Unlike recent history, MoneyGram International revenues were slightly below our estimate, which were offset by a lower-than-expected tax rate. Total revenue growth decelerated 200 basis points quarter-to-quarter, rising a still-healthy 9% year-over-year, to $386 million (versus our estimate of $392 million), while adjusted EBITDA rose 7% year-over-year, to $76.4 million (versus our estimate of $78.3 million). Margins fell 40 basis points year-over-year to 19.8% as MoneyGram incurred higher compliance-related costs and higher commission expense related to Wal-Mart (WMT $74.80; Market Perform), the latter of which MoneyGram will lap in April 2014.
The deceleration in the quarter was broad based, but was primarily driven by transactions originating outside the United States (35% of total) as growth rose 8% yearover- year (versus 14% in the September quarter); management attributed the slowdown to pressures in Southern Europe, competitive pressures, and regulations. Management stated that international trends were the primary reason for the January acceleration.
Adjusted EBITDA growth will be pressured by investments (compliance and growth initiatives), higher commission expense, and increased marketing expense. Guidance assumes pricing negatively affects revenue growth by 1-2 points (versus 1 point in 2013). Going forward, management will exclude direct monitorrelated costs from its adjusted EBITDA calculation; this amount totaled $6.1 million for nine months in 2013. We believe MoneyGram has a strong pipeline of business opportunities as signing bonus payments for renewals/new agents are expected to increase to $70 million to $90 million in 2014 (versus $45 million in 2013).
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