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MoneyGram International Inc (MGI)
Q2Â 2019 Earnings Call
Aug. 02, 2019, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, and welcome to the MoneyGram International, Inc. Second Quarter 2019 Earnings Release Conference Call. [Operator Instructions]
It is now my pleasure to turn the floor over to your host Wendi Schlarb, Head of Corporate Communications. Please go ahead, ma'am.
Wendi Schlarb -- Head of Corporate Communications and Digital Marketing
Thank you. Good morning and thank you for joining us today. On the call with me are Alex Holmes, Chairman and Chief Executive Officer, and Larry Angelilli, Chief Financial Officer. On the MoneyGram Investor Relations website, you can find our earnings press release and financial summary slide deck, which is intended to supplement our prepared remarks during today's call and provides the reconciliation of differences between GAAP and non-GAAP financial measures. We will refer to non-GAAP metrics on the call. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's quarterly performance in addition to the impact that these items and events that have on the financial results. Please note that today's call is being recorded.
During this call, we'll be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call and in the Risk Factors section of our Form 10-K, Forms 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements.
And with that, I'll turn the call over to Alex.
W. Alexander Holmes -- Chairman and Chief Executive Officer
Great. Thank you, Wendi. Good morning, everyone and thank you for joining us today. Financial results in the second quarter were impacted by the slower than anticipated recovery of the US outbound market, along with the continuing market challenges in the US to US business. Importantly, however, we reported accelerated growth from our digital platforms and returned to year-over-year growth in many key corridors as we saw sequential increase in active returning and new customers. These trends, along with the successful execution of our cost saving initiatives enabled us to deliver sequential improvements to both revenue and adjusted EBITDA. As Larry will walk you through in a bit, we continue to outperform on expenses and for the quarter, we were $33 million or 19% favorable on non-commission expenses as compared to 2018.
From a topline perspective, while off to a slower than anticipated start, we are beginning to see a return to growth in a number of areas. In the second quarter, we reported an increase in total money transfer transaction volume on a sequential basis. We posted a return to year-over-year transaction growth for our non-US markets, led by non-US online transaction growth of more than 100% on a year-over-year basis. We saw more than half of our Top 100 corridors achieve year-over-year transaction growth. And this momentum has also continued into July. I'm pleased to say that excluding the US to US market, we returned to positive transaction growth in the month of July. Importantly, all of this has been driven by our digital transformation initiatives with a focus on improving the customer and agent experience, while leading the industry and protecting consumers from fraud. I truly cannot say enough about the success of our new app, our redesigned website launched during the quarter and the expansion of these platforms to 24 countries.
Turning now to Slide 6. Over the quarter, we also completed three important achievements that collectively helped improve our long-term capital structure and credit standing. First, we successfully completed our debt refinancing. Second, we sold $74 million in pension liabilities to reduce our future expenses and funding needs. And third, we launched a strategic partnership with Ripple that also included an equity investment and a significant premium to our stock price at the time of closing. As you know, with our new partnership, Ripple has become our key partner for cross border settlement using digital assets. And I'm so excited to announce today that MoneyGram is now live and transacting on the Ripple xRapid platform. We started executing trades earlier this week and all signs point to this being a tremendously beneficial relationship for all parties involved. We are literally settling currencies in seconds and to quote my friend, Larry, this is really cool.
One of the core strengths of MoneyGram is our global liquidity and settlement engine that enables millions of customers to move billions of dollars across 200 countries and territories using over 120 currencies. We believe our settlement engine is a key asset with additional applications and use cases that could lead to new revenue streams down the road. Our partnership with Ripple will help further improve this core strength. Our internal innovation lab continues to explore new and exciting use cases for crypto, DLT and blockchain as we look to build the business model of the future.
Turning to Slide 8. A key part of our digital transformation in our corporate strategy is to deliver a differentiated customer experience. As such, we are also working to digitize and improve the agent experience to enable our partners to quickly and easily serve our shared customers. To do this, we've enhanced our ability to directly communicate with agents. We've rolled out our new web based portal, and we've launched a new web based point of sale system. As a result of these improvements and our improved agent customer support, we've seen agent satisfaction and ease of use scores increase approximately 20% through the first half of the year.
Shifting now to other customer experience improvements, we couldn't be more pleased with the success of our new app. We now have the highest rating of anyone in the industry. These digital assets enable us to compete head on with any Fintech or legacy competitor as we focus on bringing our best-in-class experience directly to the consumer. We previously reported that nearly 50 million consumers utilize the MoneyGram platform on an annual basis.
And as you can see here, we're excited about the growing numbers of returning users and new customers, who consistently use the app each month. With 70% of our digital transactions initiated on a mobile device, we are focused on accelerating growth through this channel and positioning our leading Fintech capabilities to even younger consumers. In addition to our new app, over the quarter, we launched our redesigned website. The team did an extraordinary job building the design with the customer at the center of each step in the process. The end result is a simpler design with intuitive navigation that also provides a more personalized experience and faster load times.
Together the app and the website are driving strong digital growth outside the US and as you can see here on Slide 11, digital transactions have increased 109% year-over-year and revenue has increased nearly 50%. The growth has been driven by both the strength of the user experience, in addition to our country expansion with the app and having the website now live in 24 countries. Again, we're excited about the acceleration of our digital growth. Later this month, we will go live with Visa partnership that we are eager to launch. We believe Visa's platform in combination with the innovation we are bringing to the cross border market has a huge potential to further transform our business. We're looking forward to providing an update on our continued growth in this channel on our next call.
Now I'd like to talk about our performance across the regions. As we discussed in our prior earnings call, getting the US outbound market back to growth continues to be an important area of focus for us. From a trend perspective, we continue to see a sequential improvement in transactions and revenue as we transition from Q1 to Q2. Specifically, we saw an 8% sequential increase in total US outbound transactions and our year-over-year rate of decline slowed by over 400 basis points in the quarter. More importantly, we had a very strong May with a solid Mother's Day, helping to improve stems across the board. Unfortunately, June was an unusually soft month and we lost some of the momentum that have been building. July, in contrast, however, was a good month and much of momentum has been regained.
Looking at the market from a corridor perspective, it's obviously important to highlight the continuing impact on the business of the compliance controls that were implemented in 2018, particularly in the higher fraud corridors, such as the US to US, US to Jamaica, US to Nigeria, US to Ghana and US to China. Collectively, these corridors alone impacted our total company transaction growth by about 4 percentage points in the quarter on a year-over-year basis. In addition, our new compliance standards have also had a larger than anticipated impact on US outbound since the Latin America. While those corridors are recovering that recovery has been in a much slower pace than expected. This has largely been the case in the non-exclusive retail market where almost all of our competitors have leveraged their loser [Phonetic] compliance policies to exploit our tightened controls.
Now that said, our compliance controls are working extremely well and continue to have the intended impact on fraud. I'm pleased with our compliance performance as we again saw a decrease in reported fraud and we continue to report the lowest fraud rates in the industry. A critical component of this success has been our ongoing partnership with our agents, who have stepped up to support our efforts and embrace our compliance standards. Recently, we were referred to by a competitor is being the problem with respect to their US to US growth rates for the large agent. In reality, those statements are not only incorrect, but also show a complete lack of understanding of the compliance risks associated with operating in today's especially high risk environment. I truly can't say enough about the value of ID collection at $1.1 and in contrast to those statements, I'll simply say that Walmart and all of our agents, continue to be great partners for MoneyGram and collectively, our compliance standards are leading the industry and improving the quality of our business hands down.
Our focus on returning the US market to growth centers around three primary initiatives. First, we're revitalizing our sales force and improving our incentive structure. Second, we're deploying new pricing strategies and are now more aggressively taking on the online and niche walk-in competitors. And third, we are more actively working with our agents to improve our position at the point of sale. The combination of these three initiatives are already having a positive impact on the business has not only evidenced by our July performance, but also evidenced by the continued increase in new returning and active customers.
In the online space, our leading platform continues to propel us forward. During the quarter, our online US business reported a nearly 15% sequential quarter transaction increase, following the launch of our new digital capabilities, pricing actions and the huge success of our loyalty program and again all of this has accelerated in the month of July. We're excited about how the loyalty program continues to outperform with strong month-over-month growth, in addition to members averaging a much higher number of transactions than non-members, almost 3 times. Given these successes, we are now preparing to launch the program globally later this year.
In Canada, we continue to be excited about our position in the market and our ongoing partnership with Canada Post. Earlier this year, we partnered to launch online staging and in June, we launched simplified pricing to better serve consumers across Canada. Sends in the Latin America region have been another bright spot for the company with several markets reporting revenue growth in excess of 30%. We've also expanded our coverage in the region overall. In Mexico, specifically, one of our key recent signings [Indecipherable] is already live.
In the Asia-Pacific region, we're particularly excited about the launch of a new partnership with the Korean Fintech, Sentbe. This service is already bringing in a significant number of new customers and volume to MoneyGram, and we're very appreciative and excited for this partnership. In Bangladesh, one of the largest received markets in the world, our account deposit capability, announced on the last call, is now live and usage is gaining steadily. The Middle East was one of our best performing regions during the first half of the year. Overall volumes are increasing on both a year-over-year and quarter-over-quarter basis and again here, I couldn't be more pleased with the efforts of our partners in the region, who worked with us to help regain our strength in this critically important market.
In Africa, we continue to see great success with our wallet partnerships, including zPay, which continues to perform at an accelerated pace. In other parts of Africa, while we are returning to growth, we still have some work to do. And we're working hard and working actively with our partners to reinvigorate that growth and we're optimistic about the strong recovery in the second half of the year. In Europe, well performance in the UK continues to be a drag on growth as a result of Brexit, in other parts of the region, a number of our key partners have already returned to growth. In addition, we are seeing particularly strong performance in some of the emerging markets with total customers in some areas, increasing as much as 70% on a quarter-over-quarter basis.
And with that, I'll turn the call over to Larry.
Larry Angelilli -- Chief Financial Officer
Thanks, Alex. During the quarter, we completed a number of financing transactions that had a significant impact on the company's capital structure and EBITDA. First, we had a non-cash charge of $31.3 million in the quarter, relating to the sale of $74 million or about 57% of the obligations in our defined benefit pension plan. The positive impact of this sale that it significantly reduces our future funding requirements as well as the future administrative cost of the plant. This did not have any impact on the current cash and liquidity of the company as the non-cash charge represented an acceleration of the cumulative investment losses that were already incurred over the entire life of the plant. We also completed the refinancing of our total debt, and we improved the capital structure of the company.
We reduced our senior debt to $645 million and extended the maturity to 2023, while adding $245 million tranche of five year second-lien notes. We also renewed and extended our revolving credit for three years, while reducing the facility to $35 million. And lastly, we obtained a $30 million equity infusion from Ripple, which was in conjunction with the commercial agreement to jointly develop markets for their blockchain and cryptocurrency technology over the next two years. Over the life of this agreement, we can draw another $20 million in equity and we believe the benefits to the company will offset the dilution attributable to the existing investment and the future equity, if sold to ripple. Some of these transactions resulted in the company's cash position remaining well within our targets at $133.5 million at June 30.
As Alex referenced, we expect to achieve sequential growth this year. This was the case in the second quarter, where revenue was $324 million, up 3% sequentially from the first quarter, while down 14% on a year-over-year basis. The majority of the negative impact was in June and mostly related to the impact of our previously imposed compliance rules in the US in addition to continuing headwinds in the US to US market. The US to US market is now about 7% of our total revenue. The pattern is emerging as that we're seeing success from our efforts to win back share in key markets with 52 of our Top 100 corridors showing year-over-year growth in transactions with July improving to 60 of our Top 100 corridors showing year-over-year growth. This translates to the majority of our key corridors outside the US returning to healthy growth in both volume and revenue. As a result, we believe the foundation is in place for year-over-year growth in revenue in the latter part of this year.
In our digital business, we continue to open new markets through our online and mobile business, with disruptive introductory pricing in each of these markets. As Alex mentioned, volume grew 109%, excluding the US market. We continue to building a case for new users with disruptive introductory pricing. The success of this has led us to recently lower prices on our legacy markets, which will result in revenue growth headwinds, but it remains an important investment that we're making in future technologies, which continue to attract a completely new customer base to the MoneyGram brand. Non-commission expenses on an adjusted basis were $264 million. For this first-six months, that's down $54 million or 17% year-over-year. This improvement is independent of declines in volume and the company continues to improve its competitive position with increasingly scalable expenses, further enhancing our ability to benefit from a return to growth. Total comp and benefits was decreased $12 million or 18% from the same quarter from last year.
Our restructuring was essentially completed in the first quarter. This program already paid for itself last year and is currently delivering our expected run rate savings. On a reported basis, total non-commission expenses for the first-six months declined $75 million or 21% on a year-over-year basis. On adjusted commission expenses were down 19% -- non-commission expenses were down 19% for the second quarter versus last year and this shows that our restructuring has also created a scalable cost structure due to significant improvements in both indirect variable and fixed costs. On a sequential basis, we also increased our adjusted EBITDA for the second quarter. Adjusted EBITDA was $54.3 million, up from $50.1 million in the first quarter. This was a decline of 9% from the second quarter of last year. Adjusted EBITDA margin improved, however to 16.8% from 16% last year. Adjusted EBITDA was up 8% on a sequential basis, and down 7% year-over-year on a constant currency basis.
Another benefit from the strategic changes we've made is the quality of our agent base. Our agents are more productive on average and their credit quality has improved. This in turn has improved our collections and lowered our credit losses on agent receivables. Capital expenditures are on track to meet or improve upon our guidance, as well as signing bonuses. And the DNA from these is starting to decline as we move away from the peak spending of three plus years ago. As we've been describing, continuing competitive pressures in the US, including both compliance and pricing, has slowed the pace of our recovery so far this year. On the other hand, we're pleased with our continuing success with our cost structure improvements and our ability to grow in major corridors. And we still believe we'll return to growth with total revenue growth later this year. However, based on these existing factors and the anticipating -- we are anticipating revenue to decline approximately 8% and adjusted EBITDA to decline approximately 12% for the full year 2019 compared to last year on a constant currency basis.
And now, I'll turn the call back over to Alex.
W. Alexander Holmes -- Chairman and Chief Executive Officer
Thanks, Larry. In summary, I'll simply say although we are slightly behind where we want to be or expected to be, I suppose at this point in time, our return to growth is picking up speed. We returned to year-over-year growth in many key markets and corridors and the strong execution of our digital transformation and cost saving initiatives enable us to deliver sequential improvements to adjusted EBITDA. As we return to growth, we'll do so with the de-risked customer base and a more scalable cost structure. We're excited for everything that's to come and we appreciate your time today.
And with that, I'll turn it back over to the operator and ready for your questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] We'll take our first question from Ramsey El-Assal from Barclays. Please go ahead.
Ramsey El-Assal -- Barclays Investment Bank -- Analyst
I wanted to ask about your digital transaction versus revenue growth. It looks like the delta between the two kind of improved versus last quarter. Is there anything, is pricing getting a little less intense or anything you can attribute that to?
W. Alexander Holmes -- Chairman and Chief Executive Officer
Great question, a couple of things. We are maybe backing up a little bit as we launched all of the new websites around the world. We certainly want to do that as disruptively as possible and went in with a lot of introductory pricing in a number of markets, right. We're on a customer acquisition, expansion focus here and we've been doing, I think, a really good job of that. As markets grow and as we settle in to them, we have been adjusting prices a bit to reflect that. So, yeah, when you see the growth rates for the non-US market that does reflect some changes to those prices. Although, I would say that our intention is to continue to be low priced and disruptive as we grow those businesses and those platforms and keep acquiring customers on a go forward basis.
I think as Larry talked about our legacy businesses kind of the original platforms, that was kind of the opposite. We had high prices there. And I think we continue to see challenges with growth and then kind of repositioning as the competitive landscape has changed. So we've brought the prices down in those markets as well and feel very good about the repositioning of that platform. So I think it's a trend we're going to continue to see for a while in terms of transactions outpacing revenue, but I think the fact that you're seeing revenue growth against that backdrop is super positive as well.
Ramsey El-Assal -- Barclays Investment Bank -- Analyst
Okay. Great. And then I wanted to ask on the Ripple partnership, I don't know, can you maybe help us get a sense of how much of the cost base you think you can save or I mean, clearly there is, I mean, you guys communicated there is some cost benefit, but just trying to looking through the income statement, help us understand a little bit where and when we might expect to see that starting to come through?
W. Alexander Holmes -- Chairman and Chief Executive Officer
Yeah. Let me just add one thing, then I'll let Larry jump in on that. And I mean, I guess fundamentally, right, I love to say there really is no way to instantly move money anywhere around the world, right. We run a giant net settlement engine, and I think we do it better than anybody. That's kind of how you get money from point A to point B these days and I think you have two ways of doing that. You have kind of the consumer side of it, then you have your back end settlement and trading processes and we know what this product has the capability to do is actually completely streamline and transform our back end capabilities and for the first time, I think ever really actually enable money to move instantly or is close to instant as humanly possible. So if you think about hundreds of millions of dollars circling the world every day waiting to be settled and sort of what we call money trapped in transit, the ability to streamline that can drive a ton of efficiency. So I'll let Larry jump in.
Larry Angelilli -- Chief Financial Officer
Yeah. And we've been ramping starting with some pretty low levels. I don't foresee really much of a material impact on Q3. We're live. We're doing stuff. We did move money to Mexico in a minute 13 seconds. But I think we're going to ramp. We're not going to be maxing out or stressing their system. And so it will build gradually. I think in the fourth quarter, we'll start to see some impact. I think due to the kind of confidentiality and the unique nature of what we're doing, and I don't think we can really describe at this point what the P&L impact is, but I would just say that we're expecting it to influence Q4.
Ramsey El-Assal -- Barclays Investment Bank -- Analyst
Okay. And can you share with us in what corridors this will be operating?
Larry Angelilli -- Chief Financial Officer
No. We can't on that either.
Ramsey El-Assal -- Barclays Investment Bank -- Analyst
Okay. Fair enough. Thanks for taking my questions.
Operator
Thank you. We're taking our next question from Kartik Mehta from Northcoast Research. Please go ahead.
Kartik Mehta -- Northcoast Research -- Analyst
Hey. Good morning, Alex and Larry. Alex, just bigger picture question, as you deal with this ID issue, is it having any impact on your ability to sign agents or at least in the US or as contracts come up for renewal, having to negotiate different financial aspects of it because of the idea issue?
W. Alexander Holmes -- Chairman and Chief Executive Officer
No, actually, that has not been the case at all, which I think is super positive effect. I was just down with the bank, having a conversation. Here in the US quite a large, very influential bank and basically CEO there looked at me and said, he goes, we would never transact and anybody wouldn't give us their ID, so we're completely supportive of what you're doing, I think it's great. So, it's, I think concepts like that seem to permeate throughout all of our discussions. I think the conversations with the regulators have been super positive. We've had inquiries from not only domestic, but also foreign regulators in terms of what we're doing with ID collection, how we're using ID to our benefit, what value is bringing to us in these types of things. So I think that conversation is all super positive. It's really kind of back to the non-exclusive markets particularly we have multiple competitors at the same point of sale and it becomes a conversation on the consumers' choice, the agents' influence and these sorts of things that have probably impacted us more so than anything else.
I think as I've said maybe on the last call or last year a little bit, I think certainly Latin America particularly Mexico and the northern triangle has probably been the ones that have been more broadly impacted on the ID requirement and that's I think pretty understandable and sort of today's immigration political debate that continues to be ongoing. And as I've said, I think there's going to be some loss there that you're just going to have to, as an organization kind of accept as we kind of push the program forward. But that being said, we've done a lot, I think in the last couple of quarters to try to clarify ID collection standards, what we do with that information, what types of IDs we collect, which I also think has helped resonate well with the consumers and I think has clarified some things for the agents as well as they push the program forward.
And we continue to see new customers coming in every day and all of those new customers are complying with our standards. And so I think we continue to go through a little bit of a churn where potentially some legacy customers and others have kind of turned away and the new ones coming in, understand the policies and procedures and don't seem to have much issue with it. It's interesting too, because I think once you isolate it from those kind of the Mexico, Northern Triangle, the impact is not nearly as much at all. And I think more generally around the world ID collection is more standard. So yeah, anyway so we feel good about it. We're growing through it. I think more or so than anything it's been kind of the smaller walk-in niche competitors that have really sold heavily against this. A lot of them are being very aggressive on price, going negative on FX, increasing agent commissions quite substantially.
And I think that was something that we were maybe a little bit under resource for perhaps and so we've changed that. And we're fighting that back now and I think putting a better product in front of the consumer with idea, without idea, I think you have an opportunity to influence that customer in a pretty big way and I think we're beginning to see the signs of that moving in our favor. So, yeah, it's been a lot of work, but as we keep saying we're going to get back to growth. And when we do, we are going to be doing more compliantly than anybody else in the industry and I think that says volumes about what we can and should be doing as an industry.
Kartik Mehta -- Northcoast Research -- Analyst
Moving to Alex. I know you talked about your strategy for the digital business and maybe going into a market and offering lower price. I'm just wondering on the physical side, what are the transfer pricing? Have they stabilized or they upped down, just your perspective and if there are any markets that have been particularly aggressive?
W. Alexander Holmes -- Chairman and Chief Executive Officer
Yeah, I mean I think that our view, I think is -- continues to be very different from others in the space, I think we have continued to balance pricing as much as possible. I mean clearly, yeah, I'll give you actually an example, right. So one of the large corridors UK to Romania has been something that's long been a good corridor. It's dropped off by considerably in recent times, and largely related to Brexit and Romanians kind of migrating. So as part of that, right, when you see that volume drop off, one of the reactions you can have is to lower your price and see if you can win customers and volume back when the customer simply aren't there, you're kind of giving the business away so you can put your prices back where they were and you can continue to move on.
In other cases, you lower your prices and you're going to see volume come back and you're going to see consumers come back in because you've been misplaced in the market. I mean, my view is, small niche competitors all over the world go in with lower prices. Online competition comes in with lower prices and Western Union MoneyGram end up lowering prices and trying to adjust all the time. And honestly it gets a little tiring and monotonous and so you need to take a very different view of your business and recognize it to be competitive, you have to have the right price point. And so I think we're being much more aggressive on that. And I think we're trying to put a product into the market that consumers want to buy and partner with -- and so, in the US, we see a lot of niche competitors going negative on FX to Latin America corridors.
You see prices coming down, you see agent commissions going up and so you have to put a better product in the market, but you also have to be competitive in those areas and so that's something that we're doing and I think doing very, very well. But that doesn't mean you have to change prices everywhere, it doesn't mean that you can be strategic in a number of areas and we have a lot of high value, high priced corridors that continue to perform and grow very, very well. But in those more competitive ones, you just have to put the right product in the market. So I think our view is very different from others. And I think, if you're generally lowering prices and then raising someplace and that balances out your numbers. I'm not really sure that's not a competitive pricing environment.
Kartik Mehta -- Northcoast Research -- Analyst
All right. Thanks, Alex. I really appreciate it.
Operator
Thank you. We're taking our next question from Bob Napoli from William Blair. Please go ahead.
Bob Napoli -- William Blair -- Analyst
Good morning, Alex and Larry. Thank you for the question. Your statement of getting back to growth by the end of the year is, I mean in order -- looking at these numbers in order to get back to revenue growth by the end of the year, you would have to have a pretty radical. It looks like acceleration in your business. What is your confidence? I mean, why would you state to -- what's the visibility to actually doing that?
W. Alexander Holmes -- Chairman and Chief Executive Officer
We've undergone a -- I mean a quarter-by-quarter almost an agent-by-agent kind of analysis of our business. And I think what we've been highlighting here is that really the impediments to growth have been really concentrated in the US. And I think that there is a lot of math there that really if we solve the US and we are solving for the US then all of a sudden, it's not as difficult as it used to be, because we've already returned to growth in many key corridors. The other aspect of it is, is that the rules that we put in place were rolled out over the course of last year and they really hit hard in July. I think that -- and then we added new rules throughout the summer and really into the fall.
So last year, we really saw this really degrading of our growth in a lot of the US markets. And what also happened was that we targeted some of the quarters that Alex mentioned earlier that we really didn't expect those to come back and so we have tough comps on those right now. We still haven't really shut those down as much as they ended up being shut down this time last year. So we can see it emerging, we can see that if really things continue on their current trajectory that you see the turn coming and the other aspect is that we have some pretty exciting new stuff that's launching. We've got some new agents that we find and there is some really key business that we think will be additive in the second half of the year. So the combination of all those really makes us pretty confident that the term is occurring.
Bob Napoli -- William Blair -- Analyst
Then, your expense improvement this quarter was impressive and surprising. What exactly did you do and so with an acceleration in revenue growth and expenses controlled, what are your thoughts on EBITDA margins? I mean to look more color on expense control and how that happened in margin discussion?
Larry Angelilli -- Chief Financial Officer
I think from an expense control perspective, I think some of it is momentum where when we did do our restructuring that was really isolated to very specific things in order to create a restructuring charge. We've been going through the business really systematically and just looking at things that we don't need to do any more. Part of the real hidden story here is that when you dramatically improve your systems and dramatically improve your customer experience, there's just a lot less friction and a lot less costs that go with the transaction and what we've really done as we've reduced our margin of cost for transactions to be really low.
And so we're really kind of a smaller leaner organization that's becoming much more efficient from IT and systems and customer service perspective. I really think that's the driver. I don't think the pace keeps up. I mean we were -- it was a pretty big number. I don't think we can stay on this pace to continue to decline on expenses at this rate, but we also don't really see it as sort of -- and I think that there is continuing potential for future savings going forward. And I forgot your second question.
W. Alexander Holmes -- Chairman and Chief Executive Officer
Margins.
Larry Angelilli -- Chief Financial Officer
So on margins.
Bob Napoli -- William Blair -- Analyst
On EBITDA margin, I guess, I mean...
Larry Angelilli -- Chief Financial Officer
Yeah. So this is where it gets a little interesting, because I think really today given what's happened to our revenue, we're probably a little sub-scale and I think that we can really have margin improvement with the return to growth. I think they go together. It lets us also price aggressively where we can actually take a lower gross margin, but maintain EBITDA margin. And so that's really the strategy that we can scale our operating expense base and get EBITDA expansion in conjunction with the return to revenue growth.
Bob Napoli -- William Blair -- Analyst
Okay. Thank you.
W. Alexander Holmes -- Chairman and Chief Executive Officer
Yeah. The short-term focus those investment growth, right so.
Larry Angelilli -- Chief Financial Officer
Yeah. I mean today we're doing what we need to do to get our customers back and get our growth back.
Bob Napoli -- William Blair -- Analyst
Thank you.
Operator
Thank you. We're taking our next question from David Scharf from JMP. Please go ahead.
David Scharf -- JMP Securities -- Analyst
Yeah. Good morning. Thanks for taking my questions as well. Excuse me, the first, I guess what more kind of housekeeping question for Larry. I see in the cash flow statement, the receipt of net proceeds from the Ripple investment in my calculation $30 million, for 10 a share [Phonetic] that adds 7.32 million shares. Can you give us an updated share count, not averages because it didn't moved much from Q1 to Q2, but it seemed like you entered the quarter with about 65 million shares and this would bring it up north of 72 million and then 8% warrant dilution protection to the junior debt holders would take that up to 78 million, 79 million shares, and I just want to get a sense for going forward, how to think about that for purposes of those market cap and valuation?
Larry Angelilli -- Chief Financial Officer
Yeah, I would say you're doing that right. I think the fully what I'd call diluted including any kind of employee awards as well would be approximately 85 million to 86 million, if you converted everything and including the junior warrants that we've put out.
W. Alexander Holmes -- Chairman and Chief Executive Officer
Yeah,
David Scharf -- JMP Securities -- Analyst
[Speech Overlap] in the next -- OK, sorry.
Larry Angelilli -- Chief Financial Officer
No. The warrants don't show up. And then you also have one of the things, like for example, on Bloomberg, they don't include our Series D convertible. As part of the market cap calculation that 8.9 million shares for the Series D and then you'd add the Ripple, the Ripple warrants, the Ripple stock and then you'd have the warrants associated $5.4 million associated with the subordinated debt.
David Scharf -- JMP Securities -- Analyst
Okay. So around $80 million sounds like a fair approximation, if anyone's trying to...
Larry Angelilli -- Chief Financial Officer
Yes, a little above that. But -- yeah.
W. Alexander Holmes -- Chairman and Chief Executive Officer
We can take you and share more detail...
Larry Angelilli -- Chief Financial Officer
Yeah.
David Scharf -- JMP Securities -- Analyst
No, that's helpful. And then on the warrants, I guess on the Ripple transaction and I know this was asked by a previous caller, it effectively sold 10% of the company. I mean 10% dilutive to existing holders and very often sizable transactions like that are based on maybe some really impactful revenue synergies. Here it was kind of unique because it sounds like it's more on a cost synergy, but given just the magnitude of that dilution, is there any kind of quantification on how we should think about the potential cost savings in the model? Just not sure how much the real time?
Larry Angelilli -- Chief Financial Officer
Yeah. I guess, I'm a little restricted in terms of where that's going to guiding you in terms of where that's going to show up. I would just tell you that on an EBITDA basis, the way that potential for this is it would offset the dilution for the entire 50 through a combination of...
David Scharf -- JMP Securities -- Analyst
Yeah. And I don't want to see it divulge anything you're not permitted to, but maybe a different way of asking it that you could help us with this to understand what existing settlement costs are?
Larry Angelilli -- Chief Financial Officer
No. It really isn't that straightforward and we really just are not in a position to go there. I think that over time as this effect is felt, I think there might be a little more clarity around it, but right now all we can say is that on an EBITDA basis, we think we have the potential to offset the entire 50, if you like to draw down.
David Scharf -- JMP Securities -- Analyst
Fair enough. And then lastly, on the cost side, obviously, the both amount of direct monitor costs and the compliance enhancement has been recurring for a number of years. And in terms of trying to gauge visibility into when they might ease, it looks like both of those actually increase quite a bit sequentially. Is there anything unique in June, is it related to that and should they be any reason to expect they might be falling back down in the second half?
W. Alexander Holmes -- Chairman and Chief Executive Officer
That's a good question. We transitioned during the first half of the year to a new monitor, which and part of the new extended EPA and that ramp up and first half of the year really involve them doing a lot of detailed learning understanding and exploration of MoneyGram systems, processes, policies, procedures, understanding people, and then process to get them through a lot of testing and then into kind of their first reporting cycle. We anticipate that they will be more, probably more expensive over the term than the prior, but I think our costs associated with supporting the program should be relatively stable through the rest of the year and I think that their billings may drop off a little bit in the second half of the year as we kind of roll out some heavy testing cycles into more of a ongoing monitoring process.
I will say the relationship has been great. I think that the transparency, the discussion and the dialog has been very, very good. I'm excited about, what we've done. What we're seeing and how we're working together, which I think is great and as you look longer-term, right the DPA is May of 21 and I'd expect most of these costs to be sustainable until that time, but the expectation is that everything we're doing is going to position us to be done at that point in time and again our fraud rates are as low as they've ever been and our processes and procedures and policies are going to continue to improve. So everything that we're doing is leading toward tremendous amount of cost savings when this is over and in the meantime, we got to do everything we have to do to get it right.
David Scharf -- JMP Securities -- Analyst
Understood. And, hey, last question, and only because it was obviously mentioned this quarter, pension accounting Larry is about 10 levels above my pay grade. So, but can you help just us understand in layman's terms the 43% of defined benefit plan assets that you've retained. Well, I guess, number one, is there a desire to sell that tranche, but also maybe walk us through over the next three years, how much of a cash event, if any, it is to fund those obligations?
W. Alexander Holmes -- Chairman and Chief Executive Officer
Yeah. The number has gotten small enough now, where we would be in a position to fully fund it. I think part of the answer you need to understand is that the -- there is an unfunded pension liabilities of what we did as we sold plant assets along with the liabilities and the unfunded liability stayed with the company. However, the balance now is small enough and it reduces our funding requirements on a just a normal basis to about half of they used to be and it helps us really fund this thing up over time. So yes, it's a legacy pension plan, actually most of the people aren't even MoneyGram employees, this part of our spin-off, we want to exit it. It's a real good market to sell these things. But it will really somewhat depend on the performance, the investments in the portfolio. And then also just what extra cash we have, but ultimately we think -- this brings an exit closer to fruition.
David Scharf -- JMP Securities -- Analyst
Got it. Thank you very much.
Larry Angelilli -- Chief Financial Officer
[Indecipherable]
Operator
Thank you. We'll take our next question from Tien-Tsin Huang from JPMorgan. Please go ahead.
Tien-Tsin Huang -- JPMorgan -- Analyst
Good morning. Hope you can hear me? I want to maybe just on the Walmart performance or Walmart book versus the rest in the domestic side or US outbound front, any surprises or differences there?
W. Alexander Holmes -- Chairman and Chief Executive Officer
No, not really, I mean I think Walmart, the white label service we implemented continues to perform extremely well. We continue to kind of balance the shifting of the business mix, which varies a little bit by quarter, corridor, which I think is interesting to kind of see, but I think the relationship there is good. I think our strategic initiatives are aligned and I think we're doing a lot of kind of everyday activities to continue to improve and position the product. So, very happy with that. The US to US business, our legacy business, which we still have internally there, it does continue to be a drag for us as a business opportunity, but I think that's been consistent with pretty much the last five years. So more to come on that longer term, but it is a product that does continue to get utilized just at a lower rate. I think that performance there like others have reported in the last week, the US to US.cash market is just not what it used to be. So there's some work to do there as well, but that's across the board, not just at Walmart.
Tien-Tsin Huang -- JPMorgan -- Analyst
Got it. Yeah. Not too surprising. So on the -- just two more. The loyalty program, did I hear correctly, Alex, 3 times more active than the non-loyalty customers and then you're going to launch that globally?
W. Alexander Holmes -- Chairman and Chief Executive Officer
Yes, well, globally is a relative term, isn't it? We're going to start rolling out [Speech Overlap]
Tien-Tsin Huang -- JPMorgan -- Analyst
Worth available...
Larry Angelilli -- Chief Financial Officer
That's market-by-market, yeah.
Tien-Tsin Huang -- JPMorgan -- Analyst
Yeah.
W. Alexander Holmes -- Chairman and Chief Executive Officer
Yeah. Sorry. I'm laughing at myself, but, no, yeah, absolutely. So obviously the key markets -- key send side markets and then I would argue that the new online website, the app rolling out the loyalty program. All the stuff that we've done on communications and notifications with customers being able to kind of bridge senders and receivers. All the work that we're doing on kind of redefining the send side experience, the staging process, the walk in improvement to the point of sale. With the loyalty program, it's just a completely different world that we're operating in and the opportunities that we have to acquire customers through that is just so tremendously and so just I guess amazingly and exciting for me personally and to actually know who these customers are and what they do.
We get a lot of questions about price changes right. When exactly who your customer is because of all the changes that we've made on standardization of data collection and the quality of that data. When you change your price, exactly who you're influencing, right? Because not all customers react the same even in the same corridor, older generations respond differently than younger generations due to both price changes in this mix. So it gives us a just a world of opportunity to think differently about our business and the loyalty program is just a huge component of that. But yeah, I know it's like, I think it's outpacing our pilot by about 2 times right now, which is just amazing. So we're super excited about that.
Tien-Tsin Huang -- JPMorgan -- Analyst
Okay. Yeah, it sounds like it'd be an important part of the return to growth.
W. Alexander Holmes -- Chairman and Chief Executive Officer
Yeah. I mean what's really cool is it's self funding at this point. Paying for itself, which is something that we didn't really expect either. And I think that that's just remarkable, so.
Tien-Tsin Huang -- JPMorgan -- Analyst
We'll keep asking you about it. So on the last one from me just be xRapid, I know you can't say a lot, you did mention speed as an advantage. How about other benchmarking around it? I mean, cost and anything else that you can just share at least relative to expectations or relative to benchmarks, just so we better understand the potential behind it?
W. Alexander Holmes -- Chairman and Chief Executive Officer
I think what I would say is the following, right is that all of this, I mean it's not new for Ripple, but it's new for a lot of us in terms of exploration of how we do this, right. And I think that when you think about traditional settlement and traditional foreign exchange markets, right. It's a lot of banking applications, a lot of platform and sort of a lot of internal management to have an integrated product into their platform, we've built kind of our own unique interface with them that I think the team internally has just done this amazing job with basically you can live real time sort of ping the market, get responses back on what those rates are. It's almost like a consumer FX platform and to be quite honest with you. Then you can lock in those rates you can hit the trade and it literally money ends up in your bank account, able to use for settlement of whatever purposes you want. I think as Larry said, and like what do you say?
Larry Angelilli -- Chief Financial Officer
Well, we didn't time for [Speech Overlap]
W. Alexander Holmes -- Chairman and Chief Executive Officer
[Indecipherable] literally ends up in our bank account in like 20 minutes or something like that, which is remarkable. So when you think about how our business works, which, and I think this is kind of the misunderstood part, but also the coolest as part of it is, as a consumer you got to send money to Mexico, right. The Mexican peso is inherently volatile and is moving around all the time. If you can actually time the cash flows and settlement flows with what's happening on a per transaction basis with the customer, it's pretty remarkable what you can start thinking about and doing with that type of technology.
As you think about how you manage the hundreds of millions of dollars that are moving around every single day. You can choose to trade, you can choose to not trade, you can move those things around. So from a price perspective, from a performance perspective, from a transparency perspective, and improvements to liquidity, I would say, at this point, it's kind of second to none, but that doesn't necessarily mean that you're going to get the best rate on every trade and you may not want to make that trade, and so we're kind of learning to use the platform, but certainly we have every incentive to do that.
I think that the someone asked a question, it is largely kind of cost and efficiency driven, but I think there is some real revenue opportunities. We're doing a lot as I've said on the call, at least in my script on more with distributed ledger technology looking more in terms of crypto assets what's out there, what are the capabilities and also just generally speaking across blockchain what else, it is that we can and should be doing as an organization because there's a lot of things happening in the market today. And I think we're actually probably under-appreciated for the value that we can bring from an on demand liquidity settlement perspective to a number of different aspects of that growing industry. So we're I don't know, super excited about I guess is roughly how I phrase it.
Tien-Tsin Huang -- JPMorgan -- Analyst
Yeah. Well, thanks for the responses, guys.
W. Alexander Holmes -- Chairman and Chief Executive Officer
Hey. Thank you, Tien. Appreciate it very much.
Operator
Thank you. We're taking our next question from Mike Grondahl from Northland Securities. Please go ahead.
Mike Grondahl -- Northland Securities -- Analyst
Yeah. Thanks, guys. You talked about a sequential increase in active returning and new customers in 2Q. Can you quantify any of that, just so we get a feel for it?
W. Alexander Holmes -- Chairman and Chief Executive Officer
Well, that's a good question. As I think I mentioned, I don't know, like a year and a half ago, sort of customer modeling is new for us and it's something that we're largely keeping internally, but I would say that as an organization, we attract active customers, we attract new customers, we attract [Technical Issues] different categories and it's kind of go back to, I guess, the peak of customers back in probably Q4 '17, first quarter of 2018. I would say that the drop-off in customers really continued, as we rolled out all the compliance changes. That really impacted the business through the fourth quarter of last year and probably really into kind of a February-March time frame. But since then, we've seen those trends stabilize and we're beginning to bring in new customers in a variety of different corridors and just across the board moving that up.
If you isolate for those [Indecipherable] corridors and you isolate for the US to US business that growth has been much better, and so we're really excited about that. So we got a lot of churn that we're still going through particularly in some of those higher risk corridors and then obviously with US its own entity, but, net-net the progress has been good and we continue to add, I'd say new customers generally speaking on a monthly basis and that is one of the advantages of this industries that there aren't a lot of new customers, it's a huge industry and you can continue to reposition your product every day, and it's an opportunity to bring in new customers. It's is not like you have to go after the same legacy customers all the time and try to convince them. There's a lot of new customers all the time in all the markets around the world, which I think is super exciting and beneficial particularly when you're going through as much change as we've gone through as an organization.
Mike Grondahl -- Northland Securities -- Analyst
Got it. You also talked a little bit about some of the success in your I'll call it aggressive pricing in new online markets. You said that kind of caused you to go back to your legacy online markets and get more aggressive?
W. Alexander Holmes -- Chairman and Chief Executive Officer
No.
Mike Grondahl -- Northland Securities -- Analyst
Are you describing sort of, hey, if our legacy online markets, maybe we gave it at 15% price cut or 20% Brexit, just describe in the real world what that kind of means, with an example maybe?
W. Alexander Holmes -- Chairman and Chief Executive Officer
Well, let's see, if you are a US to US customer online, you are probably depending on how much you're sending with you're probably paying fees and kind of the $11, $12 kind of range. And we've been exploring prices anywhere from $0.99 to up to $4.99 as an example. So I would say that no, not like a 15% price share like a lot of percent price cut. And I think resetting those platforms has been pretty critical. But what I can tell you is that as we've done that, the increase in new customers, the acquisition of new customers, the views on the website, the ability to actually convert those customers, that thing and then kind of repeat and increased transaction growth has just been tremendous and actually putting us in growth rates in July in the US in particular at rates we haven't seen in quite a long-time.
So I'd say it's working. It's having an intended effect obviously, added some headwinds to our return to revenue growth, but I think it's absolutely the right thing to do. And we see the consumers respond to it. I think it just gives you all the confidence in the world that your brand is relevant and your product is relevant. I think that goes in complete contrast with a lot of people have tried to portray MoneyGram as in the last 18 months. And as we've said, the changes that we've made in the business have been deliberate. We've done them to ourselves and we've done them for the right reasons, and I think to then go out and reposition the product, even if that includes some repricing is driving consumers back to brand and I think that's just tremendously exciting. And I think on top of that, I'll just add that it is a competitive market and there are a lot of services out there and we have to differentiate, we have to make product look different and be different is better for our customers. So we're doing that and I think the results of that are going to push us back into position of strength and growth in the coming months.
Mike Grondahl -- Northland Securities -- Analyst
Got it. Maybe just lastly, so the takeaway July was just remind us what you want us to take away for July?
W. Alexander Holmes -- Chairman and Chief Executive Officer
If you take away the US to US market we grew transactions in the month of July. And I think that's a huge statement to be able to make. So if you take nothing out of the way, I would say it got away.
Larry Angelilli -- Chief Financial Officer
Yeah. There's I guess 1 other takeaway is that we kind of everything is moving in kind of a straight line, and then June was kind of this anomaly and we want to make sure that June was an indicative of a trend that actually July came back to the trajectory that were on. And I think it also ratifies that we're on the right path.
Mike Grondahl -- Northland Securities -- Analyst
Great. Thanks, guys.
W. Alexander Holmes -- Chairman and Chief Executive Officer
Thanks, Mike.
Larry Angelilli -- Chief Financial Officer
Okay.
W. Alexander Holmes -- Chairman and Chief Executive Officer
So all right, operator, I think we're out of time or maybe a little over time. So we'll say thanks to everybody and we'll talk to you all later.
Operator
[Operator Closing Remarks]
Duration: 62 minutes
Call participants:
Wendi Schlarb -- Head of Corporate Communications and Digital Marketing
W. Alexander Holmes -- Chairman and Chief Executive Officer
Larry Angelilli -- Chief Financial Officer
Ramsey El-Assal -- Barclays Investment Bank -- Analyst
Kartik Mehta -- Northcoast Research -- Analyst
Bob Napoli -- William Blair -- Analyst
David Scharf -- JMP Securities -- Analyst
Tien-Tsin Huang -- JPMorgan -- Analyst
Mike Grondahl -- Northland Securities -- Analyst
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