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MoneyGram International Inc. (MGI - Analyst Report) reported first-quarter 2013 earnings per share of 27 cents, modestly higher than the Zacks Consensus Estimate of 24 cents and the year-ago quarter earnings of 23 cents.
Operating net income in the reported quarter excluded negative impacts of recent debt financing of 39 cents per share, restructuring and reorganization costs of 3 cents per share and stock-based compensation of 3 cent a share.
Including these adjustments, reported net loss surged to $12.6 million or 18 cents per share against net income of $10.3 million or 14 cents per share in the year-ago quarter.
Higher money transfer transaction volumes, higher fee and other revenue drove the top line, while lower interest expenses helped the bottom line and free cash flow. However, lower investment income along with higher operating and commission expenses reduced margins.
Total operating expenses climbed 5% year over year to $296.2 million, whereas total commission expense increased 8.7% year over year to $154.4 million. Subsequently, operating income increased to $44.3 million from $35.9 million in the year-ago quarter. However, interest expense dipped 2.8% from the prior year to $17.4 million.
MoneyGram’s total revenue for the quarter was $340.5 million, up 7% from the year-ago period. However, it lagged the Zacks Consensus Estimate of $342 million. While fee and other revenues increased 7.2% year over year to $337.7 million, investment revenue stood at $2.8 million, down 12.5% from the year-ago period.
In the Global Funds Transfer segment, MoneyGram’s revenues grew 8.2% year over year to $320.4 million. Money transfer transaction volume increased 11%, while money transfer fee and other revenue grew 10% on both year over year and a constant currency basis to $294.4 million, showcasing double-digits growth for the 8th consecutive quarter.
Self-service and new channel money transfer revenues surged 31%, representing 6% of money transfer revenues. Moreover, MoneyGram Online money transfer and bill payment transaction volume grew 50%, while revenues jumped 23% over the prior-year quarter.
Further, global agent locations increased 17% over the prior-year quarter to 321,000. Bill payment transaction volume dipped 1% year over year, whereas, fee and other revenues declined 6% to $26 million from the prior-year quarter. As a result, operating margin improved to 12.9% from 11.2% in the year-ago quarter, whereas adjusted operating margin edged up to 14.5% from 14.1% in the year-ago quarter.
Total money transfer transactions originating outside the U.S. escalated 13% from the prior-year quarter. Transaction volume to Mexico increased 23% year over year, significantly improving for the 13th consecutive quarter. Additionally, MoneyGram’s transactions originating in the U.S. increased 7% year over year, while U.S. outbound transaction increased 13% over the prior-year period.
In the Financial Paper Products segment, MoneyGram’s total revenue fell 8.3% year over year to $19.9 million, reflecting lower fee and other revenues. Subsequently, operating margin dipped to 34.7% from 41.5% in the year-ago quarter, although commission expenses remained flat. Additionally, adjusted operating margin plunged to 37.7% from 45.6% in the year-ago quarter.
As of Mar 31, 2013, MoneyGram had cash and cash equivalents of $2.43 billion (down from $2.68 billion at 2012-end), net receivables of $1.17 billion (down from $1.21 billion) and available-for-sale investments of $56.2 million (down from $63.5 million).
The company exited the reported quarter with $849.2 million of outstanding debt (up from $809.9 million at 2012-end), and assets in excess of payment service obligations of $219.7 million (down from $227.9 million).
Free cash flow increased 15.9% to $32.8 million from $28.3 million in the year-ago quarter. The upside was primarily driven by strong money transfer results as well as lower interest payments and capital expenditures, partially offset by higher signing bonuses.
Management reiterated the 2013 guidance and expects total revenue to grow 6%–9%, on a constant currency basis, while adjusted EBITDA growth is projected in the band of 3%–6%. Meanwhile, MoneyGram aims to continue achieving double-digits growth in money transfer transactions and increase free cash flow as well.
Apart from MoneyGram, other performers in the financial sector include CBOE Holdings Inc. (CBOE - Analyst Report), Fiserv Inc. (FISV - Analyst Report) and Allstate Corp. (ALL - Analyst Report), all of which carry a Zacks Rank #2 (Buy).