in place, stay at home orders, the business really just kind of slowed down the next day.
I'd say shut downs have been kind of all over the place. I'd say in general, maybe 60% of the network has kind of remained open in any given market. And that's I think started off a little more harshly, and then we saw some reopenings. There's always a balance between how many locations or network are active at any period of time in the first place. But, clearly, there was a variety of locations that were closed.
We did have a few countries that were just completely closed, some Island nations and a few other places where the governments basically shut the country down, told everybody to stay at home. But those are mostly short-term and temporary. I'd say, for the most part, governments responded when they realized if they've closed too many locations and kind of inhibited remittances to retail channels and other things, those guys reopened to some degree.
But a lot of it also becomes a little bit of a balance on the agent side, as well, in terms of whether it's worth it from them from a profitability perspective to remain open for limited amounts of services. So it's definitely been extremely challenging.
And then, of course, whether the location was open or not, there was other rules put in place in many countries where, consumers were still very restricted by their ability to even get out and move about, which of course, sort of just compound the issue. So whether the location was open or not, in some cases was a bit irrelevant as the movement of consumers, which fell pretty sharply.
Larry Angelilli
And there's a bit of color on that. January, February were really strong. So it wasn't like we saw this burst of activity in March as this thing started to -- like, people started to worry about it. I mean, actually it was funny, it was just kind of starting out to be a good quarter right out of the box. And it just continued, and then boom. It kind of fell off. So I don't think consumers were getting ahead of this at all.
Tien-Tsin Huang
Yes. No, it sounds like it's a shame that that -- obviously that will happen for everyone. Yes, that's why I wasn't asking the question. I was thinking more if maybe there's a little bit of pent up demand here at some point or people were smart enough to anticipate, that's what I was thinking. That's all helpful.
Alex, you mentioned the digital partnerships and what not. I'm curious the pipeline there and your ability to get to work and make those happen. I'm assuming that you're seeing some activity there. Any comments on that? And one more question from me.
Alex Holmes
Yes, absolutely. I mean, I think, as you know that -- to provide a little color, obviously, we're trying to diversify the portfolio obviously, as much as possible, where we can. On the receive side, we're adding as many account deposit options and wallet options, Visa Direct type options to give customers that choice and convenience to send to account, where necessary. And obviously, if we can't get out to a location, having that money in your bank account, or in your mobile wallet can be extremely helpful. And so we're clearly promoting those in a big way.
And we've had a lot of success for last couple of years in terms of expansion of those capabilities, improving the quality of service and pushing that forward. We've also obviously expanded MoneyGram online to as many countries as possible from a send perspective, where we're licensed and we have the capability from consumer funding and an authentication perspective to operate that business. But obviously, in a number of markets getting those licenses and/or permissions to run that business can be complicated. And so it's a lot easier sometimes to go straight into a market with a fintech or with a telco or a bank or any retailer that has an online website and a platform.
And a customer base is looking to send money and utilize the MoneyGram rails. And we've actually seen -- that's something we've been working on for a number of years. We have quite a few success stories out in the market. And what we're seeing now is an expansion of those, either through partnerships we currently have moving into more markets, or we're seeing an influx of requests from providers in various countries looking to add our service and get going to improve their business. So, a lot of it has been -- the sales teams proactive outreach and pushing for these. And at the same time, we're also seeing a large number of inbound requests as well.
So, yes, it's a wonderful way to do it. These digital partnerships really position the brand differently, their value add to send capabilities and just sort of an expansion of the service and the capability and market. So, yes, we have a variety that are absolutely booming right now. And then we have a whole pipeline of new ones that should be coming on board.
Tien-Tsin Huang
All right, good. Forgive me for asking third questions, but last one, I promise. Just on the expense side for you, Larry. Just can you give us a little bit of help here and thinking, what your fixed expense base might -- how much flex did you have there to bring costs down? I'm sure you're doing some marketing for Mother's Day and others, but just trying to better sense of the levers you have on the expense side? Thank you.
Larry Angelilli
Yes. What we did was we took everything to kind of a base level for April, so that we could then decide how long we wanted to hold at those expense rates. So, we really addressed most of our fixed costs extent we could. I think I can go through them one by one, but I'll just tell you that what we did was we have the ability to flex back up, if we see a returning to more normalcy or we can hold them at their current levels. And that's where the $100 million impact would be, if we held that for the remainder of the year.
Alex Holmes
Yes. And then, I'll just add to that, just from an internal perspective. The team here and the employees have stepped up in a huge way, submitting ideas and thoughts and constantly looking at how do we operate the business more effectively, what can we hold back on, what do we really need to keep moving forward with, and balancing that. And it's been just an incredible team effort. I'm so proud of what everybody's been able to do in these times and how that one stepped up. And it's just been a really great experience from a leadership perspective to see that and feel the support of the all the employees around the world, and all of our partners as well.
So, I think it's a big thank you to them for that, so that we can continue to provide a great service during these very strange times.
Operator
And we'll hear next from Ramsey El-Assal of Barclays.
Ramsey El-Assal
Hey guys, thanks so much for taking my question today. Just following up on Tien-Tsin's question on fintech partnerships. I was wondering, if you could give us some commentary, some color on the Ripple relationship. In fact the fees came in a bit ahead of our model, quite a bit ahead of our model. Is it due to greater revenues in U.S., Mexico quarter that I think you're working with them in? Or is Ripple being used to process greater percentage of total revenues? Just kind of gave to the expectation going forward for Ripple?
Alex Holmes
Yes, No, we continue to be extremely pleased with the Ripple partnership, and all the things that we're doing. From a new service, I would say it was a little bit of a relatively quiet quarter, in the sense of really pushing anything, particularly new into the market or expanding of the service. We did a lot of that in the back-half of last year, and really got going on a number of new corridors for that service.
We also have a variety of new services in the pipeline and things that we'll be rolling out, and expanding with later this year. But from a capability perspective from a service quality and from a performance, it's been a really good, really good quarter. And obviously, a very successful partnership thus far, I think, we continue to flex with them as they continue to expand the service and move some things around, and really figure out what they want, the product to look and feel like, and how they want to take that to various market.
So, I think it'll change over time. I think, the results of what we're doing will vary by quarter and by month. And I also think that, over time, where the revenue or counter expense side, I apologize, the fees sort of come from, I think it'll be generated from different areas as we experiment and move into to new services and new corridors. But, yes, it's been a good partnership, and definitely pleased with what we've been doing.
Larry Angelilli
We had five currencies going in the quarter. And so, there was some growth in trading activity in all five of those currencies, which was part of it. But I think, I don't expect that we'll be adding a lot of new currencies in the near-term.
Ramsey El-Assal
Okay. A follow-up I had was about kind of thinking how you guys are positioned for a recovery here, from the COVID related impacts. And the question is really, do you have a good sense of how much of the impact you've seen as from kind of the quarantine and limited and restricted mobility of the customers, versus sort of a broader macroeconomic impact from things like unemployment?
And, I'm just trying to understand whether there will be kind of more of a bounce back when the world turns back on, or whether there's sort of a more lingering, unemployment driven or macro driven sort of headwind as time passes here? And I know, that's a super tough question to answer, but that I kind of asked regardless?
Alex Holmes
Yes. No, it's a really good question. I think, what's been compounding sort of the analysis has also been what's happened almost simultaneously right with oil prices, and sort of capacity around the world and utilization. So, I think those two issues in a number of markets right across Middle East, Africa, even here in the U.S., what happens with oil prices and production and other things, obviously will have a lot of influence I think longer-term on what happens in that industry.
I think also when you add in hospitality and entertainment and then when you add in travel, those are ones that I think are going to be extremely interesting to see how they do respond. And so it’s a backup a little bit. To answer the question directly, thus far, I would argue that the vast majority of the slowdown has literally been related to shelter in place and then temporary unemployment.
And literally, as shelter in place rules and stay at home orders were put in by governments in markets, you could see those markets just slowdown, basically overnight. And so, clearly, that was not a result of unemployment, that was a result of I simply can’t go out and transfer money.
I also think the fact that the digital business has sustained its momentum and continues to accelerate shows that, consumers by and large do have the ability to continue to send and there is money there for that purpose.
I think longer-term, it starts to get more serious and concerning about unemployment and what that impact would be. A great example, the cruise industry right? And just to pick a nation, Filipinos dominate Indonesians. And Filipinos, they are on the cruise ships all over the world. Those don’t go back to work that unemployment level will sustain itself for a very long period of time. Same thing with hotels and other things in the hospitality space right?
So, when I looked at holistically, I'd say, the fact that for the most part construction has sustained itself, the most part a variety of industries have sustained. I think there is a subset of this that will eventually be long-term unemployment. And so, the shorter these shutdowns are, the sooner people can get back to work, I think obviously, the faster that can recover.
But, if travel and entertainment, a few these other areas don't ever come back, I think it will be some subset of kind of what we say, getting back to a 100% of capacity, I think will be inhibited by those issues. And right now, I think it's a little bit too soon to tell.
But, I think when the shelter in place order is lift, when the locations begin to reopen, that'll give us a better idea of what that balance looks like, and then what people that are unemployed begin to do.
Ramsey El-Assal
That's really helpful. Thanks.
Operator
And our next question will come from David Scharf of JMP Securities.
David Scharf
Good morning, and thanks for taking my question. And it sounds like everybody is safe over there. So, Alex, this is as much a disclosure and an Investor Relations question, as it is a fundamental one. And it relates to some of the characteristics you've been highlighting on digital. And I'm probably, well not in the last three weeks, one of those people that's asked you over time about where these customers are coming from, from digital, whether they're from walk-in cannibalization or new.
And, to the extent, if I heard you correctly, 94% of your digital users are new customers, new acquisitions. And then on top of that you're seeing higher retention rates. It feels like that business, while it's the same brand, it's just an entirely different business than your walk-in. And I'm wondering at what point, because I think it's relevant information, they have such different trajectories.
Is there a scenario in which you could see or which you're permitted to report profitability by channel on top of just these transactional metrics? Because at a minimum, it seems like digital towards your official check and money order business from the standpoint of segment reporting. And any thoughts on that, because while the color on transaction metrics is certainly helpful. It feels like the future of this business is more than just a mild channel shift. It feels like you're catering to an entirely different user base.
Alex Holmes
Yes. I think that's absolutely the right way to look at it. Just a couple of comments on some of the stats just to maybe provide a little more clarity or some thought on it. Yes. So, what we see is about 6% of the new customers are from what we call the previous walk-in business. So we know that they are MoneyGram customers and they are now online.
There is also a subset. So, you say 94% is that -- so we say about 70% to 80% any market are kind of new to MoneyGram. So there's a blend in the middle, which we call toddlers, which are these customers that do both walk-in and online transactions kind of regularly. So there is a subset in there as well just sort of do both.
But yes, about 70%, 80%, depending on which markets you're in are really new to our brand. We've never seen these customers before. And then, I think it's also important to recognize too that it's also tends to be a younger demographic as well. So I think when you begin to think about the channel itself, and the profitability of the channel, getting into the profitability of the channel, when you start to think about who these customers are, what this business is really all about, I think it was for a very long time sort of a concern of ours that you turn on an online business, and you just cannibalize your entire base. And that's clearly not the case.
Now, how many walk-in customers we pull from competitors, 6% of ours are transitioning up to digital. How many from other walk-in competitors are transitioning up as well, that's something that we don't really know. That takes a lot of surveys and customer discussions to really flesh out. So that'll come longer-term as we begin to have some of those more deeper interviews and conversations.
But, when you're seeing the incredible growth of the business with 70%, 80% of these customers being just new to MoneyGram, never seen them before, I think it does say a lot about the fact that this is a very different channel. It's a very different consumer that is interested in this channel and willing to sort of utilize it for the value that it brings.
And so the net of that is that, yes, I think, over time you can begin to look at it, almost as a separate business. I don't think we're quite there yet, because of the vast amount of overlap in the business, a lot of the sends do get picked up in cash. A lot of our cash then do go to account, right? So, there's always this ongoing blend, so you sort of need both channels overlapping to really have the most, I think dynamic network available in any given market.
But all that being said, we've done a lot over the last several years to push the profitability of this business. I think we found a really nice cost variable, cost structure for at this point in time. And I think the profitability continues to improve as we continue to scale return and repeat customers, number of transactions by customer improving, all of those things drive the profitability.
The real cost is on the initial registration and authentication of the user. Once you have that information it's a lot more straightforward. And obviously, we can drive cost down from that perspective. So from a profitability perspective, we feel very, very good about what we've done with the digital platform and the profitability that it's generating.
David Scharf
No, that's helpful. I guess, I'm just reflecting on the slide that had digital representing 18% of transactions and accelerating the 28% April. It certainly seems like in a lot of respects, it kind of merits a little bit of more standalone disclosure, because it seems like it's really where all of the growth is coming from. Are you able to give us some sort of ballpark sense for the percentage of operating income by channel?
Alex Holmes
No, not at this time. I mean, I think that from a marginal perspective, we feel very, very good about where that business currently is. But, in terms of contribution or breakout of that, that's something that we're positioned to do at this time.
David Scharf
Understand.
Alex Holmes
But I appreciate the question. I understand why you're asking the question, and I appreciate it, and totally get it. No.
David Scharf
Yes. No, I mean, listen, I think it's really just kind of following the positive narrative that you provided on that.
Alex Holmes
Yes.
David Scharf
Lastly, I realized with so much global dislocation associated with the pandemic in such an uncertain employment outlook, in terms of how the unemployment curve plays out. The oil wars went from front page news to back page news within a matter of days. Is there too much other noise with the impact of COVID to discern, whether or not the price wars have impacted the Middle East and Russian businesses even more? Maybe do you have any outlook on that?
And maybe if you can also just remind us what percentage of transactions tend to originate for what you would deemed to be, petrol based economies?
Alex Holmes
Yes. No, it’s a little tricky to breakout the second part of your question. Obviously, there is a lot of sort of oil-based economies spread across the Middle East, and parts of Asia, Africa, Latin America, even the U.S. to some degree. I mean, I wouldn’t call it an oil-based economy. Certainly, there's a lot of employment.
So, it's hard to break that out. But, obviously, in any given market particularly in Middle East and many parts of Africa, obviously there is quite a reliance on that. And in some cases, right, it's not necessarily -- as African countries were as not necessarily driver of GDP, but it is a driver of government revenues. So it’s a little kind of a unique and maybe that’s true for Middle East and Russia as well to some extent.
So, it's not necessarily the driver of employment per se, but it is a driver of income for government institutions. So, it does have an impact on those markets and it does have an impact on construction projects and further expansion of industries and kind of how decisions are made at those high-levels.
I do think, it is a little bit early to think too broadly about that longer-term impact. What I can say right now is that, I would say going into the crisis and throughout, I have not really seen or heard either through Central banks or agent partners or others that there's any indication that those economies anticipate having a slowdown or making best changes to what their plans have been because of the current price of oil. But, at some point in time, that may be an inevitable decision. If you want to?
Larry Angelilli
I would say a lot of those countries had already taken steps, because when oil went from a $100 to $40, we did see massive changes in employment. We did see it happen -- impact the business, but going from $40 to where it is now, we don't really see an impact either in the kind of level of activity or the ability of us to actually source those currencies either. I think it's holding in there, but I think it was because they had already taken pretty dramatic steps to skinning things down.
David Scharf
Got it. Okay. Thanks very much guys.
Operator
And our next question will come from Bob Napoli of William Blair.
Bob Napoli
Good morning, everybody. A question just on liquidity and capital if you would. I think, you have a payment to the government for $55 million in November. And I know that was pushed back before, but maybe just some commentary on, how are you going to ride this out from a balance sheet perspective?
Larry Angelilli
Yes. We don't have a lot of ability to talk about that actually. What we are engaged with them, almost on a weekly basis, they're going through a process.
Alex Holmes
The government in on...
Larry Angelilli
The government, yes. But there's nothing new for us to report, since our last disclosure last quarter. What we're doing, as you know, we're lining up liquidity, but the ultimate disposition of that is still too early to tell.
Bob Napoli
When you say you're lining up liquidity, I mean, what do you need for the company to feel like it has the staying power, that without the need to raise additional capital, in order to ride this out? Or you mean how else would you manage through say, this economy stays pretty rough for the next year or so?
Alex Holmes
Yes. It's just about like -- I think a couple of things. First of all, we brought in some new investors in the past year that I think continue to be very supportive and bullish on the story. We've had great support from our new debt holders as well, continuing ongoing dialogue with them. And look, I mean, everybody is aware that this is a global pandemic crisis, this is not a reflection in any way at all of MoneyGram, the company, the organization or anything that we've done in particular to end up in the position that we are with respect to the COVID-19 crisis.
So, I think everybody is more than aware of it, everybody is very supportive. And I think we said nothing but positive dialogue thus far. Obviously, the government payment is a government payment. It's obviously a large number. It's something we've talked about before. We've had the dialogue with the government. And at this point, they've been willing to push the payment down the road to continue discussions, and we continue to be in those discussions. And we will get it to a conclusion on that. When we get to the conclusion on it, in the meantime, we continue to operate the business. And I think we've done a really good job on that.
Bob Napoli
Okay. And just to follow-up on the digital business. The revenue growth and the transaction growth down 19%. And I would share that, if you can give some more -- I assume you can give 0:56:19] a little more few more metrics on that business would be helpful. But I mean, if revenue transactions are down 19% with somewhere in the 30% range, 30% to 35% range for revenue decline reasonable in a run rate basis?
Larry Angelilli
I'd say that's a little high. I don't think I can go through that, but I would say that that's probably too big a number.
Bob Napoli
Okay. And have you seen any signs of that revenue number the bottoming out and any signs of it on a weekly basis of a bit of an improvement at all?
Alex Holmes
Yes. I think in my -- I went through that a bit in my prepared remarks. I mean, I think it is important, we have touched 40% declines, and that was kind of early days, the first few days in March, the first couple weeks, March, early April. Yes, the business has performed actually considerably better, really since mid-April.
And we do have the Ramadan began. And then we have Mother's Day is coming up and Easter holidays that we've been through as well all which has a little bit of variety and also a little bit of volatility in the results on kind of any given day, as you kind of grow through those different time periods. But the business has been stronger, considerably stronger. And, I'd say that 19% through April 27, is actually really, really good. If you consider the first part of April was very similar to mid-March, which was down and kind of the 40%.
So, it definitely has recovered. And I would anticipate that, it will continue to do so, provided that these shelter in place orders lift and that things go smoothly around the world as things begin to open back up. I mean, I think when the world slowly opens back up, it can only be positive for business trends. On the flip side, right, if those don't go well, or there's a surge in the virus or there's other issues that come up, then we may see it flow back down. But at this point, and this is not a forward looking statement, but at this point, we've seen though, we have passed the worst of it. But that's not to say that it couldn't get worse going forward, but at this point, we have passed the worst of it.
Operator
And our next question will come from Rayna Kumar of Evercore ISI.
Rayna Kumar
Good morning, thanks for taking my question. Several weeks ago, the World Bank put out a report after meeting that global remittances would be down 20% in 2020. Do you view that as a good indicator of how your business could perform this year?
Alex Holmes
I would argue that that’s a projection from the World Bank. I think we've been on a number of World Bank calls. In fact, Larry has been on several of them and speaking directly. So, I'll let him comment more broadly. Listen, I think if the market continued for the rest of the year, the way it has in April, then I think that's a probably a pretty good number if things recover. I think that that's way too pessimistic. But, I think, again, I think they're trying to give a some perspective.
Obviously, the World Bank is very, very concerned about the well-being of the underprivileged all around the world, and the number of people that rely on remittances and the GDPs of a number of economies because of remittances. So, if money isn't moving there is cause for alarm and a lot of concern. So I think that, the World Bank is always focused on that. But Larry, you can comment more directly on the calls you've been on.
Larry Angelilli
Yes. And the way they do that calculation has a lot to do with base value sent. And that's not really a primary driver of revenue in most cases. So people are spending less, but they're still spending in effects remittance companies P&Ls a lot differently than it's just. And I think what they're really referring to is more of a reduction in the funds available to send. They're also using models that were based on the great recession. And this is going to play out differently because it's very, very different regionally.
So, it's hard to argue that because we're seeing sort of it, but at that level now -- but I would just tell you that it seems to be improving. So early indications would suggest that that's going to be a bigger impact than what we would see. Even if it doesn't get to normal, that seems a bit severe.
Rayna Kumar
Could you provide us an update on your compliance systems? Is there anything else you need to put in place to be in compliance with your deferred prosecution agreement with the Department of Justice?
Alex Holmes
I'd say that's a broad question. I would say from a level of specifity, I think that there are a number of ongoing discussions with the monitor across a wide variety of areas that sort of all fall under the global compliance program. I would say, first and foremost, our performance against global fraud has been absolutely phenomenal. We have great results from the antifraud program, which is kind of the heart of the matter. So, I think that's really exciting to see. We have about a year left with the DPA in the monitor at this point in time we've a variety of different areas that we're working on.
I would say there's no single large projects underway. There's a variety of small ones and some ongoing system changes, ongoing process improvements, and structural changes, and then ongoing monitoring and feedback from the monitor. But nothing that sort of stands out is as high-risk at this point, as far as I'm concerned.
Rayna Kumar
Got it. Very helpful. Just one final question from me. Could you remind us the limitations on your debt covenants? And where you stand versus it?
Alex Holmes
Right now, none of our -- if we continue along this path, our covenants seem adequate for the remainder of the year. I think, we went into this with adequate cushion. So really, it'll be a function of the duration of this. But at this point, we don't perceive a breach.
Rayna Kumar
Thank you.
Operator
And our next question will come from Mike Grondahl with Northland Securities.
Mike Grondahl
Yes. Good morning, guys. Sorry, if this has been asked, but of your top 15 sort of retail agent customers, how many are up for renewal in 2020?
Alex Holmes
I think there's one at the moment -- that’s -- yes, one or two maybe that, I would say are --sorry I'm pausing on the question, but because there's always ongoing contract renegotiations, and discussions and extensions and all sorts of things happening, I'm trying to think of actually, which contracts are definitively expiring. And there's maybe one or two. It's kind of normal. Nothing unusual.
Mike Grondahl
Got it. Similar for 2021?
Alex Holmes
I'm sorry?
Larry Angelilli
2021.
Mike Grondahl
What about 2021?
Alex Holmes
Yes. There you have the same.
Mike Grondahl
Okay. Thanks, guys.
Alex Holmes
Okay. And I think we're overtime here. So we'll probably wrap up with that one, operator. So, thank you for your time everybody. I appreciate all the questions. And everybody stay safe and healthy. Thank you.
Operator
That does conclude today's teleconference. Thank you all for your participation. You may now disconnect.
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