MoneyGram 2009 Annual Report Download - page 42

Table of Contents
offset by growth in money transfer transaction volume. Money transfer transaction volume growth resulted in incremental commissions
expense of $16.1 million, while lower commission rates and the decline in the euro exchange rate, net of hedging activities, reduced
commissions expense by $7.7 million and $6.9 million, respectively. Bill payment fee commissions expense decreased $3.8 million due
to volume declines, partially offset by a $0.6 million increase due to higher average rates. Commissions expense in 2009 also decreased
by $2.5 million primarily from lower signing bonus amortization as certain historical signing bonuses were fully amortized in the third
quarter of 2009.
The operating margin of 8.3 percent for 2009 decreased from 13.8 percent in 2008, due primarily to $34.5 million of legal reserves
related to a patent lawsuit and a settlement agreement with the Federal Trade Commission, a $5.2 million increase in stock-based
compensation, a $7.1 million increase in provision for loss and a $3.2 million charge to impair goodwill related to discontinued bill
payment product offerings, partially offset by the higher fee revenue as discussed above.
2008 Compared to 2007
For 2008, Global Funds Transfer revenue increased $154.5 million, or 18 percent, compared to 2007. Fee and other revenue increased
$157.8 million, or 18 percent, driven by the growth in money transfer and bill payment transaction volume, partially offset by a
$3.3 million decrease in investment revenue from lower yields earned on the realigned portfolio. See Table 3 — Net Investment Revenue
Analysis for further information.
Money transfer fee and other revenue grew $138.7 million, or 19 percent, in 2008, while money transfer transaction volume increased
18 percent. Money transfer transaction volume growth resulted in incremental fee and other revenue of $131.8 million in 2008, while
average money transfer fees reduced revenue by $11.6 million from lower principal per transaction and corridor mix. The increase in the
euro exchange rate, net of hedging activities, increased revenue by $20.2 million in 2008. The money transfer growth in 2008 was a result
of our network expansion and continued targeted pricing initiatives to provide a strong consumer value proposition, supported by targeted
marketing efforts. For money transfer, our Americas transactions increased 19 percent in 2008, while EMEAAP transactions increased
16 percent in 2008. Transaction volume to Mexico grew 2 percent in 2008 compared to 8 percent in 2007, reflecting slowing growth from
the economic conditions in the United States. Mexico represented 12 percent of our total transactions in 2008 compared to 13 percent in
2007. Bill payment transaction volume growth of 13 percent from network expansion increased revenue by $18.8 million, while higher
average fees from higher principal per transaction and vertical mix increased revenue by $0.3 million in 2008.
Commissions expense increased $92.9 million, or 23 percent, from 2007, primarily driven by higher money transfer and bill payment
transaction volume, higher commission rates, amortization of signing bonuses and increases in the euro exchange rate. Higher money
transfer transaction volumes increased fee commissions expense by $54.4 million, while higher average commissions per transaction,
primarily from Walmart, increased commissions by $4.0 million. The extension of the current agreement with Walmart, our largest agent,
through January 2013 includes certain commission increases over the term of the contract. The Walmart commission rate increased one
percent effective March 25, 2008, but is not scheduled to increase again until 2011. Amortization of signing bonuses increased
$11.6 million in 2008 from the signing of several large agents in 2007 and one large agent in the first quarter of 2008. The change in the
euro exchange rate increased fee commissions expense by $8.8 million. Bill payment commissions expense increased $11.3 million due
to volume growth and $3.2 million due to higher average rates.
Operating income of $139.4 million in 2008 increased from operating income of $127.3 million in 2007, reflecting a higher growth of fee
revenue compared to commissions expense growth and investment revenue declines.
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