Moneygram earnings call transcript

Moneygram earnings call transcript

Author: chilivili Date of post: 30.05.2017

Good morning, ladies and gentlemen, and welcome to the MoneyGram International, Inc. 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 questions following the presentation. It's now my pleasure to turn the floor over to your host Suzanne Rosenberg, Vice President of Investor Relations. Please go ahead, ma'am. Good morning, everyone, and welcome to our second-quarter earnings call.

With me today are Alex Holmes, Chief Executive Officer, and Larry Angelilli, Chief Financial Officer. Our earnings release and informational slides are available on our website at MoneyGram. Please note that today's call is being recorded and some of the information you will hear contains forward-looking statements.

Actual results or trends could differ materially from our forecast or expectations. For more information please refer to the risk factors discussed in our form K for MoneyGram assumes no obligation to update any forward-looking statements. Our presentation also includes certain non-GAAP financial measures in an effort to provide additional information to investors.

Non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. You will find reconciliation tables within our earnings release issued this morning and in the form 8-K submitted to the SEC. And good morning, everyone. Second quarter results showed solid improvement to many of our key financial metrics.

When we spoke our first quarter conference call we outlined several concerns with certain countries going into the second quarter of this year. Specifically, there continues to be economic and geopolitical issues impacting our performance in Saudi Arabia, Libya, and Angola, countries that have historically been strong send markets for MoneyGram.

In Saudi Arabia we continue to see a slowdown in transactions and revenue due to economic challenges. While in Libya and Angola our business continues to be impacted by geopolitical issues which keep these countries largely closed to banks and remittance providers. We are keeping a close watch on these countries but given the complexities of the issues we are not expecting the smartest to improve in the near future. As we look ahead we see increased opportunities to capitalize on growth and expansion both geographically and through our product offerings.

Exciting new technologies are being implemented on the digital side of our business, which will transform our Company and differentiate our brand. This includes the evolution of our kiosk strategy. As you know, we remain very bullish on industry-leading kiosk technology and our solutions are resonating strongly with our customers. Our staging kiosks in particular are providing a better overall customer experience at the point-of-sale and due to lower operating costs and capital requirements, our staging kiosks are easier to scale and are more profitable.

As a result, we have decided to sunset our full-service kiosk to focus more on the profitable growth and customer centric solutions that come from the staging platform. We continue to see solid growth with our partners around the world and I look forward to sharing more on our kiosk expansion efforts and the evolution of this product in the coming months. Our whole organization is energized to gain market share through digital innovation and I'll talk about that in a moment.

Now let's talk in more detail on our second quarter results. The difference between revenue and transaction growth was largely due to a decline in U. While the year-over-year growth rates are not where we want them to be, our total transactions leveled off in the quarter as volume was flat on a sequential basis.

Outside of our U. Lower transaction growth was primarily due to corridor mix and the decision to rationalize our kiosk platforms. We again saw strong sends to Mexico and announced a renewed agreement with Walmart Mexico through We have a robust network of more than 20, agent locations in Mexico including the most diverse retail distribution network in the industry.

In total for the second quarter, U. During the quarter, our non-U. Our constant currency revenue growth rate remained consistent despite the negative impact of lower volume in Libya, Angola and Saudi Arabia. On a sequential basis, the deceleration of revenue growth is partly attributable also to the anniversary of our Nigeria send business which launched last year.

In total for the second quarter, non-U. Now let's look at our digital solutions. While these growth rates are below where we have been, the primary driver related to the previously mentioned closure of our full-service kiosks in the U. Excluding these, our kiosk growth remains robust. Other components of our digital business MoneyGram.

During the quarter MoneyGram. During the second quarter, we further expanded our digital footprint with account deposit services in ten new countries across Europe, as well as in El Salvador, through a new agreement with Millicom, the parent company of Tigo Mobile Wallets Our account deposit network now reaches over 2 billion or mobile wallet, banks or mobile wallets in 27 countries.

We also saw many renewals and launched significant new relationships with physical agents in key markets around the world. In Bulgaria, we expanded our relationship with DSK Bank, launching a new service which makes it the only bank in that country that offers cash-to-cash, cash-to-ATM and cash-to-mobile money.

MoneyGram International (MGI) Alex Holmes on Q2 Results - Earnings Call Transcript | Seeking Alpha

In Poland we expanded our relationship with Bank Pocztowy to include outbound services and we also launched our service with Tesco, expanding on our already success relationship from the UK. In Indonesia, we signed an agreement with Arsema to provide our remittance service at the Indonesia post office locations. And we also launched our service through Alpha Bank in Albania providing more diversification in that important receive country.

When I look at our money transfer business in its totality, I like our position in the market and I love the direction We are headed. A strong physical network supported by an ever increasing set of digital assets is creating a compelling omnichannel offering for our customers.

In fact, the second quarter represented the higher number of money transfer transactions in the Company's history. The underlying momentum in our business is strong. In addition to all of these expansion efforts, our focus has been and continues to be on redesigning the customer experience. We want to change the way our customers interact with our brand, both online and at the point of sale. Some of these changes are designed to improve customer protections while others will allow for better communication and more frequent interaction.

In total, we are building a better product. Over the long term, these product improvements will ensure stickiness with customers, increased ease-of-use, better protection and a better experience. As we move into the second half of the , our team is hard at work implementing new technologies that, the combined with a global network, will differentiate the MoneyGram brand and deliver a superior customer experience.

As Alex explained, we delivered a solid quarter that mirrored what we expected when we recorded our first-quarter results. We continue to improve many of our key financial metrics, including the quality of our earnings and cash flow, while continuing to look for opportunities to support the geographic diversification.

The recent Brexit outcome put a spotlight on the strength of our business model as were able to provide uninterrupted service for our customers while several of the newer players shut down when markets became volatile.

Importantly, we didn't experience any negative impact from Brexit in the quarter. Looking forward, if the value of the pound stays low, there will be an impact to our reported revenue. However, this should largely be offset by our lower comps-driven denominated operating costs in the UK.

The economic and political issues that we discussed in Libya, Angola and Saudi Arabia, combined with our decision to cease the operation of the virtual service kiosks, impacted our growth in the quarter by about 1.

In addition to increasing money transfer revenue during the quarter, we returned to normal seasonal expenses and, as we predicted, more normal foreign exchange results, which in turn brought our operating results in line with expectations. Commissions, as a percent of revenue for the quarter, improved to And as a reminder, commissions tend to vary through the year and our experience is affected by corridor-mix and seasonality.

This primarily reflected the absence of a one-time non-cash charge recorded last year for the Company's buyout of a pension obligation. The expense favorability was also driven by overall efforts to control expense growth partially offset by an increase in depreciation and amortization.

With respect to MoneyGram. We expect this positive trend to continue in as we further refine our risk management techniques and improve our cost structure for online transactions. Turning now to our outlook. As we discussed, certain markets continue to exert downward pressure on our revenue growth. However, we believe we can continue to offset this impactive margin expansion and expense management. That said, the timing of expenses will be different this year which should shift the strong growth quarter into the fourth quarter.

For the third quarter, our expectations for year-over-year growth rate in adjusted EBITDA are low single digits when compared to what was our strongest quarter of last year. We are pleased with our position as we enter the second half of the year.

While we continue to keep a careful watch on the top line, from a bottom-line perspective our focus on profitable growth is yielding positive results as we saw solid improvements to operating income, EPS, EBITDA and cash flow in the first six months of From a strategic perspective, our innovative technology is changing the way customers meet their financial needs and we will continue to implement these differentiating assets that deliver hybrid money transfer solutions to the market.

We are excited about these transformative initiatives and products we will deliver over the coming months and we look forward to updating you on our progress. I wondering if you could talk a little bit more about the competitive environment in the U. Where do you see the pressures coming from primarily? Is it traditional competition or more mobile options? Right now it certainly continues to be, at least in our view, consistent with where it has been. I think largely the same competitors that we have had.

I don't think we are seeing a lot of impact from any of the local digital solutions, at least on the domestic U. I think the market certainly continues to be impacted by the Walmart product.

I think certainly, as we have talked about, Western union changed their prices and has been implementing those. So I think our business continues to absorb those changes. Obviously, we continue to keep a watch on the U. But when we look at it, I think, as we said, on a sequential quarter basis we did about the same volume.

So certainly while we were having growth rates that are not where we want them to be, I think the market at least looks somewhat stable. And then as far as your more conservative view on revenue. Can you talk about where the pressure to make that change came from? Is it the fact that some of your challenged countries like Libya, Angola, Saudi aren't coming back as fast as you thought?

Or is it impacts like oil in various parts of the world that are having a bigger impact? Can you maybe talk a little bit about what the increased pressure is coming from directly?

Certainly our expectation for countries like Libya and Angola was that at this point that they would be at least opening back up to some degree and so far they had been very, very quiet. Certainly Saudi Arabia is a country where I think the economic issues in and around that area are impacting growth.

It is a situation where the largest send market, the second-largest outside the U. So certainly in those countries there is a lot of opportunity over the long term for growth and sustainable growth. Right now I think they are absorbing the impact of what is happening in those countries.

Obviously Saudi borrowed a lot of money for the first time.. We saw the bin Laden construction lay off, quite a few people. So we are keeping an eye on contracts for workers and see what they decide to do in the future on some of their construction projects.

When they look around other areas of the world, we have some pockets of real exciting growth right now. So I wouldn't say is completely everywhere where there is oil pressures. I don't think it's completely everywhere that there is a situation that is causing us concern and consternation. These are just historically have been large markets for us. When they slow down it puts pressure on that top line. We continue to look at other areas of opportunity for accelerated growth. We have quite a few exciting things happening.

Some of those happen to be at this point, though, just smaller markets and I think the growth there isn't offsetting the pressure from some of the larger markets. So when you take Saudi, Libya, Angola, you look at the US-to-US pieces.

It is an opportunity, I think, exists in many markets. Those markets are particularly large and so we would like to grow through those and get a big growth rates going in a number of other areas. And we think we have a lot of opportunity to do that. We have some exciting things coming and some good initiatives underway. So, yes, we started the year, we saw some of the pressure on these markets.

I think we talked about that on the first quarter call that if these things sustained they would certainly continue to pressure the business and that is exactly kind of the affect we saw in the second quarter.

And unfortunately right now we just don't see a lot of opportunity that those countries will turn around in the near term.. Thanks for the color on that. I guess one last question. I may have missed some of the commentary around the digital platform. Is that kind of a sign of a maturing, or a sizes of business? Or are you seeing any significant changes in the digital side of things?

And I think that as an important one. Certainly the slowdown in Saudi. Our largest agent in Saudi Arabia operates through basically an online platform and a kiosk-based platform. And so when that growth in Saudi slows it obviously has a corresponding impact on our digital growth rates. Our decision to close our full-service kiosk, which is never an easy thing to do, took some volume out of our metrics as well. We think that is the right decision for the longer term.

We are excited about where our kiosk platform is going but as we cycle out those kiosks, replace that with more traditional forms of business, there is some lost volume in revenue associated with that.

So that's coming out of the numbers as well. The other aspect of it, too, is that We have some real large pockets of success in digital and we have a lot of smaller things.

MGI Transcripts - MoneyGram International, Inc. | Seeking Alpha

I think today we are transacting digitally in over 40 different countries. Some of those are quite large and some of those are quite small. And I think the mix of where the growth is or what happens with those growth rate certainly influences the numbers that we report. So when I look at our digital revenue growth, all the initiatives that we have done around the world, all of the pieces that we are adding, they are all, for the most part, performing at or above our expectations.

And so it is really just a couple of pockets of growth. I do think there is some side components to it. I cannot look at our digital business today and really say that I have either concerns about it or that I am disappointed by the performance. In fact, it is the opposite. I continue to be very excited by what that is creating and one of the real exciting pieces of it is that we continue, and We have talked about this a little bit, but we continue to see our agent partners that were traditionally just a cash Asian partner looking to add additional services.

And whether that's account deposit or whether that's more of a mobile solution. So we are doing these things with our current agent partners and it is evolving our business into this, what we call the hybrid model, in allowing omnichannel options for customers.

And I think that is pretty exciting as well and I think it's going to be a balance as we go forward.. And we will take our next question from Jim Schneider with Goldman Sachs. Thanks for taking my question. Can you could maybe provide a little bit more color on the digital comments you made earlier. Can you maybe talk about any changes in the competitive landscape you are seeing within digital beyond the roll out for the kiosk in what you mentioned in Saudi? Any changes in terms of pricing or new competitors entering the market in relevant geographies?

I'm thinking through your question. There is a couple of components to it. I would say globally speaking we really haven't seen a lot of change in the competitive landscape itself. I don't think we haven't seen a big swing. I think a lot of the excitement and noise around new competitors in the online space and some of the growth that you saw over the last couple of years really hasn't been there.

So I think it's to some degree kind of business as usual in the competitive market. I think at the same time pricing has been generally very stable in that business as well. So from that perspective, it has been positive.

And then just a quick follow-up. On the sunsetting of the full-service kiosk, are you going to recognize some kind of OpEx benefit in the results over the coming quarters? Or is that going to be fully reinvested in other areas? That is part of how We are able to not have the impact of the lower revenue on our earnings - our EBITDA. So we are basically eliminating a business that wasn't profitable. So it should be recovered through operating expenses this year.

Hello, Alex and Larry. Thanks for taking the question. I just wanted to understand a little bit more about the decision to sunset the full-service kiosk. So I guess what is it exactly that makes the staged ones more profitable? I would have thought you are either just paying maybe for rental or for the space but the full-service ones might actually be more profitable for the long term? It's a good question. The full-service kiosks in some ways are a lot like opening a store and really from a rent, from an armored car, from the upkeep, from the servicing, obviously paying for them upfront, amortizing that price, when you look at it from a holistic view there is expectations of the amount of volume that you need to push through a particular location in order to make it profitable.

I would say that certainly really we had a couple hundred of these in the market around the US. I would say some of them were very successful and others weren't. When you look at it in totality, it is a business that was exciting, it was interesting. We learned a lot from it.

The investment that we made there coupled with the investment in the staging kiosk, and some of the evolution of the product that we are looking to put into the market. It has been a win-win. I think at the end of the day, though, the question becomes can you continue to push those? Can you scale, those? Add more to the market and do that in a profitable way or are you better off putting your resources somewhere else? So the success of staging, I would say the scalability of that mode, the value that brings far outweighs the value that we were getting from the full-service kiosk.

And so, yes, while it was a nice product and it was something that conceptually I would have liked to have continued to invested behind it if we could have. It just doesn't make financial sense to do that. And so we are putting our resources where we think we are going to get better returns and better growth over the long term.

We started pulling those out in the second quarter. I think those are mostly out of the market at this point. There may be a few stragglers but they are pretty much done. And then maybe one more question about some of those quarters that you called out in the US-to-US business as well. Could you maybe parse out the impact from fewer migrants in areas like Saudi and the fact that Angola is still shutdown versus pricing?

Or intensified levels of competition from your competitors? I can give you a little bit more color than we already did. Certainly the issues in the countries are all different. I would say they are all fairly unique. Angola seems to be suffering more from a currency issue. The government seems to be struggling with kind of, I don't know if I want to say the balance, the trade portfolio and what it might be.

But the ability to send and receive money in that country has been generally restricted because of a lot of these controls they tried to get a hold of what is happening with their economy. I think if you shift to Libya it's a little bit different. I think there is some agent partners of ours, the banks, that are interested in opening up. They want to send money. Obviously, there are some political, geopolitical issues associated with some of the ISIS concerns. There is just general governmental controls and then there is also just at this point I think a little bit of chaos in the markets after everything that, that country has been through.

So I think to do banking services, to do money transfer services in stable economies or at least stable governments make a big difference and there is a little bit of instability there.

So I think the concern around that is the ability to open up and really manage that without having to be overly concerned about bad things happening when you do that. So I think that is something we have a lot of contact with our agents in Libya working with the government. Hopefully, we can get them some progress there.

But it is just one of these things, it takes some time and certainly we are very sensitive to the issues on the ground in the country. When you shift to Saudi Arabia that becomes much more of an economic type issue.

And I think that the big setback in a lot of their investment projects that they've had, a lot of slowing in those investments. I don't have statistics at this point on what they have done with new worker contracts but a lot of their work is done through contract labor that comes in from parts of southeast Asia, Philippines, et cetera.

And you know one of the steps we have seen is that there has been layoffs in the bin Laden construction company. Saudi Arabia is dealing with challenges with Yemen. That is a big corridor for them. Yemen has obviously got some similar ISIS type challenges with it and so a lot of that volume has slowed way down. We are seeing in Saudi Arabia some price decreases going into the market. We are looking at those and trying to figure out if there is some opportunities to reinvigorate growth through some lower prices on the competitive side.

But generally speaking I think it's just a tough market and that's got to cycle through and we will see how that plays out. I guess I had a couple of questions. Just on the digital front first. I know a lot of questions have already been asked but just the expectation for growth there in the second half. I didn't know the timing of the full-service change. But can we see a step down before it steps up again? I think it our expectations right now is that we stabilize.

I don't think we are going to see a big step down from there. Obviously depending on what happens with Saudi I think that can influence it if the situation there deteriorates further. Right now, that is not our expectation but time will tell. So we have a lot of things as well planned for digital. Those rollouts will come later this year and then the timing of then, when the growth from those initiative kicks in, also can help. So it's a little bit lumpy right now but we are expecting continued solid performance in the digital business..

That is good to know. I guess in terms of the guidance I am glad to see you are protecting the EBITDA I know there has been a lot of pressure that you haven't been able to control on the revenue side. But how do you feel about cutting the costs here again? How close are we getting to cutting into muscle here, Alex, as you are thinking about protecting margins? Well actually, I don't think we are cutting any muscle at this point. Right now what we are doing is actually taking advantage of some of the initiatives that we put in place and really trying to look at operational efficiencies.

And we continue to find ways to improve what we are doing, find ways to do things differently and that continues to help. The other aspect of all of this that kind of gets lost in the numbers a little bit is that our focus has been and will continue to be on what we term internally as profitable growth.

We are reviewing all of our agents. We are reviewing all of our business, our flows, where the money is moving. Looking at all of these pieces and then trying to make decisions as an organization that are beneficial to the bottom line performance.

How do we maximize returns on each and every transaction? How do we operate not only more efficiently but also how do we invest behind those areas that we are going to see better profit per transaction not just revenue per transaction or just transaction growth.

So we are making a lot of decisions on that. And you can see the continued improvement to the commission rate. We continue to do a lot of those pieces and on top of that we are also, I think, continuing to tune our compliance pieces as well. We are doing a lots on the compliance front, putting in a lots of new controls into the system and sometimes when those go in they are a little disruptive to our customers and so we are doing a lot to tune those.

We are doing a lot in online risk management, trying to make sure that, that experience is better. So I think you can drive efficiencies, you can drive throughput better through that. We had the most transactions this quarter that we have ever had good through our system. While you look at the growth rates and say maybe these are not the growth rates that We have seen before, the total volume is there and the business is growing underneath that.

I think we are getting better efficiencies, better throughput of the business that we have and that is really exciting and that's something that we want to continue to see and invest behind..

Just a footnote on that also some of volume we lost didn't have a lot of profitability associated with it. So you are getting a little bit of a break there, is that we are losing the volume that is not profitable in keeping the stuff that is.

More of the low calorie stuff that is there. Just the Walmex renewal, any call outs there? Things that we should consider? I guessing that's a pretty productive channel for you. Actually I'm glad you asked that.

Walmart Mexico has been a great partner of ours for a very long time. I think the situation with Walmart Mexico much like everything else in Mexico. When you go back 10 or 15 years you have a lot of exclusive contracts. That has changed a lot over the prior years. One of the things that maybe you are not aware of with Walmart Mexico is that, that has been a nonexclusive relationship for a number of years. So there are other providers in Walmart Mexico today.

The addition of Western Union, whenever that rolls out will not be, from that perspective, isn't really any different than what We have seen inside Walmart Mexico. There are multiple brands there today. Broadly speaking, our relationship with Walmart is good. We have a number of initiatives underway, some things that I'm pretty excited about and pretty proud of and we will be talking about those in the coming months.

So we look forward to continuing growth to Mexico and certainly continuing to work with Walmart Mexico to make their business even better. The Walmart Mexico is a nice agent for us in Mexico.

AlphaStreet – Transcript Earnings Call Moneygram International Inc. (NasdaqGS:MGI)

Certainly by far not our largest agent in Mexico. So if there is any impact on that I think that is going to be largely offset through other things that we are doing. This is Anthony Dejanovic on for Rayna. Could you discuss the pricing trends that you saw in the quarter and what your outlook for pricing is for the rest of the year? I think it has been a nice balance.

I would say, globally speaking, pricing has been very stable. There is always price changes going into markets. One of the things that we continue to spend a lot of time and effort focused on is really on the FX rate side. Clearly with the currency volatility that we have seen in the markets, paying attention to currencies and what consumers are willing to pay and not pay in any given market on any given day is extremely important.

I think it is something we have spent a lot of time and effort, focused on and something that we do very, very well.

So We have had some places of decreased prices but We have also had a lot of areas of increasing prices and so I'd say the balance of that is a very stable market. There is really not any particular area right now where I'm concerned about pricing and that is very positive. Just in terms of your FX in the second half of the year. What is your outlook for FX impact on revenues? I think we are calling it a neutral. I think we would have that - those gains in the first quarter, and I think we are calling out that, that was kind of a one-time deal.

We don't see the impact. And on the top line in terms of our foreign exchange I think that we could get some modest lift in margin as we are just more scientific about how we price foreign exchange, as Alex was just talking about.

But we don't think it's going to be one of the drivers or something that makes meaningful change in the sense of what our guidance has been.. Yes, I think the one area that we did call out in the script was really on the pound.

Clearly the devaluation of the pound has been felt in the reported numbers and will continue to be. I mean the UK is a nice market for us. We do a lot of trade in pounds but that is more on a reported basis as it comes back into the U. So there will be some headwinds on the reported revenue from that but when you look at it on a constant currency basis We are hopeful that, that will be neutral. Just one final question.

Did you disclose what the non-US transaction growth was in the quarter? Just a couple of things. Can you help me out on the tax rate? You have to bring all that cash back so you get the U. So there is a reason why I and focusing on it somewhat.

I think we have been saying that the real impact on tax rates will be in We are in the process this year.

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But even with the progress that we have made, it going to be hard for it to have a meaningful impact on our tax rate for We will have a tax rate in the future that will more reflect our international operations.

But it is going to be a next year thing. I don't think you are going to see the impact this year. I really don't care about this year versus next year. But kind of more the longer term outlooks. Can you give any color around that at all?

I would just say that right now we are at the fully U. I think also it is going to be on a slope. So it is not going to be - automatically fall to a new number. I think it would approach what you are seeing with some of our competitors over time. But I think is going to be on a ramp. That is a big difference. It is not a big stretch. The first half is at -you are not that far away from that. You had that big benefit in the first quarter.

Or some color around your long-term thoughts around EBITDA margins? We will be managing the Company to improve that margin. We have done it in the past. I think one of the things - one way you get there is what we are doing and that is eliminating the low-margin business. So, yes, margin expansion is actually part of our strategy and that as an integral part of how we are going to get to stronger EBITDA numbers. And then the kiosks. Just to be clear, the kiosks - it is the acquisition made essentially several years ago that is what you shut down?

Not the CVS kiosks or that part of the business? It was through an acquisition almost 4 years ago. They were standalone kiosks. So they were cash accepting kiosks, I think. And there was about something of them. I think certainly we integrated the acquisition and added locations.

We moved those kiosks around from time to time to some different places. I think as I said earlier, we have some that were doing very, very well and then some that just wouldn't perform. When you step back and look at our staging kiosks and those are deployed in multiple markets around the world, obviously CVS being the big number here in the US. Those are doing very well and those will continue to be deployed and perform. In fact, we are adding a few as we speak.. And then last question. The revenue growth rate that you have for this year.

As you think out longer term, is that - do you think that growth rates in the high single-digits are the right place for MoneyGram to be? And I think it is going to be lumpy. That's the - lumpy is not the right word. I think it's going to vary from time-to-time by market.

When you get nice pockets of growth and large countries performing well, that brings it up and otherwise it comes back down. We have expectations of growth in markets that are very different. But, yes, I think high single-digits, low double-digits, whatever it may be is where we can perform.

But it is not going to be the same every single quarter, which is why our guidance is yearly and we do have fluctuation throughout the year.. Well if you can attain that in high single-digit, low double-digit revenue growth, expanding margins and reducing tax rate, your stock is dramatically undervalued. So good luck to you. Alex, I wanted to get your thoughts on Brexit. Obviously, you said right now no impact but as you look at Brexit over the next few years, do you see any impact to the business?

Positive or negative because of what is happening? I think it is a very good question and it's an interesting topic and one that certainly all of us are thinking through, certainly our employees in the country are very curious about themselves. I think the answer is, right now no one really knows what the longer-term effects of Brexit will be.

Certainly the UK, and obviously London, in particular has been a great bed of growth for a lot of international companies. It has been a great place for Europeans to go. People from Asia and all over the world. It's a phenomenal market and a lot going on in the financial space and so it's a good question because it is something we are certainly concerned about. Right now you are seeing a lot of growth in traditional Commonwealth countries. You see a lot of volumes to Jamaica, India, other places around the world.

I think when you also see a lot of migration from Eastern Europe, people from Western Europe and then all parts of the world. It's one of the places that we send almost as many countries from the UK as we do from the U.

So we are keeping an eye on it. I do think that, depending on how it all plays out, and part of it obviously is a question not just of regulation and free flow of travel but a lot of it is also a question, I think, of what happens with the economy. So if the growth sustains, if the job market sustains itself and the ability to have people coming into the country continues, then I certainly think we have great prospects for the UK for a very long while.

If that changes, then obviously we will have balance that out. Right now we are not seeing a huge impact on migration or anything like that. What we are seeing though is certainly the lower valuation of the pound against a lot of currencies in the world certainly influences consumers decisions when they send money. They may spend a little bit less or they may hold back and until they see some things stabilize. I think there is a question in terms of where is the pound going to settle out.

Does it move back up a little or down a little bit. That will influence the decisions that our customers make in terms of when do to I send in and what's the value I get against a rupee or whatever the currency you are trading against may be.

And then, Alex, I know we have talked about Saudi a lot but would you say - is MoneyGram's experience any different than what is happening in the market? In essence are you going in line or better or worse than the market right now? That is always an interesting question to ponder. Unfortunately, the Saudi Arabia, unlike Banco de Mexico, they don't really report their growth rates that often as a country. My expectation, and from what we have seen in the market, is that it is underperforming right now as a country.

My expectation would be that other competitors would be in the same situation that we are. I think that the banks in the country, our agent partners, talk about the impacts and the issues that they are seeing and I don't have any reason to believe that, that wouldn't be consistent with others that are in that market right now.. And we would take next question from Sara Gubins with Bank of America Merrill Lynch. It looks like the compliance enhancement program costs continue to wind down, should that be completed fairly soon?

It continues to wind down. Winding down is perhaps not the right word. I would say the investment needed to complete the program continues to be lower. There is a lot that we have left to do. Certainly we have a lot of changes to systems and functionality that are currently being coded and worked on and those will go in the coming months. We will have spend in for the program.

I think there is still some question around how much that is and then currently the monitor that we have continues to bill us on a monthly basis and that, right now, is expected to continue through also. So we are working on our estimates for timing of delivery of certain components.

But I don't see that program ramping up any larger than it has been. And certainly the spend for it should continue to dissipate. Okay and then Western Union just announced that they have successful completely the recommendations made by their monitor, do you have a sense of whether that's on the horizon for you? Well, the DPA that we have is through November So certainly our conversations with the monitor continue on a daily, weekly, monthly basis.

I think we have made a tremendous amount of progress with our compliance program.

I am very proud of the steps that we have taken, the initiatives that are underway and particularly in all the things that we do every day to differentiate and leading the market in a number of different fashions.

I think that the global nature of our responsibility is a little bit different from what other people have had to do. Which I think makes our compliance changes and our system changes unique in that sense since we are responsible for all of these changes on a global basis and not just in certain markets. But I feel good about we are and we will continue to make progress. I don't expect to be putting out a press release like they did in the near future. But I'm hopeful that in the coming 12 to 18 months we will be in a position where we can talk more about the exit in our success with our initiative..

This is Mike P. I'm just wondering if you are looking short- to medium-term on strategy to take market share, are you seeing opportunities there and if you are, whether by segment or region?

That as an interesting topic because as you look at the markets and where we are competing, we have a number of really interesting things anyway. So for example, the announcement with Arsema in Indonesia, that gets us into the Indonesian post office.

We have had a number of bank partners in Indonesia for a number of years. As you know, a number of islands, concentration of people in different places, getting out into those remote villages and markets is a challenge.

When you are through a postal network it becomes a heck of a lot easier. When you are trying to have your send business grow from places like Malaysia into Indonesia, if you don't have that reach you don't get that same volume.

So adding an agents like that kind of changes that paradigm. So it's a slow growth. It is a slow ramp. But Indonesia is a huge market. Malaysia is a huge market. I think Malaysia is the sixth largest send country in the world so adding that into Indonesia can materially change our business over the coming years in those markets.

We are having great success in Brazil, a country that we struggled with for a very long time. Still a small market but growing. Sends out of Mexico is another good example of an area where historically we haven't had a lot of success and now we are getting that success. So often times it is getting that formula right and getting that balance right. So small markets today for us, but opportunity to grow into those markets.

And we have a lot more examples like that underway plus we have some really interesting initiatives on the digital side, some new partnerships and a few little pieces of opportunities in different areas.

So there is a lot coming and we feel very good about that and all the initiatives that are underway. So there will be more to talk about.

And then on the second part, it kind of goes off that first question but for the second half of on marketing, is that a certain area we should be looking at or is it pretty much the same as it has been?

On the first quarter call, we talked about ramping up marketing on a sequential basis into the second. So clearly that increase is reflected in our results for the quarter. Third quarter, consistent with last year will be another quarter of heavy investment. We have a number of activities underway in different markets around the world.

And then that will carry into the fourth quarter. So you will see more from us in the market, but I think on the financials side it shouldn't be materially different from last year's numbers. I actually still do have a couple questions. It looks like you have reached that by midyear. Number one, am I missing something?

Am I incorrect in that? It was the first quarter, number one, that was so strong and then also we have outperformed. I think part of it is, is that the thread between EBITDA-adjusted EBITDA is narrow and I think one of the things We are talking about is quality earnings. It was a bit of a higher cash component in it. And then so I think we are outperforming on cash. I think we had originally guidance that cash wouldn't go up this year and it has, in the first half of the year.

But we also, in all fairness, we did benefit from that very strong first quarter that put us in a really good place. So at this point it looks like we will be able to outperform that.

I would assume more than just flat for the entire second half. We have curtailments we have mandatory payments on debt, but we did buy stock to offset some of the dilution from employee benefit plans. And then lastly, just circling back to some of the geographies noted. Obviously, we have known for years what a strong send country Saudi Arabia is.

Normally, I would not have thought that Angola and Libya in any combination would be that material in the context of hundreds of thousands of locations worldwide. Are there other countries in the region?

Not to predict future hot spots, but just to give us a sense since Angola and Libya were called out as being meaningful enough to contribute to the lower guide. Are there any countries in the region of similar size in terms of send volume that you would characterize as experiencing, if not similar, some signs of dislocations and uncertainty?

You know, in the interest of time I won't belabor you with all of the interesting things that we get ourselves involved in on a daily basis in markets around the world. But we have a lot of large send markets in Africa, places like Congo and Gabon. We have a very nice right now growing send business in Nigeria, which is exciting for us. You know, I think we talked about Russia, We have talked about Ukraine, We have talked about some of these other places.

I think when you get large economies that are heavily influenced by, not only oil, but what is even more interesting is when the governments themselves rely on that oil or natural gas, or whatever it might be, revenue to kind of sustain the government. When those things weaken you certainly see instability in currencies and you see instability in those markets. Clearly Libya has the added challenge of what is happening from ISIS and other military kind of challenges.

But it is really interesting to us on the daily management of currencies in different markets. It's one thing to be able to buy and sell and trade the currencies and it's another one to be able to convert some of these currencies back into dollars or back into euros and sometimes that can be challenging. So I would say disciplined cash management in all of those countries is important and when governments manipulate currencies in an attempt to stabilize their economies, it can be very challenging on that front.

It creates opportunities but it also can be challenging from expectations of business. It has grown into a really big and robust send market in a number of ways much like the rest of the world. A lot of where Mexico traditionally received only, now a big send market in its own making.

As these things change, the way you manage your business and operate in those country changes and the importance of understanding what is happening, not only at the Central Bank level, but also with the political situations and the banking environment is very important. So, yes, it is just kind of one of the challenges, I think, and also one of the opportunities and advantages of operating in so many countries around the world..

And it appears there are no further questions at this time. Alex Holmes, I would like to turn the conference back to you for any additional or closing remarks, sir. Thank you very much, As always I appreciate your interest in MoneyGram and certainly we will continue to update you on our progress as we move forward.

So thanks to all and have a great day and a great weekend. And, ladies and gentlemen, that does conclude today's conference. I want to thank everyone for their participation. You may now disconnect. 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.

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And now I'll turn the call over to Alex. Alex Holmes Thank you, Suzanne. T hat said, the global nature of our business, along with our continued focus on operational efficiencies, enabled us to deliver bottom-line growth for the quarter within our expectations. Services , Business Services , Transcripts. Error in this transcript? Contact us to add your company to our coverage or use transcripts in your business. Learn more about Seeking Alpha transcripts here.

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