MONEYGRAM INTERNATIONAL INC - Quarter Report: 2023 March (Form 10-Q)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

	Form	10-Q


(Mark One)
☑			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended March 31, 2023.
☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to .

Commission File Number: 001-31950

MONEYGRAM INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)


Delaware						16-1690064
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)
2828 N. Harwood St., 15th Floor Dallas, Texas						75201 (Zip Code)
(Address of principal executive offices)

(214) 999-7552

Registrant’s telephone number, including area code

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

___________________________________

Securities Registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	MGI	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.:

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of April 26, 2023, 97,735,549 shares of common stock, $0.01 par value, were outstanding.

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	PART I. FINANCIAL INFORMATION
		Page
Item 1. Financial Statements (Unaudited)		1
Condensed Consolidated Balance Sheets		1
Condensed Consolidated Statements of Operations		2
Condensed Consolidated Statements of Comprehensive Income		3
Condensed Consolidated Statements of Cash Flows		4
Condensed Consolidated Statement of Stockholders’ Deficit		6
Notes to the Unaudited Condensed Consolidated Financial Statements		7
Note 1 — Description of the Business and Basis of Presentation		7

Note 2 — Settlement Assets and Payment Service Obligations		8
Note 3 — Fair Value Measurement		8
Note 4 — Investment Portfolio		10
Note 5 — Derivative Financial Instruments		10
Note 6 — Debt		11
Note 7 — Pension and Other Benefits		12
Note 8 — Stockholders' Deficit		12
Note 9 — Stock-Based Compensation		13
Note 10 — Income Taxes		14
Note 11 — Commitments and Contingencies		15
Note 12 — Earnings per Common Share		17
Note 13 — Segment Information		17
Note 14 — Revenue Recognition		19


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		29

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 6. Exhibits		31

Signatures		32

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GLOSSARY OF TERMS

This glossary highlights some of the terms used in the Quarterly Report on Form 10-Q and is not a complete list of all the defined terms used herein.


Abbreviation						Term

API						Application Programming Interface
CFPB						Bureau of Consumer Financial Protection Bureau was created by the Dodd-Frank Act to issue and enforce consumer protection initiatives governing financial products and services, including money transfer services, in the U.S.



Consent Order						Stipulated Order for Compensatory Relief and Modified Order for Permanent Injunction


COVID-19						Coronavirus disease
Digital Channel						Transactions in which either the send transaction, receive transaction or both occur through one of the Company's digital properties such as moneygram.com, the native mobile application or virtual agents

DPA						Deferred Prosecution Agreement dated November 9, 2012 by and between MoneyGram International, Inc and the United States Department of Justice and the United States Attorney's Office for the Middle District of Pennsylvania, as amended.


Fitch						Fitch Ratings, Inc.
FPP						Financial Paper Products
FTC						Federal Trade Commission
GFT						Global Funds Transfer

LIBOR						London Interbank Offered Rate

Merger						Mobius Merger Sub, Inc., a Delaware corporation will merge with and into the Company, with the Company being the surviving company
Merger Agreement						On February 14, 2022, the Company, entered into an Agreement and Plan of Merger
Merger Sub						Mobius Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent
MDP						Madison Dearborn Partners, LLC, a Delaware limited liability company
MGO						MoneyGram Online (our direct-to-consumer business)
Moody's						Moody's Investor Service

Non-U.S. dollar						The impact of non-U.S. dollar exchange rate fluctuations on the Company's financial results is typically calculated as the difference between current period activity translated using the current period's exchange rates and the comparable prior-year period's exchange rates; this method is used to calculate the impact of changes in non-U.S. dollar exchange rates on revenues, commissions and other operating expenses for all countries where the functional currency is not the U.S. dollar.
NYAG						New York State Office of the Attorney General
NYDFS						New York Department of Financial Services


Parent						Mobius Parent Corp.
Pension						The Company’s Pension Plan and SERPs
Pension Plan						Defined benefit pension plan
Postretirement Benefits						Defined benefit postretirement plan
P2P						Peer-to-peer

Retail Channel						Transactions in which both the send transaction and receive transaction occur at one of the Company's physical agent locations

ROU						Right-of-use

SERPs						Supplemental executive retirement plans
S&P						Standard & Poor's
SEC						U.S. Securities and Exchange Commission


U.S. DOJ						U.S. Department of Justice, Criminal Division, Money Laundering and Asset Recovery Section
U.S. GAAP						Accounting principles generally accepted in the United States of America
U.S. Judge						United States Judge for the Middle District of Pennsylvania

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and certain documents incorporated by reference herein may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), including statements with respect to, among other things, the financial condition, results of operations, plans, objectives, future performance and business of MoneyGram and its subsidiaries. Statements preceded by, followed by or that include words such as “believes,” “estimates,” “expects,” “projects,” “plans,” “anticipates,” “intends,” “continues,” “will,” “should,” “could,” “may,” “might,” “would,” “goals,” “predicts,” “potential,” “target,” “forecast,” “outlook,” “currently,” and other similar expressions are intended to identify some of the forward-looking statements within the meaning of the Reform Act and are included, along with this statement, for purposes of complying with the safe harbor provisions of the Reform Act. These forward-looking statements are based on management’s current expectations, beliefs and assumptions as of the date of this report, are not historical facts or guarantees of future performance and are subject to certain risks, uncertainties and changes in circumstances that are difficult to predict and many of which are outside of our control due to a number of factors. These factors include, but are not limited to:

•the impact of the COVID-19 pandemic or future pandemics on our business, including the potential for work stoppages, lockdowns, shelter-in-place or restricted movement guidelines, service delays and lower consumer and commercial activity;

•our ability to compete effectively;

•our ability to maintain key agent or biller relationships, or a reduction in business or transaction volume from these relationships, including with our largest agent, Walmart, through its introduction of additional competing white-label money transfer products or otherwise;

•our ability to continue to grow our Digital Channel, including through our direct-to-consumer digital business, MoneyGram Online;

•a security or privacy breach in systems, networks or databases on which we rely;

•current and proposed regulations addressing consumer privacy and data use and security;

•our ability to manage fraud risks from consumers or agents;

•the ability of us and our agents to comply with U.S. and international laws and regulations;

•litigation and regulatory proceedings involving us or our agents and other commercial relationships, which could result in material settlements, fines or penalties, revocation of required licenses or registrations, termination of contracts, other administrative actions or lawsuits and negative publicity;

•disruptions to our computer systems and data centers and our ability to effectively operate and adapt our technology;

•the ability of us and our agents to maintain adequate banking relationships;

•our ability to successfully develop and timely introduce new and enhanced products and services and our investments in new products, services or infrastructure changes;

•our high degree of leverage and substantial debt service obligations, significant debt covenant requirements and our ability to comply with such requirements;

•our below investment-grade credit rating;

•our ability to maintain sufficient capital;

•weakness in economic conditions, including recession and inflation, in both the U.S. and global markets;

•the financial health of certain European countries or the secession of a country from the European Union;

•a significant change, material slow down or complete disruption of international migration patterns;

•our ability to manage risks associated with our international sales and operations, including exchange rates among currencies;

•our offering of money transfer services through agents in regions that are politically volatile or, in a limited number of cases, that may be subject to certain U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") restrictions;

•major bank failure or sustained financial market illiquidity, or illiquidity at our clearing, cash management and custodial financial institutions;

•changes in tax laws or unfavorable outcomes of tax positions we take, or a failure by us to establish adequate reserves for tax events;

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•our ability to manage credit risks from our agents and official check financial institution customers;

•our ability to adequately protect our brand and intellectual property rights and to avoid infringing on the rights of others;

•our ability to manage risks related to the operation of retail locations and the acquisition or start-up of businesses;

•any restructuring actions and cost reduction initiatives that we undertake may not deliver the expected results and these actions may adversely affect our business;

•our capital structure;

•unpredictability and severity of catastrophic events, including acts of terrorism, outbreak of war or hostilities, civil unrest, adverse climate or weather events and pandemics or other public health emergencies, as well as our response to any of the aforementioned factors;

•risks relating to the proposed Merger (as defined herein), including the possibility that the consummation of the Merger could be delayed or not completed and the effect of announcement or pendency of the Merger on our business; and

•the risks and uncertainties described in the Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our 2022 Form 10-K, as well as any additional risk factors that may be described in our other filings with the SEC from time to time.

These forward-looking statements speak only as of the date they are made, and MoneyGram undertakes no obligation to publicly update or revise any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by federal securities law.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED


(Amounts in millions, except share data)	March 31, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	136.9	$	172.1
Settlement assets	3,252.0		3,607.2
Property and equipment, net	143.7		134.5
Goodwill	442.2		442.2
Right-of-use assets	41.3		42.5
Other assets	119.4		106.7
Total assets	$	4,135.5	$	4,505.2
LIABILITIES
Payment service obligations	$	3,252.0	$	3,607.2
Debt, net	785.0		785.4
Pension and other postretirement benefits	53.0		53.3
Lease liabilities	44.0		45.4
Accounts payable and other liabilities	144.9		159.7
Total liabilities	4,278.9		4,651.0
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDERS' DEFICIT

Common stock, $0.01 par value, 162,500,000 shares authorized, 100,726,839 and 98,964,065 shares issued, 97,718,262 and 96,626,432 shares outstanding at March 31, 2023 and December 31, 2022, respectively	1.0		1.0
Additional paid-in capital	1,419.6		1,415.3
Retained loss	(1,474.2)		(1,479.2)
Accumulated other comprehensive loss	(64.5)		(64.9)
Treasury stock: 3,008,577 and 2,337,633 shares at March 31, 2023 and December 31, 2022, respectively	(25.3)		(18.0)
Total stockholders' deficit	(143.4)		(145.8)
Total liabilities and stockholders' deficit	$	4,135.5	$	4,505.2

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED


	Three Months Ended March 31,
(Amounts in millions, except per share data)		2023		2022
REVENUE
Fee and other revenue		$	314.7	$	305.5
Investment revenue		22.8		2.1
Total revenue		337.5		307.6
COST OF REVENUE
Commissions and other fee expense		149.6		148.7
Investment commissions expense		13.7		0.4
Direct transaction expense		14.6		12.3
Total cost of revenue		177.9		161.4
GROSS PROFIT		159.6		146.2
OPERATING EXPENSES
Compensation and benefits		61.0		56.5
Transaction and operations support		50.5		45.1
Occupancy, equipment and supplies		15.9		14.5
Depreciation and amortization		12.5		12.2
Total operating expenses		139.9		128.3
OPERATING INCOME		19.7		17.9
Other expenses
Interest expense		15.0		10.9

Other non-operating expense		1.0		0.9
Total other expenses		16.0		11.8
Income before income taxes		3.7		6.1
Income tax (benefit) expense		(1.3)		1.0
NET INCOME		$	5.0	$	5.1

EARNINGS PER COMMON SHARE
Basic		$	0.05	$	0.05
Diluted		$	0.05	$	0.05

Weighted-average outstanding common shares and equivalents used in computing earnings per common share
Basic		97.2		95.7
Diluted		100.7		99.5

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED


	Three Months Ended March 31,
(Amounts in millions)		2023		2022
NET INCOME		$	5.0	$	5.1
OTHER COMPREHENSIVE INCOME (LOSS)
Net change in unrealized holding gain on available-for-sale securities arising during the period, net of tax expense of $0.1 and $0.0 for the three months ended March 31, 2023 and 2022, respectively		(0.2)		0.1
Net change in pension liability due to amortization of prior service credit and net actuarial loss, net of tax benefit of $0.1 and $0.1 for three months ended March 31, 2023 and 2022, respectively		0.3		0.4

Unrealized non-U.S. dollar translation adjustments, net of tax expense of $0.1 and $0.0 for the three months ended March 31, 2023 and 2022, respectively		0.3		(1.8)
Other comprehensive income (loss)		0.4		(1.3)
COMPREHENSIVE INCOME		$	5.4	$	3.8

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED


	Three Months Ended March 31,
(Amounts in millions)	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5.0	$	5.1
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	12.5		12.2
Signing bonus amortization	9.8		13.9
Change in right-of-use assets	1.6		2.4

Amortization of debt discount and debt issuance costs	0.3		0.7

Non-cash compensation and pension expense	5.4		3.7
Signing bonus payments	(15.0)		(14.7)

Change in lease liabilities	(2.8)		(3.2)

Change in accounts payable, other assets and liabilities	(24.1)		(50.0)
Other non-cash items, net	0.3		(0.1)
Net cash used in operating activities	(7.0)		(30.0)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for capital expenditures	(19.9)		(10.3)
Proceeds from available-for-sale investments	0.1		—
Purchases of interest-bearing investments	(100.4)		(61.0)
Proceeds from interest-bearing investments	161.0		60.8
Purchase of equity investments	—		(4.0)

Net cash provided by (used in) investing activities	40.8		(14.5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Transaction costs for issuance and amendment of debt	—		(0.3)

Principal payments on debt	(1.0)		(1.0)



Change in receivables, net	164.9		(203.2)
Change in payment service obligations	(355.2)		(4.0)

Payments to tax authorities for stock-based compensation	(7.3)		(6.0)
Net cash used in financing activities	(198.6)		(214.5)
NET CHANGE IN CASH AND CASH EQUIVALENTS AND SETTLEMENT CASH AND CASH EQUIVALENTS	(164.8)		(259.0)
CASH AND CASH EQUIVALENTS AND SETTLEMENT CASH AND CASH EQUIVALENTS—Beginning of year	1,671.2		2,050.9
CASH AND CASH EQUIVALENTS AND SETTLEMENT CASH AND CASH EQUIVALENTS—End of period	$	1,506.4	$	1,791.9

See Notes to the Unaudited Condensed Consolidated Financial Statements

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Supplemental disclosures to the Condensed Consolidated Statements of Cash Flows are presented below:


	Three Months Ended March 31,
(Amounts in millions)	2023		2022
Cash payments for interest	$	19.8	$	16.6
Cash payments for taxes, net	$	2.7	$	3.3

The following table provides a reconciliation of Cash and Cash Equivalents as reported in the Condensed Consolidated Statements of Cash Flows to the line items within the Consolidated Balance Sheets as of:


(Amounts in millions)	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	136.9	$	103.7
Settlement cash and cash equivalents	1,369.5		1,688.2
Cash and cash equivalents and settlement cash and cash equivalents	$	1,506.4	$	1,791.9

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

UNAUDITED


(Amounts in millions)	Common Stock		Additional Paid-In Capital		Retained Loss		Accumulated Other Comprehensive Loss		Treasury Stock		Total
January 1, 2023	$	1.0	$	1,415.3	$	(1,479.2)	$	(64.9)	$	(18.0)	$	(145.8)
Net income	—		—		5.0		—		—		5.0
Stock-based compensation activity	—		4.3		—		—		(7.3)		(3.0)

Other comprehensive income	—		—		—		0.4		—		0.4
March 31, 2023	$	1.0	$	1,419.6	$	(1,474.2)	$	(64.5)	$	(25.3)	$	(143.4)


(Amounts in millions)	Common Stock		Additional Paid-In Capital		Retained Loss		Accumulated Other Comprehensive Loss		Treasury Stock		Total
January 1, 2022	$	0.9	$	1,400.3	$	(1,513.4)	$	(62.8)	$	(10.0)	$	(185.0)
Net income	—		—		5.1		—		—		5.1
Stock-based compensation activity	—		2.8		—		—		(6.1)		(3.3)
Exercise of lender warrants	0.1		—		—		—		0.1		0.2
Other comprehensive loss	—		—		—		(1.3)		—		(1.3)
March 31, 2022	$	1.0	$	1,403.1	$	(1,508.3)	$	(64.1)	$	(16.0)	$	(184.3)

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Description of the Business and Basis of Presentation

References to "MoneyGram," the "Company," "we," "us" and "our" are to MoneyGram International, Inc. and its subsidiaries.

Nature of Operations — MoneyGram offers products and services under its two reporting segments: GFT and FPP. The GFT segment provides global money transfer services and bill payment services to consumers through two primary distribution channels: retail and digital. Through our Retail Channel, we offer services through third-party agents, including retail chains, independent retailers, post offices and other financial institutions. Additionally, we have limited Company-operated retail locations. We offer services through MGO, digital partnerships, direct transfers to bank accounts, mobile wallets and card solutions, such as Visa Direct, as part of our Digital Channel. The FPP segment provides official check outsourcing services and money orders through financial institutions and agent locations.

Basis of Presentation — The accompanying unaudited Condensed Consolidated Financial Statements of MoneyGram are prepared in conformity with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The Condensed Consolidated Balance Sheets are unclassified due to the timing uncertainty surrounding the payment of settlement obligations. The Condensed Consolidated Financial Statements include all adjustments of a normal recurring nature that, in the opinion of management, are necessary in order to make the financial statements not misleading.

There were no other material impacts to our unaudited Condensed Consolidated Financial Statements as of and for the periods ended March 31, 2023, based on the Company's assessment of its estimates. As additional information becomes available to us, our future assessment of these estimates, as well as other factors, could materially and adversely impact our Consolidated Financial Statements in the future.

Use of Estimates — The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on historical experience, future expectations and other factors and assumptions the Company believes to be reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing basis and are revised when necessary. Changes in estimates are recorded in the period of change. Actual amounts may differ from these estimates.

Principles of Consolidation — The Condensed Consolidated Financial Statements include the accounts of MoneyGram International, Inc. and its subsidiaries. Intercompany profits, transactions and account balances have been eliminated in consolidation.

Recently Adopted or Issued Accounting Standards and Related Developments Not Yet Adopted — The Company has determined that there have been no recently adopted or issued accounting standards that had, or will have, a material impact on its Condensed Consolidated Financial Statements.

Merger Update — On February 14, 2022, we entered into a Merger Agreement by and among the Company, Parent and an affiliate of MDP, and Merger Sub. The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company. Following the Merger, the Company will become a subsidiary of Parent. At the effective time of the Merger, each outstanding share of common stock will be automatically canceled and converted into the right to receive $11.00 in cash.

On May 23, 2022, the Company held a virtual-only special meeting of stockholders related to the Merger Agreement and stockholders approved and adopted the Merger Agreement.

To date, money transmission regulators in all applicable U.S. states and territories have provided their approval or non-objection of the transaction. In addition, the parties have obtained all but one approval from international money transmission regulators and have received approval from the Financial Conduct Authority ("FCA") in the United Kingdom and the National Bank of Belgium where MoneyGram holds its European license. The parties refiled the application under the Hart-Scott-Rodino ("HSR") Antitrust Improvements Act of 1976, and the new HSR waiting period expired on March 13, 2023.

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The final regulatory approval is to be issued by the Reserve Bank of India (“RBI”). The RBI is the issuer of MoneyGram’s Money Transfer Service Scheme ("MTSS") license in India. Since the Company and MDP signed the Merger Agreement, the RBI issued a new Circular covering approval requirements related to Payment System Operators ("PSO") such as the Company. The Merger will be one of the first PSOs undergoing a sale since the Circular was issued. As a result, the process has been taking longer than originally anticipated. MoneyGram continues to engage in active dialogue with the RBI and the Central Government of India regarding its review of the Merger.

Prior to closing, the parties will engage in a financing marketing period which, pursuant to the merger agreement, may last for as long as fifteen consecutive business days. Closing would occur within a matter of days after completing the marketing period.

The parties have agreed to extend the end date beyond February 14, 2023, in accordance with the Merger Agreement, to May 14, 2023. In light of the timing and factors discussed above, the parties now expect to close the Merger late in the second quarter of 2023.

Note 2 — Settlement Assets and Payment Service Obligations

The Company records payment service obligations relating to amounts payable under money transfers, money orders and consumer payment service arrangements. These obligations are recognized by the Company at the time the underlying transaction occurs. The Company records corresponding settlement assets, which represent funds received or to be received for unsettled money transfers, money orders and consumer payments.

The following table summarizes the amount of settlement assets and payment service obligations:


(Amounts in millions)	March 31, 2023		December 31, 2022
Settlement assets:
Settlement cash	$	1,369.5	$	1,499.1
Receivables, net	942.1		1,107.0
Interest-bearing investments	937.7		998.1
Available-for-sale investments	2.7		3.0
Total settlement assets	$	3,252.0	$	3,607.2

Payment service obligations	$	(3,252.0)	$	(3,607.2)

Note 3 — Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date.

Assets and liabilities that are measured at fair value on a recurring basis:

•Available-for-sale investments — For residential mortgage-backed securities issued by U.S. government agencies, fair value measures are obtained from an independent pricing service. As market quotes are generally not readily available or accessible for these specific securities, the pricing service measures fair value through the use of pricing models utilizing reported market quotes adjusted for observable inputs, such as market prices for comparable securities, spreads, prepayment speeds, yield curves and delinquency rates. Accordingly, these securities are classified as Level 2 financial instruments.

For asset-backed and other securities, which include investments in limited partnerships, market quotes are generally not available. The Company utilizes broker quotes to measure market value, if available. Because the inputs and assumptions that brokers use to develop prices are unobservable, valuations that are based on brokers' quotes are classified as Level 3. Also, the Company uses pricing services that utilize pricing models based on market observable and unobservable data. The observable inputs include quotes for comparable securities, yield curves, default indices, interest rates, historical prepayment speeds and delinquency rates. These pricing models also apply an inactive market adjustment as a significant unobservable input. Accordingly, asset-backed and other securities valued using third-party pricing models are classified as Level 3.

•Derivative financial instruments — Derivatives consist of forward contracts to manage income statement exposure to non-U.S. dollar exchange risk arising from the Company's assets and liabilities denominated in non-U.S. dollar currencies. The

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Company's forward contracts are well-established products, allowing the use of standardized models with market-based inputs. These models do not contain a high level of subjectivity, and the inputs are readily observable. Accordingly, the Company has classified its forward contracts as Level 2 financial instruments. See Note 5 — Derivative Financial Instruments for additional disclosure on the Company's forward contracts.

The following table summarizes the Company's financial assets and liabilities measured at fair value by hierarchy level on a recurring basis:


(Amounts in millions)	Level 2		Level 3		Total
March 31, 2023
Financial assets:
Available-for-sale investments:
Residential mortgage-backed securities	$	1.4	$	—	$	1.4
Asset-backed and other securities	—		1.3		1.3
Forward contracts (1)	5.1		—		5.1
Total financial assets	$	6.5	$	1.3	$	7.8
Financial liabilities:
Forward contracts	$	4.1	$	—	$	4.1

December 31, 2022
Financial assets:
Available-for-sale investments:
Residential mortgage-backed securities	$	1.5	$	—	$	1.5
Asset-backed and other securities	—		1.5		1.5
Forward contracts (1)	5.2		—		5.2
Total financial assets	$	6.7	$	1.5	$	8.2
Financial liabilities:
Forward contracts	$	3.3	$	—	$	3.3

(1) Includes associated cash posted as collateral

Assets and liabilities that are disclosed at fair value — Debt and interest-bearing investments are carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The fair values of the Term Loan and Senior Secured Notes are estimated using an observable market quotation (Level 2).

The following table provides the carrying value and fair value for the Term Loan and the Senior Secured Notes:


(Amounts in millions)	March 31, 2023				December 31, 2022
	Carrying value		Fair value		Carrying value		Fair value
Term Loan	$	379.0	$	374.3	$	380.0	$	378.6
Senior Secured Notes	$	415.0	$	414.0	$	415.0	$	420.2

The carrying amounts for the Company's cash and cash equivalents, settlement cash and cash equivalents, receivables, interest-bearing investments and payment service obligations approximate fair value as of March 31, 2023 and December 31, 2022.

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Note 4 — Investment Portfolio

The following table shows the components of the investment portfolio:


(Amounts in millions)	March 31, 2023		December 31, 2022
Cash and cash equivalents and settlement cash and cash equivalents	$	1,506.4	$	1,671.2


Interest-bearing investments	937.7		998.1
Available-for-sale investments	2.7		3.0
Total investment portfolio	$	2,446.8	$	2,672.3

The following table is a summary of the amortized cost and fair value of available-for-sale investments:


(Amounts in millions)	Amortized Cost		Gross Unrealized Gains		Fair Value
March 31, 2023
Residential mortgage-backed securities	$	1.4	$	—	$	1.4
Asset-backed and other securities	—		1.3		1.3
Total	$	1.4	$	1.3	$	2.7

December 31, 2022
Residential mortgage-backed securities	$	1.5	$	—	$	1.5
Asset-backed and other securities	—		1.5		1.5
Total	$	1.5	$	1.5	$	3.0

As of March 31, 2023 and December 31, 2022, 52% and 50%, respectively, of the fair value of the available-for-sale portfolio were invested in residential mortgage-backed securities issued by U.S. government agencies. These securities have the implicit backing of the U.S. government, and the Company expects to receive full par value upon maturity or pay-down, as well as all interest payments.

Gains and Losses — For the three months ended March 31, 2023 and 2022, the Company had no realized gains or losses.

Contractual Maturities — Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations, sometimes without call or prepayment penalties. Maturities of residential mortgage-backed and asset-backed and other securities depend on the repayment characteristics and experience of the underlying obligations.

Note 5 — Derivative Financial Instruments

The Company uses forward contracts to manage its non-U.S. dollar needs and non-U.S. dollar exchange risk arising from its assets and liabilities denominated in non-U.S. dollars. While these contracts may mitigate certain non-U.S. dollar risk, they are not designated as hedges for accounting purposes and will result in gains and losses in the Condensed Consolidated Statements of Operations. The Company also reports gains and losses from the spread differential between the rate set for its transactions and the actual cost of currency at the time the Company buys or sells in the open market.

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The following net gains (losses) related to assets and liabilities denominated in non-U.S. dollar are included in "Transaction and operations support" in the Condensed Consolidated Statements of Operations and in the "Net cash used in operating activities" line in the Condensed Consolidated Statements of Cash Flows:


	Three Months Ended March 31,
(Amounts in millions)		2023		2022
Net realized non-U.S. dollar loss		$	(17.9)	$	(3.2)
Net gain from the related forward contracts		18.9		5.0
Net gain from non-U.S. dollar transactions and related forward contracts		$	1.0	$	1.8

As of March 31, 2023 and December 31, 2022, the Company had $791.8 million and $816.0 million, respectively, of outstanding notional amounts relating to its non-U.S. dollar forward contracts. As of March 31, 2023 and December 31, 2022, the Company reflects the following fair values of derivative forward contract instruments in its Condensed Consolidated Balance Sheets on a net basis, allowing for the right of offset by counterparty and cash collateral:


(Amounts in millions)	Gross Amount of Recognized Assets				Gross Amount of Offset				Cash Collateral Posted				Net Amount of Assets Presented in the Condensed Consolidated Balance Sheets
Balance Sheet Location	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
"Other assets"	$	3.3	$	1.8	$	(3.2)	$	(1.6)	$	5.0	$	5.0	$	5.1	$	5.2


(Amounts in millions)	Gross Amount of Recognized Liabilities				Gross Amount of Offset				Cash Collateral Received				Net Amount of Liabilities Presented in the Condensed Consolidated Balance Sheets
Balance Sheet Location	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
"Accounts payable and other liabilities"	$	7.3	$	4.9	$	(3.2)	$	(1.6)	$	—	$	—	$	4.1	$	3.3

The Company's forward contracts are primarily executed with counterparties governed by International Swaps and Derivatives Association agreements that generally include standard netting arrangements. Asset and liability positions from forward contracts and all other non-U.S. dollar exchange transactions with the same counterparty are net settled upon maturity. In addition, the Company nets derivative liabilities against any receivables for cash collateral placed with the same counterparties.

The Company is exposed to credit loss in the event of non-performance by counterparties to its derivative contracts. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits and by selecting major international banks and financial institutions as counterparties. Collateral generally is not required of the counterparties; however, it is required of the Company in some contracts. In the unlikely event the counterparty fails to meet the contractual terms of the derivative contract, the Company's risk is limited to the fair value of the instrument. The Company has not had any historical instances of non-performance by any counterparties, nor does it anticipate any future instances of non-performance.

Note 6 — Debt

The following is a summary of the Company's outstanding debt:


(Amounts in millions, except percentages)	March 31, 2023		December 31, 2022
9.34% Term Loan due 2026	$	379.0	$	380.0
5.375% Senior Secured Notes due 2026	415.0		415.0


Total debt at face value	794.0		795.0
Unamortized debt issuance costs and debt discounts	(9.0)		(9.6)
Total debt, net	$	785.0	$	785.4

Indenture and New Credit Agreement — On July 21, 2021, the Company entered into a new credit agreement (the “New Credit Agreement”) with the lenders from time to time party thereto and Bank of America, N.A., as administrative agent and completed its previously announced private offering of $415.0 million aggregate principal amount of 5.375% senior secured notes due 2026 (the “Senior Secured Notes” or "Notes" and such offering, the "Notes Offering") and related guarantees. The New Credit Agreement provides for (i) a senior secured five-year term loan in an aggregate principal amount of $400.0 million (the “Term Loan”) and (ii) a senior secured four-year revolving credit facility that may be used for revolving credit loans,

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swingline loans and letters of credit (the "Revolving Credit Facility" and together with the Term Loan the "New Credit Facilities") up to an aggregate principal amount of $40.0 million. The interest rate spread applicable to loans under the Term Loan is 3.50% per annum for base rate loans and 4.50% for LIBOR rate loans. For purposes of the Term Loan, the LIBOR rate is subject to a 0.50% per annum floor and for purposes of the Revolving Credit Facility the LIBOR rate is subject to a 0.0% floor. As of March 31, 2023 and December 31, 2022, LIBOR rate was 4.63% and 4.07%, and interest rate was 9.34% and 8.57%, respectively, for the Term Loan. As of March 31, 2023, the Company had no borrowings and no outstanding letters of credit under its Revolving Credit Facility. The New Credit Facilities were secured by substantially all of the Company's assets and its material domestic subsidiaries that guarantee the payment and performance of the Company's obligations under the Credit Facilities.

Debt Covenants and Other Restrictions — The New Credit Agreement requires the Company and its consolidated subsidiaries to maintain a minimum interest coverage ratio of 2.150:1.000 and to not exceed a total net leverage ratio of 4.750:1.000. The asset coverage covenant contained in the New Credit Agreement requires the aggregate amount of the Company's cash and cash equivalents and other settlement assets to exceed its aggregate payment service obligations. As of March 31, 2023, the Company was in compliance with its financial covenants: our interest coverage ratio was 4.330 to 1.000, our total net leverage ratio was 3.156 to 1.000 and our assets in excess of payment service obligations used for the asset coverage calculation were $136.9 million. We continuously monitor our compliance with our debt covenants.

Note 7 — Pension and Other Benefits

The following table is a summary of net periodic benefit expense for the Company's defined benefit Pension Plan and supplemental executive retirement plans, collectively referred to as "Pension":


	Three Months Ended March 31,
(Amounts in millions)		2023		2022

Interest cost		$	1.1	$	0.6
Expected return on plan assets		(0.4)		(0.3)

Amortization of net actuarial loss		0.4		0.5
Net periodic benefit expense		$	1.1	$	0.8

Net periodic benefit expense for the Pension and Postretirement Benefits is recorded in "Other non-operating expense" in the Condensed Consolidated Statements of Operations. Settlement charge, amortization of net actuarial loss and prior service cost were reclassified out of the components of "Accumulated other comprehensive loss".

Note 8 — Stockholders' Deficit

The following table is a summary of the changes to Accumulated other comprehensive loss by component:


(Amounts in millions)	Net Unrealized Gains on Securities Classified as Available-for-sale, Net of Tax		Cumulative non-U.S. dollar Translation Adjustments, Net of Tax		Pension and Postretirement Benefits Adjustment, Net of Tax		Total
January 1, 2023	$	2.2	$	(38.7)	$	(28.4)	$	(64.9)
Other comprehensive income before reclassification	(0.2)		0.3		—		0.1
Amounts reclassified from accumulated other comprehensive loss	—		—		0.3		0.3
Net current period other comprehensive income	(0.2)		0.3		0.3		0.4
March 31, 2023	$	2.0	$	(38.4)	$	(28.1)	$	(64.5)

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(Amounts in millions)	Net Unrealized Gains on Securities Classified as Available-for-sale, Net of Tax		Cumulative non-U.S. dollar Translation Adjustments, Net of Tax		Pension and Postretirement Benefits Adjustment, Net of Tax		Total
January 1, 2022	$	1.5	$	(28.9)	$	(35.4)	$	(62.8)
Other comprehensive loss before reclassification	0.1		(1.8)		—		(1.7)
Amounts reclassified from accumulated other comprehensive loss	—		—		0.4		0.4
Net current period other comprehensive loss	0.1		(1.8)		0.4		(1.3)
March 31, 2022	$	1.6	$	(30.7)	$	(35.0)	$	(64.1)

Note 9 — Stock-Based Compensation

The Company recognized stock-based compensation expense of $4.3 million and $2.8 million for the three months ended March 31, 2023 and 2022, respectively, all of which related to restricted stock units.

Stock Options — The following table is a summary of the Company's stock option activity:


	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (in millions)
Options outstanding at December 31, 2022	110,775	$	17.51	0.6 years	$	—
Forfeited/Expired	(59,790)	16.48
Options outstanding, vested or expected to vest, and exercisable at March 31, 2023	50,985	$	18.71	1 years	$	—

As of March 31, 2023, the Company had no unrecognized stock option expense related to outstanding options.

Restricted Stock Units — On February 16, 2023, the Company granted time-based and performance-based restricted stock units. The time-based restricted stock units vest in three equal installments on each anniversary of the grant date. The performance-based restricted stock units are subject to performance conditions and a one-year performance period. When and if the conditions are satisfied at the end of the one-year performance period, vesting of the performance-based restricted stock units are subject only to the passage of time and vest in three equal installments on each anniversary of the grant date.

The following table is a summary of the Company's restricted stock unit activity:


	Total Shares	Weighted-Average Grant-Date Fair Value		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value (in millions)
Restricted stock units outstanding at December 31, 2022	3,673,515	$	7.45	0.78 years	$	40.0
Granted	1,439,554	10.85
Vested	(1,762,774)	5.82
Forfeited	—	—
Restricted stock units outstanding at March 31, 2023	3,350,295	$	9.77	1.48 years	$	34.9
Restricted stock units vested and deferred at March 31, 2023	174,827	$	4.15		$	1.8

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The following table is a summary of the Company's restricted stock unit compensation information:


	Three Months Ended March 31,
(Amounts in millions)		2023		2022
Weighted-average grant-date fair value of restricted stock units vested during the period		$	10.3	$	5.2
Total intrinsic value of vested and converted shares		$	19.1	$	17.6

As of March 31, 2023, the Company's outstanding restricted stock units had unrecognized compensation expense of $26.8 million with a remaining weighted-average vesting period of 1.9 years.

Note 10 — Income Taxes

For the three months ended March 31, 2023, the Company recognized an income tax benefit of $1.3 million on pre-tax income of $3.7 million primarily due to a decrease in unrecognized tax benefits, a decrease in valuation allowance, recognition of excess tax benefits on share-based compensation, and U.S. general business credits, all of which were partially offset by non-deductible expenses and foreign taxes net of federal income tax benefits. The decrease of $0.4 million in valuation allowance against our U.S. federal and state deferred tax assets was primarily due to the combined use of U.S. general business credits, U.S. interest expense carryovers and state net operating loss carryovers.

As of March 31, 2023 the Company is no longer in a three-year cumulative pre-tax loss position. However the Company will maintain a valuation allowance on applicable deferred tax assets until there is sufficient evidence to support the reversal of any or all of these valuation allowances. The Company continues to analyze the positive and negative evidence in determining the need for a valuation allowance with respect to its deferred tax assets. It is reasonably possible that, within the next 12 months, the valuation allowance could be significantly reduced if there is sufficient evidence indicating it is more likely than not that all or a portion of the Company's deferred tax assets will be realized. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period in which the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability achieved and other applicable evidence.

For the three months ended March 31, 2022, the Company recognized an income tax expense of $1.0 million on pre-tax income of $6.1 million primarily due to a decrease in valuation allowance, recognition of excess tax benefits on share-based compensation, U.S. general business credits and a recovery of state taxes, all of which were partially offset by foreign taxes net of federal income tax benefits, non-deductible expenses and an increase in unrecognized tax benefits. The decrease in valuation allowance against our U.S. federal and state deferred tax assets was due to the estimated use of $0.7 million of U.S. general business credits and state net operating losses.

Unrecognized tax benefits are recorded in "Accounts payable and other liabilities" in the Condensed Consolidated Balance Sheets. As of March 31, 2023 and December 31, 2022, the liability for unrecognized tax benefits was $7.3 million and $9.1 million, respectively, exclusive of interest and penalties.

For the three months ended March 31, 2023 and 2022, the net amount of unrecognized tax benefits that if recognized could impact the effective tax rate was $7.3 million and $13.6 million, respectively. The Company accrues interest and penalties for unrecognized tax benefits through "Income tax (benefit) expense" in the Condensed Consolidated Statements of Operations. For the three months ended March 31, 2023, the Company's accrual for interest and penalties decreased by $1.7 million which was comprised of a $1.1 million decrease due to a lapse of the statute and cash payments of $0.5 million. For the three months ended March 31, 2022, the company’s accrual for interest and penalties decreased by $0.8 million which was comprised of a $0.1 million increase in the accrual offset by cash payments of $0.9 million. As of March 31, 2023 and December 31, 2022, the Company had a liability of $1.2 million and $2.8 million, respectively, for accrued interest and penalties within "Accounts payable and other liabilities." As a result of the Company's completion of its litigation related to its securities losses, the Company is anticipating a $1.1 million decrease to the total amount of state related unrecognized tax benefits by way cash settlements or statute lapses over the next 12 months.

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Note 11 — Commitments and Contingencies

Legal Proceedings — The matters set forth below are subject to uncertainties and outcomes that are not predictable. The Company accrues for these matters as any resulting losses become probable and can be reasonably estimated. Further, the Company maintains insurance coverage for many claims and litigation matters. In relation to various legal matters, including those described below, the Company had $7.5 million of liability recorded in "Accounts payable and other liabilities" in the Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022.

Litigation Commenced Against the Company:

Class Action Securities Litigation — On November 14, 2018, a putative securities class action lawsuit was filed in the United States District Court for the Northern District of Illinois against MoneyGram and certain of its executive officers. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and alleges that MoneyGram made material misrepresentations regarding its compliance with the stipulated order for permanent injunction and final judgment that MoneyGram entered into with the FTC in October 2009 and with the DPA that MoneyGram entered into with the U.S. Attorney’s Office for the Middle District of Pennsylvania and the U.S. Department of Justice in November 2012. The lawsuit seeks unspecified damages, equitable relief, interest and costs and attorneys' fees. The Company believes the case is without merit and is vigorously defending this matter. On May 16, 2019, MoneyGram filed a motion to dismiss which the court has yet to rule upon. We are unable to predict the outcome, or the possible loss or range of loss, if any, related to this matter.

Books and Records Requests — The Company has received multiple requests from various putative shareholders for inspection of books and records pursuant to Section 220 of the Delaware General Corporation Law relating to the subject matter of the putative class lawsuit described in the preceding paragraphs. On February 26, 2019, two of these shareholders filed a petition in the Delaware Court of Chancery to compel MoneyGram to produce books and records in accordance with their request but have since dismissed their action. We are unable to predict the outcome, or the possible loss or range of loss, if any, related to these matters.

It is possible that additional shareholder lawsuits could be filed relating to the subject matter of the above putative class action, the Section 220 books and records requests or pertaining to the MDP transaction.

Other Matters — The Company is involved in various other claims and litigation that arise from time to time in the ordinary course of the Company's business. Management does not believe that after final disposition any of these matters is likely to have a material adverse impact on the Company's financial condition, results of operations or cash flows.

Government Investigations:

On June 9, 2021, the Government filed an Amended Unopposed Motion to Dismiss that provided additional details about the Company’s satisfaction of its obligations under the DPA and enhancements to the Company’s compliance program. On June 10, 2021, the United States Judge for the Middle District of Pennsylvania signed an Order dismissing the criminal information with prejudice, which effectively discharged the Government’s criminal case against the Company and officially ended the matter.

NYDFS — As previously reported, on June 22, 2018, the Company received a request for production of documents from the NYDFS related to the Company’s failure to maintain an effective anti-money laundering program and to adequately supervise certain of the Company’s New York-based agents that conducted suspicious transactions on behalf of customers. This request followed previous inquiries by the NYDFS regarding certain of the Company's New York based agents. Following the June 22, 2018 request for production, the Company received and responded to several inquiries from the NYDFS related to this matter. On March 16, 2022, the Company and the NYDFS entered into a consent order (the “Consent Order”) to resolve this matter.

In entering into the Consent Order, the NYDFS acknowledged that there were several mitigating factors with respect to the Consent Order, including that the Company fully cooperated with the NYDFS’s investigation, including by reporting on the results of its internal investigation on the matter, had voluntarily undertaken significant enhancements to its compliance program and had undertaken remediation to prevent similar violations from occurring. Such measures and enhancements include termination of certain agents, the creation of new compliance procedures to increase the authority of compliance personnel within the Company, the implementation of new limits on and supervision of high-risk agents and a substantial increase in the resources allocated to compliance. Pursuant to the Consent Order, the Company agreed to, among other things, pay a civil monetary penalty in the amount of $8.3 million and undertake various reporting obligations. These include the obligation to (i) submit to the NYDFS a written description of the Company’s current compliance program with respect to the supervision of its New York-based agents and update such description with the NYDFS at 12 and 24 months after the date of the Consent Order, (ii) deliver to the NYDFS detailed data of all transactions in the State of New York for the one-year period prior to the date of the Consent Order, and (iii) fully cooperate with the NYDFS regarding all terms of the Consent Order. Pursuant to the Consent Order, the NYDFS agreed that it will take no further action against the Company for the conduct

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subject to the previous request for production of documents, provided that the Company fully complies with the terms of the Consent Order. The $8.3 million payment, which was made in the first quarter of 2022, is consistent with the estimated amount that the Company previously accrued in the fourth quarter of 2021.

CFPB — As previously reported, on February 12, 2020, the Company received a Report of Examination ("ROE") from the CFPB stating that previous findings from a 2019 exam were not remediated, and the matter would be referred to its Enforcement Unit. On March 18, 2020, the Company received a Civil Investigative Demand ("CID") from the CFPB's Enforcement Unit. On June 11, 2020, the Company provided a timely response to the ROE describing the remedial actions taken and that the findings have been substantially remediated. On August 21, 2020, the Company completed its production in response to the CID. On February 25, 2021, the CFPB provided the Company with a Notice and Opportunity to Respond and Advise ("NORA") letter, documenting the CFPB's intent to take legal action against the Company based on four alleged violations under the Remittance Rule, the Electronic Fund Transfer Act (the "EFTA") and the Consumer Financial Protection Act (the "CFPA"). MoneyGram provided the CFPB with its written response to the NORA letter on March 17, 2021. Over the next several months, the Company and the CFPB engaged in negotiations regarding a potential settlement agreement but were ultimately unable to reach an agreed resolution on this matter. On April 21, 2022, the CFPB and the NYAG filed a complaint (the “Complaint”) in the United States District Court for the Southern District of New York against the Company and MoneyGram Payment Systems, Inc., a wholly owned subsidiary of the Company. The Complaint alleges seven counts of violations under the Remittance Rule, the CFPA, the EFTA and New York Executive Law § 63(12) and seeks injunctive relief, restitution, unspecified damages, civil money penalties and costs. On July 5, 2022, the CFPB and the NYAG filed a First Amended Complaint. In response to the First Amended Complaint, on August 4, 2022, The Company filed a consolidated motion to dismiss and to transfer venue to the United States District Court for the Northern District Texas. The CFPB and NYAG responded to the Company's motions on September 19, 2022, and MoneyGram filed its reply brief on October 3, 2022.

In a separate matter, on October 19, 2022, the United States Court of Appeals for the Fifth Circuit held the funding structure of the CFPB to be unconstitutional. On November 14, 2022, the Department of Justice ("DOJ"), on behalf of the CFPB, petitioned the Supreme Court for a writ of certiorari to review and reverse the Fifth Circuit's decision. The company had previously challenged the constitutionality of the CFPB's funding structure as part of the Company's motion to dismiss the CFPB's and NYAG's case, which was pending in the Southern District of New York. In light of the developments, in the Fifth Circuit and the potential for the U.S. Supreme Court to grant cert, MoneyGram filed a letter motion to stay the case which was granted, over the CFPB's and NYAG's objection, by the United States District Court for the Southern District of New York on December 9, 2022. On March 31, 2023, the CFPB and NYAG filed a letter motion to lift the stay in light of a decision in the United States Court of Appeals for the Second Circuit that held the CFPB’s funding structure to be constitutional. MoneyGram opposed the CFPB and NYAG’s motion and requested the stay continue until the Supreme Court rules on the constitutional question at issue in the circuit courts. The United States District Court for the Southern District of New York agreed with MoneyGram and ruled to continue the stay until the Supreme Court ultimately decides the issue. As a result, the current lawsuit will be on hold pending the Supreme Court's ultimate decision. The parties were ordered to promptly file a joint letter apprising the District Court of the Supreme Court's decision to grant or deny the Petition once the Supreme Court issues any decision, which could impact the length of the District Court's stay. MoneyGram continues to believe the case is without merit and intends to vigorously defend this matter. Based on the prior settlement negotiations which have since terminated, the Company had accrued $7.5 million as of March 31, 2023, as our best estimate to settle this matter. Notwithstanding the termination of the settlement discussion and the filing of the lawsuit by the CFPB, we continue to maintain the $7.5 million accrual in accordance with U.S. GAAP as our best loss estimate related to this matter.

Other Matters — The Company is involved in various other government inquiries and other matters that arise from time to time. Management does not believe that after final disposition any of these other matters is likely to have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

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Note 12 — Earnings Per Common Share

The following table is a reconciliation of the weighted-average share amounts used in calculating earnings per common share:


	Three Months Ended March 31,
(Amounts in millions)		2023	2022
Basic common shares outstanding		97.2	95.7

Shares related to restricted stock units		3.5	3.8

Diluted common shares outstanding		100.7	99.5

Potential common shares issuable to employees upon exercise or conversion of shares under the Company's stock-based compensation plans are excluded from the computation of diluted earnings per common share in periods when the effect would be anti-dilutive. All potential common shares are anti-dilutive in periods of net loss available to common stockholders. Stock options are anti-dilutive when the exercise price of these instruments is greater than the average market price of the Company's common stock for the period, regardless of whether the Company is in a period of net loss available to common shareholders.

The following table summarizes the weighted-average potential common shares excluded from diluted earnings per common share as their effect would be anti-dilutive:


	Three Months Ended March 31,
(Amounts in millions)		2023	2022
Shares related to stock options		0.1	0.1

Note 13 — Segment Information

The Company's reporting segments are primarily organized based on the nature of products and services offered and the type of consumer served. The Company has two reporting segments: GFT and FPP. See Note 1 — Description of the Business and Basis of Presentation for further discussion on our segments. Walmart Inc. ("Walmart") is our only agent that is considered major. The following table is a summary of revenue from Walmart as a percentage of each segment and total revenue:

Three Months Ended March 31,

2023

2022

Revenue from Walmart as a percentage of GFT revenue

<10%

Revenue from Walmart as a percentage of FPP revenue

<10%

Revenue from Walmart as a percentage of total revenue

<10%

The following table is a summary of the total revenue by segment:


	Three Months Ended March 31,
(Amounts in millions)		2023		2022
GFT revenue
Money transfer revenue		$	294.8	$	284.5
Bill payment revenue		9.3		9.1
Total GFT revenue		304.1		293.6




FPP revenue
Money order revenue		12.1		10.5
Official check revenue		21.3		3.5
Total FPP revenue		33.4		14.0
Total revenue		$	337.5	$	307.6

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The following table is a summary of the gross profit by segment:


	Three Months Ended March 31,
(Amounts in millions)		2023		2022
GFT gross profit		$	139.9	$	132.6

FPP gross profit (1)		19.7		13.6
Total gross profit		159.6		146.2
Total operating expenses		139.9		128.3
Total operating income		19.7		17.9
Interest expense		15.0		10.9

Other non-operating expense		1.0		0.9
Income before income taxes		$	3.7	$	6.1

(1) In periods of extremely low interest rates, it is possible for commissions to be close to zero, resulting in abnormally high gross margin.

The following table sets forth assets by segment:


(Amounts in millions)	March 31, 2023		December 31, 2022
GFT	$	1,316.9	$	1,412.6

FPP	2,771.5		3,066.0
Other	47.1		26.6
Total assets	$	4,135.5	$	4,505.2

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Note 14 — Revenue Recognition

The following table is a summary of the Company's revenue streams disaggregated by services and products for each segment and timing of revenue recognition for such services and products excluding other revenue:


	Three Months Ended March 31,
(Amounts in millions)		2023		2022
GFT revenue
Money transfer fee revenue		$	284.0	$	275.8
Bill payment services fee revenue		9.3		9.3
Other revenue		10.8		8.5
Total GFT fee and other revenue		304.1		293.6





FPP revenue
Money order fee revenue		1.2		1.4
Official check outsourcing services fee revenue		1.7		1.7
Other revenue		7.7		8.8
Total FPP fee and other revenue		10.6		11.9
Total fee and other revenue		314.7		305.5
Investment revenue		22.8		2.1
Total revenue		$	337.5	$	307.6

Timing of revenue recognition:
Services and products transferred at a point in time		$	294.6	$	286.5
Products transferred over time		1.7		1.7
Total revenue from services and products		296.3		288.2
Investment revenue		22.8		2.1
Other revenue		18.4		17.3
Total revenue		$	337.5	$	307.6

Due to the short-term nature of the Company's services and products, the amount of contract assets and liabilities on the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, is negligible. Assets for unsettled money transfers, money orders and consumer payments are included in "Settlement assets" with a corresponding liability recorded in "Payment service obligations" on the Condensed Consolidated Balance Sheets. For more information on these assets and liabilities see Note 2 — Settlement Assets and Payment Service Obligations.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is to provide an understanding of MoneyGram International, Inc.'s ("MoneyGram," the "Company," "we," "us" and "our") financial condition, results of operations and cash flows by focusing on changes in certain key measures. This MD&A is provided as a supplement to and should be read in conjunction with, our unaudited Condensed Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and Notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. This discussion contains forward-looking statements that involve risks and uncertainties. MoneyGram's actual results could differ materially from those anticipated due to various risks and factors discussed above under Cautionary Statements Regarding Forward-Looking Statements and elsewhere in this Quarterly Report on Form 10-Q and in our 2022 Form 10-K, as well as any additional risk factors that may be described in our other periodic filings with the SEC from time to time.

The comparisons presented in this MD&A refer to the same period in the prior year, unless otherwise noted. This MD&A is organized in the following sections:

•Overview

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Policies and Estimates

OVERVIEW

MoneyGram is a global leader in cross-border P2P payments and money transfers. Our consumer-centric capabilities enable the quick and affordable transfer of money to family and friends around the world. Whether through online and mobile platforms, integration with mobile wallets, kiosks, or any one of the hundreds of thousands of agent locations in over 200 countries and territories, with over 100 now digitally enabled, the innovative MoneyGram platform connects consumers in ways designed to be convenient for them. In the U.S. and in select countries and territories, we also provide bill payment services, issue money orders and process official checks. We primarily offer our services and products through our Digital Channel and third-party agents. The Digital Channel includes MGO (our direct-to-consumer business), digital partners, direct transfers to bank accounts, mobile wallets and debit card solutions such as Visa Direct. Third-party agents include retail chains, independent retailers, post offices and financial institutions. MoneyGram also has a limited number of Company-operated retail locations.

We manage our revenue and related commissions expense through two reporting segments: GFT and FPP. The GFT segment provides global money transfer services in more than 440,000 agent locations. Our global money transfer services are our primary revenue driver, accounting for 87% of total revenue for the three months ended March 31, 2023. The GFT segment also provides bill payment services to consumers through substantially all of our money transfer agent locations in the U.S., at certain agent locations in select Caribbean countries and through our Digital Channel. The FPP segment provides money order services to consumers through retail locations and financial institutions located in the U.S. and Puerto Rico and provides official check services to financial institutions in the U.S.

Business Environment

The competitive environment continues to change as both established players and new, digital-only entrants work to innovate and deliver an affordable and convenient customer experience to win market share. Our competitors include a small number of large money transfer and bill payment providers, financial institutions, banks and a number of small niche money transfer service providers that serve select regions. We generally compete on the basis of customer experience, price, agent commissions, brand awareness and convenience.

We continue to invest in innovative products and services, such as our leading mobile app and integrations with mobile wallets and account deposit services, to position the Company to meet consumer needs. Furthermore, our partnership with Visa Direct provides consumers with additional choices on how to receive funds across a broader number of countries. We believe that combining our cash and digital capabilities enables us to differentiate against digital-only competitors who are not able to serve a significant portion of the remittance market that relies on cash.

As a leader in the evolution of digital P2P payments, we were the first company to utilize blockchain technology at scale for cross-border payments. Given our extensive global network, strong culture of fintech innovation, expertise in compliance and API-driven infrastructure, we are well-positioned to lead cross-border payment innovation.

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Recent Developments

On February 14, 2022, we entered into a Merger Agreement by and among the Company, Parent and an affiliate of MDP, and Merger Sub. The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company. Following the Merger, the Company will become a subsidiary of Parent. At the effective time of the Merger, each outstanding share of common stock will be automatically canceled and converted into the right to receive $11.00 in cash.

On May 23, 2022, the Company held a virtual-only special meeting of stockholders related to the Merger Agreement and stockholders approved and adopted the Merger Agreement.

Anticipated Trends

This discussion of trends expected to impact our business in 2023 is based on information presently available and reflects certain assumptions, including assumptions regarding future economic conditions. Differences in actual economic conditions compared with our assumptions could have a material impact on our results. See Cautionary Statements Regarding Forward-Looking Statements, Part II, Item 1A, Risk Factors of this Quarterly Report on Form 10-Q and Part I, Item 1A, Risks Factors of our 2022 Form 10-K for additional factors that could cause results to differ materially from those contemplated by the following forward-looking statements.

Through 2023, we believe the industry will continue to see a number of trends, including the growth of digital transactions, a competitive pricing environment, continuing focus on customer experience and a broader trend towards potential diversification of product and service offerings.

To position the Company to respond to these trends, our digital-first strategy is creating tremendous value for consumers. To address this new and evolving digital consumer, we expect to continue to invest in product innovation as we look to go deeper and wider in our consumer-direct digital offerings. We also plan to expand MGO to new countries, add new digital send partners and add more wallets and account deposit offerings.

As we grow our digital business, we will also focus on maintaining our global cash network. MoneyGram's cash receive network is essential to millions of receivers around the world who rely on cash to support the urgent needs of their families. Additionally, the cash network continues to provide benefit for those consumers who need to send cash in many markets.

In 2023, we began executing on our strategy to lead cross-border payment innovation and blockchain-enabled settlement through growing our partnership with the Stellar Development Foundation as well as through other initiatives and partnerships.

We continue monitoring the social, political, regulatory and economic environment around the world. Changes in these factors could cause us to alter our approach in certain markets. There could be adverse impacts to our revenues, earnings and cash flows should economic and political conditions deteriorate beyond the current state, including, among other potential impacts, economic recessions, inflationary pressures, war and political instability.

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We expect a high level of competition for agents and customers, along with competitive pricing to be a continuous challenge in 2023. Currency volatility, inflation, liquidity pressure on certain central banks, immigration restrictions and continuing immobility of labor throughout the world may also continue to impact our business. We also anticipate continuing prioritization of our operating cost structure as well as our transaction related expenses and expect to remain price competitive across our product line.

For our FPP segment, we expect the gradual decline in overall paper-based transactions to continue primarily due to continued gradual migration by customers to other payment methods. Our investment revenue, which consists primarily of interest income generated through the investment of cash balances received from the sale of our FPP, is dependent on the prevailing short-term interest rate environment in the United States. The Company will see a positive impact on its investment revenue as compared to 2022, due to higher U.S. money market rates rise driven by Federal Reserve actions in 2022 and year-to-date in 2023.

Financial Measures and Key Metrics

This Quarterly Report on Form 10-Q includes financial information prepared in accordance with U.S. GAAP as well as certain non-GAAP financial measures that we use to assess our overall performance.

U.S. GAAP Measures — We utilize certain financial measures prepared in accordance with U.S. GAAP to assess the Company's overall performance. These measures include fee and other revenue, commissions and other fee expense, fee and other revenue less commissions, gross profit, operating income and operating margin.

Non-GAAP Measures — Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with U.S. GAAP. The non-GAAP financial measures should be viewed as a supplement to and not a substitute for, financial measures presented in accordance with U.S. GAAP and are not necessarily comparable with similarly named metrics of other companies. We strongly encourage investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. We believe that the non-GAAP financial measures enhance investors' understanding of our business and performance because they are an indicator of the strength and performance of ongoing business operations. The non-GAAP measures are commonly used as a basis for investors, analysts and other interested parties to evaluate and compare the operating performance and value of companies within our industry. They are also used by management in reviewing results of operations, forecasting, allocating resources or establishing employee incentive programs. The following are non-GAAP financial measures we use to assess our overall performance:

EBITDA (Earnings before interest, taxes, depreciation and amortization, including agent signing bonus amortization).

Adjusted EBITDA — (EBITDA excluding restructuring and reorganization costs, legal and contingent matter costs, stock-based, contingent and incentive compensation costs, merger-related costs, severance and related costs) — Adjusted EBITDA does not reflect cash requirements necessary to service interest or principal payments on our indebtedness or tax payments that may result in a reduction in cash available.

Adjusted Free Cash Flow (Adjusted EBITDA less cash interest, cash taxes, cash payments for capital expenditures and cash payments for agent signing bonuses) — Adjusted Free Cash Flow does not reflect cash payments related to the adjustment of certain significant items in Adjusted EBITDA.

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RESULTS OF OPERATIONS

The following table is a summary of the results of operations:


	Three Months Ended March 31,
(Amounts in millions)		2023		2022
Revenue
Fee and other revenue		$	314.7	$	305.5
Investment revenue		22.8		2.1
Total revenue		337.5		307.6
Cost of revenue
Commissions and other fee expense		149.6		148.7
Investment commissions expense		13.7		0.4
Direct transaction expense		14.6		12.3
Total cost of revenue		177.9		161.4
Gross profit		159.6		146.2
Operating expenses
Compensation and benefits		61.0		56.5
Transaction and operations support		50.5		45.1
Occupancy, equipment and supplies		15.9		14.5
Depreciation and amortization		12.5		12.2
Total operating expenses		139.9		128.3
Operating income		19.7		17.9
Other expenses
Interest expense		15.0		10.9

Other non-operating expense		1.0		0.9
Total other expenses		16.0		11.8
Income before income taxes		3.7		6.1
Income tax (benefit) expense		(1.3)		1.0
Net income		$	5.0	$	5.1

Revenue

For the three months ended March 31, 2023, revenue increased by $29.9 million due to an increase in FPP revenue of $19.4 million and an increase in GFT revenue of $10.5 million. See the "Segments Results" section below for further discussions.

Cost of Revenue

For the three months ended March 31, 2023, cost of revenue increased by $16.5 million, primarily due to an increase in FPP investment commissions expense of $13.3 million and in GFT cost of revenue of $3.2 million. See the "Segments Results" section below for further discussions.

Compensation and Benefits

For the three months ended March 31, 2023, compensation and benefits increased by $4.5 million, primarily due to higher long-term incentive compensation, higher severance costs and the impact of inflation on employee related payroll.

Transaction and Operations Support

Transaction and operations support primarily includes marketing, professional fees, customer care and other outside services, telecommunications, agent support costs, including forms related to our products, non-compensation employee costs, including training, travel and relocation costs, non-employee director stock-based compensation expense, bank charges and the impact of non-U.S. dollar exchange rate movements on our monetary transactions, assets and liabilities denominated in a currency other than the U.S. dollar.

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Transaction and operations support increased by $5.4 million for the three months ended March 31, 2023. The increase is primarily due to an increase in marketing campaign activities, including our recent sponsorship of Haas F1 Team, partially offset by a decrease in legal expenses associated with Merger-related costs.

Occupancy, Equipment and Supplies

Occupancy, equipment and supplies expense includes facilities rent and maintenance costs, software and equipment maintenance costs, freight and delivery costs and supplies. Occupancy, equipment and supplies expense increased by $1.4 million for the three months ended March 31, 2023, due to an increase in software expense including the implementation of a new enterprise resource planning ("ERP") system as we migrate to cloud computing.

Depreciation and Amortization

Depreciation and amortization expense includes depreciation on computer hardware and software, agent signage, point of sale equipment, capitalized software development costs, office furniture, equipment and leasehold improvements and amortization of intangible assets. Depreciation and amortization remained relatively flat for the three months ended March 31, 2023.

Other Expenses

Interest expense increased by $4.1 million for the three months ended March 31, 2023, primarily due to the rate increase on our variable rate Term Loan.

Other non-operating expense remained relatively flat for the three months ended March 31, 2023.

Income Tax Expense

Segments Results

GFT

The following table sets forth our GFT segment results of operations for the three months ended March 31, 2023:


	Three Months Ended March 31,
(Amounts in millions)		2023		2022
Money transfer revenue		$	294.8	$	284.5
Bill payment revenue		9.3		9.1
Total revenue		304.1		293.6

Cost of revenue		164.2		161.0
Gross profit		$	139.9	$	132.6

Money Transfer Revenue

Money transfer revenue increased by $10.3 million for the three months ended March 31, 2023, primarily due to the continued strength of our digital business where digital revenue increased by $23.9 million or an increase of 30% for the three months ended March 31, 2023. Digital revenue now accounts for 35% of our total money transfer revenue and as of March 31, 2023, digital transactions now account for 50% of our money transfer transactions.

Bill Payment Revenue

Bill payment revenue remained relatively flat for the three months ended March 31, 2023.

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Cost of Revenue

Cost of revenue increased by $3.2 million for the three months ended March 31, 2023, primarily due to an increase in commissions and other fee expense driven by higher transactions associated with our digital partners.

FPP

The following table sets forth our FPP segment results of operations:


	Three Months Ended March 31,
(Amounts in millions)		2023		2022
Money order revenue		$	12.1	$	10.5
Official check revenue		21.3		3.5
Total revenue		33.4		14.0

Investment commissions expense		13.7		0.4
Gross profit		$	19.7	$	13.6

Money Order Revenue

Money order revenue increased by $1.6 million for the three months ended March 31, 2023, primarily due to an increase in investment revenue as a result of higher prevailing interest rates driven by an increase in the federal funds rate.

Official check revenue

Official check revenue increased by $17.8 million for the three months ended March 31, 2023, primarily due to an increase in investment revenue as a result of higher prevailing interest rates driven by an increase in the federal funds rate.

Investment Commissions Expense

Investment commissions expense consists of amounts paid to financial institution customers based on short-term interest rate indices times the average outstanding cash balances of official checks sold by the financial institution. Investment commissions are recognized each month based on the average outstanding balances of each financial institution customer and their contractual variable rate for that month. In periods of extremely low interest rates, it is possible for commissions to be at or close to zero, resulting in abnormally high gross margin.

Investment commissions expense increased by $13.3 million for the three months ended March 31, 2023, primarily due to higher prevailing interest rates driven by an increase in the federal funds rate.

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EBITDA, Adjusted EBITDA and Adjusted Free Cash Flow (Non-GAAP Measures)

The following table is a reconciliation of our non-GAAP financial measures to the related U.S. GAAP financial measures:


	Three Months Ended March 31,
(Amounts in millions, except percentages)		2023		2022
Income before income taxes		$	3.7	$	6.1
Interest expense		15.0		10.9
Depreciation and amortization		12.5		12.2
Signing bonus amortization		9.8		13.9
EBITDA		41.0		43.1
Significant items impacting EBITDA:
Stock-based, contingent, incentive compensation and other		4.8		2.8
Merger-related costs		1.6		3.7
Legal and contingent matters		0.1		0.6
Restructuring and reorganization costs		—		(1.3)
Direct monitor costs		—		0.1




Adjusted EBITDA		47.5		49.0
Cash payments for interest		(19.8)		(16.6)
Cash payments for taxes, net		(2.7)		(3.3)
Cash payments for capital expenditures		(19.9)		(10.3)
Cash payments for agent signing bonuses		(15.0)		(14.7)
Adjusted Free Cash Flow		$	(9.9)	$	4.1

See "Results of Operations" and "Analysis of Cash Flows" sections for additional information regarding these changes.

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LIQUIDITY AND CAPITAL RESOURCES

We have various resources available for purposes of managing liquidity and capital needs, including our investment portfolio, credit facilities and letters of credit. We refer to our cash and cash equivalents, settlement cash and cash equivalents, interest-bearing deposits and available-for-sale interest-bearing investments collectively as our "investment portfolio." The Company utilizes cash and cash equivalents in various liquidity and capital assessments.

Cash and Cash Equivalents, Settlement Assets and Payment Service Obligations

The following table shows the components of the Company's cash and cash equivalents and settlement assets:


(Amounts in millions)	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	136.9	$	172.1
Settlement assets:
Settlement cash	$	1,369.5	$	1,499.1
Receivables, net	942.1		1,107.0
Interest-bearing investments	937.7		998.1
Available-for-sale investments	2.7		3.0
Total settlement assets	$	3,252.0	$	3,607.2

Payment service obligations	$	(3,252.0)	$	(3,607.2)

Our primary sources of liquidity include cash flows generated by the sale of our payment instruments, our cash and cash equivalents and interest-bearing deposit balances and proceeds from our investment portfolio. Our primary operating liquidity needs are related to the settlement of payment service obligations to our agents and financial institution customers, general operating expenses and debt service.

To meet our payment service obligations at all times, we must have sufficient highly-liquid assets and be able to move funds globally on a timely basis. On average, we receive in and pay out a similar amount of funds on a daily basis to collect and settle the principal amount of our payment instruments sold and related fees and commissions with our end-consumers and agents. This pattern of cash flows allows us to settle our payment service obligations through existing cash balances and ongoing cash generation rather than liquidating investments or utilizing our Revolving Credit Facility. We have historically generated and expect to continue generating, sufficient cash flows from daily operations to fund ongoing operational needs.

We preposition cash in various countries and currencies to facilitate settlement of transactions. We also maintain funding capacity beyond our daily operating needs to provide a cushion through the normal fluctuations in our payment service obligations, as well as to provide working capital for the operational and growth requirements of our business. We believe we have sufficient liquid assets and funding capacity to operate and grow our business for the next 12 months. Should our liquidity needs exceed our operating cash flows, we believe that external financing sources, including availability under our Revolving Credit Facility, will be sufficient to meet our anticipated funding requirements.

Cash and Cash Equivalents and Interest-bearing Investments

To ensure we maintain adequate liquidity to meet our payment service obligations at all times, we keep a significant portion of our investment portfolio in cash and cash equivalents and interest-bearing investments at financial institutions rated A- or better by two of the following three rating agencies: Moody's, S&P and Fitch; and in AAA rated U.S. government money market funds. If the rating agencies have split ratings, the Company uses the lower of the highest two out of three ratings across the agencies for disclosure purposes. If the institution has only two ratings, the Company uses the lower of the two ratings for disclosure purposes. As of March 31, 2023, cash and cash equivalents (including unrestricted and settlement cash and cash equivalents) and interest-bearing investments totaled $2.4 billion. Cash and cash equivalents consist of interest-bearing deposit accounts, non-interest-bearing transaction accounts and money market securities; interest-bearing investments consist of time deposits and certificates of deposit with maturities of up to 24 months.

Available-for-sale Investments

Our investment portfolio includes $2.7 million of available-for-sale investments as of March 31, 2023. U.S. government agency residential mortgage-backed securities comprise $1.4 million of our available-for-sale investments, while asset-backed and other securities compose the remaining $1.3 million.

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Clearing and Cash Management Banks

We collect and disburse money through a network of clearing and cash management banks. The relationships with these banks are a critical component of our ability to maintain our global active funding requirements on a timely basis. In the U.S., we have agreements with four active clearing banks that provide clearing and processing functions for official checks, money orders and other draft instruments. We believe that this network of banks provides sufficient capacity to handle the current and projected volumes of items for these services. We also maintain relationships with a variety of domestic and international cash management banks for electronic funds transfer and wire transfer services used in the movement of consumer funds and agent settlements.

Term Loan and Notes

The following is a summary of the Company's outstanding debt:


(Amounts in millions, except percentages)	March 31, 2023		December 31, 2022
9.34% Term Loan due 2026	$	379.0	$	380.0
5.38% Senior Secured Notes due 2026	415.0		415.0
Total debt at face value	794.0		795.0
Unamortized debt issuance costs and debt discounts	(9.0)		(9.6)
Total debt, net	$	785.0	$	785.4

As of March 31, 2023, the Company had no borrowings and no outstanding letters of credit under its Revolving Credit Facility and had $40.0 million of availability. See Note 6 — Debt of the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosure related to the credit facilities.

Credit Ratings

As of March 31, 2023, our credit ratings from Moody's and S&P were B2 with a stable outlook and B with a stable outlook, respectively. The Company does not have rating triggers associated with its credit agreements or its regulatory capital requirements.

Analysis of Cash Flows


	Three Months Ended March 31,
(Amounts in millions)	2023		2022
Net cash used in operating activities	$	(7.0)	$	(30.0)
Net cash provided by (used in) investing activities	40.8		(14.5)
Net cash used in financing activities	(198.6)		(214.5)
Net change in cash and cash equivalents	$	(164.8)	$	(259.0)

Cash Flows from Operating Activities

For the three months ended March 31, 2023, net cash used in operating activities improved by $23.0 million, primarily due to lower signing bonuses to agents, legal fees, prepaid expenses and short-term incentive compensation payments in 2023 when compared to 2022.

Cash Flows from Investing Activities

For the three months ended March 31, 2023, net cash provided by investing activities increased by $55.3 million, primarily due to an increase in certificate deposits that matured and were not reinvested.

Cash Flows from Financing Activities

During the three months ended March 31, 2023, net cash used in financing activities decreased by $15.9 million, primarily due to the change in receivables included in settlement assets and the change in payment service obligations. See Note 2 — Settlement Assets and Payment Service Obligations of the Notes to the Unaudited Condensed Consolidated Financial Statements.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of these financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts and related disclosures in the unaudited Condensed Consolidated Financial Statements. Actual results could differ from those estimates. On a regular basis, management reviews its accounting policies, assumptions and estimates to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. Our significant accounting policies are discussed in Note 2 — Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Critical accounting policies are those policies that management believes are very important to the portrayal of our financial position and results of operations and that require management to make estimates that are difficult, subjective or complex. There were no changes to our critical accounting policies and estimates during the quarter ended March 31, 2023. For further information regarding our critical accounting policies and estimates, refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates in the Company's 2022 Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 — Description of the Business and Basis of Presentation of the Notes to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for information regarding recent accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk since December 31, 2022. For further information on market risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures about Market Risk in the Company's 2022 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report (the "Evaluation Date"), the Company carried out an evaluation, under the supervision and with the participation of management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

During the first quarter of 2023, the Company completed the implementation of a new enterprise resource planning ("ERP") system and consequently, modified the design of certain existing internal controls, as well as implemented new controls and procedures impacted by the implementation of the new ERP system. Except for the implementation of the new ERP system, there were no other changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A description of our legal proceedings is included in and incorporated by reference to Note 11 — Commitments and Contingencies of the Notes to the Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this report.

ITEM 1A. RISK FACTORS

The following risk factor disclosures should be read in conjunction with the risk factors described in the Company's 2022 Form 10-K and subsequent periodic filings with the SEC. We are supplementing the risk factors previously disclosed in such filings to include the following updated risk factors:

Adverse developments affecting the financial services industry, such as recent bank failures or concerns involving liquidity, may have a material effect on the Company’s operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10 and March 12, 2023, the Federal Deposit Insurance Corporation took control and was appointed receiver of Silicon Valley Bank (“SVB”), and Signature Bank, respectively, after each bank was unable to continue their operations. These events exposed vulnerabilities in the banking sector, including legal uncertainties, significant deposit outflows, volatility and contagion risk, and caused market prices of regional bank stocks to plummet.

We have not experienced any adverse impact to our current and projected business operations, financial condition and results of operations as a result of the SVB, Signature Bank or other recent bank failures; however, we are unable to predict the extent or nature of the impacts of these evolving circumstances at this time. If, for example, other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened. Therefore, while it is not currently possible to predict the potential impact that the failure of SVB, Signature Bank, or other bank failures could have on economic activity or our business in particular, the failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in response to these events could adversely impact our business, financial condition and results of operations.

Although we expect to continue to assess our banking relationships as we believe necessary or appropriate, our access to cash in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect the financial institutions with which we have banking relationships, and in turn, us. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could also include factors involving financial markets or the financial services industry generally. The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These could include, but may not be limited to, delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets.

In addition, widespread investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial or contractual obligations. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and projected business operations and financial condition and results of operations.

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ITEM 6. EXHIBITS

The following exhibits are filed or incorporated by reference herein in response to Item 601 of Regulation S-K. The Company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K pursuant to the Exchange Act under Commission File No. 1-31950.


Exhibit Number			Description
2.1			Agreement and Plan of Merger by and among MoneyGram International, Inc., Mobius Parent Corp. and Mobius Merger Sub, Inc., dated as of February 14, 2022 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the Commission on February 15, 2022).
3.1			Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., dated June 28, 2004 (Incorporated by reference from Exhibit 3.1 to Registrant's Annual Report on Form 10-K filed on March 15, 2010).
3.2			Certificate of Amendment of Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., dated May 12, 2009 (Incorporated by reference from Exhibit 3.1 to Registrant’s Annual Report on Form 10-K filed March 15, 2010).
3.3			Certificate of Amendment of Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., dated May 18, 2011 (Incorporated by reference from Exhibit 3.1 to Registrant's Current Report on Form 8-K filed May 23, 2011).
3.4			Certificate of Amendment of Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., dated November 14, 2011 (Incorporated by reference from Exhibit 3.1 to Registrant's Current Report on Form 8-K filed November 14, 2011).
3.5			Amended and Restated Bylaws of MoneyGram International, Inc., as amended and restated October 28, 2015 (Incorporated by reference from Exhibit 3.5 to Registrant’s Quarterly Report on Form 10-Q filed on November 2, 2015).
3.6			Amendment to the Amended and Restated Bylaws of MoneyGram International, Inc., dated March 2, 2016 (Incorporated by reference from Exhibit 3.6 to Registrant’s Annual Report on Form 10-K filed on March 2, 2016).
3.7			Amended and Restated Certificate of Designations, Preferences and Rights of Series D Participating Convertible Preferred Stock of MoneyGram International, Inc., dated May 18, 2011 (Incorporated by reference from Exhibit 3.2 to Registrant's Current Report on Form 8-K filed May 23, 2011).
4.1			Indenture, dated as of July 21, 2021, by and among MoneyGram International, Inc., the guarantors party thereto, and Wells Fargo Bank, National Association, as trustee and notes collateral agent (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed with the Commission on July 26, 2021).
4.2			Form of 5.375% Senior Secured Notes due 2026 (included as Exhibit A to the Indenture incorporated by reference herein as Exhibit 4.1).
31.1*			Section 302 Certification of Chief Executive Officer
31.2*			Section 302 Certification of Chief Financial Officer
32.1**			Section 906 Certification of Chief Executive Officer
32.2**			Section 906 Certification of Chief Financial Officer
101.INS**			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104**			Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101).
*			Filed herewith.
**			Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		MoneyGram International, Inc.
		(Registrant)

April 28, 2023	By:	/s/ CHRISTOPHER RUSSELL
		Christopher Russell
		Chief Accounting Officer
		(Duly Authorized Officer and Chief Accounting Officer)