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MoneyGram International (MGI)
Q2 2020 Earnings Call
Jul 31, 2020, 9:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good day, and welcome to the MoneyGram International, Inc., second-quarter 2020 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, Mr. Stephen Reiff, head of strategy and communications.

Please go ahead, sir.

Stephen Reiff -- Head of Strategy and Communications

Good morning and thank you for joining us today. On the call with me are Alex Holmes, chairman and chief executive officer; Larry Angelilli, chief financial officer; and Kamila Chytil, chief operating officer and leader of the company's digital business. On the MoneyGram investor relations website, you can find our earnings press release and presentation, which is intended to supplement our prepared remarks during today's call and to provide the reconciliations 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 those prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's performance in addition to the impact that these items and events had on 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.

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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, and the comments made during the conference call and in the Risk Factors section of our Form 10-K, Forms 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 -- Chairman and Chief Executive Officer

Great. Thank you, Stephen. Good morning and thank you all for joining us today. I certainly hope that you are all well and safe.

First and foremost, the health, safety, and livelihood of our customers, employees, and partners remains our top priority as the COVID-19 pandemic continues to evolve. With nearly 80% of all global remittances sent to developing countries, demand for our affordable services has never been greater as people in the developing world increasingly rely on this critical income stream. Every day, I'm humbled to hear powerful customer stories of trials and triumphs as MoneyGram plays a central role in their lives, whether it's a healthcare executive sending money to its aging parents in India or a young barista helping to support her grandparents in Eastern Europe. We have a unique lens into how global macroeconomic factors impact everyday lives.

I'm extremely proud of how we've come together as a company over these last few months to serve our diverse customer base of tens of millions of people who rely on our essential services for life's daily needs. As you'll hear throughout the call today, it's a very exciting time to be at MoneyGram, and I'm incredibly thankful to our global team members who have worked so tirelessly to execute our strategy during these difficult times and help enable the company to deliver very strong results for the second quarter. Importantly, we returned to year-over-year revenue growth in June, led by strong 10% money transfer transaction growth. And this momentum has not only continued but also strengthened in July.

In fact, July is now our largest July ever for money transfer transactions and also the single largest transaction month that we've reported in over two and a half years, and that's with one day left to go. This return to revenue growth has been driven by the phenomenal expansion of our digital business, as well as the continued improvement of our retail walk-in business in many markets around the world. I'm also extremely pleased that we reported year-over-year constant-currency adjusted-EBITDA growth of 5% for the quarter, continuing the momentum from the first quarter. This growth was driven by the resurgence of our money transfer business, the agile management of our operations throughout the crisis, and the ongoing operational efficiencies that continue to be delivered from our digital transformation.

As a result of our strong adjusted EBITDA, our credit profile has also significantly improved. We achieved a better-than-expected quarter-end cash position of over $130 million and fully paid down our revolving credit facility. Overall, despite the terrible ongoing COVID-19 crisis, I am very pleased that we were able to deliver exceptional financial results for the quarter. So taking a further look at our performance during the quarter.

When we last spoke, we reported that we had delivered a much stronger back half of April than what we saw from mid-March to mid-April. That momentum continued to accelerate into May and further strengthened in June. The turnaround in trends has been incredible, increasing from a decline of 17% in April to a positive 10% year-over-year growth rate in June. And as I mentioned earlier, that has continued to accelerate in July.

Clearly, digital has been an amazing success driving phenomenal results, including 106% digital transaction growth for the quarter. In addition, the more recent recovery in many parts of our walk-in business has been an important contributor to the turnaround as well. We were pleased to see increased strength from our U.S., Canada, and European outbound send markets, while strong receive growth in countries such as Pakistan and Bangladesh helped to drive an excellent quarter. Sends from the U.S.

were driven by a return to growth for sends to Latin America and the Caribbean, which was also great to see. Over the last few months, a number of headlines have suggested that the coronavirus pandemic has transformed the company and the industry. Although the pandemic has clearly accelerated the change in consumer behavior, this is much more than an overnight success story for us. We began to thoughtfully lay the foundations of our digital transformation four years ago and have focused on three strategic priorities: first, we invested to deliver the industry's best customer experience and build a direct-to-consumer digital business with start-up agility powered by our leading global brand and network.

As a result of these efforts, even prior to COVID-19, our intuitively designed product and growing customer awareness was already driving extremely strong digital growth rates. Then as the crisis arose, our quick action to further shift our operational resources to our digital business led to a rapid acceleration of digital growth. And the third major action that has led to our turnaround has been our efforts to overhaul major send and receive markets, particularly with new wallet and account deposit partnerships. These three overarching actions have put us in an extraordinary and unique position to seize the moment and ensure consumers are able to transfer money from the comfort of their own homes.

Diving into the details of each of these three major actions, you can see here, on Slide 6, some of the primary drivers behind our consumer and customer experience improvements that have been critical to our turnaround. Our focus has been on design and personalization. We incorporated the best-in-class examples from other leading consumer brands and then adapted those proven techniques for our customers by soliciting their feedback at every step in the process. As a result, our unique loyalty program continues to experience rapid growth as we expand to more markets and also seamlessly integrate the program with our digital capabilities.

Excitingly, loyalty members are accounting for an increasing percentage of our overall business. Another critical component of our customer experience enhancements has been the user design and the simplicity of our app. I'm proud of our product team and their relentless pursuit of customer feedback to make this the best user experience in the industry. As evidence of this success, we recently surpassed 100,000 reviews with incredible 4.8-star rating on the Apple App Store.

And finally, whether through app notifications, personalized birthday emails, text, and forming of a completed transfer or live chat support, we've invested to enhance and personalize our customer communications. These consumer-focused product enhancements are having a positive impact on the entire business and are some of the top drivers of our fantastic digital growth. Now, as I mentioned, our digital business has had an incredible quarter, posting 106% digital transaction growth, up from 57% in the first quarter. Our digital revenue growth increased to 64% from 17% in the first quarter, and we anticipate that revenue growth will continue to accelerate in the third quarter.

So let's take a look at the components of our digital business. First, MoneyGram Online. Our consumer direct channel comprising over 65% of our digital business delivered incredible year-over-year transaction growth of 104% for the quarter, accelerating from a growth rate of 60% in the first quarter. And importantly, cross-border year-over-year transaction growth month to date through July 29 is up an exceptional 205%.

This is an acceleration from 185% that we just saw in June. As we'll discuss on the next slide, this profitable growth engine is driven by our uncompromising focus on delivering the best product offering to our customers. Expanding digital partnerships remains a critical component of our strategy, and our efforts here have also been producing great results. Transaction growth from our digital partnership improved to an astounding 97%.

This nearly triple-digit growth rate marks a rapid acceleration from the 25% growth rate we reported in the first quarter. The third component is our account deposit and mobile wallet receive side services. These partnership integrations with company like Visa and our related FastSend products have been major strategic initiatives as part of our digital transformation these past few years. In fact, our average daily Visa Direct transaction volume in July has more than doubled since the first quarter.

When global shelter-in-place policies were implemented earlier this year, awareness for our capabilities in this channel rapidly accelerated. Once again, our prior investments enabled us to help capitalize on the opportunity and seize the moment. As a result, growth in sends to accounts and wallets accelerated to 148% in the second quarter compared to the same period last year. At the end of the quarter, digital transactions represented 27% of all money transfer transactions, a significant increase from the 18% we reported at the end of the first quarter.

It's important to reemphasize that our digital business has become a significant portion of our business and is contributing meaningfully to both the top and bottom line. Larry will go into a bit more detail shortly, but in the second quarter, our digital business surpassed the margins that we see in the retail walk-in business. Unpacking this a bit further, the digital business is simply very different from the walk-in space. This business is not about revenue per transaction, nor it is about fighting for the share of wallet at the point of sale.

It's about creating a frictionless customer experience. In the digital business, we're measuring success in a similar manner to the way in which many other leading tech companies measure their success: total customers, monthly active users, transaction frequency, and customer retention. And in contrast to many start-ups that haven't achieved profitability, we're also focused on the gross margin of this business because profitability matters, especially as our transformation accelerates. Because our relationship is established directly with the consumer, we have less commissions, less support costs, and less infrastructure costs.

In essence, we can charge less because it costs us less. Our high customer acquisition retention rates are really the best metrics to underscore the strong return on investment that we are achieving from our focus on delivering the industry's best customer experience. Our consumer direct channel has nearly 50% higher customer retention rates than our walk-in business, and these customers also complete 34% more transactions per month than the average walk-in customer. Our digital business is quickly gaining more customers who are staying with the brand and transacting with us more often.

As you can also see, our customer-centric app has been critical to our growth with a 220% year-over-year increase in customers transacting through the app in the month of June. Over 80% of MoneyGram Online transactions are done on a mobile device, and this consumer direct channel is attracting a new, younger segment of customers to our brand. Once individuals try MoneyGram Online, they keep coming back given the simplicity of the experience, the affordable prices, and the unparalleled receive options for family and friends. As the digital business grows, our third overarching action to return to growth has been to further enhance our leading distribution network and expand partnerships in major markets.

We've overhauled major receive markets by integrating new walk-in agents along with important account deposit and wallet partnerships in markets such as India, Philippines, Pakistan, Bangladesh, and Egypt. Enabling consumers to receive funds digitally has been a major component of our strategy to accelerate digital growth. And when the COVID-19 shelter-in-place policies arose, we were once again able to capitalize on our prior investments in these markets. On the send side, we focused on expanding both digital and physical partnerships in many parts of the world.

In the Middle East, we have expanded with leading companies such as Digital Financial Services and Etisalat, Al Rajhi Bank, and LuLu Financial Group. Partnerships with leading fintech players in Asia such as E9pay and GME also highlight another critical component of our strategy as we seek to integrate with high-growth companies to quickly and affordably acquire new customers. Amidst this incredibly productive year of new signings integrations, we've also renewed a number of our major contracts with partners such as the UK Post, and we continue to partner very closely with Visa to expand Visa Direct capabilities to additional corridors. These new digital and physical integration signings and renewals on both the send and receive side complement each other and are clearly contributing to our success in scaling major corridors and markets.

I'm excited about how the focused execution of our strategy and close partnership with leading companies around the world continues to drive results and, collectively, helped to enable our return to revenue growth in June and further carry our momentum into July. I'll turn the call over to Larry now to walk you through the financials.

Larry Angelilli -- Chief Financial Officer

Thanks, Alex. So as Alex described, MoneyGram experienced a significant turnaround in revenue, operating income, and EBITDA over the course of the second quarter. Each month in the quarter, we saw improving trends in revenue to the point where in June, the company had year-over-year growth in almost every major money transfer category. While reported revenue of $280 million for the second quarter of 2020 was down 14% on a year-over-year basis, this was almost all related to the negative impact of COVID-19 in April and lower interest rates on investments.

In June and continuing in July, the company has accelerated from the growth rates it was achieving even before the pandemic. In addition, MoneyGram is now growing at both walk-in and digital markets, as well as among existing agents and new relationships. While triple-digit growth rates in digital are continuing, they're being augmented with increases in same-store sales in the walk-in business. The exception of this is the U.S.

to U.S. market, which continues to decline, but is now trending lower than 4% of our total money transfer revenue. In the second quarter, we also began to ramp up revenue from some of the new agent signings such as those that Alex just discussed, all against the backdrop of a broad range of geographies. As a result of the nearly 29% decline in revenue from COVID-19 in April, total revenue for the quarter on a constant-currency basis was down 13% from last year.

And as I mentioned, another byproduct of COVID-19 was a significant decline in interest rates, which caused the reduction in investment revenue of approximately 70% for the second quarter. An especially encouraging aspect of the company's broad-based growth is that digital properties are achieving scale. And they also generated profit margins that are better than the average margins in the traditional walk-in business. So while digital pricing tends to be lower than walk-in pricing to the consumer, MoneyGram is currently able to maintain or increase profit margins in its newest and fastest-growing business.

As we've stated in the past, MoneyGram has designed its digital offerings with a lower cost structure based on our acknowledgment that future opportunities in this market would go to those with competitive prices. And while in the short term, lower pricing can lower the growth rates of total revenue, MoneyGram has been offsetting this impact with rapid transaction growth well in excess of growth rates in all of our walk-in markets. So this resulted in an increasingly significant contribution to earnings and cash flow for the second quarter, and we expect this to continue. The trends are also encouraging in Walmart stores.

In spite of new competition from the Walmart Marketplace, our volume of U.S. offline transaction was actually higher in June than last year. This is developing into a trend as July is even stronger than June at Walmart. And as we've described in the past, the Walmart Marketplace is designed to keep fees the same among competitors but offers open competition in foreign exchange.

We did have lower foreign exchange revenue in the second quarter due to lower FX spreads at Walmart and the impact of COVID-19 in April. However, by the end of the second quarter, our customer count at Walmart was virtually unchanged from before the Marketplace was even started. In fact, we continue to see our product at Walmart overwhelmingly preferred by customers and associates, providing the basis for continuing growth in transaction. The strength and of our Walmart volume provided a partial offset to lower FX spreads in the quarter.

What is noteworthy about this quarter is that money transfer businesses experienced a broad-based recovery across both its product offerings and its geographies. This will be increasingly important in the face of future challenges from the economic impact of COVID-19 and continued low interest rates. When we discussed our strategy for navigating COVID-19 last quarter, we described the cost-reduction program that totaled almost $100 million in savings for the last three quarters of this year. As the business showed steady signs of recovery and ultimately return to growth in June, we realized that this amount of savings would not be required to preserve our targeted performance for the year.

As we announced in June, we restored salaries for 100% of our employees effective at the end of the second quarter. We also accrued for a special compensation plan that can potentially restore retroactive compensation for all employees that was withheld during the quarter. As a result, compensation and benefits were flat compared to the first quarter and down less than 1% on a year-over-year basis. Even after this reinstitution of expenses, MoneyGram reported adjusted EBITDA of $56.4 million and an adjusted EBITDA margin of 20.2%.

This was an increase of 4% from the second quarter and up 10% sequentially from the first quarter of this year. Not only were these results achieved without any reduction in comp and benefits expenses, but they included an $11 million reduction in investment revenue on a year-over-year basis. This is another indication that not only has MoneyGram returned to growth, but profitable growth and is producing increased quality of earnings. On a constant-currency basis, adjusted EBITDA was up 5% from last year.

Transactions and operating expenses were lower by more than 60% when compared with the second quarter of last year. While we expect that some of these expenses will be gradually restored this year if and when conditions warrant. We have also learned more about our expense base. We've discovered new efficiencies that become permanent, and they can be a permanent component of our margin expansion strategy.

Our experience this quarter also confirmed our prediction that we were building a scalable cost structure and that a return to revenue growth would provide for higher EBITDA margins and improved earnings and cash flow. That scalability supported the company's pre-tax operating income of $22 million, a 54% increase over last year. Reported EBITDA for the quarter was $50 million, which is up 23% from last year after adding back last year's special pension charge of $31 million. The company generated $25 million in adjusted free cash flow in the quarter, an increase of 24% from last year.

We used that cash to pay off our revolving credit balance during the quarter, thus reducing interest expense, as well as reducing our leverage. In addition, the company did not elect to pay interest in kind this quarter, adding additional support to meeting our financial covenants. Another result was, and as Alex mentioned, that the company's cash position remained unchanged at March 31 at approximately $130 million even after all these principal reductions. We announced this week that the Department of Justice has deferred our final forfeiture payment to May 9, 2021.

This provides us additional confidence that we can maintain our normal levels of liquidity into next year and can buffer volatility that may still arise as the COVID-19 crisis continues. Ultimately, MoneyGram, through its performance in the quarter, significantly improved its ability to withstand future challenges that may arise from the COVID-19 pandemic. We'll continue with agile management of our expense base, to support unexpected decrease in revenues, and we have improved our credit profile to comply with our financial covenants. While we believe that our current levels of performance are sustainable for the remainder of this year, we also acknowledge that the crisis is far from over and its economic impact is still developing.

As a result, we will not be providing a specific outlook for next quarter or for the fiscal year. However, if revenue trends and the business remain at their current range, then we anticipate sustained adjusted EBITDA growth in the third quarter. And now I'll turn the call back to Alex.

Alex Holmes -- Chairman and Chief Executive Officer

Great, Larry. Thank you. I'm thrilled with how the new MoneyGram is continuing to resonate so positively with consumers around the world. In summary, as I reflect on our incredibly strong quarter, the state of our business is strong.

We returned to overall revenue growth in June and July is already a record-setting month for us. We reported adjusted EBITDA growth for the quarter and delivered improved EBITDA margins. We generated higher cash flows and began to de-lever, and our direct-to-consumer digital business is delivering consistent triple-digit growth rates. If you look at our digital business as a stand-alone entity with 106% digital transaction growth, 220% app customer growth, high customer retention rates, and strong profit margins, and then simply compare those metrics in our business to those of other digital players in the industry and their company valuations, our digital business alone should be valued in the billions, which easily highlights the significant delta to our current company valuation.

This strong momentum, combined with our continued execution, suggests to me that a higher valuation for MoneyGram is more than warranted. And with that, I'll turn the call over to the operator, and we are ready for your questions. Thank you.

Questions & Answers:


Absolutely, sir. [Operator instructions] And we will take our first question from Mr. David Scharf with JMP Securities. Please go ahead, sir.

David Scharf -- JMP Securities -- Analyst

Good morning, everybody. Thanks for taking my questions. I hope everybody's staying well and safe. First off, maybe a little more background on kind of the digital user.

I know in the last couple of quarters, I think you had mentioned, Alex, that sort of upwards of 70% of the users were new to the brand, that it wasn't necessarily cannibalizing kind of existing walk-in customers. I would imagine those percentages may be shifting around quite a bit when you're dealing with this type of growth, but can you provide more of an update on both, who is using this? Are they new or more of them coming from walk-in? Has the COVID impacted that shift? And secondly, a little more color on perhaps what types of corridors or dominant send or receive markets might be behind a lot of the growth or whether it's just broad-based geographically? Thank you.

Alex Holmes -- Chairman and Chief Executive Officer

Sure. Thanks, David. Yes, I'll go into some detail on all those components. I mean, I think it really is consistent with what we described in the first quarter.

Anything, actually, interestingly enough, I'd say the cannibalization rate as we've moved through the quarter and then into July has actually gone down a little bit from where it was trending when we last spoke kind of at the end of April. So it's really interesting from that perspective because it really is a broad-based growth trend that we see. And I would argue that the corridors, for the most part, really do reflect and kind of mirror what you see in the walk-in space, right? You're consistently seeing European outbound trends, U.S. outbound trends, Asian outbound trends, Middle East, etc., through any of the digital channels, really mirroring and kind of looking a lot like what you see in traditional walk-in space.

So there's not really a lot of variation or differentiation there. Obviously, the growth rates are significantly different. And the customers that we're acquiring seem to be coming from pretty much every walk of life and sort of every geography migration pattern that you would probably want to find and see in the business, right? So the U.S. is -- online is definitely going to Latin America, Mexico, sending to India, Pakistan, parts of Africa, Europe, etc.

I mean, kind of the normal Asian markets. And that just kind of overlays throughout. So these customers definitely are, I think, coming from a lot of the smaller niche brands in the walk-in space. A lot of them are probably also shifting from some of the bank online apps and some of the other places that have been seen before.

I really think that the product, the pricing, and kind of the acquisition strategy we have around that have resonated extremely well. So it really is kind of a broad-based shift. And I don't think that there's really anything unique that I would call out that would sort of say that it's somehow a one-off type thing.

David Scharf -- JMP Securities -- Analyst

Got it. No, no, no. That's helpful. And maybe as a follow-up, on the customer acquisition strategy, I think you had mentioned two-thirds of the transactions in digital are direct-to-consumer.

But can you expand on the partnership side and whether that's going to actually increase? I'm trying to understand because I haven't seen any -- I've seen ads for MoneyGram walk-in services. I haven't seen any on the digital side. And maybe if you can expand a little on the customer acquisition strategy and sort of [Technical difficulty]

Alex Holmes -- Chairman and Chief Executive Officer

Sure. Sure. Absolutely. Well, maybe intentionally or not, you sort of asked two different questions there and they're both sort of equally unique.

I'll take part of that, and then I'll actually let Kamila talk a little bit about the other part. So with respect to digital partnerships, I think as you're probably more than aware, licensing in this industry is a critical aspect of operations in any country. And so when you're in a lot of foreign jurisdictions and markets, there are a lot of restrictions on who's allowed to actually be the license holder in those countries, and so, right, we've tried to place our MoneyGram Online platform to go direct in markets anywhere that it's possible to do that. But obviously, there's a number of jurisdictions where that's just going to be extremely difficult to do.

And so finding a partner typically and hopefully, right, one with a very strong platform with a customer base related to a corresponding product but not necessarily money transfer product, so they have a set of consumers and then adding our service as a platform inside of the app or inside of the web page to enable those customers to send money is really kind of what that digital partnership piece is all about. And I would say that as we've improved our service, the quality of the product and the integrations and really improved our focus on that, we've been coming up with a number of partners across just an increasing amount of markets, and we expect that trend to continue. And that's actually an interesting segue because you get the opportunity to not only kind of leverage and promote to that customer base, but you can also do that in a very direct way. Now, when you're in your MoneyGram Online platforms and you're all over the world, and you got to attract customers, that's obviously a very different approach, and I'll let Kamila talk about that a little bit because I think we've shifted from probably what people would traditionally think you need to do in that space to really win share of mind from a customer.

Kamila Chytil -- Chief Operating Officer and Leader of Digital Business

Thanks, Alex. Yeah. And definitely, David, I'm glad you mentioned the ad because our brand is relevant both in the walk-in and the digital space, but acquisition and marketing is really very different in digital. If you type in, for example, on Google send money or money transfer, our site shows up in a very high organic position, right? So consumers kind of go past the ad for perhaps some other smaller competitors, our site is always in first, second, or third position.

And it actually ranks much higher than some of our more analog -- in terms of culture and, perhaps, offering, some of our more analog competitors. So the pandemic has taught us a lot. We're using very grassroots types marketing activities. We're very strong in social media right now.

We've just introduced a loyalty refresh and a new referral program. So we feel very good about the type of acquisitions that we are seeing, and the return rate really speaks to the fact that these customers continue to pick our brand over and over again.

David Scharf -- JMP Securities -- Analyst

Thank you.


Thank you. [Operator instructions] We will take our next question from Kartik Mehta with Northcoast Research. Please go ahead.

Kartik Mehta -- Northcoast Research -- Analyst

Alex, you talked about June being good and July, obviously, continuing that trend. I'm wondering are there specific corridors where you're seeing strength. And are there any corridors where maybe might still be weak because of the crisis?

Alex Holmes -- Chairman and Chief Executive Officer

Yeah. I think that, you know, without going into a lot of specifics, just generally speaking, U.S. outbound is a great example, has been extremely strong. European outbound has been really, really good.

I would say, perhaps, in contrast, we've seen some good recoveries in some aspects and parts of the Middle East, but not nearly back to strength that I would like to see from that region. I think Asia is probably the same. There's some mixed results there. Some countries have kind of recovered and returned to growth, and others are still really not back where we want to be.

And that's a little bit different across channels as well. In some instances, the walk-in space is still really down. A lot of countries that have had significant shelters in place orders have been challenging. A good example of that might be Oman.

Oman was closed for a very long time. It reopened and then closed again for a couple of weeks as governments kind of battle with the process to eradicate COVID or eliminate it from their borders, if possible. So I think it's examples like that, they tend to be spotty over the world. And so if you've got the digital properties in those countries, you're seeing strong growth in a lot of the digital properties, but the walk-in space can be a little bit challenged still.

I'd say the same is really true for a lot of the receive markets as well. If you look at parts of Africa, Latin America, India is another good example where the walk-in space has just been really challenged from a cash pickup and payout perspective because of the rules associated with shelter-in-place policies from the governments, but we're seeing a surge in account deposit and wallet-type transfers into those markets. And I think that that's also potentially, in my mind anyway, driving some of the online send side behavior, as well as it's a little bit more intuitive, I think, in many cases to send online to account even though cash to account is pretty prominent but when consumers are sort of struggling to get to send locations in the walk-in space as well, I think it's kind of a natural win-win that everything sort of migrates digital to digital. And I think that that's what we're seeing generally around the world.

I think I highlighted a couple of key markets that have just been exceptional for us, Pakistan and Bangladesh, have been huge call outs. I'd say, very strong return to growth in the Philippines. Mexico has done extremely well for us, and these are obviously significantly large markets. They're all very competitive mind you.

So I'm, by no means, suggesting that we're unique in that, but I think that at the end of the day, when your larger markets are seeing recovery and sustained growth, and whether that's from the traditional cash pickup or whether that's continuing pivot and momentum in the digital side, it's good to see just across the board. And I think as I mentioned, July is literally the single largest July we've ever had for money transfer transactions, and we still don't even have today done yet. So it's really pretty remarkable and I think reflective of all the hard work we've put in place and then also recovery in a number of these markets.

Kartik Mehta -- Northcoast Research -- Analyst

And, Alex, when you look at your digital transactions, what percentage would you call completely digital by that that it's not truncated at a physical location? Because I know having your physical location is a big advantage for you, but I'm wondering if you're seeing any changes in consumer behavior where the transaction is 100% digital.

Alex Holmes -- Chairman and Chief Executive Officer

Yeah. It's a little difficult to answer that question because of just kind of the diversity of the sends and the receive markets. And I think we're also seeing -- in the walk-in send locations, we're also seeing a larger shift to digital receives on the receive side, right? So it's really kind of an amalgamation of all those. I would say that digital to digital is definitely increasing.

Digital to cash is probably as strong as it's been. And then I would argue that cash to digital is on an increase as well.

Kartik Mehta -- Northcoast Research -- Analyst

Hey, thank you very much. Appreciate it.

Alex Holmes -- Chairman and Chief Executive Officer

Thank you, Kartik.


We will take our next question from Tien-Tsin Huang with JP Morgan. Please go ahead.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

I got to say the operator has got a great radio voice. I want to ask you guys -- I'm really happy to hear a lot of these trends. Just trying to understand a little bit better based on everything you guys have talked about. We've seen Visa, MasterCard with very strong debit trends improving coinciding in mid-April as well when PPP kicked in.

It sounds like you're not cannibalizing your walk-in. A lot of your peers are also seeing a lot of digital improvement. So just trying to understand how much of it is you taking share from traditional channels or bank channels versus stimulus impacting some of this as well? I don't know if you've been able to study that, but just, I guess, the stickiness or continuity question that I have, if that makes sense.

Alex Holmes -- Chairman and Chief Executive Officer

It does make a lot of sense. And, you know, I do think one of the most difficult things in this industry always is figuring out where your customer came from. Obviously, I think we touched on this a little bit on the last quarter call, that we have phenomenal insights into our own customers and our customer demographics and everything about them. I think we have probably the leading data quality on customers.

And for us, it's really easy to tell if a customer was with us before, if they came and then went and came back, if they were a walk-in, which locations they went to and then if they've gone through the online space or if they toggle back and forth. And for us, those trends have been consistent. We obviously saw at the beginning of the year and then further into the year, an acceleration of that conversion. But again, as I mentioned to David earlier, that acceleration actually slowed a little bit, and we're seeing a bit of a less conversion of walk-in customers.

I think that's probably reflective of the fact that a lot of walk-in locations did reopen. And so I think if consumers were switching, perhaps that slowed a little bit. But what's remarkable and really interesting is that our digital business -- while that occurred, our digital business didn't slow down and actually has accelerated and continued to push forward. So I think we're capturing new customers.

I think we're taking share from a lot of the other traditional players that are out there. I think we're actually competing extremely well with some of the pure-play digital guys. And from what I've heard in numbers that have been mumbled around, I actually think we're probably outperforming a number of the pure-play digital partners as well. And so I think that having the global brand name, having the payout capabilities, not only the vastness of our cash capabilities but also the increasingly uniqueness of our digital payout capabilities, I think it's really resonating extraordinarily well across the industry.

And it's a massive value increase in play on any of the pure-play digital that just have limited networks or really haven't built out the robustness that we were able to capitalize on. So I think our position, I have such conviction on that because that's what we were seeing even sort of last year, right, last October, last November, as our digital business was accelerating. It was remarkably similar trends. And so I think what's happened with the COVID pandemic is that that's just increased the size of the funnel and it's pushing more people to us.

And I think it is just coming from new customers, customers with other brands, customers that were with other banks or other digital partnership who are finding and seeing our brand and it's resonating, and they're coming in to use our service.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Yes. And then on the stimulus point then, Alex.

Alex Holmes -- Chairman and Chief Executive Officer

Yeah, sorry. I think the stimulus is obviously helping. I mean, you're handling $500, $600 to consumers. I mean, that's a significant amount of money.

Sustainability of that is a good question, and I certainly think that there's a large responsibility on the parts of governments around the world to figure out how to sustain economies and consumer spending when the government's shelter-in-place policies that are obviously impacting employment. So I think there is a responsibility there. And I think the stimulus needs to continue to come. I'm not an advocate for over government spending or anything like that.

But I do think in a time of crisis, when the government is actually asking you to stay home and not work and shelter in place and closing locations and retail outlets and everything else, you have to find a way to supplement income for people. And I think in our business, the average transfer is $350. So when you're talking about giving someone $600 or $500 or whatever the amount may be in the corresponding country, it's a significant amount of money for the vast majority of our consumer base. And I think that it definitely is helping.

What I can't tell you is, is it additive to or supplemental to normal income that someone would have made? I mean, that's where I don't have that relevant amount of detail. But definitely, all the stimulus stuff is clearly helping.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Yeah. No, it's tough. It's tough. I appreciate your answer.

I don't want to hog the call, but let me ask one more if you don't mind. Just given all of that, and I get that you're going to change your cost-cutting strategy given the momentum, but how hard are you going to lean in on marketing or driving more customer acquisition, some of the loyalty investments, etc.? I mean, how hard are you going to push that here versus what you thought in March here? I'm just trying to understand how much of it is permanent versus opportunistic.

Alex Holmes -- Chairman and Chief Executive Officer

No, it's a great question. And one, it's, I think, reflective, I guess, of what's going on in the marketplace, right? I mean, when you go back to the start of all of this, we definitely hunkered down and rolled back a number of investments and things that we were planning to do as an organization simply because who knew what was going to happen and a lot of what happened or was going to happen was not within our control. So I think we did absolutely the right thing. We took the exact right measures as an organization.

I think the entire team was completely supportive. And it's really been kind of a coming together opportunity. As we've seen revenue continue to surge in June and July, we're certainly going to be opportunistic about that and take advantage of that growth and the cash that's coming in associated with that to reinvest in the business and continue to push money there. So, no, we intend to be as aggressive as we can be.

But again, also, I think persons would suggest that this crisis is far from over. And again, the uncertainties around that and the economic fallout of a lot of things has yet to be seen. So we'll do it as we need. But I think, as Larry pointed out, I think we've discovered a number of unique ways to flex the expenses kind of on an as-needed basis.

And I think, as Kamila pointed out, we're doing some really different and unique things in marketing that don't take nearly the upfront effort and cost that I would think you would traditionally see in an industry like ours, and that's all very positive when you wrap it together. So we're definitely going to -- we're going to push.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Thank you.


And we will take our next question from Ramsey El-Assal with Barclays. Please go ahead.

Ramsey El-Assal -- Barclays -- Analyst

Hi, guys. Thanks for taking my question today. I wanted to follow-up on Tien-Tsin's first question and just kind of get a sense for the degree to which you guys have any visibility to see whether the performance, certainly, as you progress in the second quarter and into July, is sustainable in the context of sort of pull forward or bounce backs or any kind of shifting in your customers' behaviors, these consumers' behaviors in the context of they weren't able to transact and suddenly they were. Do you have any visibility? I guess the broader question is to the sustainability of the trends you're sort of seeing, is the call here that there's a shift to digital and it's somewhat permanent? Or are you expecting kind of a leveling off of some of these trends? I know it's a tough question, but I just thought I'd give a shot there.

Alex Holmes -- Chairman and Chief Executive Officer

No, it's a great question, and it's absolutely, I would argue, extraordinarily fascinating to break down and analyze. There's a couple of different ways to answer that question. And I'll do my best here, and then Larry and Kamila can keep me on the rails if I forget something. But going back a little bit, when we saw the original stimulus checks come up, we saw a huge surge.

And then that surge came back down but at a plateaued level, way above where we were. So we retained a significant amount of those customers that we saw as that stimulus went out, and then those customers have stayed with us and continued to transact and move forward. I think that as shelter-in-place policies relieved, you could clearly see the momentum in the business coming back. So the question, I think, that continues to be asked, is it pent-up demand? And is it catch-up? And you do see that a little bit because some of the principal per transactions in certain corridors have increased and you do obviously see some timing with the stimulus.

But every time something reopens, every time stimulus flows through, you see a bit of a spike and then a step back down, but it's a nice staircase because it keeps stepping up and then flattening, stepping up and flattening. And you're not really seeing that pullback. There's a couple of examples in some markets. I won't give the specific names to protect the innocent here.

But in the Middle East and kind of here in the Americas, there's a couple of markets that I would call out that we saw incredible surges in the online business when -- in the digital properties when the shelter-in-place orders came in. In the Middle East example, the country is effectively shut down except for a couple of online properties. And the growth rates we saw, obviously, were extraordinarily phenomenal. That has slowed after the walk-in space reopened, but the growth rates that we're sustaining in that market are still three, four, five, six times higher than they were prior to everything that occurred.

So I think there's a lot of increases. And again, to me, it's like sort of looks like a staircase. So you're sort of seeing these ups and then flattening and that's obviously coming off of a big drop. But that big drop was long ago at this point.

I mean, that was mid-March to mid-April. So to think that people are still catching up on send seems a little bit exaggerated to me. So I think the net of my answer to your question would be where our anticipation is that we're in a position given all of the change we've made to our business, all the investments we've made in the send markets, all the investments in the receive markets, all the digital changes that we've made, our anticipation is that we're going to continue to grow. The question becomes at which rate can you sustain the growth? And I think the only thing that would be an inhibitor to that would be if every country around the world decided to do what happened back in March, which is again, shut down for several months.

But that seems to be a little bit against what governments are interested at this point, right? They all want to find a way to sustain, open, and keep things moving forward. And I think the other aspect of what's been happening, too, is that this crisis has forced a lot of change in the industry as well. I mean, there are a number of competitors that have shifted their focus or have actually closed or they're struggling from a liquidity perspective. And I think that our flexibility and diversity as an organization has allowed us to take advantage of that, and really take a good portion of that customer share as well.

So net-net, it's been a very positive May, June, July for us, and we're anticipating that that will continue moving forward.

Ramsey El-Assal -- Barclays -- Analyst

OK. And then let me ask a follow -- a quick two-parter follow-up, which is more relevant to your EBITDA performance. You highlighted cutting the transaction and operations support and the cost-cutting in that line was very significant this quarter. And then you also mentioned that you gained some insights in terms of how much of this could be sort of permanent in nature.

Can you kind of give us more color on that, help us dimensionalize how much of that might stick around versus flown back in as it's a pretty big driver? And then just the second part of it is also on Ripple. Given that's kind of a new line and it also contributed to EBITDA, could you just help us kind of think through the sort of run rate of that line into the back half, if possible? And I'll hop back in the queue here.

Alex Holmes -- Chairman and Chief Executive Officer

Sure. So one of the things I think we kind of touched on tangentially was marketing. I think that when we shifted from sort of a brand recognition strategy to a digital strategy, it also had a very significant impact on the amount of money it takes to market. And I think some of those changes are permanent, that we have a different marketing focus that has a different expense base and it's really focused on the digital properties.

So some of that, I think, is permanent. Some of that is going to come back. We are going to become a little more aggressive, and I think some of that expense will come back but not to the level that it was. The other aspect of it is, I think it's a longer-term trend, where, as we've upgraded our systems capabilities, it just cost us less to make changes and to keep up with things.

And our entire backbone is modern now and we can change things on the fly that used to take months, maybe years. And so that's a significant cost savings as well. And so some of that's permanent, but I think we're being kind of judicious about -- we use the word agile. I think we're watching on a week-to-week, day-to-day, month-to-month basis in terms of these trends.

And we also have the ability to, I think, ascertain whether it's being effective or not. If the marketing isn't working, we can stop it. So I think that's a permanent change as well. Regarding Ripple, I think we have told people, and I don't know how many people, but I think we've told just about everybody that Ripple peaked in the first quarter.

If it was significantly lower this quarter than last quarter, I think it's in a run rate now that's fairly consistent. So it represents a lower percentage of our EBITDA, represents a lower percentage of our -- since it's classified as a negative expense, it's a lower percentage of our expense reductions. And actually, we're looking at that as sort of a quality of earnings metric that we've become less reliant on it in terms of its impact on our EBITDA. And then the other aspect here that's beyond our control is our investment income.

And I think that is a permanent headwind that we're going to deal with. We don't see interest rates moving back up really anytime soon. So that's going to be a governor in terms of us on controlling our expenses. I think that we acknowledge that that's probably a permanent aspect for the rest of the year of a negative in terms of headwind and our expense base will continue to reflect that.

I think at the end of the day, we turned in these numbers with these expense cuts and it started to show that there was some of it that didn't have a revenue impact. And I think that's the rule that we're going to be using, is that if it has a potential upside to revenue, we'll spend it. And I think if it doesn't, we're going to look at it very carefully.

Ramsey El-Assal -- Barclays -- Analyst

hanks so much. Thanks a great deal.


We'll take our next question from Bob Napoli with William Blair. Please go ahead.

Bob Napoli -- William Blair -- Analyst

Thank you. Maybe following up on that question. So the $56 million in adjusted EBITDA, it's the understanding you're not giving guidance and things can change in this crazy world. But given the trends that you have in July, if kind of the trends continue to hold, we should see year-over-year revenue growth in the third quarter in the money transfer business, and we should see EBITDA be higher than the second-quarter adjusted EBITDA?

Alex Holmes -- Chairman and Chief Executive Officer

Yeah. I think we feel good about -- if trends continue, we definitely feel good that we'll see adjusted EBITDA growth for the third quarter over 2019. And then I think money transfer growth will obviously have to drive that. And then where total revenue comes in really is a derivation of all those above factors.

Bob Napoli -- William Blair -- Analyst

OK. I'm sorry, but why wouldn't EBITDA grow quarter over quarter if revenue is going to be up materially, and your cost base and Ripple has bottomed?

Alex Holmes -- Chairman and Chief Executive Officer

Well, I don't think we said it is [Inaudible] guiding specifically to it. And I think that – yes. I mean, I think if you're just trending out kind of what's currently happening, then I'm probably agreeing with you, but again, a lot of what can change those trajectories is not within our control. And I think that's probably the biggest hedge in all of this, is that most of the impact on our business in the second quarter really had absolutely nothing to do with us.

We've executed extremely well. I think we've outperformed given kind of what we were handed. We had really strong momentum as we talked about in January, February into the first half of March, and that reaccelerated through May, and now we're seeing in June and July. And I think it's not just what's happening in the global economy, but I think it's also all the actions and activities and specific things that we had in our plan, including doing an excellent job at Walmart and getting all the new business partners around the world and the acceleration of our digital business.

And so if economic impact and government decisions around COVID don't come into the fold in a material way and impact our business like it did sort of at the end of March, then yes, we should have a very good quarter.

Larry Angelilli -- Chief Financial Officer

And then the only thing I would add is that one of the uncertainties is that there's a lag. If we make a decision to reinstate some expenses today and then a month from now, we find that we're having a relapse of some sort of COVID shutdown, then that's pretty tough for us to control. So I think that's where we're uncertain around this, is that we're going to tiptoe back, but we just want to make sure that -- and we know that we can't match expenses and revenues simultaneously.

Bob Napoli -- William Blair -- Analyst

And just what's the revenue from digital? I think in the Q -- was it $33 million in the first quarter was the revenue from the digital business?

Larry Angelilli -- Chief Financial Officer

I don't think we give that number. I mean, I think we give a percentage of money transferred.

Alex Holmes -- Chairman and Chief Executive Officer

Yes. I don't have it in front of me, but we can follow up with you on that. It's approaching 20% of total revenue, I think.

Larry Angelilli -- Chief Financial Officer


Bob Napoli -- William Blair -- Analyst

20% of money transfer revenue?

Larry Angelilli -- Chief Financial Officer

No. Total.

Alex Holmes -- Chairman and Chief Executive Officer

No. Total revenue.

Bob Napoli -- William Blair -- Analyst

Of total revenue? OK. OK. That's helpful. And then just last question.

And I think, Alex, you kind of hit on this a little bit in your comments, but a big picture question. So you have Remitly that raises $85 million at a $1.5 billion valuation. How do you compare your business to using them as a highly regarded digital-only player in the private markets? How do you compare your business and your technology to somebody like that and your performance? I mean, your comment on the potential valuation of MoneyGram relative to somebody like a Remitly, I guess.

Alex Holmes -- Chairman and Chief Executive Officer

Sure. Yes. And I'm not going to single out Remitly. But if you take the vast bucket of what I would argue would be your swath of digital competition with these incredibly high valuations, I would put our digital business up against them as second to none.

And I would say that in many cases, we have a superior product. I think that the user experience that we put forward, the quality of the app, the quality of the service, the consistency of the messaging, the safety and security of it with respect to fraud-related type activities. I would say that the number of corridors that we can send to and receive into, the FX rates, and just generally, at the end of the day, the consumer experience associated with it really is unmatchable. At the end of the day, when you take a look at what you get from our service in any market in which you try to use it and then compare that to anybody else, it's really extraordinary.

And importantly, it generates a significant amount of profit. When we talk about a digital platform and business across 75 markets that has margin basically on average and, obviously, like anything in this space, it varies by corridor. But higher margins on average in the walk-in space, how can you look at that business and say that it's not worth at least what valuations those guys are getting, if not even bigger than that because it comes with the backing of a very large organization that is obviously incredibly well-known with a massive global brand. So it's fascinating to me to look at our valuation.

I get it. I mean, it's been a long time coming back. But I think that we've been doing exactly what we said we're going to do. We've been investing in return to growth.

We're returning to growth. We're putting up phenomenal numbers. We've built an incredible platform. We've taken out an extraordinary amount of cost, and we're managing our way through this crisis, I think, extremely well.

So when I look at it, I think the company is just -- and obviously, it's my job to believe that and put forward the best performance we can, but I think the company is materially undervalued. And I think we've addressed and continue to address those challenges that give us that discount. And I think it's time to remove that discount and push the company up.

Bob Napoli -- William Blair -- Analyst

Thank you. Appreciate it.

Stephen Reiff -- Head of Strategy and Communications

I think we are overtime, but we'll squeeze in one more if we can.


Absolutely, sir. We will take our final question from Rayna Kumar with Evercore. Please go ahead.

Rayna Kumar -- Evercore ISI -- Analyst

Good morning. Alex and Larry, you've gotten a lot of questions today on the digital business. I'm going to ask something about your walk-in business. Are you still adding agent locations? And you had a competitor this quarter that added a material amount of locations.

If you can tell us where you stand and where there's the most opportunity to add?

Alex Holmes -- Chairman and Chief Executive Officer

Yeah. Thanks for the question, Rayna. And I think we've been in a position for a long while now that we've been able to really take a hard look at all of our markets around the world and really think through what we need to serve each individual market. And we're really taking that approach in terms of a very market-by-market kind of view.

And we are not in a situation where we feel that we need to add locations for any reason other than we think that adding a location is going to be helpful because it's a partner that we want to partner with, and we think it's going to be additive to our growth. With the way in which exclusivity has shifted to non-exclusivity, I think the ubiquity of networks in certain markets, it's rather, I would say, irrelevant, and it's only relevant to the individual consumer sending and their ability to pick up money. I also think, too, that our network continues to be wholly unique in the idea that when you send to a country, you can pick up at any location, and you're not restricted through it. You don't want to be very limited point-to-point network where you're kind of picking out an agent and then having to send there.

And typically, you're doing that because the company you're using is promoting the one that's going to give them the lowest commission and probably arguably trying to promote an FX rate or something like that. So our network is ubiquitous in that sense. It's very flexible for customers. And so we want to have a strong network.

I think the size of the network is completely irrelevant. I think the other thing, too, is that governments around the world are increasingly focused on KYA of agents and agent oversight and responsibility associated to that. The more agents you add, the more cost there is to maintain that network and look at it, and that's not something that we think is really value-add going forward. But we have some amazing partners and we'll continue to add amazing partners.

And we've also made some decisions lately to cut ties with agent partners where they want large signing bonuses, they want investments in signage. And we're just not going to play in the infrastructure investment game anymore. And that's just, I think, the right thing to do from a financial perspective. And the returns we get, reinvesting in our own consumer direct channels is exponentially more valuable than giving a ton of money to somebody to pay for signage.

And so we're kind of shifting away from that a little bit, but we're going to maintain our network and we're going to partner with partners that want to partner with us, that want to invest with us and want to build businesses in their markets and that have reputable brands and strong network. So if someone wants to tell me tomorrow morning they have 1 million locations, then I'll send them a bottle of champagne and they can celebrate with it, but I don't think it means much.

Rayna Kumar -- Evercore ISI -- Analyst

Got it. That's very helpful. Last week, you announced the tax benefits plan. Maybe just discuss the rationale behind it and what benefits do you expect to achieve from this.

Larry Angelilli -- Chief Financial Officer

The NOL?

Rayna Kumar -- Evercore ISI -- Analyst


Larry Angelilli -- Chief Financial Officer

So you're talking about the shareholder rights plan?

Rayna Kumar -- Evercore ISI -- Analyst

I am.

Larry Angelilli -- Chief Financial Officer

Yes. OK. So what happens is that there's a section of the U.S. tax code called 382.

And what it does is it's very strict, and it can cause a company to lose all its NOL carryforwards and its tax credits. And the motivation behind it is that the IRS doesn't want people to traffic in their tax benefits or in their tax efficiencies. So what they've done is they've created a situation where it's possible that even normal trading activity can trigger the IRS definition of a change of control, which is much more complicated than what you would normally expect. Given our market cap and given the fact that we no longer have control stock, we thought it was prudent to protect those benefits and really just to protect it against someone just inadvertently taking a large position.

And this is, by the way, retroactively over a three-year period. So it was really a preventative measure just to make sure that through some mistake, we didn't lose our tax attributes. The board can withdraw this at any time. It's not intended to be anything more than a preventative measure to prevent an inadvertent shareholder position that can cause us to lose our benefits.

Rayna Kumar -- Evercore ISI -- Analyst

Got it. Very helpful. Thank you.

Alex Holmes -- Chairman and Chief Executive Officer

Excellent. OK. Well, thank you all very, very much. We certainly appreciate your time and attention, as always, and we look forward to catching up with you all individually over the coming weeks.

Thanks very much. Appreciate it.


[Operator signoff]

Duration: 68 minutes

Call participants:

Stephen Reiff -- Head of Strategy and Communications

Alex Holmes -- Chairman and Chief Executive Officer

Larry Angelilli -- Chief Financial Officer

David Scharf -- JMP Securities -- Analyst

Kamila Chytil -- Chief Operating Officer and Leader of Digital Business

Kartik Mehta -- Northcoast Research -- Analyst

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Ramsey El-Assal -- Barclays -- Analyst

Bob Napoli -- William Blair -- Analyst

Rayna Kumar -- Evercore ISI -- Analyst

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