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MoneyGram International Inc (NASDAQ:MGI)
Q1 2019 Earnings Call
May. 8, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the MoneyGram International Inc. First Quarter 2019 Earnings Release Conference Call. Today's conference is being recorded.

(Operator Instructions) It is now my pleasure to turn the floor over to your host, Wendi Schlarb, head of Corporate Communications and Digital Marketing. Please go ahead, ma'am.

Wendy Schwab -- Head of Corporate Communications and Digital Marketing

Thank you. 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 financial summary slide deck, which is intended to supplement our prepared remarks during today's call and provides a reconciliation of differences between GAAP and non-GAAP financial measures. We will 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 the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's first quarter performance in addition to the impact that these items and events had on the 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 in our Form 10-K, Form 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 -- Chief Executive Officer

Great. Thank you, Wendi. Good morning, everyone, and thank you for joining us today. As we review the first quarter results, there are a few important highlights to call out. First, the quarter was in line with our expectations. We knew that coming into the year that the first quarter would represent a seasonal low point for revenue, which would be further compounded by the impact of the prior year de-risking initiatives. Importantly, however, our first quarter results include the continued success of our cost reduction and efficiency efforts, which exceeded our expectations, along with the commencement of growth trends in several of our major corridors on a year-over-year basis.

While there's still much work to do, we have accomplished a lot over the last several months and we are executing our strategy to return to growth in the second half of the year.

During today's discussion, I'll be walking you through an update on the progress we've made over the last quarter in addition to discussing our strategic plans as we shift our focus from a year of transition in 2018 through a year of acquiring and retaining customers in 2019.

So let's turn now to discuss the update within the first pillar of our corporate strategy, delivering a differentiated customer experience.

To acquire customers, we're executing 4 primary initiatives. First, we're delivering offers and improving communications through both marketing and transactional notifications in addition to the targeted use of promo codes. I'm excited to report that our open and click through rates as well as our promo code utilization rates are achieving the desired results in the corridors where they were deployed over the quarter.

Second, we're acquiring customers by launching digital products in new markets. These products are attracting new customers who have never previously used MoneyGram and we're excited about strong user adoption, which has enabled us to achieve a year-over-year increase in online transactions outside the United States of 107%.

And finally, we're focused on growing our customer base through the expansion of our affiliate program outside of the U.S. This program is designed to promote MoneyGram through partner referral sites, reaching a new segment of consumers not found through traditional channels. Due to the successful year-over-year increase in transactions through this channel, we're launching additional programs in Europe and Australia.

In summary, as I've mentioned, customer growth is our theme for the year, approximately 50 million people use MoneyGram annually and we're focused on growing that base through these 4 initiatives and many others.

In an age where many companies are valued based on their number of users regardless of profitability, I would argue that we have one of the lowest valuations on a per user basis of any company regardless of industry.

Our users and our 80% global brand awareness are an undervalued aspect of our business and we'll continue to focus on growing that base to return to growth in the second half of the year.

I'll now shift to the second half of the equation, our customer retention initiatives. First and foremost, our loyalty program, MoneyGram Plus Rewards, is growing at an accelerated pace and exceeding expectations. We're achieving strong membership enrollment and loyalty members are averaging a significantly higher number of transactions than nonmembers. Given the success of the loyalty program in the U.S., we'll be expanding the program internationally later this year.

Second, we're increasing our focus on inactive customers with targeted win-back campaigns. These communications and offers are already driving positive results. Programs initiated at the end of the fourth quarter enabled us to reengage and bring back an impressive number of inactive customers in the first quarter of this year. Thanks to the capabilities built last year, for the first time in our history, we're able to directly communicate with those customers. As we get to know them better, we're excited to further deployed these new technologies in a more automated manner to better serve their needs and preferences.

And third, numerous research reports and customer surveys highlight the importance of positive interactions with customer care and support teams. As a result, we've invested in improving our support for both agents and customers, which has helped drive improved satisfaction rating and increased levels of personalized service for our high-value customers. Whether it's providing dedicated call center support for our premier loyalty members or giving a promo code for customers who has called looking for additional assistance, we're focused on delivering a differentiated experience at each and every customer touch point. These overarching initiatives are driving an increase in the number of returning customers, which will help grow our customer base to support our return to growth.

Turning now to our next strategic growth priority, capitalizing on our physical and digital network. Over the quarter, we expanded our digital footprint by launching products in various markets and, for the first time, brought digital capabilities to 2 new markets, including Canada and Chile.

In Canada, we're specially excited the launch of our website in conjunction with our longtime partner, Canada Post. And in Chile, one of the fastest-growing submarkets in the region, we launched our Pay With Cash mobile staging capability that provides an improved experience for both customers and agents. This capability significantly reduces the amount of time needed to complete transactions at the point-of-sale.

During the quarter, we also added this capability to our app in the U.K. I'm also excited to announce that this summer, our app will be available in 26 countries and our newly designed consumer-centric website will be live in all existing online markets.

All of these efforts are driving results. As mentioned earlier, we achieved over 100% year-over-year increase in online transactions outside the U.S. and importantly, despite introductory pricing, we still saw over 30% increase in digital revenue outside of the United States. It's important to note that customers are not just switching to us for the low price and then leaving. In Europe, for example, we recently shifted some of our pricing and our volume was not negatively impacted. Additionally, our data shows that customers who've tried the new MoneyGram app consistently return to use it.

Our investment in digital and the value proposition is resonating well with consumers. Our digital capabilities enable us to reach a new younger customer segment, often in higher income countries. These customers send money via a digital channel that are then received by the family and friends, often in developing countries, who need cash at physical locations. Many of the new money transfer providers have left the developing world behind by now providing cash payout options. MoneyGram, on the other hand, is focused on continuing to provide all consumers with choice and convenience that they demand.

And that brings us to an update on our digital and physical network. Looking at our network, we're pleased to announce that we now have 90% of our agents active on a monthly basis in the U.S. This is a huge improvement and a direct result of both our network optimization efforts and our agent engagement initiatives that improved the agent experience. Further, agents are excited about the enhancements we've brought to the customer experience, especially around loyalty. All this has led to an increased agent satisfaction score and importantly improved productivity rates. In addition to these improvements, we're selectively expanding our network where we see opportunities to scale as differentiation and improve profitability.

In Bangladesh, one of the top 10 received markets in the world, we launched a partnership with Bangladesh Krishi Bank to extend our courage to over 1,300 locations in primarily remote villages. Additionally, we signed an agreement with Jamuna Bank to enable account deposits. As more consumers begin to enter the financial system in Bangladesh, they continue to use MoneyGram's leading cash network or now can choose to have the money transferred directly to their bank accounts.

Australia is another strategic market where having both a walk-in and online business is critical to grow. To that end, given the success of our self-service kiosk over the past several years with 7-Eleven, we have expanded that service and signed an agreement with United Petroleum to drive more volume to our kiosk network in the country.

And MoneyGram Online, which we just launched last year, continues to perform extremely well.

In Egypt, we signed an agreement with the Agricultural Bank of Egypt with 1,200 locations in what is the fifth largest remittance receive market globally. With this deal, MoneyGram will have the largest network in the country and will be the first money transfer company to partner with the bank.

In the UAE, we announced a partnership with payit wallet, the first fully featured digital wallet in the UAE. This is another great example of a pure play digital company that has partnered with us to access our API driven money transfer platform to serve more customers.

In Africa, we continue to see great success with our wallet partnerships. As you know, we have existing partnerships in countries such as Ghana, Kenya, Tanzania and Zimbabwe. Given the success, we are aggressively pursuing new agreements across the continent, which I'll look forward to updating you on later this year.

On the physical front, we're focused on building our presence in one of the fastest-growing markets in Africa, the Democratic Republic of the Congo. The recently elected President is focused on improving financial inclusion across the country, which creates tremendous opportunities for our business. To that end, we resigned an important agreement with Rav Bank, which gives us access to one of the largest networks in the country.

In Europe, we signed an agreement with Logista in France, which gives us access to an additional 1,000 retail locations in this growing market. It's a key partnership that will support our pay with cash mobile staging capabilities mentioned earlier.

Elsewhere in the region, we've increased our scale and diversity in Greece by launching a new partnership with Tough Link and resigning an agreement with our important partner, ACS Courier. We also renewed the contract with Smith & Smith in Romania, one of the largest receive markets in the region. And finally, we signed 2 new digital partnerships, 1 in Moldova and 1 in Georgia.

In Mexico, we signed 2 new agents to expand our reach in what continues to be a growing market and we've also entered into a new partnership to enhance our noncash offerings. Elsewhere in Latin America, we launched the new money transfer partnership in Argentina with the large bill payment provider that has a network of over 1,200 locations.

In the U.S. and Canada, as part of our strategy to grow our presence in ethnic grocery stores, we launched a partnership with Garvey Transfer and also with Island Pacific Supermarket's affiliate NAAC. This service will be offered in supermarkets to deliver our leading cash and digital services to their diverse customer base, including a large population of Filipinos.

In the U.S., we also announced an innovative partnership with Click Global to better serve the large and growing population of gig economy workers that now number approximately 60 million people. About 1/3 of these individuals prefer to receive payment in cash and the MoneyGram network now enables them to receive cash payments for their work.

And finally, we continue to be very pleased with the performance of the Walmart2World service where performance continues to exceed our expectations.

Now it wouldn't be a MoneyGram earnings call without discussing compliance. So I'll simply say that we've shared in the past that despite rising fraud rates across the industry, our compliance programs are achieving what we believe are the lowest fraud rates in the industry. The most recent FTC Sentinel report provides evidence of this in that our fraud rates decreased again this past year. This highlights the progress we've made and that fraud reported against MoneyGram continues to represent an ever smaller piece of a rapidly growing issue for many other companies.

And with that I'll turn the call over to Larry.

Lawrence Angelilli -- Executive VP & CFO

Thanks, Alex. Before getting into the results for the quarter, it's important to note that the company obtained a commitment for $245 million of junior capital this week. So it is important first step in launching the refinancing of our senior debt.

This junior capital facility with a maturity of up to 6 years significantly reduces the leverage on the company's senior debt and improves the company's credit profile for senior lenders.

As we disclosed in an 8-K this morning, this new facility has both cash and payment-in-kind interest and also provides for warrants for up to 8% of MoneyGram's fully diluted shares. This is an essential piece of the company's process in improving its capital structure, and with this commitment in place, we could be in the process of refinancing our senior debt and extending our revolving credit.

For the first quarter, total revenue was $315 million, which is down 17% year-over-year on a reported basis and 15% on a constant-currency basis. This included the impact of losing the final Albertsons volume in early February and the Walmart contract, which had not yet converted to Walmart2World in the first quarter last year. We also continue to feel the impact from compliance-related corridors where de-risking initiatives were not fully implemented a year ago. All of these impacts were included in our expectations for the quarter. We anticipate going over the bulk of these mainly in the second half of this year.

However, as we've been discussing for the last 2 quarters, we're looking at the company's results more from a sequential point of view. That's because the full impact of our derisking process will not be fully lapped until the second half of the year. The impact of seasonality is also relevant to first quarter results. Sequential trends for this quarter reflect the normal seasonal decline from the fourth quarter and when comparing the results on a sequential quarterly basis, total revenue was down 9% on a reported basis, 6% on a constant-currency basis. And importantly in the first quarter, we saw sequential growth trends and year-over-year growth trends in several of our largest corridors.

The most significant headwind in our business continues to be the U.S. to U.S. market. This business is now much smaller than in the past and should have less of an impact on results due to our diversification away from this market.

We also continue to feel the impact from compliance-related corridors where de-risking initiatives continue to have a significant impact. As we've discussed, we anticipate growing through the bulk of these mainly in the second half of this year.

Another way to analyze our trends is to look at revenue since the full impact of compliance took effect last year. We compared our money transfer revenue for March to the trailing 3 months, 6 months and 12-month average. For example, March money transfer revenue exceeded both our 3-month and 6-month average by 7% and 3%, respectively. This is another indication that we're at the early stages of winning back volume from agents and customers and that the company is leveling off.

Due to the successful implementation of our restructuring and our improved operating systems, MoneyGram continues to significantly reduce operating expenses, which were $307 million for the quarter, down $67 million or 18% on a year-over-year basis. Excluding adjustments, total operating expenses still declined a meaningful $50 million for the quarter on a year-over-year basis. These cost improvements are primarily long term in nature and represent a scalable cost structure to the significant improvements in both indirect variable and fixed expenses.

Including the impact of the $30 million termination payment received in the first quarter of last year, MoneyGram had virtually the same EBITDA of 17% less revenue. The company incurred $3.6 million in restructuring and reorganization cost in the first quarter and now the program is essentially complete. MoneyGram has exceeded its goals for cost reductions, while successfully rolling out new and better technology around the world.

Total compensations and benefits decreased $19.9 million or 25% from the same quarter last year, excluding several costs related to reorganization and restructuring, total comp and benefits would have decreased $16.9 million or 23%.

The company's adjusted EBITDA was $50.1 million, a decline of 25% on a recorded -- on a reported basis and 22% on a constant-currency basis. These results slightly exceeded our expectations. Excluding the termination payment from Ant Financial, we have less adjustments in 2019, and we believe shows a higher quality of EBITDA than last year.

Capital expenditures and signing bonuses are also within our expectations and noncash expense from the combination of these 2 items is starting to decline as we move away from the peak spending of 3 years ago.

And lastly, from a tax perspective, as we discussed over the past year, the company continues to feel the impact of TCJA and the double and triple taxation effect that it has on global companies like MoneyGram. We continue to work with Washington to correct for the unintended consequences of this tax law.

And now I'll turn it back over to Alex.

Alex Holmes -- Chief Executive Officer

Thanks, Larry. In summary, the quarter was in line with expectations and again reflects the impact of seasonality and de-risking initiatives that began in 2018. We remain focused on growing our low risk customer base through customer acquisition and retention initiatives and our digital strategy continues to advance the company forward. Customers continue to view MoneyGram as the most safe, affordable and convenient cross-border money transfer company in the world and we look forward to bringing our services to an increasing number of people around the globe.

And with that I'll turn the call over to the operator, and we will take your questions.

Questions and Answers:

Operator

(Operator Instructions) And we'll take our first question from Ramsey El-Assal with Barclays.

Ben Budish -- Barclays -- Analyst

Hey guys.This is Ben Budish on for Ramsey. I just wanted to ask about your digital transaction growth. I don't know, the last couple quarters, I don't think we've gotten a growth rate kind of ex-U. S. to U.S. in Outbound. Is there any kind of color you can give us on how the numbers compare to a comparable metric for last quarter or what the impact of U.S. outbound business would have been?

Alex Holmes -- Chief Executive Officer

Ben, the U.S. outbound business is doing OK. It's kind of going through the same changes that were implemented with the de-risking efforts and some of the other corridor changes that we made. We're doing quite a bit in the U.S. right now, with promotions and pricing and we're doing a lot of different things to try to accelerate that growth and get it back, where similar to our competitor, we're having challenges in the U.S. to U.S. business, both in the walk-in space and in the online space, which is generally speaking, has been historically a larger portion of our online business domestically. So that's obviously down and we're sorting through that. So we anticipate the growth in the MoneyGram online outbound will return similar to the walk-in business, hopefully ahead of that and the U.S. to U.S. will continue to be a work in progress, but we continue to expand outside the U.S. and the growth results continue to outperform.

Ben Budish -- Barclays -- Analyst

Okay. And then just the gap between transaction revenue growth on the digital. Is that all introductory pricing? And if so, when do you kind of expect to either raise prices or see that kind of lap?

Alex Holmes -- Chief Executive Officer

Yes. Some of it is introductory pricing. Obviously, we're kind of running hard at it. We're in a large-scale customer acquisition mode right now as an organization and that's not just in the online space. We are doing a lot with discount promotions, coupons. We're on a big customer win-back campaign as we talked about and obviously looking to continue to acquire more and more customers.

In the online space, most of the customers we acquire are new to MoneyGram in various ways. Some of them are a bit of a crossover from walk-in space, but generally speaking, they're net new to us as we say, which is pretty exciting.

Across the globe, the promotions, discounts, pricing, we're looking at what we need to do with pricing to be competitive against the backdrop of a number of different levels of competition, right? You've got the online guys, you've got the niche corridors and then you've got the broader more global people out there. So for us right now, obviously, revenue growth and getting that going the right direction is important, but I think it's more important that we focus on customer acquisition, retention, win backs and then we get the transaction growth moving in the right direction. So I think the trend in the discount of transactions growth versus revenue growth, I think, is illustrative of that strategy than something that I would anticipate we're going to see for the coming quarters.

Ben Budish -- Barclays -- Analyst

All right. Thank you thanks

Operator

And we will take our next question from Mike Grondahl with Northland Securities.

Mike Grondahl -- Northland Securities. -- Analyst

Thanks guys. You talked about seeing some year-over-year growth in some of your larger major corridors. Can you talk a little bit about what's driving that?

Alex Holmes -- Chief Executive Officer

Yes. I think it's a number of things. I think that, first and foremost, a large number of the compliance changes that we made, right, were done over the course of the year, particularly we targeted some of the more fraud-centric areas.

I think when you drop back and look at the implementation of the pricing -- excuse me, the ID and all these data collection standards, that was kind of earlier on in the year and that's something that we've been talking a lot about spending a lot of time with agents, socializing with them and really beginning to put the plans in place to look at what are the corridors, the largest impacts of that, which ones are sort of the unintended consequences. We talked a lot last year or earlier this year about some of the U.S. to Latin America corridors being sort of unintended consequences of all of that getting knocked down a bit.

And so we've had to spend an inordinate amount of time over the past 6 months really trying to get the message out to the customers directly and then also doing a lot with our agents and partners. So the loyalty program has been a huge add for us in the U.S. I give all the credit in the world to the U.S. team and everything they're trying to do to message and communicate, particularly in the nonexclusive locations. The efforts that we put forward to try to win customers back and I think the message is beginning to resonate. And there's a time lag in everything that you do, particularly in the walk-in space.

It takes a long time for the message to get there and for those things to resonate, right? When we collect ID, I think people immediately assume that it has to be some sort of U.S. ID or a driver's license and that type of thing, and so clarifying those messages in those communication pieces takes a while.

So yes. I mean, we're not, for lack of better term, out of the wood yet in terms of some of that impact on those de-risking efforts and obviously we're in a unique position with some of the data collection standards and the ID collection. But we are seeing others begin to take on those similar responsibilities on ID collection. And all those things begin to help over time. And so I feel like we're doing a really good job trying to get the business back to where we wanted to be and we're not there yet, but I think the promotions, the pricing, the win-back campaigns, the targeted customer acquisition strategies, I think, are all kind of coming together.

So it's been a pretty good group effort, but we've also tried to do a lot at the point of sales to help the agents for a better experience. Whether that's been through the compliance organizations or the operations team or the marketing team, the sales guys directly, it's been a lot of work. But I think it's beginning to resonate and, hopefully, beginning to show up in the results as we move forward.

Mike Grondahl -- Northland Securities. -- Analyst

Got it. Maybe just secondly, could you be a little bit more specific with some of the agent support? What are some of the things you're doing now for the agents?

Alex Holmes -- Chief Executive Officer

Yes. No. There's quite a few things that we're doing. One has obviously been a lot of efforts that we've talked about in the past on improving that technology and the point of sale. I think you're one of the analysts who gets out in the street and goes and talks to the agents, and we've been doing a lot to make that experience better. We've also involved them more directly into the campaigns to win the customers, right. There's always an angle with an agent, particularly in the nonexclusive agent, around their view of the value of the transaction, right? And you get some agents that are really, really focused on making sure the customers gets the best price and there are other agents that are obviously more interested in making sure that they get the best price.

So as part of our effort as well, Mike, has been on reducing the friction at the point-of-sale, putting a better product, better service in place. We've enrolled them in campaigns to help support the growth of and promotion of things like the staging product and the promotion of our loyalty program. They enjoy being part of those campaigns. And I think generally speaking as well, we talked about this a little bit, I think on the last call, but we're also trying to get more aggressive where we need to on commissions. A lot of the niche competition that sort of come in underneath us is really focused on outsized commissions and really focusing on how do I win the competition at the point-of-sale from an agent perspective.

And so we've had to change our focus there as well. I think the message that Larry delivered around reducing our fixed and variable cost so that we can put a little more money back into the commission side is an important part of that strategy as well. So I think when you take those things collectively, put a little bit more effort into getting back out spending time with the agents and making sure that they understand the value that we place on them and the importance of them participating with us in these efforts to get the customers back. They're there to do it, and I think we have a great brand name and recognition and word-of-mouth goes a long way in this business. So you begin to treat it right it's going to come back, and I think that's happening.

Mike Grondahl -- Northland Securities. -- Analyst

Sounds good. Okay. Hey thanks

Alex Holmes -- Chief Executive Officer

thanks Mike

Operator

And we'll take our next question from Tien-Tsin Huang with JPMorgan.

Tien-Tsin Huang -- JPMorgan. -- Analyst

I know you guys are obviously working really hard on the customer side of it. I'm curious if you have any new answers on customer acquisition cost and lifetime value of customers for digital, given all the work just hearing you talk about, I mean, maybe figure that dynamic, especially digital versus traditional. Anything to share on that?

Alex Holmes -- Chief Executive Officer

Yes. Probably not any hard dollars I want to fling around, but I would say that our general customer acquisition rate continues to be relatively inexpensive in the walk-in space and I think that is simply because a lot of it can be driven through the partnerships that you have, and again, influencing consumer behavior and agent behavior at the point-of-sale is a pretty critical part. We have a lot of great agent partners around the world, most of them are there to help promote our service and our brand. You give them the right tools to do that and the right pieces to attract the customer back. It resonates and goes a very, very long way. In the online space, it's obviously a very different game. It can be expensive to acquire customers. But the stickiness is a lot better. We see a lot more repeat customers in the online space.

And so we're putting more money behind that, is part of what we've been doing and we've been doing quite a bit on pushing that forward. So the lifetime value of the customer in the online space is clearly superior to the walk-in. Not 100%, but for the bulk of the customers, you're going to get more people toggling between brands and the walk-in than you do in the online. So once you get them, you're in pretty good shape. Anything you want to add to that?

Lawrence Angelilli -- Executive VP & CFO

Yes. What we've done was specifically targeted repeat users. So our incentives are directly really to incentivize customers to do multiple transactions over a period of time. So we actually can annuitize that income stream, and so we can close our line what it cost to get customer in a lifetime value.

And it's very specifically targeted toward certain transactions and frequency, and so without giving you specific numbers, it's clearly the motivator behind the design of our incentives for consumers.

Alex Holmes -- Chief Executive Officer

Yes. I mean, I'll just add to that. I think loyalty program is illustrative of that, right? The way that it works is you get a discount, 20% discount on the second transaction. That's specifically designed to win you back once you've done 1 and then you get the 40% discount on your sixth or fifth, depending on the quarter that you're in there. But that same kind of thing, right, which is where we see drop-offs in customer behaviors and how you win them back is important. So if you can't get them -- if they're in a loyalty program, very sticky online, much stickier but then collecting data about customers has been huge for us. Getting people to opt in into transactional notifications, but also in the marketing notifications is huge because we can directly target them, and that is very relatively inexpensive in terms of sending messages to customers and that's actually a very effective way to do it. But obviously, online spending is very competitive. That can be expensive, but it's obviously an important and very critical part of the online expansion.

Tien-Tsin Huang -- JPMorgan. -- Analyst

Thanks. Maybe just my follow-up, I'll ask something on the refi side and pretend to be a credit analyst. So with the $245 million done here, what's left? What's next in terms of steps? Can you maybe help us with the time line and if there have been any surprises so far in that process in the refi?

Lawrence Angelilli -- Executive VP & CFO

The time line is, is that we very shortly flip into amending or extending our existing senior notes. So it's kind of a 3-step process. We needed to get this subordinated piece done. Now we flip into getting the senior stuff done. And then the third and simultaneously related to that is also our revolving credit, which was temporarily extended, and so that will get redone. That should all start really in the next couple of days and we're expecting that to be a much more accelerated process because now that the credit has been improved and everybody understands the impact of the subordinated notes.

So I think we're kind of lifting -- getting the subordinate done is -- that was the heavy lifting and then now we can kind of finish this off over the next several weeks.

Tien-Tsin Huang -- JPMorgan. -- Analyst

Thank you.

Operator

And we will take our next question from Rayna Kumar with Evercore ISI.

Rayna Kumar -- Evercore -- Analyst

Good morning. Thanks for taking my question. Earlier you spoke a little bit about the pricing in your digital business. Could you discuss the trends you're seeing out there for your cash to cash cross-border business and then your expectations for rest of 2019?

Alex Holmes -- Chief Executive Officer

Sure. I think it's, as always, the answer is always slightly incomplete because it's a market-by-market view. But I would say that generally speaking, if I'm here in the U.S. and you're focused on kind of the retail side of space, particularly in the smaller retail space, if there's a lot going on. I'd say prices are generally stable from a fee perspective, but I'd say that there's a lot happening in the FX side, a lot of the competition is getting very aggressive on FX including the view seeing negative FX in some cases, meaning you're actually giving customers more on the backend than they'd actually receive otherwise.

So that's something that we're very attuned to. I think generally speaking, around the world, we continue to see price and fees in particular being a competitive piece of the business across Middle East and Africa, parts of Asia. There's a lot of new players leading with price and then obviously some of the legacy ones are adjusting prices to get there.

I would argue, from our perspective, that generally speaking, pricing is consistent. I think with at least the message that we're trying to resonate is that it's -- price is what a lot of the competition leads with and it's something that we have to be very sensitive to and that we are for sure preparing for that inevitable price battle that I think is always ongoing and I think that we were probably not extremely well positioned for that over the last couple of years. I'd say now we're very well positioned for it and I think that you can take advantage of that. I mean, one thing is for sure. You lower prices you get more customers. So the question is, how do you do that in a profitable way without impacting margin? And then obviously, there's always a delicate balance there, but I think with the restructuring initiatives that we put in place, the reduction of our cost base, we're in a great position to scale and particularly if you can put the same customers through the system with more transactions, the repeat customer piece of it makes a big, big difference.

So yes. No. I mean -- I think that comparatively speaking, prices are where the story kind of begins and I think that we're very well positioned to compete now and that's something that we're going to continue to see.

Rayna Kumar -- Evercore -- Analyst

Got it. And as a follow-up, on your previous earnings call, you spoke about returning to growth in the back half of this year and in 2020. Is that still your expectations? And besides better comparisons related to compliance, what else could help you return to growth?

Alex Holmes -- Chief Executive Officer

Well, the first question is, yes, we still are holding to that. And I think it's -- it really is based on these win-back campaigns and the recovery of some of these corridors that are important to us. The -- it's really going to be much more about restoring growth in individual corridors than it is to land, for example, a huge new piece of business or something. This is really each quarter at a time. And right now, we see that a lot of the things that we're doing are working and will support a return to growth in the second half of the year.

I mean, it is partly the comp issue. I mean, in July, we did see a material step down. So we are really looking at that as also being part of this. But so far, I think our efforts are succeeding and we're on schedule to deliver that kind of growth in the second half.

Lawrence Angelilli -- Executive VP & CFO

Yes. I mean, just to add to that a little bit, I think that we've got specific corridor de-risking that we have yet to go through later this year. We continue to have a challenge with our U.S. to U.S. business, which we're hoping to address also later this year where we just recently lapped the Walmart2World, which could be positive for us. That product is performing very, very well. So there will continue to be some residual effects there. Obviously, Albertsons rolled off at the end of January, early February. So that's compounding the growth rate issue at the moment, but -- and then there's other things as well, right? There's some markets that we're trying to get reopened and aren't reopened yet. There's some hard currency issues in a number of markets where traditionally those have been strong growers for us.

But I think to that end, we are where we want to be. I think that the pricing discount promotions, I think all the customer win backs that Larry talked about, we talked about, all of that makes a big, big difference, influencing agents at the point-of-sale and if we're able to get a couple of markets reopened that we're targeting, we continue to see the growth and some new agents come onboard in a few areas and begin to win the customers' minds back to the brand. We're going to be in really good shape. I think it's a big effort across a number of different areas, but I think that between the customers themselves and the agents, there's a lot of opportunity out there.

I mean, we certainly benefit from one thing and that's we're in a growing industry. We're also in an industry that continues to, I think, become more dynamic every day and not everyone can say that and I think we're fortunate in that respect. So we're going to do what we need to do to get the business back and start with customers then transactions and then revenue, then that's kind of the formula we're following.

Wendy Schwab -- Head of Corporate Communications and Digital Marketing

Thank you.

Alex Holmes -- Chief Executive Officer

Thanks Brian--.

Operator

And we'll take our next question from David Scharf with JMP Securities.

David Scharf -- JMP Securities. -- Analyst

Good morning. Thanks for taking my questions. Alex or Larry, I wanted to make sure I better understood the terms of this refinancing, because it seems like a few aspects of it are kind of stand out as particularly expensive. On this 8% warrant side, just looking at the 8-K, I want to make sure if I have this correct. I mean, it doesn't seem like there are very many restrictions on those being exercised and it looks like they're exercised nominally at the $0.01 per share. Should we be in effect modeling an 8% increase in diluted share count upon closing? I mean, is there any likely scenario in which you didn't effectively cede 8% of the company to the 2 new lenders?

Lawrence Angelilli -- Executive VP & CFO

I think you should model it. That's one of the reasons we're disclosing it this way, so that you should model it as 8% dilution. So they're $0.01 warrants. And actually, it's a fairly standard aspect of this sort of mezzanine financing. It's -- it can be a broad range, but we went through a competitive process and this was an aspect of every bit that we saw and -- but it is dilutive at 8%.

Alex Holmes -- Chief Executive Officer

I think that until we close the facility and fund, then you get all of the terms and conditions associated with that. You're not going to see all the optionality around that. So I think there is -- I think making that assumption is probably important on the flip side. There will be some optionality around that and the timing of it is also very much open.

Lawrence Angelilli -- Executive VP & CFO

Yes. We won't be able to file this. There's a material agreement until it closes. And there is some conditionality around it, but through what we can talk about now, that's what we -- that's the message we want to get out.

David Scharf -- JMP Securities. -- Analyst

Got it. But not closing would be far worse than giving up 8%. I see.

Lawrence Angelilli -- Executive VP & CFO

If it doesn't close, there's some -- yes.

David Scharf -- JMP Securities. -- Analyst

Larry, could you explain the PIK feature and the payment in kind feature in terms of whether or not, with your option, I mean, are you able...

Lawrence Angelilli -- Executive VP & CFO

Yes. It's in our option. It really is a -- I'm sorry, I cut you off.

David Scharf -- JMP Securities. -- Analyst

Oh no, I was curious, just number one, what the payment kind consists of; and number two, in lieu of cash interest I would assume; and then number two, what kind of a cap is on the PIK feature.

Lawrence Angelilli -- Executive VP & CFO

Yes. What the payment in kind does, it softens the impact from a cash flow perspective and it is in our option. So we can pick or we can pay the cash interest based on our desire on a quarterly basis. So really, what it does is it softens the impact during the life of the facility to support interest coverage as necessary.

I don't think we have disclosed the amount of the pick, but it is also a pretty standard feature in these types of facilities. It's less than half of the yield, but it is significant in terms of the cash impact that it can have, but it is under option.

David Scharf -- JMP Securities. -- Analyst

So just to -- no, I'm definitely familiar with these sub-debt plus warrant structures, but just want to understand the magnitude in this scenario where this facility carries roughly $32 million of interest cost per year. If you were to pick, let's say half of it, so you would have 6 -- you could still have $32 million in GAAP interest expense, but if $16 million were in cash, is the other $6 million -- how is the others -- the other $16 million just accrued, does it just gross up the kind of the face amount of the facility? Or is it issued in the form of additional warrants?

Lawrence Angelilli -- Executive VP & CFO

No. It actually just grosses up the principal balance and then -- yes.

David Scharf -- JMP Securities. -- Analyst

Okay, perfect. And then lastly, I don't know if you provided the metric before, but where does U.S. to U.S. stand now in terms of the mix of your transactions and money transfer?

Alex Holmes -- Chief Executive Officer

It's like 8%.

David Scharf -- JMP Securities. -- Analyst

Down to 8%? Got it. Perfect.Thanks so much.

Alex Holmes -- Chief Executive Officer

Thanks. Operator, I think we're about out here. So I think we're good.

Operator

That concludes today's question-and-answer session.

Alex Holmes -- Chief Executive Officer

Thank you. Great. Thanks, everybody.

Lawrence Angelilli -- Executive VP & CFO

Thanks, everybody.

Operator

And that concludes today's call. Thank you for your participation. You may now disconnect.

Duration: 47 minutes

Call participants:

Wendy Schwab -- Head of Corporate Communications and Digital Marketing

Alex Holmes -- Chief Executive Officer

Lawrence Angelilli -- Executive VP & CFO

Ben Budish -- Barclays -- Analyst

Mike Grondahl -- Northland Securities. -- Analyst

Tien-Tsin Huang -- JPMorgan. -- Analyst

Rayna Kumar -- Evercore -- Analyst

David Scharf -- JMP Securities. -- Analyst

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