EDGAR 10-K Filing

Company CIK: 1273931
Filing Year: 2023
Filename: 1273931_10-K_2023_0001273931-23-000039.json

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ITEM 1. BUSINESS
Item 1. BUSINESS
Overview
MoneyGram International, Inc. (together with our subsidiaries, "MoneyGram," the "Company," "we," "us" and "our") 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 as of December 31, 2022, the innovative MoneyGram platform leverages its leading distribution network, global financial settlement engine, cloud-based infrastructure with integrated APIs and its unparalleled compliance program to enable seamless and secure transfers around the world. Whether through our mobile application, moneygram.com, integration with account deposit and mobile wallets, kiosks, or any one of the more than 440,000 agent locations around the globe, we connect consumers, primarily those who may not be fully served by other financial institutions, in any way that is convenient for them. As an alternative financial services company, we provide individuals with essential services to help them meet the financial demands of their daily lives. Our growing direct-to-consumer digital business, our Retail Channel centered around our global distribution network, our emerging embedded finance business for enterprise customers, enable the Company to serve the entire remittance market. Given strong mobile P2P market growth rates, our direct-to-consumer digital business is a growth engine for the Company as our digital capabilities enable us to serve new customer segments who utilize our platform to transfer money around the world.
Our money transfer services are our primary revenue driver, but MoneyGram has additional offerings which include bill payment services, money order services and official check processing. We have one primary customer care center in Warsaw, Poland, with regional support centers providing ancillary services and additional call center services in various countries. MoneyGram provides call center services 24 hours per day, 365 days per year and provides customer service in dozens of languages.
The MoneyGram® brand has name recognition throughout the world. We use various trademarks and service marks in our business, including, but not limited, to MoneyGram, the red Globe design logo, MoneyGram FastSend, ExpressPayment and AgentWorks, some of which are registered in the U.S. and other countries. This document also contains trademarks and service marks of other businesses that are the property of their respective holders and are used herein solely for identification purposes. We have omitted the ® and TM designations, as applicable, for the trademarks we reference in this 2022 Form 10-K.
We conduct our business primarily through our wholly-owned subsidiary, MoneyGram Payment Systems, Inc. ("MPSI"), under the MoneyGram brand. The Company was incorporated in Delaware on December 18, 2003. Through the Company's predecessors, we have been in operation since 1940.
Our Segments
We manage our business primarily through two reporting segments: Global Funds Transfer ("GFT") and Financial Paper Products ("FPP"). The following table presents the components of our consolidated revenue associated with our reporting segments for the years ended December 31:
2022 2021 2020
GFT
Money transfer 91 % 93 % 91 %
Bill payment 3 % 3 % 4 %
FPP
Money order 3 % 3 % 3 %
Official check 3 % 1 % 2 %
Total revenue 100 % 100 % 100 %
See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 16 - Segment Information of the Notes to the Consolidated Financial Statements contained in Part II, Item 8 of this report for additional financial information about our segments and geographic areas.
During 2022, 2021 and 2020, our 10 largest agents accounted for 24%, 26% and 30%, respectively, of total revenue and 24%, 26% and 31%, respectively, of GFT segment revenue. In 2021 and 2020, Walmart Inc. ("Walmart") is our only agent that accounts for more than 10% of our total revenue. In 2022, 2021 and 2020 Walmart accounted for less than 10%, 11% and 13% of total revenue, respectively. In 2022, 2021 and 2020 Walmart accounted for less than 10%, 10% and 13% of GFT segment revenue, respectively.
GFT Segment
The GFT segment is our primary revenue driver, providing global money transfer services and bill payment services principally as an alternative to banking services in more than 200 countries and territories around the world. We primarily offer services through third-party agents, including retail chains, independent retailers, post offices, banks and other financial institutions. We also offer digital solutions such as moneygram.com, mobile app solutions, account deposit and kiosk-based services. Additionally, we have limited Company-operated retail locations.
We entered into a partnership with The Stellar Development Foundation ("SDF"), a non-profit organization that supports the development and growth of Stellar, an open-source public blockchain that allows money to be tokenized and transferred anywhere in the world. MoneyGram's network, integrated with the Stellar blockchain and facilitated through Circle's USD Coin (USDC), enable cash funding and payout in local currency for consumers using USDC.
We continue to focus on the growth of our GFT segment for outbound transactions originating in the U.S. and those originating outside of the U.S. Sends originated outside of the U.S. generated 58% in 2022, 58% in 2021 and 55% in 2020 of our total revenue and 62% in 2022, 60% in 2021 and 59% in 2020 of our total GFT segment revenue. In 2022, our GFT segment had total revenue of $1.2 billion.
Money Transfer - We earn our money transfer revenues primarily from consumer transaction fees and the management of currency exchange spreads on money transfer transactions involving different "send" and "receive" currencies. We have Corridor pricing capabilities that provide us flexibility when establishing consumer fees and non-U.S. dollar exchange rates for our money transfer services, which allow us to remain competitive in all locations. In a cash-to-cash money transfer transaction, both the agent initiating and receiving the transaction earn a commission that is generally based on a percentage of the fee charged to the consumer, or in certain cases a fixed commission. When a money transfer transaction is initiated at a MoneyGram-owned store or via our online platform, typically only the agent receiving the transaction earns a commission.
In certain countries, we have multi-currency technology that allows consumers to choose a currency when initiating or receiving a money transfer. The currency choice typically consists of local currency, U.S. dollars and/or euros. These capabilities allow consumers to know the amount that will be received in the selected currency.
Retail Channel
As of December 31, 2022, our money transfer agent network had more than 440,000 locations. Our network includes agents such as international post offices, banks and broader financial services, as well as large and small retailers. Additionally, we have a limited number of Company-owned and operated retail locations in Western Europe. Some of our agents outside the U.S. manage sub-agents that offer MoneyGram branded services. We refer to these agents as super-agents. Although the sub-agents are under contract with these super-agents, the sub-agent locations typically have access to similar technology and services as our other agent locations. Many of our agents have multiple locations, a large number of which operate in locations
that are open outside of traditional banking hours, including nights and weekends. Our agents know the markets they serve, and they work with our sales and marketing teams to develop business plans for their markets. This may include contributing financial resources to, or otherwise supporting, our efforts to market MoneyGram's services.
Typically, retail send transactions are funded in cash. In retail receive transactions, the funds are available for the designated recipient to collect usually within 10 minutes at any MoneyGram agent location.
As of December 31, 2022, in over 90 countries, the designated recipient may also receive the transferred funds via a deposit to the recipient's bank account or mobile wallet account.
Digital Channel
We offer money transfer services through our Digital Channel which includes MGO (our direct-to-consumer business), digital partners, direct transfers to bank accounts, mobile wallets and debit card solutions such as Visa Direct. MGO is available in 38 countries and territories as of December 31, 2022. Through our Digital Channel, consumers can send money from the convenience of their own homes to any of our agent locations worldwide, a recipient's bank account or a recipient's mobile wallet. MGO consumers can fund their transactions from their bank accounts, debit cards, or credit cards. MGO, the Company’s single largest generator of money transfer transactions, maintains three of its individual country sites on the Company’s top 10 list of money transfer generating sources. Since 2021, MGO’s U.S. site became the Company's largest source of money transfer revenue in the world, surpassing Walmart. Cross-border money transfer transactions through MGO grew 16% in 2022 compared to the prior year.
We also offer money transfer services via digital partners, which enable our partners’ customers to send international money transfers online or through a mobile device to any MoneyGram pay-out location or directly to a recipient’s bank account or mobile wallet through the MoneyGram platform.
Transfers directly to bank accounts and mobile wallets are the third main component of our Digital Channel. Through the MoneyGram platform, customers had direct access to over 5.0 billion accounts in over 90 countries as of December 31, 2022. Total digital transactions represented 43% of money transfer transactions for the year ended December 31, 2022.
Bill Payment Services - Bill payment revenues are generated primarily from fees charged to consumers for each transaction completed. Our primary bill payment service offering is our ExpressPayment service, which we offer at substantially all of our money transfer agent locations in the U.S., Canada and Puerto Rico, at certain agent locations in select Caribbean and European countries and through our digital solutions.
Through our bill payment services, consumers can complete urgent bill payments, pay routine bills, or load and reload prepaid debit cards with cash at an agent location or through moneygram.com. We offer consumers same-day and two- or three-day payment service options; the service option is dependent upon our agreement with the biller. We offer payment options to over 12,000 billers in key industries, including the ability to allow the consumer to load or reload funds to over 500 prepaid debit card programs. These industries include the credit card, mortgage, auto finance, telecommunications, corrections, health care, utilities, property management, prepaid card and collections industries.
Marketing - The global marketing organization employs an omnichannel approach that tailors our brand message to each specific market, culture and consumer preferences. The organization is increasingly focusing on search related digital marketing tactics to reach consumers on their computers and mobile devices. Our marketing strategy also includes our MoneyGram Plus Rewards loyalty program that gives consumers the benefit of earning discounts on future transactions and special promotions available only to loyalty members.
Sales - Our sales teams are organized by geographic area, product and delivery channel. We have dedicated teams focused on developing our agent and biller networks to enhance the reach of our money transfer and bill payment products. Our agent requirements vary depending upon the type of outlet, location and compliance and regulatory requirements. Our sales teams and strategic partnership teams continue to improve our agent relationships and overall network strength with a goal of providing the optimal agent and consumer experience.
Competition - The market for money transfer and bill payment services is very competitive on a regional and global basis. We generally compete on customer experience, price, the ability to conduct both digital and cash transactions, the convenience of multiple payout options across a broad global network in over 200 countries & territories, commission payments, customer loyalty program initiatives and marketing efforts.
Our competitors include a small number of large money transfer and bill payment providers, financial institutions, banks and a large number of small niche money transfer service providers that serve select regions. Our largest competitor in the cross-border money transfer industry is The Western Union Company ("Western Union"), which also competes with our bill payment services and money order businesses. Additionally, Walmart has a white-label money transfer service, operated by a competitor of MoneyGram, that allows consumers to transfer money between Walmart U.S. store locations. In 2018, Walmart launched Walmart2World, powered by MoneyGram, a new white-label money transfer service that allows customers to send money from
Walmart in the U.S. to any MoneyGram location in the world. On November 4, 2019, Walmart announced that the white-label money transfer service would now be joined by other brands in becoming part of a marketplace of money transfer services at Walmart stores across the U.S. On January 19, 2021, Walmart informed us that they had entered into a new agreement that would enable Western Union money transfer, bill payment and money order services at U.S. Walmart locations.
We expect to encounter increasing competition as digitally-focused new entrants seek to grow revenue through customer acquisition initiatives focused on specific Corridors, but we believe we will continue to differentiate against the competition by competing on a global scale, addressing the entire remittance market by offering digital and cash capabilities and delivering a superior customer experience in addition to continuing to be a fintech innovator and a leader in protecting consumers through our unparalleled compliance engine and variety of product offerings.
Seasonality - A larger share of our annual money transfer revenues traditionally occurs in the second and fourth quarters as a result of major global holidays falling during these periods, in addition to seasonal travel patterns throughout the world.
FPP Segment
Our FPP segment provides money orders to consumers through our agents and financial institutions located throughout the U.S. and Puerto Rico and provides official check outsourcing services for banks and credit unions across the U.S.
In 2022, our FPP segment generated revenues of $84.2 million from fee and other revenue and investment revenue. We earn revenue from the investment of funds underlying outstanding official checks and money orders. We refer to our cash and cash equivalents, settlement cash and cash equivalents, interest-bearing investments and available-for-sale investments collectively as our "investment portfolio." Our investment portfolio consists of low risk, highly liquid bank deposits that earn a market rate of return for similar investments.
Money Orders - Consumers use our money orders to make payments in lieu of cash or personal checks. We generate revenue from money orders by charging per item and other fees, as well as from the investment of funds underlying outstanding money orders, which generally remain outstanding for less than 11 days. We sell money orders under the MoneyGram brand and on a private label or co-branded basis with certain agents and financial institutions in the U.S. As of December 31, 2022, we issued money orders through our network of over 8,000 agents and financial institutions located in the U.S. and Puerto Rico.
Official Check Outsourcing Services - Official checks are used by consumers where a payee requires a check drawn on a bank. Financial institutions also use official checks to pay their own obligations. Similar to money orders, we generate revenue from our official check outsourcing services through U.S. banks and credit unions by charging per item and other fees, as well as from the investment of funds underlying outstanding official checks, which generally remain outstanding for approximately four days. As of December 31, 2022, we provided official check outsourcing services through 597 financial institutions at over 5,900 branch bank locations.
Marketing - We employ a wide range of marketing methods. We use a marketing mix to support our brand, which includes traditional, digital and social media, point of sale materials, signage at our agent locations and targeted marketing campaigns. Official checks are financial institution branded, and therefore, all marketing to this segment is business to business.
Sales - Our sales teams are organized by product and delivery channel. We have dedicated teams that focus on developing our agent and financial institution networks to enhance the reach of our official check and money order products. Our agent and financial institution requirements vary depending upon the type of outlet or location, and our sales teams continue to improve and strengthen these relationships with a goal of providing the optimal consumer experience with our agents and financial institutions.
Competition - Our money order competitors include a small number of large money order providers and a large number of small regional and niche money order providers. Our largest competitors in the money order industry are Western Union and the U.S. Postal Service. We generally compete for money order agents on the basis of value, service, quality, technical and operational differences, price, commission and marketing efforts. We compete for money order consumers on the basis of trust, convenience, availability of outlets, price, technology and brand recognition.
Official check competitors include financial institution solution providers, such as core data processors and corporate credit unions. We generally compete against a financial institution's desire to perform these processes in-house with support from these types of organizations. We compete for official check customers on the basis of value, service, quality, technical and operational differences, price and commission.
Regulation
Compliance with laws and regulations is a highly complex and integral part of our day-to-day operations. Our operations are subject to a wide range of laws and regulations of the U.S. and other countries, including anti-money laundering laws and regulations; financial services regulations; currency control regulations; anti-bribery laws; sanctions laws and regulations; money transfer and payment instrument licensing laws; escheatment laws; privacy, data protection and information security laws; and consumer disclosure and consumer protection laws. Regulators worldwide are exercising heightened supervision of money transfer providers and requiring increased efforts to ensure compliance. Failure to comply with any applicable laws and regulations could result in restrictions on our ability to provide our products and services, as well as the potential imposition of civil fines and possibly criminal penalties. See the Risk Factors section in Item 1A for additional discussion regarding potential impacts of failure to comply. We continually monitor and enhance our global compliance programs in light of the most recent legal and regulatory changes.
Anti-Money Laundering Compliance
Our services are subject to U.S. anti-money laundering laws and regulations, including the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001, as well as state laws and regulations and the anti-money laundering laws and regulations of many of the countries in which we operate, particularly in the European Union. Countries in which we operate may require one or more of the following:
•reporting of large cash transactions and suspicious activity;
•limitations on amounts that may be transferred by a consumer or from a jurisdiction at any one time or over specified periods of time, which require aggregation over multiple transactions;
•consumer information gathering and reporting requirements;
•consumer disclosure requirements, including language requirements and non-U.S. dollar restrictions;
•notification requirements as to the identity of contracting agents, governmental approval of contracting agents or requirements and limitations on contract terms with our agents;
•registration or licensing of the Company or our agents with a state or federal agency in the U.S. or with the central bank or other proper authority in a foreign country; and
•minimum capital or capital adequacy requirements.
Anti-money laundering regulations are constantly evolving and vary from country to country. We continuously monitor our compliance with anti-money laundering regulations and implement policies and procedures in light of the most current legal requirements.
We offer our money transfer services primarily through third-party agents with whom we contract and do not directly control. As a money services business, we and our agents are required to establish anti-money laundering compliance programs that include: (i) internal policies and controls; (ii) designation of a compliance officer; (iii) ongoing employee training and (iv) an independent review function. We have developed an anti-money laundering training manual available in multiple languages and a program to assist with the education of our agents on the various rules and regulations. We also offer in-person and online training as part of our agent compliance training program and engage in various agent oversight activities. We have also adopted a global compliance policy that outlines key principles of our compliance program to our agents.
In connection with regulatory requirements to assist in the prevention of money laundering, terrorist financing and other illegal activities and pursuant to legal obligations and authorizations, the Company makes information available to certain U.S. federal and state, as well as certain foreign, government agencies when required by law. In recent years, the Company has experienced an increase in data sharing requests by these agencies, particularly in connection with efforts to prevent money laundering or terrorist financing or reduce the risk of consumer fraud. In certain cases, the Company is also required by government agencies to deny transactions that may be related to persons suspected of money laundering, terrorist financing or other illegal activities, and as a result the Company may inadvertently deny transactions from customers who are making legal money transfers, which could lead to liability or reputational damage. Responding to these agency requests may result in increased operational costs.
Sanctions Compliance
In addition to anti-money laundering laws and regulations, our services are subject to sanctions laws and regulations promulgated by OFAC and other jurisdictions in which our services are offered. These sanctions laws and regulations require screening of transactions against government watch-lists, including but not limited to, the watch-lists maintained by OFAC and prohibit transactions in, to or from certain countries, governments, individuals and entities. Sanctions regimes may also impose limitations on amounts that may be transferred by a consumer to or from a jurisdiction at any one time or over specified periods of time, requiring aggregation over multiple transactions, as well as transactional and other reporting to a government agency.
Money Transfer and Payment Instrument Licensing
In most countries, either we or our agents are required to obtain licenses or to register with a government authority in order to offer money transfer services. Almost all states in the U.S., the District of Columbia, Puerto Rico, the U.S. Virgin Islands and Guam require us to be licensed to conduct business within their jurisdictions, exercise authority over certain aspects of our business and regularly examine us and our business.
Our primary overseas operating subsidiary, MoneyGram International SA, is a licensed payment institution under the National Bank of Belgium pursuant to the European Union Payment Services Directive ("PSD"). The Company, through its subsidiaries, is also licensed in other jurisdictions including the United Kingdom, Mexico and Canada. In 2016, the PSD was amended by a revised Payment Services Directive ("PSD2"), which was implemented in the national law of the member states during or prior to January 2018 and was further amended by the 4th and 5th Anti-Money Laundering Directives in the European Union. Among other changes, the PSD2, as amended, has increased the supervisory powers granted to member states with respect to activities performed by us and our agents in the European Union. We are also subject to increasingly significant licensing or other regulatory requirements in various other jurisdictions. The financial penalties associated with the failure to comply with anti-money laundering laws have increased in recent regulation, including the 4th Anti-Money Laundering Directive in the EU. These laws have increased and will continue to increase our costs and could also increase competition in some or all of our areas of service. Legislation that has been enacted or proposed in other jurisdictions could have similar effects.
Licensing requirements in the U.S. and abroad may include minimum net worth requirements, provision of surety bonds or letters of credit, compliance with operational procedures, agent oversight and the maintenance of reserves or "permissible investments" in an amount equivalent to outstanding payment obligations, as defined by our various regulators. The types of securities that are considered "permissible investments" vary across jurisdictions, but generally include cash and cash equivalents, U.S. government securities and other highly rated debt instruments. Many regulators require us to file reports on a quarterly or more frequent basis to verify our compliance with their requirements. Many regulators also subject us to periodic examinations and require us and our agents to comply with anti-money laundering and other laws and regulations.
Escheatment Regulations
Unclaimed property laws of every state in the U.S., the District of Columbia, Puerto Rico and the U.S. Virgin Islands require that we track certain information on all our payment instruments and money transfers and, if they are unclaimed at the end of an applicable statutory abandonment period, that we remit the proceeds of the unclaimed property to the appropriate jurisdiction. Statutory abandonment periods for payment instruments and money transfers range from three to seven years. Certain foreign jurisdictions also have unclaimed property laws. These laws are evolving and are frequently unclear and inconsistent among various jurisdictions, making compliance challenging. We have an ongoing program designed to comply with escheatment laws as they apply to our business.
Data Privacy and Cybersecurity Laws and Regulations
We are subject to federal, state and international laws and regulations relating to the collection, use, retention, security, transfer, storage and disposal of personally identifiable information of our consumers, agents and employees. In the U.S., we are subject to various federal privacy laws, including the Gramm-Leach-Bliley Act, which requires that financial institutions provide consumers with privacy notices and have in place policies and procedures regarding the safeguarding of personal information. We are also subject to privacy and data breach laws of various states. Outside the U.S., we are subject to privacy laws of numerous countries and jurisdictions. In some cases, these laws are more restrictive than the U.S. laws and impose more stringent duties on companies or penalties for non-compliance. For example, the General Data Protection Regulation in the European Union ("GDPR") imposes a higher standard of personal data protection with significant penalties for non-compliance for companies operating in the European Union or doing business with European Union residents. The new California Consumer Protection Act, which became effective on January 1, 2020, imposes heightened data privacy requirements on companies that collect information from California residents and creates a broad set of privacy rights and remedies modeled in part on the GDPR. In addition, government surveillance laws and data localization laws are evolving to address increased and changing threats and risks. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction.
Dodd-Frank Act
The Dodd-Frank Act was signed into law in 2010. The Dodd-Frank Act imposes additional regulatory requirements and creates additional regulatory oversight over us. The Dodd-Frank Act created the CFPB. The CFPB's Remittance Transfer Rule became effective on October 28, 2013. Its requirements include: a disclosure requirement to provide consumers sending funds internationally from the U.S. enhanced pre-transaction written disclosures, an obligation to resolve certain errors, including errors that may be outside our control and an obligation to cancel transactions that have not been completed at a customer's request. As a "larger participant" in the market for international money transfers, we are subject to direct examination and supervision by the CFPB. We have modified our systems and consumer disclosures in light of the requirements of the Remittance Transfer Rule. In addition, under the Dodd-Frank Act, it is unlawful for any provider of consumer financial
products or services to engage in unfair, deceptive or abusive acts or practices. The CFPB has substantial rule making and enforcement authority to prevent unfair, deceptive or abusive acts or practices in connection with any transaction with a consumer for a financial product or service.
Non-U.S. Dollar Exchange Regulation
Our money transfer services are subject to non-U.S. dollar exchange statutes of the U.S., as well as similar state laws and the laws of certain other countries in which we operate. Certain of these statutes require registration or licensure and reporting. Others may impose currency exchange restrictions with which we must comply.
Anti-Bribery Regulation
We are subject to regulations imposed by the FCPA in the U.S., the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions. We are subject to recordkeeping and other requirements imposed upon companies related to compliance with these laws. We maintain a compliance program designed to comply with applicable anti-bribery laws and regulation.
Clearing and Cash Management Bank Relationships
Our business involves the transfer of money on a global basis on behalf of our consumers, our agents and ourselves. We buy and sell a number of global currencies and maintain a network of settlement accounts to facilitate the funding of money transfers and foreign exchange trades to ensure that funds are received on a timely basis. Our relationships with the clearing, trading and cash management banks are critical to an efficient and reliable global funding network.
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 maintain significant relationships with major international banks which provide the capability to transfer money electronically as well as through domestic electronic funds transfer networks and international wire transfer systems. There are a limited number of banks that have capabilities broad enough in scope to handle our volume and complexity. Consequently, we generally employ banks whose market is not limited to their own country or region and have extensive systems capabilities and branch networks that can support settlement needs that are often unique to different countries around the world. In 2013, we activated our participation in the Society for Worldwide Interbank Financial Telecommunication ("SWIFT") network for international wire transfers, which improves access to all banks in the world while lowering the cost of these funds transfers.
Intellectual Property
The MoneyGram brand is important to our business. We have registered our MoneyGram trademark in the U.S. and in a majority of the other countries in which we do business. We maintain a portfolio of other trademarks that are material to our Company, which are discussed above in the Overview section. In addition, we maintain a portfolio of MoneyGram branded and related domain names.
We rely on a combination of patent, trademark and copyright laws and trade secret protection and confidentiality or license agreements to protect our proprietary rights in products, services, expertise and information. We believe the intellectual property rights in processing equipment, computer systems, software and business processes held by us and our subsidiaries provide us with a competitive advantage. We take appropriate measures to protect our intellectual property to the extent such intellectual property can be protected.
Human Capital
Global Talent - At MoneyGram, our people are our most important asset and the success of our global talent (human capital) is essential to the success of our Company. As of December 31, 2022, we employed 939 employees in the U.S. and 2,247 employees globally.
Attracting, recruiting, developing and retaining diverse talent enables us to build a strong and dynamic company. We are focused on supporting our employees across the full employee lifecycle from candidate recruitment through the full employee experience. We have transformed a number of our temporary programs first implemented during the beginning of the COVID-19 pandemic in 2020 into permanent workplace changes. For example, in 2020, we worked with our employees to provide a fully virtual work place, accommodating school, family and health needs of our employees, offering additional training, work-from-home flexibility and increased mental health support through our employee assistance program and our benefits partners. In 2021, we allowed all global employees to determine whether they wanted to return to the office full time, partially, or become permanently virtual employees. We also gave employees greater autonomy over their working hours to better accommodate their personal lives. In 2022 we continued our workforce transformation by focusing on wellness and teambuilding in the no-longer-new virtual and hybrid workplace.
Employee Engagement - At MoneyGram, we provide a variety of employee engagement programs designed to ensure that our employees have a voice in their future and are engaged in our business. We solicit direct employee feedback related to new proposals and programs, and we also have a robust engagement team (“The Red Team”) with representatives across all of our regions and offices, with a focus on employee volunteerism and community service opportunities. We host monthly employee engagement forums and a variety of internal training courses through our global Lunch and Learn program. We also work to keep our employees updated on Company opportunities and developments through quarterly Town Hall meetings with our CEO and full executive leadership team. We offer two paid Community Service days per year where all employees are encouraged to spend time volunteering within their communities. We have also won several "top workplace" awards on the local and national level, based solely on anonymous employee feedback over the past two years.
Talent Acquisition and Development - As a leading FinTech and digital payments company, we compete for top global talent around the world. We value our employees for who they are as individuals, and we believe that a strong culture focused on respect for each employee as a valuable individual is essential to the successful acquisition, retention and development of diverse talent. To that end, we focus on inclusive hiring, employee development, positive coaching and mentorship and internal and external educational opportunities. We have a robust in-house training program, and we likewise provide opportunities for formal and informal continuing education participation for our employees across their respective areas of expertise. Whether it is through tuition reimbursement, Company-paid certification courses, outside or internal continuing education or simply department-led trainings, we invest in our employees’ development. We closely track employee attrition, with a focus on creating a workplace where employees want to work.
Employee Wellness - We value our employees and work to provide competitive programs to support the total wellness of our employees, including resources, programs and services to support our employees’ physical, mental and financial wellness. We provide a variety of benefits to our employees globally, including a choice of comprehensive health insurance plans, fully-paid maternity and family leave, vacation and holiday time off and retirement planning and financial well-being services and retirement savings opportunities. We also provide fully paid employee time off for employee volunteerism and community service and provide community service opportunities for our employees who wish to participate. We also offer a global virtual, interactive wellness program for all employees. We offer a number of Company-funded as well as optional benefits and discounts for our employees, from a variety of life, disability and critical care programs, pet insurance, legal services plans, rideshare and transportation opportunities and discount insurance packages. We are constantly reviewing and improving our global benefits packages across all markets to ensure that we are providing our employees the most competitive package of benefits to meet the needs of employees and families.
Diversity, Equity & Inclusion ("DEI") - Our focus on diversity, inclusion, equity, has grown from a corporate social responsibility program to a full DEI and Social Impact program, with a formal DEI program that applies to our employees as well as our suppliers and agents. MoneyGram has boasted an inclusive and non-discriminatory workplace long before it was legally mandated and our commitment to principles of diversity, equity and inclusion extend to our recruiting practices, or our vendors and trading partners, our employee experiences and our community service activities. MoneyGram engages in global programs to promote hiring of disabled employees, as well as a focus on racial, religious, ethnic and gender diversity. We are committed to providing an inclusive workplace, with specific focus on providing opportunities to all of our global workforce. We are committed to equal pay for equal work, inclusive leadership opportunities and intentional focus on creating a workplace that celebrates and embraces our employees for who they are in all aspects of their lives.
Executive Officers of the Registrant
W. Alexander Holmes, age 48, has served as Chief Executive Officer since January 2016 and Chairman of the Board since February 2018. Prior to that, Mr. Holmes served as Executive Vice President, Chief Financial Officer and Chief Operating Officer of the Company from February 2014 to December 2015 and Executive Vice President and Chief Financial Officer from March 2012 to January 2014. He joined the Company in 2009 as Senior Vice President for Corporate Strategy and Investor Relations. From 2003 to 2009, Mr. Holmes served in a variety of positions at First Data Corporation, including chief of staff to the Chief Executive Officer, Director of Investor Relations and Senior Vice President of Global Sourcing & Strategic Initiatives. From 2002 to 2003, he managed Western Union's Benelux region from its offices in Amsterdam.
Brian Johnson, age 42, has served as the Chief Financial Officer since September 1, 2022. He joined MoneyGram in July 2018 as Head of Corporate financial planning and analysis (“FP&A”) and M&A, and was responsible for overseeing the Company’s corporate FP&A function and M&A activities before being appointed Head of Corporate Finance and Global Treasurer in January 2021, where he oversees all treasury, FP&A, pricing and M&A activity. Prior to joining MoneyGram, Mr. Johnson was a Managing Director at Commerce Street Capital from April 2014 to June 2018 where he advised clients on acquisitions and divestitures. His professional experience also includes tenures with Hudson Advisors/Lone Star Funds and Bear Stearns. Mr. Johnson holds a Bachelor of Science in Mechanical Engineering from Bucknell University and holds the Chartered Financial Analyst and Certified Valuation Analyst designations.
Anna Greenwald, age 44, has served as the Chief Operating Officer since August 4, 2022. Prior to that, she was appointed Chief Readiness Officer in March 2021 and was responsible for leading the Company’s go-to-market strategy, agent network oversight and engagement and global regulatory exam readiness. She joined MoneyGram in 2011, previously holding positions in the Product, Technology and Operations departments, including serving as the Global Head of Go-to-Market from February 2015 to April 2021. Prior to joining MoneyGram, Ms. Greenwald worked for Boston Scientific, Qumu and other leading technology companies where she led business model transformation, global expansion initiatives, managed merger activities and oversaw compliance remediation efforts. Ms. Greenwald holds a Master of Business Administration from the University of Colorado, a Master of Science from Metropolitan State University and a Bachelor of Science from Minnesota State University.
Robert L. Villaseñor, age 52, has served as General Counsel and Corporate Secretary since October 2019. He joined the Company in July 2018 as Associate General Counsel, Corporate and Securities and Assistant Secretary. He has over 20 years of experience representing public companies on a broad range of legal issues including public reporting, lending and capital markets transactions, mergers and acquisitions, strategic investments and various commercial matters. Prior to MoneyGram, he worked in the Corporate and Securities Group at Starbucks Corporation from 2012 to 2018. Prior to Starbucks, he served as the chief corporate and securities attorney at two other public companies. He began his career in private practice at the law firm of Gibson, Dunn & Crutcher LLP working in the areas of mergers and acquisitions and capital markets.
Grant A. Lines, age 58, has served as Chief Revenue Officer since January 2018. Prior to that, he served as Chief Revenue Officer, Africa, Middle East, Asia Pacific, Russia and CIS from February 2015 until January 2018. Mr. Lines previously served the Company as Executive Vice President, Asia-Pacific, South Asia and Middle East from February 2014 to February 2015. Prior to that, Mr. Lines served the Company as Senior Vice President, Asia-Pacific, South Asia and Middle East from February 2013 to February 2014. Prior to joining the Company, Mr. Lines served as General Manager of Black Label Solutions, a leading developer and supplier of computerized retail point of sale systems, from May 2011 to December 2012. He served as Managing Director of First Data Corporation's ANZ business, a global payment processing company, from September 2008 to February 2011.
Andres Villareal, age 58, has been Chief Compliance Officer since March 2016. He joined the Company in April 2015 as Senior Vice President and Deputy Chief Compliance Officer. From 2004 to April 2015, Mr. Villareal held various positions at Citigroup, a leading global bank, including Global Head of Compliance for Citi Commercial Bank and Chief Compliance Officer for Citi Assurance Services, a captive insurance company. Mr. Villareal has over 29 years of experience in various compliance, legal and business roles in a variety of industries, including financial services, banking and insurance.
Available Information
Our website address is www.moneygram.com. The information on our website is not part of this 2022 Form 10-K. We make our reports on Forms 10-K, 10-Q and 8-K, Section 16 reports on Forms 3, 4 and 5 and all amendments to those reports, available electronically free of charge in the Investor Relations section of our website (ir.moneygram.com) as soon as reasonably practicable after they are filed with or furnished to the SEC. Additionally, the SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, which may be found at www.sec.gov.

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ITEM 1A. RISK FACTORS
Item 1A. RISK FACTORS
Various risks and uncertainties could affect our business. Any of the risks described below or elsewhere in the 2022 Form 10-K or our other filings with the SEC could have a material impact on our business, prospects, financial condition or results of operations.
Risks Related to the Merger
The announcement and pendency of the Merger could adversely affect our business, financial condition and results of operations.
The announcement and pendency of the proposed Merger could cause disruptions to our business or business relationships and create uncertainty surrounding our business, which could have an adverse impact on our financial condition and results of operations, regardless of whether the Merger is completed, including as a result of the following (all of which could be exacerbated by a delay in completion of the Merger):
•customers, agents or other parties with which we maintain business relationships may experience uncertainty prior to the closing of the Merger and seek alternative relationships with third parties or seek to terminate or renegotiate their relationships with us;
•our employees may experience uncertainty about their future roles with us, which might adversely affect our ability to attract, retain and motivate key personnel and other employees;
•the Merger Agreement restricts us from engaging in certain actions without the consent of Parent, including, among other things, subject to certain exceptions, acquiring other businesses and assets, selling, transferring or licensing our assets, making investments, making capital expenditures, repurchasing or issuing securities and incurring indebtedness; these restrictions could prevent or delay us from pursuing business opportunities that may arise prior to the consummation of the Merger and result in our inability to respond effectively and timely to competitive pressures, industry developments, developments relating to our customers and agents; and
•the attention of our management may be directed to Merger-related considerations and may be diverted from the day-to-day operations of our business; and.
•there may be litigation relating to the Merger, or injunctions or governmental orders initiated by a governmental entity restraining, enjoining or prohibiting the consummation of the Merger, and there may be costs related thereto.
The proposed Merger may not be completed within the timeframe we anticipate or at all, and the failure to complete or delays in completing the Merger could adversely affect our business, financial results and stock price.
We can provide no assurance that the proposed Merger will be consummated or consummated in the timeframe or manner currently anticipated. Completion of the Merger is subject to a number of conditions, such as the receipt of regulatory approvals, including approvals with respect to money transmitter licenses, and shareholder approval, which are not within our control. There can be no assurance as to when, or if, the conditions to closing of the Merger will be satisfied or waived (as applicable). In addition, the Merger Agreement may be terminated under certain specified circumstances, including, but not limited to, a change in recommendation of our Board of Directors and a termination of the Merger Agreement by us to accept a “Company Superior Proposal” (as defined in the Merger Agreement).
These conditions to closing are described in more detail in the Merger Agreement, which is included as Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on February 15, 2022. In addition, while the Merger is not subject to a financing condition, Parent will need to receive equity and debt financing, as it has obtained such financing commitments, in order to satisfy its payment obligations and pay other costs and expenses related to the Merger. Further, any delay in completing the Merger could cause us or the combined company not to realize some or all of the benefits that the parties expect us or the combined company to achieve in connection with the Merger.
If the transaction is not consummated within the expected time frame or at all, we may be subject to a number of material risks. The price of our common stock may decline to the extent that current market prices reflect a market assumption that the Merger
will be completed. In addition, some costs, expenses and fees related to the Merger must be paid whether or not the Merger is completed, and we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger, as well as the direction of management resources towards the Merger, for which we will have received little or no benefit if the closing of the Merger does not occur. We may also experience negative reactions from our shareholders and other investors, employees, agents and other parties with which we maintain business relationships. In addition, if the Merger Agreement is terminated, in specified circumstances, we may be required to pay a termination fee. If the Merger is not consummated, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely affected. If the Merger is not consummated for any reason, holders of our common stock will not receive the Merger Consideration for their shares in connection with the Merger. Instead, our common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act, and we will continue to file periodic reports with the SEC on account of our common stock.
Risks Related to Our Business and Industry
The COVID-19 outbreak, declared a pandemic by the World Health Organization, is ongoing both in the United States and globally and has adversely affected and may continue to materially adversely affect, our business operations, financial condition, liquidity and cash flow. The extent to which the COVID-19 pandemic will further impact our business depends on future developments, which are highly uncertain and difficult to predict.
The outbreak of COVID-19, which was declared a pandemic by the World Health Organization, is ongoing both in the United States and globally, causing significant macroeconomic uncertainty, volatility and disruption. In response, many governments have initiated, resumed or extended social distancing rules, lockdowns or shelter-in-place orders resulting in the closure of many businesses. These actions have resulted in an overall reduction in consumer activity and the continued closure of some of our agent locations.
The COVID-19 pandemic and the related economic fallout began to adversely impact MoneyGram's results of operations in the middle of March 2020. The inability of our agents to operate normally has reduced the volume of consumer transactions in almost all of the 200 countries and territories in which we operate. These developments have negatively impacted and may continue to negatively impact our sales and operating margin as well as our workforce, agents and customers.
It is impossible to predict the scope and duration of the impact of the pandemic on our business as the situation is ever evolving and there are a number of uncertainties related to this pandemic. These uncertainties include, but are not limited to, the potential adverse effect on the global economy, our agent network, travel and transportation services, our employees and customers. Even though some governments lifted some restrictions on citizens and businesses during the second half of 2020, the resulting economic impact of COVID-19 could still continue to negatively impact our business and the recent resurgence of COVID-19 cases (including due to variant strains) could result in further lockdowns and shelter-in-place orders by governments. The extent to which the COVID-19 pandemic will further impact our business depends on future developments, which are highly uncertain and difficult to predict, and accordingly, as the COVID-19 situation continues to evolve, additional adverse effects may arise that are currently unknown. All of these effects discussed above could have a material adverse effect on our near-term and long-term business operations, revenues, earnings, financial condition, liquidity and cash flows.
We face intense competition, and if we are unable to continue to compete effectively for any reason, including due to our enhanced compliance controls, our business, financial condition and results of operations could be adversely affected.
The markets in which we compete are highly competitive, and we face a variety of competitors across our businesses, some of which have larger and more established customer bases and substantially greater financial, marketing and other resources than we have. Money transfer, bill payment and money order services compete in a concentrated industry, with a small number of large competitors and a large number of small, niche competitors. Our money transfer products compete with a variety of financial and non-financial companies, including banks, card associations, web-based services, payment processors, informal remittance systems, consumer money transfer companies and others. The services are differentiated by features and functionalities, including brand recognition, customer service, reliability, distribution network and options, price, speed and convenience. Distribution channels such as online, mobile solutions, account deposit and kiosk-based services continue to evolve and impact the competitive environment for money transfers. The electronic bill payment services within our GFT segment compete in a highly fragmented consumer-to-business payment industry. Our official check business competes primarily with financial institutions that have developed internal processing capabilities or services similar to ours and do not outsource official check services. Financial institutions could also offer competing official check outsourcing services to our existing and prospective official check customers.
Our future growth depends on our ability to compete effectively in money transfer, bill payment, money order and official check services. For example, if our products and services do not offer competitive features and functionalities or if we do not keep up with technological advances, we may lose customers to our competitors, which could adversely affect our business, financial condition and results of operations. In addition, if we fail to price our services appropriately relative to our competitors, consumers may not use our services, which could adversely affect our business, financial condition and results of
operations. For example, transaction volume where we face intense competition could be adversely affected by pricing pressures between our money transfer services and those of some of our competitors, which could reduce margins and adversely affect our financial condition and results of operations. We have historically implemented and will likely continue to implement price adjustments from time to time in response to competition and other factors. If we reduce prices in order to more effectively compete, such reductions could adversely affect our financial condition and results of operations in the short term and may also adversely affect our financial condition and results of operations in the long term if transaction volumes do not increase sufficiently.
In addition, our enhanced compliance controls have negatively impacted and may continue to negatively impact, our revenue and net income. In 2018 we launched enhanced compliance measures representing the highest standards in the industry, including new global customer verification standards for all money transfer services, which have significantly increased our operating expenses. While these measures have resulted in a decline in fraud rates, they have negatively impacted and may continue to negatively impact, our revenue and net income. Such impacts could adversely affect our financial condition and results of operations in the short term and may also adversely affect our financial condition and results of operations in the long term if transaction volumes do not increase sufficiently.
If we lose key agents, our business with such agents is reduced or we are unable to maintain our agent network under terms consistent with those currently in place, including due to increased costs or loss of business as a result of higher compliance standards, our business, financial condition and results of operations could be adversely affected.
Most of our revenue is earned through our agent network. In addition, our international agents may have subagent relationships in which we are not directly involved. If agents or their subagents decide to leave our network, our revenue and profits could be adversely affected. Agent loss may occur for a number of reasons, including competition from other money transfer providers, an agent's dissatisfaction with its relationship with us or the revenue earned from the relationship, or an agent's unwillingness or inability to comply with our standards or legal requirements, including those related to compliance with anti-money laundering regulations, anti-fraud measures or agent monitoring.
Agents may also generate fewer transactions or reduce locations for reasons unrelated to our relationship with them, including increased competition in their business, political unrest, general economic conditions, regulatory costs or other reasons. In addition, we may not be able to maintain our agent network under terms consistent with those already in place. Larger agents may demand additional financial concessions or may not agree to enter into exclusive arrangements, which could increase competitive pressure. The inability to maintain our agent contracts on terms consistent with those already in place, including in respect of exclusivity rights, could adversely affect our business, financial condition and results of operations.
A substantial portion of our agent network locations, transaction volume and revenue is attributable to or generated by a limited number of key agents. During 2022 and 2021, our ten largest agents accounted for 24% and 26%, respectively, of our total revenue. Our largest agent, Walmart, accounted for less than 10% and 11% of our total revenue in 2022 and 2021, respectively. If our contracts with our key agents, including Walmart, are not renewed or are terminated, or are renewed but on less favorable terms, or if such agents generate fewer transactions, reduce their locations or allow our competitors to use their services (e.g. Ria and Western Union in Walmart), our business, financial condition and results of operations could be adversely affected. In addition, the introduction of additional competitive products by Walmart or our other key agents, including competing white-label products, could reduce our business with those key agents and intensify industry competition, which could adversely affect our business, financial condition and results of operations.
Complex and evolving U.S. and international laws and regulation regarding privacy and data protection could result in claims, changes to our business practices, penalties, increased cost of operations or otherwise harm our business.
We are subject to requirements relating to data privacy and the collection, processing, storage, transfer and use of data under U.S. federal, state and foreign laws. For example, the FTC routinely investigates the privacy practices of companies and has commenced enforcement actions against many, resulting in multi-million dollar settlements and multi-year agreements governing the settling companies' privacy practices. In addition, the General Data Protection Regulation in the European Union, effective May 2018, imposed a higher standard of personal data protection with significant penalties for non-compliance for companies operating in the European Union or doing business with European Union residents. The new California Consumer Protection Act, which became effective on January 1, 2020, imposes heightened data privacy requirements on companies that collect information from California residents. If we are unable to meet such requirements, we may be subject to significant fines or penalties. Furthermore, certain industry groups require us to adhere to privacy requirements in addition to federal, state and foreign laws, and certain of our business relationships depend upon our compliance with these requirements. As the number of jurisdictions enacting privacy and related laws increases and the scope of these laws and enforcement efforts expands, we will increasingly become subject to new and varying requirements. Failure to comply with existing or future data privacy laws, regulations and requirements, including by reason of inadvertent disclosure of personal information, could result in significant adverse consequences, including reputational harm, civil litigation, regulatory enforcement, costs of remediation, increased
expenses for security systems and personnel, harm to our consumers and harm to our agents. These consequences could materially adversely affect our business, financial condition and results of operations.
In addition, the Company makes information available to certain U.S. federal and state, as well as certain foreign, government agencies in connection with regulatory requirements to assist in the prevention of money laundering and terrorist financing and pursuant to legal obligations and authorizations. In recent years, the Company has experienced increasing data sharing requests by these agencies, particularly in connection with efforts to prevent terrorist financing or reduce the risk of identity theft. During the same period, there has also been increased public attention to the corporate use and disclosure of personal information, accompanied by legislation and regulations intended to strengthen data protection, information security and consumer privacy. These regulatory goals may conflict, and the law in these areas is not consistent or settled. While we believe that we are compliant with our regulatory responsibilities, the legal, political and business environments in these areas are rapidly changing, and subsequent legislation, regulation, litigation, court rulings or other events could expose us to increased program costs, liability and reputational damage that could have a material adverse effect on our business, financial condition and results of operations.
A breach of security in the systems on which we rely could adversely affect our business, financial condition and results of operations.
We rely on a variety of technologies to provide security for our systems. Advances in computer capabilities, new discoveries affecting the efficacy of cryptography or other events or developments, including improper acts by third parties, may result in a compromise or breach of the security measures we use to protect our systems. We obtain, transmit and store confidential consumer, employer and agent information in connection with certain of our services. These activities are subject to laws and regulations in the U.S. and other jurisdictions. The requirements imposed by these laws and regulations, which often differ materially among the many jurisdictions, are designed to protect the privacy of personal information and to prevent that information from being inappropriately disclosed.
Any security breaches in our or our suppliers’ source code, computer networks, systems, databases or facilities could lead to the inappropriate use or disclosure of personally identifiable or proprietary information, which could harm our business and result in, among other things, unfavorable publicity, damage to our reputation, loss in our consumers' confidence in our or our agents' business, fines or penalties from regulatory or governmental authorities, a loss of consumers, lawsuits and potential financial losses. In addition, we may be required to expend significant capital and other resources to protect against these security breaches or to alleviate problems caused by these breaches. Our agents, banks, digital asset exchanges and third-party independent contractors may also experience security breaches involving the storage and transmission of our data as well as the ability to initiate unauthorized transactions, funds transfers or digital asset transfers. If an entity gains improper access to our, our suppliers', agents' banks', digital asset exchanges' or our third-party independent contractors', source code, computer networks, systems, or databases or facilities, they may be able to steal, publish, delete or modify confidential customer information or generate unauthorized money transfers, funds transfers or digital asset transfers. Such a breach could expose us to monetary liability, losses and legal proceedings, lead to reputational harm, cause a disruption in our operations, or make our consumers and agents less confident in our services, which could have a material adverse effect on our business, financial condition and results of operations.
Cybersecurity threats continue to increase in frequency and sophistication; a successful cybersecurity attack could interrupt or disrupt our information technology systems or cause the loss of confidential or protected data which could disrupt our business, force us to incur excessive costs or cause reputational harm.
The size and complexity of our information systems make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from attacks by malicious third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise. While we have invested in the protection of data and information technology, there can be no assurance that our efforts will prevent or quickly identify service interruptions or security breaches. Any such interruption or breach of our systems could adversely affect our business operations and result in the loss of critical or sensitive confidential information or intellectual property and could result in financial, legal, business and reputational harm to us.
Other attacks in recent years have included distributed denial of service ("DDoS") attacks, in which individuals or organizations flood commercial websites or application programming interfaces ("APIs") with extraordinarily high volumes of traffic with the goal of disrupting the ability of commercial enterprises to process transactions and possibly making their websites or APIs unavailable to customers for extended periods of time. We, as well as other financial services companies, have been subject to such attacks.
We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems.
Consumer fraud could adversely affect our business, financial condition and results of operations.
Criminals are using increasingly sophisticated methods to engage in illegal activities such as identity theft, fraud and paper instrument counterfeiting. As we make more of our services available over the internet and other digital media, we subject ourselves to new types of consumer fraud risk because requirements relating to consumer authentication are more complex with internet services. Certain former agents have also engaged in fraud against consumers, and existing agents could engage in fraud against consumers. We use a variety of tools to protect against fraud; however, these tools may not always be successful. Allegations of fraud may result in fines, settlements, litigation expenses and reputational damage.
Our industry is under increasing scrutiny from federal, state and local regulators in the U.S. and regulatory agencies in many countries in connection with the potential for consumer fraud. If consumer fraud levels involving our services were to rise, it could lead to further regulatory intervention and reputational and financial damage. This, in turn, could lead to additional government enforcement actions and investigations, reduce the use and acceptance of our services or increase our compliance costs and thereby have a material adverse impact on our business, financial condition and results of operations.
MoneyGram is subject to compliance with U.S. anti-money laundering laws, the Bank Secrecy Act, the Dodd-Frank Act, FCPA, PSD2 and numerous international laws and regulations. Failure to comply with these laws could result in material settlements, fines, penalties and increased operating costs, all of which may adversely affect our business, financial condition and results of operations.
Our business is subject to certain regulations aimed at preventing money laundering and terrorism. We are subject to U.S. federal anti-money laundering laws, the Bank Secrecy Act and anti-money laundering laws in other countries in which we operate, particularly in the European Union. We are subject to sanctions laws and regulations, promulgated by OFAC. We are also subject to financial services regulations, money transfer and payment instrument licensing regulations, consumer protection laws, currency control regulations, escheatment laws, privacy and data protection laws and anti-bribery laws. Many of these laws are evolving, with requirements that may be unclear and inconsistent across jurisdictions, making compliance challenging. Subsequent legislation, regulation, litigation, court rulings or other events could expose us to increased program costs, liability and reputational damage.
We are considered a Money Services Business in the U.S. under the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001. As such, we are subject to reporting, recordkeeping and anti-money laundering provisions in the U.S. as well as other jurisdictions. During 2017 and 2018, there were significant regulatory reviews and actions taken by U.S. and other regulators and law enforcement agencies against banks, Money Services Businesses and other financial institutions related to money laundering. We are also subject to regulatory oversight and enforcement by the U.S. Department of the Treasury Financial Crimes Enforcement Network. Any determination that we have violated any anti-money-laundering laws could have an adverse effect on our business, financial condition and results of operations.
The Dodd-Frank Act increases the regulation and oversight of the financial services industry. The Dodd-Frank Act addresses, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, thrift charters and changes among the bank regulatory agencies. The Dodd-Frank Act requires enforcement by various governmental agencies, including the CFPB. Money transmitters such as the Company are subject to direct supervision by the CFPB and are required to provide additional consumer information and disclosures, adopt error resolution standards and adjust refund procedures for international transactions originating in the U.S. in a manner consistent with the Remittance Transfer Rule (a rule issued by the CFPB pursuant to the Dodd-Frank Act). In addition, the CFPB may adopt other regulations governing consumer financial services, including regulations defining unfair, deceptive, or abusive acts or practices and new model disclosures. We could be subject to fines or other penalties if we are found to have violated the Dodd-Frank Act's prohibition against unfair, deceptive or abusive acts or practices. The CFPB's authority to change regulations adopted in the past by other regulators could increase our compliance costs and litigation exposure. We may also be liable for failure of our agents to comply with the Dodd-Frank Act. The legislation and implementation of regulations associated with the Dodd-Frank Act have increased our costs of compliance and required changes in the way we and our agents conduct business. In addition, we are subject to periodic examination by the CFPB.
We are also subject to regulations imposed by the FCPA in the U.S., the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions. Because of the scope and nature of our global operations, we experience a higher risk associated with the FCPA and similar anti-bribery laws than other companies. We are subject to recordkeeping and other requirements imposed upon companies related to compliance with these laws. Between 2016 and 2021, there has been an increase in regulatory reviews and enforcement actions taken by the U.S. and other regulators related to anti-bribery laws, along with increased scrutiny on payments to and relationships with, foreign entities and individuals.
We are also subject to the PSD2, as amended by the 4th and 5th Anti-Money Laundering Directives in the EU, which governs the regulatory regime for payment services in the European Union and similar regulatory or licensing requirements in other jurisdictions. The PSD2 and other international regulatory or licensing requirements may impose liability on us for the conduct of our agents and the commission of third-party fraud utilizing our services. If we fail to comply with the PSD2 or such other
requirements, we could be subject to fines or penalties or revocation of our licenses, which could adversely impact our business, financial condition and results of operations.
Violation of laws or regulations by our agents could adversely affect our business, financial condition and results of operations.
In some cases, we could be liable for the failure of our agents or their subagents to comply with laws and regulations. As a result, the risk of adverse regulatory action against the Company related to the actions of its agents or their subagents, the cost to monitor our agents and their subagents has increased. In addition to fines and penalties, a failure by us or our agents to comply with applicable laws and regulations could seriously damage our reputation resulting in diminished revenue and profit, increased operating costs, revocation of required licenses or registrations, loss of approved status, termination of contracts with banks or retail representatives, administrative enforcement actions, class action lawsuits, cease and desist orders and civil and criminal liability. The occurrence of one or more of these events could have a material adverse effect on our business, financial condition and results of operations.
We are subject to the discretion of administrative enforcement agencies.
In certain cases, regulations may provide administrative discretion regarding enforcement, and regulations may be applied inconsistently across the industry, resulting in increased costs for the Company that may not be incurred by competitors. Changes in laws, regulations or other industry practices and standards, or interpretations of legal or regulatory requirements, may reduce the market for or value of our products or services or render our products or services less profitable or obsolete. For example, policymakers may impose heightened customer due diligence requirements or other restrictions, fees or taxes on remittances. Additionally, we have been subject to ongoing investigations and enforcement-related inquiries that resulted in a settlement and pending litigation with the NYDFS and CFPB, respectively. Changes in the laws affecting the kinds of entities that are permitted to act as money transfer agents (such as changes in requirements for capitalization or ownership) could adversely affect our ability to distribute certain services and the costs of providing those services.
Litigation or investigations involving us, our agents or other contractual counterparties could result in material settlements, fines or penalties and may adversely affect our business, financial condition and results of operations.
We have been and in the future may be, subject to allegations and complaints that individuals or entities have used our money transfer services for fraud-induced money transfers, as well as certain money laundering activities, which may result in fines, penalties, judgments, settlements and litigation expenses. We also are the subject from time to time of litigation related to our business. The outcome of such allegations, complaints, claims and litigation cannot be predicted.
Regulatory and judicial proceedings and potential adverse developments in connection with ongoing litigation may adversely affect our business, financial condition and results of operations. There may also be adverse publicity associated with lawsuits and investigations that could decrease agent and consumer acceptance of our services. Additionally, our business has been in the past and may be in the future, the subject of class action lawsuits including securities litigation, regulatory actions and investigations and other general litigation. The outcome of class action lawsuits, including securities litigation, regulatory actions and investigations and other litigation is difficult to assess or quantify but may include substantial fines and expenses, as well as the revocation of required licenses or registrations or the loss of approved status, which could have a material adverse effect on our business, financial position and results of operations or consumers' confidence in our business. Plaintiffs or regulatory agencies in these lawsuits, actions or investigations may seek recovery of very large or indeterminate amounts, and the magnitude of these actions may remain unknown for substantial periods of time. The cost to defend or settle future lawsuits or investigations may be significant. In addition, improper activities, lawsuits or investigations involving our agents may adversely impact our business operations or reputation even if we are not directly involved.
If we fail to successfully develop and timely introduce new and enhanced products and services or if we make substantial investments in an unsuccessful new product, service or infrastructure change, our business, financial condition and results of operations could be adversely affected.
Our future growth will depend, in part, on our ability to continue to develop and successfully introduce new and enhanced methods of providing money transfer, bill payment, money order, official check and related services that keep pace with competitive introductions, technological changes and the demands and preferences of our agents, financial institution customers and consumers. If alternative payment mechanisms become widely substituted for our current products and services, and we do not develop and offer similar alternative payment mechanisms successfully and on a timely basis, our business, financial condition and results of operations could be adversely affected. We may make future investments or enter into strategic alliances to develop new technologies and services or to implement infrastructure changes to further our strategic objectives, strengthen our existing businesses and remain competitive. Such investments and strategic alliances, however, are inherently risky, and we cannot guarantee that such investments or strategic alliances will be successful. If such investments and strategic alliances are not successful, they could have a material adverse effect on our business, financial condition and results of operations.
We have outstanding indebtedness in the form of Senior Secured Notes and a credit facility and may incur other debt in the future, which may adversely affect our financial condition and future financial results.
On July 21, 2021, we (i) completed a private offering of $415.0 million aggregate principal amount of 5.375% senior secured notes due 2026 (the "notes") and related guarantees (the "notes offering") and (ii) 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.
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, swingline loans and letters of credit up to an initial aggregate principal amount of $32.5 million (the "Revolving Credit Facility" and, together with the Term Loan, the "New Credit Facilities"). In December 2021, we added additional $7.50 million capacity to our Revolving Credit Facility bringing the total Revolving Credit Facility to $40.0 million.
As of December 31, 2022, we had $795.0 million in debt, including $415.0 million under the notes and $380.0 million outstanding under the Term Loan. Our existing and future levels of indebtedness could have important consequences to stockholders and note holders and may adversely affect our financial conditions and future financial results by, among other things:
•affecting our ability to satisfy our obligations under the notes and New Credit Agreement;
•requiring a significant portion of our cash flows from operations to be dedicated to interest and principal payments, which may not be available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;
•impairing our ability to obtain additional financing in the future;
•limiting our flexibility in planning for, or reacting to, changes in our business and industry; and
•increasing our vulnerability to downturns in our business, our industry or the economy in general, including any such downturn related to the impact of the COVID-19 pandemic.
Further, the Indenture governing the terms of the notes contains covenants limiting the ability of MoneyGram and certain of our subsidiaries to, among other things, incur or guarantee additional debt or issue disqualified stock or certain preferred stock; create or incur liens; pay dividends, redeem stock or make other distributions; make certain investments; create restrictions on the ability to pay dividends to or make certain intercompany transfers; transfer or sell assets; merge or consolidate, and; enter into certain transactions with affiliates.
The New Credit Agreement also contains certain financial covenants and certain negative covenants, including limitations on liens, asset sales, consolidations and mergers, acquisitions, investments, indebtedness, transactions with affiliates and payment of dividends.
These restrictions could adversely affect our ability to finance our future operations or capital needs, withstand a future downturn in our business or the economy in general, engage in business activities, including future opportunities that may be in our interest and plan for or react to market conditions or otherwise execute our business strategies. Our ability to comply with the covenants and other terms governing the notes and the New Credit Agreement will depend in part on our future operating performance. If we fail to comply with such covenants and terms, we may be in default and the maturity of the related debt could be accelerated and become immediately due and payable. In addition, because substantially all of our assets are pledged as a security under the New Credit Agreement, if we are not able to cure any default or repay outstanding borrowings, such assets are subject to the risk of foreclosure by our lenders. From time to time, we may not be in compliance with such covenants or other terms governing the New Credit Agreement and we may be required to obtain waivers or amendments to the New Credit Agreement from our lenders in order to maintain compliance and there can be no certainty that any such waiver or amendment will be available, or what the cost of such waiver or amendment, if obtained, would be. If we are unable to obtain necessary waivers and the debt under such credit facility is accelerated, we would be required to obtain replacement financing at prevailing market rates, which may not be favorable to us. Additionally, a default on indebtedness could result in a default under the terms of the indenture governing the notes. There is no guarantee that we would be able to satisfy our obligations if any of our indebtedness is accelerated.
We may be adversely affected by the potential discontinuation of LIBOR.
In July 2017, the Financial Conduct Authority in the United Kingdom ("FCA"), which regulates LIBOR, publicly announced that it will no longer compel or persuade banks to make LIBOR submissions after 2021. In March 2021, the CFA announced that the intended cessation date of the overnight 1-, 3-, 6-, and 12-month tenors of USD LIBOR would be June 30, 2023, and while other alternatives have been proposed, it is unclear which, if any, alternative to LIBOR will be available and widely accepted in major financial markets.
While there is currently no consensus on what rate or rates may become accepted alternatives to LIBOR, a group of large banks, the Alternative Reference Rate Committee ("AARC"), selected the Secured Overnight Financing Rate ("SOFR") as an alternative to LIBOR for U.S. dollar denominated loans and securities. SOFR has been published by the Federal Reserve Bank of New York ("FRBNY") since May 2018, and it is intended to be a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities. The FRBNY currently publishes SOFR daily on its website at apps.newyorkfed.org/markets/autorates/sofr. The FRBNY states on its publication page for SOFR that use of SOFR is subject to important disclaimers, limitations and indemnification obligations, including that the FRBNY may alter the methods of calculation, publication schedule, rate revision practices or availability of SOFR at any time without notice. Because SOFR is published by the FRBNY based on data received from other sources, the Company has no control over its determination, calculation or publication. There can be no assurance that SOFR will not be discontinued or fundamentally altered in a manner that is materially adverse to the parties that utilize SOFR as the reference rate for transactions. There is also no assurance that SOFR will be widely adopted as the replacement reference rate for LIBOR.
The Term Loan and the Revolving Credit Facility each permit both base rate borrowings and LIBOR borrowings, in each case plus a spread above the base rate or LIBOR rate, as applicable. If an alternative to LIBOR is not available and widely accepted after 2022, our ability to borrow at an alternative to the base may be adversely impacted, and the costs associated with any potential future borrowings may increase.
Weakness in economic conditions could adversely affect our business, financial condition and results of operations.
Our money transfer business relies in part on the overall strength of global and local economic conditions. Our consumers tend to be employed in industries such as construction, energy, manufacturing and retail that tend to be cyclical and more significantly impacted by weak economic conditions than other industries. This may result in reduced job opportunities for our customers in the U.S. or other countries that are important to our business, which could adversely affect our business, financial condition and results of operations. For example, sustained weakness in the price of oil could adversely affect economic conditions and lead to reduced job opportunities in certain regions that constitute a significant portion of our total money transfer volume, which could result in a decrease in our transaction volume. In addition, increases in employment opportunities may lag other elements of any economic recovery.
Our agents or billers may have reduced sales or business as a result of weak economic conditions. As a result, our agents could reduce their number of locations or hours of operation, or cease doing business altogether. Our billers may have fewer consumers making payments to them, particularly billers in those industries that may be more affected by an economic downturn such as the automobile, mortgage and retail industries.
Extended periods of economic disruption and high inflation could have an adverse effect on our business. Significant inflation can impact our results of operations and financial condition by increasing interest rates and the cost of labor, equipment and other expenses. In a highly inflationary environment, we may be unable to increase prices for our offerings to offset the corresponding increase to operating costs, which may impact our margins. Further, 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, could lead to extended periods of economic disruption.
As economic conditions deteriorate in a market important to our business, our revenue, financial condition and results of operations can be adversely impacted. Additionally, if our consumer transactions decline due to deteriorating economic conditions, we may be unable to timely and effectively reduce our operating costs or take other actions in response, which could adversely affect our business, financial condition and results of operations.
A significant change or disruption in international migration patterns could adversely affect our business, financial condition and results of operations.
Our money transfer business relies in part on international migration patterns, as individuals move from their native countries to countries with greater economic opportunities or a more stable political environment. A significant portion of money transfer transactions are initiated by immigrants or refugees sending money back to their native countries. Changes in immigration laws that discourage international migration and political or other events (such as war, trade wars, terrorism or health emergencies including but not limited to the COVID-19 pandemic) that make it more difficult for individuals to migrate or work abroad could adversely affect our money transfer remittance volume or growth rate. Specifically, since the start of the COVID-19 pandemic, many governments have initiated, resumed or extended social distancing rules, lockdowns or shelter-in-place orders resulting in the inability of many individuals to migrate or work abroad, which has impacted our business. The resulting economic impact of prior and ongoing COVID-19 governmental lockdown orders could continue to negatively impact our business. Furthermore, continuing increases in COVID-19 cases occurring now or in the future could result in a return to lockdowns and shelter-in-place orders by governments which could negatively impact our business.
Additionally, sustained weakness in global economic conditions could reduce economic opportunities for migrant workers and result in reduced or disrupted international migration patterns. Reduced or disrupted international migration patterns,
particularly in the U.S. or Europe, are likely to reduce money transfer transaction volumes and therefore have an adverse effect on our business, financial condition and results of operations. Furthermore, significant changes in international migration patterns could adversely affect our business, financial condition and results of operations.
There are a number of risks associated with our international sales and operations that could adversely affect our business.
We provide money transfer services between and among more than 200 countries and territories and continue to expand in various international markets. Our ability to grow in international markets and our future results could be adversely affected by a number of factors, including:
•changes in political and economic conditions and potential instability in certain regions, including in particular the recent civil unrest, terrorism, political turmoil and economic uncertainty in Africa, the Middle East, Europe and other regions;
•restrictions on money transfers to, from and between certain countries;
•currency controls, new currency adoptions and repatriation issues;
•changes in regulatory requirements or in foreign policy, including the adoption of domestic or foreign laws, regulations and interpretations detrimental to our business;
•possible increased costs and additional regulatory burdens imposed on our business;
•the implementation of U.S. sanctions, resulting in bank closures in certain countries and the ultimate freezing of our assets;
•burdens of complying with a wide variety of laws and regulations;
•possible fraud or theft losses and lack of compliance by international representatives in foreign legal jurisdictions where collection and legal enforcement may be difficult or costly;
•reduced protection of our intellectual property rights;
•unfavorable tax rules or trade barriers;
•inability to secure, train or monitor international agents; and
•failure to successfully manage our exposure to non-U.S. dollar exchange rates, in particular with respect to the euro.
In particular, a portion of our revenue is generated in currencies other than the U.S. dollar. As a result, we are subject to risks associated with changes in the value of our revenues denominated in non-U.S. dollars. In addition, we maintain significant non-U.S. dollar balances that are subject to volatility and could result in losses due to a devaluation of the U.S. dollar. As exchange rates among the U.S. dollar, the euro and other currencies fluctuate, the impact of these fluctuations may have a material adverse effect on our results of operations or financial condition as reported in U.S. dollars. See Enterprise Risk Management-Non-U.S. Dollar Risk in Item 7A of this 2022 Form 10-K for more information.
Because our business is particularly dependent on the efficient and uninterrupted operation of our information technology, computer network systems and data centers, disruptions to these systems and data centers could adversely affect our business, financial condition and results of operations.
Our ability to provide reliable services largely depends on the efficient and uninterrupted operation of our computer network systems and data centers. Our business involves the movement of large sums of money and the management of data necessary to do so. The success of our business particularly depends upon the efficient and error-free handling of transactions and data. We rely on the ability of our employees and our internal systems and processes, including our consumer applications, to process these transactions in an efficient, uninterrupted and error-free manner.
In the event of a breakdown, catastrophic event (such as fire, natural disaster, power loss, telecommunications failure or physical break-in), security breach, computer virus, improper operation, improper action by our employees, agents, consumers, financial institutions or third-party vendors or any other event impacting our systems or processes or our agents' or vendors' systems or processes, we could suffer financial loss, loss of consumers, regulatory sanctions, lawsuits and damage to our reputation or consumers' confidence in our business. The measures we have enacted, such as the implementation of disaster recovery plans and redundant computer systems, may not be successful. We may also experience problems other than system failures, including software defects, development delays and installation difficulties, which would harm our business and reputation and expose us to potential liability and increased operating expenses. In addition, any work stoppages or other labor actions by employees who support our systems or perform any of our major functions could adversely affect our business. Certain of our agent contracts, including our contract with Walmart, contain service level standards pertaining to the operation of our system and give the agent a right to collect damages or engage other providers and, in extreme situations, a right of termination for system downtime exceeding agreed upon service levels. If we experience significant system interruptions or system failures, our business interruption insurance may not be adequate to compensate us for all losses or damages that we may incur.
In addition, our ability to continue to provide our services to a growing number of agents and consumers, as well as to enhance our existing services and offer new services, is dependent on our information technology systems. If we are unable to effectively manage the technology associated with our business, we could experience increased costs, reductions in system availability and loss of agents or consumers. Any failure of our systems in scalability, reliability and functionality could adversely impact our business, financial condition and results of operations.
We conduct money transfer transactions in some regions that are politically volatile and economically unstable, which could increase our cost of operating in those regions.
We conduct money transfer transactions in some regions that are politically volatile and economically unstable, which could increase our cost of operating in those regions. For example, it is possible that our money transfer services or other products could be used in contravention of applicable law or regulations. Such circumstances could result in increased compliance costs, regulatory inquiries, suspension or revocation of required licenses or registrations, seizure or forfeiture of assets and the imposition of civil and criminal fees and penalties, inability to settle due to currency restrictions or volatility, or other restrictions on our business operations. In addition to monetary fines or penalties that we could incur, we could be subject to reputational harm that could have a material adverse effect on our business, financial condition and results of operations.
Major bank failure or sustained financial market illiquidity, or illiquidity at our clearing, cash management and custodial financial institutions, could adversely affect our business, financial condition and results of operations.
We face certain risks in the event of a sustained deterioration of financial market liquidity, as well as in the event of sustained deterioration in the liquidity, or failure, of our clearing, cash management and custodial financial institutions. In particular:
•We may be unable to access funds in our investment portfolio, deposit accounts and clearing accounts on a timely basis to settle our payment instruments, pay money transfers and make related settlements to agents. Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs. Any delay or inability to settle our payment instruments, pay money transfers or make related settlements with our agents could adversely impact our business, financial condition and results of operations.
•In the event of a major bank failure, we could face major risks to the recovery of our bank deposits used for the purpose of settling with our agents and to the recovery of a significant portion of our investment portfolio. A substantial portion of our cash, cash equivalents and interest-bearing deposits are either held at banks that are not subject to insurance protection against loss or exceed the deposit insurance limit.
•Our Revolving Credit Facility is one source of funding for our corporate transactions and liquidity needs. If any of the lenders participating in our Revolving Credit Facility were unable or unwilling to fulfill its lending commitment to us, our short-term liquidity and ability to engage in corporate transactions, such as acquisitions, could be adversely affected.
•We may be unable to borrow from financial institutions or institutional investors on favorable terms, which could adversely impact our ability to pursue our growth strategy and fund key strategic initiatives.
If financial liquidity deteriorates, there can be no assurance we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.
An inability by us or our agents to maintain adequate banking relationships may adversely affect our business, financial condition and results of operations.
We rely on domestic and international banks for international cash management, electronic funds transfer and wire transfer services to pay money transfers and settle with our agents. We also rely on domestic banks to provide clearing, processing and settlement functions for our paper-based instruments, including official checks and money orders. Our relationships with these banks are a critical component of our ability to conduct our official check, money order and money transfer businesses. The inability on our part to maintain existing or establish new banking relationships sufficient to enable us to conduct our official check, money order and money transfer businesses could adversely affect our business, financial condition and results of operations. There can be no assurance that we will be able to establish and maintain adequate banking relationships.
If we cannot maintain sufficient relationships with large international banks that provide these services, we would be required to establish a global network of local banks to provide us with these services or implement alternative cash management procedures, which may result in increased costs. Relying on local banks in each country in which we do business could alter the complexity of our treasury operations, degrade the level of automation, visibility and service we currently receive from banks and affect patterns of settlement with our agents. This could result in an increase in operating costs and an increase in the amount of time it takes to concentrate agent remittances and to deliver agent payables, potentially adversely impacting our cash flow, working capital needs and exposure to local currency value fluctuations.
We and our agents are considered Money Service Businesses in the U.S. under the Bank Secrecy Act. U.S. regulators are increasingly taking the position that Money Service Businesses, as a class, are high risk businesses. In addition, the creation of
anti-money laundering laws has created concern and awareness among banks of the negative implications of aiding and abetting money laundering activity. As a result, banks may choose not to provide banking services to Money Services Businesses in certain regions due to the risk of additional regulatory scrutiny and the cost of building and maintaining additional compliance functions. In addition, certain foreign banks have been forced to terminate relationships with Money Services Businesses by U.S. correspondent banks. As a result, we and certain of our agents have been denied access to retail banking services in certain markets by banks that have sought to reduce their exposure to Money Services Businesses and not as a result of any concern related to the Company's compliance programs. If we or our agents are unable to obtain sufficient banking relationships, we or they may not be able to offer our services in a particular region, which could adversely affect our business, financial condition and results of operations.
Changes in tax laws and unfavorable outcomes of tax positions we take could adversely affect our tax expense and liquidity.
From time to time, the U.S. federal, state, local and foreign governments may enact legislation that could increase our effective tax rates. If changes to applicable tax laws are enacted that significantly increase our corporate effective tax rate, our net income could be negatively impacted.
We file tax returns and take positions with respect to federal, state, local and international taxation, and our tax returns and tax positions are subject to review and audit by taxing authorities. An unfavorable outcome in a tax review or audit could result in higher tax expense, including interest and penalties, which could adversely affect our financial condition, results of operations and cash flows. We establish reserves for material known tax exposures; however, there can be no assurance that an actual taxation event would not exceed our reserves.
We face credit risks from our agents and financial institutions with which we do business.
The vast majority of our money transfer, bill payment and money order business is conducted through independent agents that provide our products and services to consumers at their business locations. Our agents receive the proceeds from the sale of our payment instruments and money transfers, and we must then collect these funds from the agents. If an agent becomes insolvent, files for bankruptcy, commits fraud or otherwise fails to remit payment instruments or money transfer proceeds to us, we must nonetheless pay the payment instrument or complete the money transfer on behalf of the consumer.
Moreover, we have made and may make in the future, secured or unsecured loans to agents under limited circumstances or allow agents to retain our funds for a period of time before remitting them to us. As of December 31, 2022, we had credit exposure to our agents of $436.0 million in the aggregate spread across 6,378 agents.
Financial institutions, which are utilized to conduct business for our FPP segment, issue official checks and money orders and remit to us the face amounts of those instruments the day after they are issued. We may be liable for payment on all of those instruments. As of December 31, 2022, we had credit exposure for official checks and money orders conducted by financial institutions of $379.0 million in the aggregate spread across 961 financial institutions. In addition, we maintain balances in banks and digital asset exchanges around the world for our money transfer business. The deposits in these institutions may not have balance protection and, in the case of digital asset exchanges, may not be subject to regulation.
We monitor the creditworthiness of our agents and the financial institutions with which we do business on an ongoing basis. There can be no assurance that the models and approaches we use to assess and monitor the creditworthiness of our agents and these financial institutions will be sufficiently predictive, and we may be unable to detect and take steps to timely mitigate an increased credit risk.
In the event of an agent bankruptcy or a financial institution receivership or insolvency, we would generally be in the position of creditor, possibly with limited or no security, and we would therefore be at risk of a reduced recovery. We are not insured against credit losses, except in circumstances of agent theft or fraud. Significant credit losses could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to adequately protect our brand and the intellectual property rights related to our existing and any new or enhanced products and services, or if we infringe on the rights of others, our business, prospects, financial condition and results of operations could be adversely affected.
The MoneyGram brand is important to our business. We utilize trademark registrations in various countries and other tools to protect our brand. Our business would be harmed if we were unable to adequately protect our brand and the value of our brand was to decrease as a result.
We rely on a combination of patent, trademark and copyright laws, trade secret protection and confidentiality and license agreements to protect the intellectual property rights related to our products and services. We also investigate the intellectual property rights of third parties to prevent our infringement of those rights. We may be subject to third-party claims alleging that we infringe their intellectual property rights or have misappropriated other proprietary rights. We may be required to spend resources to defend such claims or to protect and police our own rights. We cannot be certain of the outcome of any such allegations. Some of our intellectual property rights may not be protected by intellectual property laws, particularly in foreign
jurisdictions. The loss of our intellectual property protection, the inability to secure or enforce intellectual property protection or to successfully defend against claims of intellectual property infringement could harm our business, prospects, financial condition and results of operation.
Failure to attract and retain key employees could have a material adverse impact on our business.
Our success depends to a large extent upon our ability to attract and retain key employees. Qualified individuals with experience in our industry are in high demand. In addition, legal or enforcement actions against compliance and other personnel in the money transfer industry may affect our ability to attract and retain key employees. The lack of management continuity or the loss of one or more members of our executive management team could harm our business and future development.
Any restructuring activities and cost reduction initiatives that we undertake may not deliver the expected results and these actions may adversely affect our business operations.
We have undertaken and may in the future undertake various restructuring activities and cost reduction initiatives in an effort to better align our organizational structure and costs with our strategy. These activities and initiatives can be substantial in scope, and they can involve large expenditures. Such activities could result in significant disruptions to our operations, including adversely affecting the timeliness of product releases, the successful implementation and completion of our strategic objectives and the results of our operations. If we do not fully realize or maintain the anticipated benefits of any restructuring plan or cost reduction initiative, our business, financial condition and results of operations could be adversely affected.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business.
We are required to certify and report on our compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing the effectiveness of our internal control over financial reporting. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. In order to achieve effective internal controls, we may need to enhance our accounting systems or processes, which could increase our cost of doing business. Any failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business.
Risks Related to Ownership of Our Stock
Our charter and Delaware law contain provisions that could delay or prevent an acquisition of the Company, which could inhibit your ability to receive a premium on your investment from a possible sale of the Company.
Our charter contains provisions that may discourage third parties from seeking to acquire the Company. These provisions and specific provisions of Delaware law relating to business combinations with interested stockholders may have the effect of delaying, deterring or preventing certain business combinations, including a merger or change in control of the Company. Some of these provisions may discourage a future acquisition of the Company even if stockholders would receive an attractive value for their shares or if a significant number of our stockholders believed such a proposed transaction to be in their best interests. As a result, stockholders who desire to participate in such a transaction may not have the opportunity to do so.
Our amended and restated bylaws provide that unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for certain types of lawsuits, which could limit our stockholders’ ability to obtain their preferred judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for each of the following:
•any derivative action or proceeding brought on behalf of the Company;
•any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Company to the Company or the Company’s stockholders;
•any action arising pursuant to any provision of the Delaware General Corporation Law; and
•any action asserting a claim governed by the internal affairs doctrine.
These exclusive-forum provisions do not apply to claims under the Securities Act, the Exchange Act or any other claims for which the federal courts have exclusive jurisdiction.
Any person or entity purchasing or otherwise acquiring any interest in any shares of our stock shall be deemed to have notice of and to have consented to the exclusive forum provisions in our amended and restated bylaws.
These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If any other court of competent jurisdiction were to find our exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our business.
Our Board of Directors has the power to issue series of preferred stock and to designate the rights and preferences of those series, which could adversely affect the voting power, dividend, liquidation and other rights of holders of our common stock.
Under our charter, our Board of Directors has the power to issue series of preferred stock and to designate the rights and preferences of those series. Therefore, our Board of Directors may designate a new series of preferred stock with the rights, preferences and privileges that our Board of Directors deems appropriate, including special dividend, liquidation and voting rights. The creation and designation of a new series of preferred stock could adversely affect the voting power, dividend, liquidation and other rights of holders of our common stock and, possibly, any other class or series of stock that is then in existence.
The market price of our common stock may be volatile.
The market price of our common stock may fluctuate significantly in response to a number of factors, some of which may be beyond our control. These factors include the perceived prospects for or actual operating results of our business; changes in estimates of our operating results by analysts, investors or our management; our actual operating results relative to such estimates or expectations; actions or announcements by us, our agents, or our competitors; litigation and judicial decisions; legislative or regulatory actions; and changes in general economic or market conditions. In addition, the stock market in general has from time to time experienced extreme price and volume fluctuations. These market fluctuations could reduce the market price of our common stock for reasons unrelated to our operating performance.
Investors in our common stock may be subject to state money transmitter change of control notice and approval requirements if their aggregate ownership equals or exceeds 10% of our outstanding voting or non-voting shares.
MoneyGram Payment Systems, Inc., one of our wholly owned subsidiaries, owns a money transmitter license, or the statutory equivalent, in each of the 49 U.S. states that require such a license to operate, as well as in certain U.S. territories. While state statutes governing money transmitters vary, most require investors to receive the approval of, or provide notice to, the relevant licensing authority before exceeding a certain ownership threshold, including indirect ownership, in a licensed money transmitter. These ownership thresholds vary by state, with the lowest being at 10% of voting or non-voting shares outstanding. Accordingly, current or prospective investors seeking to acquire 10% or greater ownership of MoneyGram in the aggregate would need to first obtain such regulatory approvals or provide such notices to the relevant regulators.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
Item 2. PROPERTIES
Our leased corporate offices are located in Dallas, TX. We have a number of offices leased in more than 30 countries and territories around the world including, but not limited to: U.S., United Kingdom, Poland and United Arab Emirates. These offices provide operational, sales and marketing support and are used by both our GFT Segment and our FPP Segment. We believe that our properties are sufficient to meet our current and projected needs. We periodically review our facility requirements and may acquire new facilities, or modify, consolidate, dispose of or sublet existing facilities, based on business needs.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. LEGAL PROCEEDINGS
A description of our legal proceedings is included in and incorporated by reference to Note 14 - Commitments and Contingencies of the Notes to the Consolidated Financial Statements contained in Part II, Item 8 of this report.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. MINE SAFETY DISCLOSURES
None.
PART II.

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the Nasdaq Stock Market LLC under the symbol "MGI." As of February 22, 2023, there were 6,699 stockholders of record of our common stock.
On November 6, 2021, our Board of Directors has authorized the repurchase from time to time, on the open market and in private-negotiated transactions, shares of common stock. The aggregate repurchases of common stock, inclusive of any prior repurchase authorizations previously remaining, shall not exceed $50.0 million in the aggregate, exclusive of any fees, commissions or other expenses related to such repurchases. The Company is subject to limitations in our debt agreements on the amount of shares it may repurchase. Common stock tendered to, or withheld by, the Company in connection with the exercise of stock options or vesting of restricted stock units is not considered repurchased shares under the terms of the repurchase authorization. As of December 31, 2022, the Company had repurchased 1,023,209 shares or $6.1 million in common stock and has remaining authorization to repurchase $43.9 million in common stock. The Merger Agreement contains certain restrictions that limit the Company's ability to make repurchases.
During the three months ended December 31, 2022, the Company did not repurchase any common shares.
STOCKHOLDER RETURN PERFORMANCE
The Company's peer group consists of companies that are in the money remittance and payment industries, along with companies that effectively capture our competitive landscape given the products and services that we provide. The old peer group is composed of the following companies: Euronet Worldwide Inc., Fiserv, Inc., Global Payments Inc., International Money Express, Inc., PayPal Holdings, Inc., and Western Union. The new peer group includes Block, Inc. in addition of the old peer group.
The following graph compares the cumulative total return from December 31, 2017 to December 31, 2022 for our common stock, our new and old peer groups of payment services companies and the S&P 500 Index. The graph assumes the investment of $100 in each of our common stock, our new and old peer groups and the S&P 500 Index on December 31, 2017, and the reinvestment of all dividends as and when distributed. The graph is furnished and shall not be deemed "filed" with the SEC or subject to Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG MONEYGRAM INTERNATIONAL, INC.,
S&P 500 INDEX AND PEER GROUP INDEX
*$100 invested on 12/31/2017 in stock or index, including reinvestment of dividends.
The following table is a summary of the cumulative total return for the fiscal years ending December 31:
12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022
MoneyGram International, Inc. $ 100.00 $ 15.17 $ 15.93 $ 41.46 $ 59.86 $ 82.63
S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.89
Peer Group $ 100.00 $ 115.83 $ 159.33 $ 274.20 $ 216.31 $ 113.96

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our Consolidated Financial Statements and related Notes contained in Part II, Item 8 of this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated due to various factors discussed above under Cautionary Statements Regarding Forward-Looking Statements and under the caption Risk Factors in Part I, Item 1A of this 2022 Form 10-K.
The comparisons presented in this discussion refer to the prior year, unless otherwise noted. For a discussion on the comparison between fiscal year 2021 and fiscal year 2020 results, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in MoneyGram’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC. This discussion 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 91% of total revenue for the year ended December 31, 2022. 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 and European 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.
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.
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 FCA in the United Kingdom and the National Bank of Belgium where MoneyGram holds its European license. While the waiting period under the Hart-Scott-Rodino ("HSR") Antitrust Improvements Act of 1976 had previously expired, the parties recently refiled the application as the existing approval was set to expire. The new HSR waiting period is set to expire on March 13, 2023. The parties previously received all required international antitrust and foreign direct investment approvals.
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 has been 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 either late in the first quarter or early in the second quarter of 2023.
On March 16, 2022, we announced that a final agreement had been reached to settle its previously disclosed legacy enforcement matter with NYDFS through a consent order. The Company paid a civil monetary penalty of $8.3 million to the NYDFS and will undertake various reporting obligations. This payment is consistent with the estimated amount that MoneyGram previously accrued in the fourth quarter of 2021.
On March 11, 2022, MoneyGram and Stellar Development Foundation announced a new partnership with Techstars, a global investment business that provides access to capital, one-on-one mentorship and customized programming for entrepreneurs. The program will recruit founders across the world who are focused on driving technological innovation in areas such as blockchain and digital payments to further streamline cross-border payments and support financial inclusion.
During 2022, the U.S. dollar strengthened significantly against most major currencies. The impact was a reduction in the value of foreign-based revenue as it is converted to our reporting currency, the U.S. dollar.
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 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.
In 2022, MoneyGram focused on positioning the Company to better compete by delivering a differentiated customer experience, scaling our digital growth, being the preferred partner for cross-border transactions, capturing new revenue by monetizing our capabilities and continuing to improve the cost structure of the Company.
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.
We also anticipate a U.S. dollar strengthening as interest rates rise faster in the US compared to other industrialized countries, especially in Europe.
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.
During 2022, 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.
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 U.S. money market rates rise in conjunction with actions by the Federal Reserve.
COVID-19 Update
General Economic Conditions and MoneyGram Impact
The global spread and unprecedented impact of COVID-19 and its variants is complex and ever-evolving. In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended extensive containment and mitigation measures worldwide. The outbreak is global and has impacted all the countries in which we do business. Since the outbreak, we have seen the profound effect it is having on human health, the global economy and society at large. Public and private sector policies aimed at reducing the transmission of COVID-19 have varied significantly in different regions of the world, but have resulted in travel restrictions as well as certain business closures across many of the countries in which we operate. Multiple variants of COVID-19 combined with a lack of vaccinations in many countries have resulted in new waves of infections and new restrictions. These restrictions, combined with limitations on labor mobility, often have an impact on the ability of consumers to transact at agent locations, which can cause temporary reductions in remittance activity.
It is impossible to predict the scope and duration of the impact of the COVID-19 pandemic as the situation has been different on a country by country basis. The impact of COVID-19 and its variants in 2022 and beyond will depend on the duration and severity of economic conditions resulting from the crisis, its impact on public health, immigration, public policy actions, vaccination rates and expansion and duration of returns to lockdowns and shelter-in-place orders by governments, as well as changes in consumer behavior over the long term.
We continue to place a priority on business continuity and contingency planning, including for potential extended closures of any key agents or disruptions related to our contractual counterparties that might arise as a result of COVID-19. While disruptions in our service offerings have occurred from time to time from temporary agent location closures, the inability of labor markets to return to normal mobility can represent a longer impact on the Company. We cannot reasonably estimate the potential impact or timing of those events, and we may not be able to mitigate such impact.
Financial Measures and Key Metrics
This 2022 Form 10-K 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 adjusted for certain significant items) - 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.
RESULTS OF OPERATIONS
The following table is a summary of the results of operations for the years ended December 31:
(Amounts in millions) 2022 2021
Revenue
Fee and other revenue $ 1,272.2 $ 1,275.8
Investment revenue 37.9 7.8
Total revenue 1,310.1 1,283.6
Cost of revenue
Commissions and other fee expense 610.7 622.7
Investment commissions expense 21.9 0.9
Direct transaction expense 57.6 60.5
Total cost of revenue 690.2 684.1
Gross profit 619.9 599.5
Operating expenses
Compensation and benefits 228.0 227.8
Transaction and operations support 187.2 179.1
Occupancy, equipment and supplies 59.8 61.9
Depreciation and amortization 51.7 57.0
Total operating expenses 526.7 525.8
Operating income 93.2 73.7
Other expenses
Interest expense 49.4 69.5
Loss on early extinguishment of debt - 44.1
Other non-operating expense 4.0 3.7
Total other expenses 53.4 117.3
Income (loss) before income taxes 39.8 (43.6)
Income tax expense (benefit) 5.6 (5.7)
Net income (loss) $ 34.2 $ (37.9)
Revenue
Revenue increased by $26.5 million for the year ended December 31, 2022, due to an increase in FPP revenue of $29.4 million, partially offset by a decrease in GFT revenue of $2.9 million. See the "Segments Results" section below for a detailed discussion of revenues by segment.
Cost of Revenue
Cost of revenue increased by $6.1 million for the year ended December 31, 2022, due to an increase in FPP cost of revenue of $21.1 million, partially offset by a decrease in GFT cost of revenue of $15.0 million. See the "Segments Results" section below for further discussions.
Compensation and Benefits
Compensation and benefits remained relatively flat for the year ended December 31, 2022.
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, 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.
Transaction and operations support increased by $8.1 million for the year ended December 31, 2022. The increase is primarily due to a return to pre-pandemic levels of activities such as marketing campaigns and business travel, higher transaction costs associated with the pending merger, partially offset by a decrease in legal expenses related to the NYDFS and CFPB matters.
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 decreased by $2.1 million for the year ended December 31, 2022, primarily due to a decrease in facilities costs as a result of a reduction of our global footprint since providing our employees with the option of a work-from-home policy in the second quarter of 2021.
Depreciation and Amortization
Depreciation and amortization 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 decreased by $5.3 million for the year ended December 31, 2022, primarily due to a continued decrease in purchases of hardware and software as a result of our migration to cloud computing and a decrease in office furniture and equipment.
Other Expenses
Interest Expense decreased by $20.1 million for the year ended December 31, 2022, primarily due to interest savings as a result of our refinancing of high-cost debt in the third quarter of 2021.
Loss on Early Extinguishment of Debt of $44.1 million for the year ended December 31, 2021, included $16.5 million of prepayment call premium and $27.6 million associated with the write-off of debt issuance costs and debt discounts.
Other non-operating expense remained relatively flat.
Income Tax Expense
For the year ended December 31, 2022, the Company recognized an income tax expense of $5.6 million on a pre-tax income of $39.8 million. Our income tax rate was lower than the statutory rate primarily due to U.S. general business credits, a net decrease in valuation allowance, a net decrease in unrecognized tax benefits, recognition of excess tax benefits on share-based compensation, all of which were partially offset by non-deductible expenses and foreign taxes net of federal income tax benefits. See Note 13 - Income Taxes of the Notes to the Consolidated Financial Statements contained in Part II, Item 8 of this report for additional information related to our unrecognized tax benefits.
Segments Results
GFT
The following table sets forth our GFT segment results of operations for the years ended December 31:
(Amounts in millions) 2022 2021
Money transfer revenue $ 1,190.3 $ 1,189.2
Bill payment revenue 35.6 39.6
Total revenue 1,225.9 1,228.8
Cost of revenue 668.2 683.2
Gross profit $ 557.7 $ 545.6
Money Transfer Revenue
Money transfer revenue for the year ended December 31, 2022, was relatively flat when compared to the same period in 2021. Money transfer revenue was negatively impacted by a strengthening U.S. Dollar relative to most other major currencies. Offsetting the currency headwinds were continued strong results for our digital business. Digital revenue increased to $98.6 million or an increase of 37% during the year ended December 31, 2022. Digital revenue now accounts for 31% of our total money transfer revenues.
Bill Payment Revenue
Bill payment revenue decreased by $4.0 million for the year ended December 31, 2022, due to lower transactions.
Cost of Revenue
Cost of revenue decreased by $15.0 million for the year ended December 31, 2022, primarily due to a decrease in commissions and other fee expense driven by lower rates in commissions associated with both MGO and walk-in business and the dollar strengthening against most major currencies.
FPP
The following table sets forth our FPP segment results of operations for the years ended December 31:
(Amounts in millions) 2022 2021
Money order revenue $ 44.1 $ 40.9
Official check revenue 40.1 13.9
Total revenue 84.2 54.8
Investment commissions expense 22.0 0.9
Gross profit $ 62.2 $ 53.9
Money Order Revenue
Money order revenue increased by $3.2 million for the year ended December 31, 2022, 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 $26.2 million for the year ended December 31, 2022, 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.
Commissions expense increased by $21.1 million for the year ended December 31, 2022, due to higher interest rates as a result of recent actions taken by the Federal Reserve.
EBITDA, Adjusted EBITDA, Adjusted Free Cash Flow and Constant Currency (Non-GAAP Measures)
The following table is a reconciliation of our non-GAAP financial measures to the related U.S. GAAP financial measures for the years ended December 31:
(Amounts in millions, except percentages) 2022 2021
Income (loss) before income taxes $ 39.8 $ (43.6)
Interest expense 49.4 69.5
Depreciation and amortization 51.7 57.0
Signing bonus amortization 50.1 56.4
EBITDA 191.0 139.3
Significant items impacting EBITDA:
Stock-based, contingent, incentive compensation and other 15.8 7.3
Merger-related costs 7.7 -
Severance and related costs 1.9 0.2
Legal and contingent matters 1.9 14.1
Restructuring and reorganization costs (0.9) 9.4
Loss on early extinguishment of debt - 44.1
Compliance enhancement program - 2.9
Direct monitor costs - 4.9
Adjusted EBITDA $ 217.4 $ 222.2
Adjusted EBITDA $ 217.4 $ 222.2
Cash payments for interest (47.5) (51.8)
Cash (payments) refunds for taxes, net (13.7) (5.7)
Cash payments for capital expenditures (53.8) (41.4)
Cash payments for agent signing bonuses (36.9) (36.0)
Adjusted Free Cash Flow $ 65.5 $ 87.3
See "Results of Operations" and "Analysis of Cash Flows" sections for additional information regarding these changes.
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 investments and available-for-sale 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 as of December 31:
(Amounts in millions) 2022 2021
Cash and cash equivalents $ 172.1 $ 155.2
Settlement assets:
Settlement cash and cash equivalents $ 1,499.1 $ 1,895.7
Receivables, net 1,107.0 700.4
Interest-bearing investments 998.1 992.3
Available-for-sale investments 3.0 3.0
Total settlement assets $ 3,607.2 $ 3,591.4
Payment service obligations $ (3,607.2) $ (3,591.4)
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 December 31, 2022, cash and cash equivalents (including unrestricted and settlement cash and cash equivalents) and interest-bearing investments totaled $2.7 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 $3.0 million of available-for-sale investments as of December 31, 2022. U.S. government agency residential mortgage-backed securities comprise $1.5 million of our available-for-sale investments, while asset-backed and other securities compose the remaining $1.5 million.
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.
Credit Facilities and Notes
The following is a summary of the Company's outstanding debt as of December 31:
(Amounts in millions, except percentages) 2022 2021
8.571% Term Loan due 2026
$ 380.0 $ 384.0
5.375% Senior Secured Notes due 2026
415.0 415.0
Total debt at face value 795.0 799.0
Unamortized debt issuance costs and debt discounts (9.6) (12.3)
Total debt, net $ 785.4 $ 786.7
As of December 31, 2022, 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 9 - Debt of the Notes to the Consolidated Financial Statements contained in Part II, Item 8 of this report for additional disclosure related to the credit facilities.
During the first half of 2021, the First Lien Credit Agreement and Second Lien Credit Agreement were in effect. The First Lien Credit Agreement provided for (a) a senior secured three-year revolving credit facility available for revolving credit loans, swingline loans and letters of credit up to an aggregate principal amount of $35.0 million, and was scheduled to mature on September 30, 2022, (the "First Lien Revolving Credit Facility") and (b) a senior secured four-year term loan facility in an aggregate principal amount of $645.0 million (the "First Lien Term Credit Facility" and together with the First Lien Revolving Credit Facility, the "First Lien Credit Facility"). The Second Lien Credit Agreement provided for a second lien secured five-year term loan facility in an aggregate principal amount of $245.0 million (the "Second Lien Term Credit Facility" and together with the First Lien Credit Facility, the "Prior Credit Facilities").
On June 28, 2021, the Company prepaid $100.0 million of principal balance under its Second Lien Credit Agreement utilizing the proceeds under the ATM Program plus cash on hand as defined and further discussed in Note 11 - Stockholders' Deficit of the Notes to the Consolidated Financial Statements contained in Part II, Item 8 of this report.
On July 21, 2021, we (i) completed the notes offering of $415.0 million aggregate principal amount of 5.375% senior secured notes due 2026 and related guarantees and (ii) entered into a New Credit Agreement with the lenders from time to time party thereto and Bank of America, N.A. as administrative agent. The New Credit Agreement provides for (i) a senior secured five-year Term Loan in an aggregate principal amount of $400.0 million and (ii) a senior secured four-year Revolving Credit Facility that may be used for revolving credit loans, swingline loans and letters of credit up to an initial aggregate principal amount of $32.5 million. In December 2021, we added additional $7.5 million capacity to our Revolving Credit Facility bringing the total Revolving Credit Facility to $40.0 million.
On July 21, 2021, the proceeds from the notes offering, together with borrowings under the Term Loan, were used to prepay the full amount of outstanding indebtedness under the Prior Credit Facilities and to pay related accrued interest, fees and expenses. Simultaneous with the prepayment, the Prior Credit Facilities were terminated. In the fourth quarter of 2021, the Company prepaid $16.0 million of principal balance under its New Credit Agreement to deleverage its balance sheet.
As a result of the implementation of this new long-term financing, we expect our interest expense to decline by approximately $47.0 million on an annualized basis and cash payments for interest to decline by approximately $36.0 million on an annualized basis.
The Indenture governing the terms of the notes contains covenants limiting our ability to, among other things, incur or guarantee additional debt or issue disqualified stock or certain preferred stock; create or incur liens; pay dividends, redeem stock or make other distributions; make certain investments; create restrictions on the ability to pay dividends or make certain other intercompany transfers; transfer or sell assets; merge or consolidate, and; enter into certain transactions with affiliates. These covenants are subject to a number of exceptions and qualifications as set forth in the Indenture. Most of these covenants will be suspended in the event and for as long as the notes have investment grade ratings.
The New Credit Agreement also contains certain representations and warranties, certain financial covenants and events of default and certain negative covenants, including without limitation, limitations on liens, asset sales, consolidations and mergers, acquisitions, investments, indebtedness, transactions with affiliates and payment of dividends. The New Credit Agreement, requires the Company and its consolidated subsidiaries to, (i) solely with respect to the Revolving Credit Facility, (A) maintain a minimum interest coverage ratio of not less than 2.150 to 1.000, (B) not permit their settlement assets to be less than their payment service obligations at any time and (C) maintain a total net leverage ratio that does not exceed 4.750 to 1.000, and (ii) solely with respect to the Term Loan, maintain a total net leverage ratio that does not exceed 5.000 to 1.000.
The Company recorded a loss on early extinguishment of debt of $44.1 million which included $16.5 million of prepayment call premium and $27.6 million associated with the write-off of debt issuance costs and debt discounts. The Company also paid accrued interest of $7.0 million.
Credit Ratings
As of December 31, 2022, 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.
Regulatory Capital Requirements
We have capital requirements relating to government regulations in the U.S. and other countries where we operate. Such regulations typically require us to maintain certain assets in a defined ratio to our payment service obligations. Through our wholly-owned subsidiary and licensed entity, MPSI, we are regulated in the U.S. by various state agencies that generally require us to maintain a pool of liquid assets and investments in an amount generally equal to the regulatory payment service obligation measure, as defined by each state, for our regulated payment instruments, namely teller checks, agent checks, money orders and money transfers. The regulatory requirements do not require us to specify individual assets held to meet our payment service obligations, nor are we required to deposit specific assets into a trust, escrow or other special account. Rather, we must maintain a pool of liquid assets. Provided we maintain a total pool of liquid assets sufficient to meet the regulatory and contractual requirements, we are able to withdraw, deposit or sell our individual liquid assets at will, without prior notice, penalty or limitations. We were in compliance with all state and regulatory capital requirements as of December 31, 2022. We believe that our liquidity and capital resources will remain sufficient to ensure ongoing compliance with all regulatory capital requirements.
Material Cash Requirements from Contractual Obligations
The following table includes aggregated information about the Company's contractual obligations that impact our liquidity and capital needs. The table includes information about payments due under specified contractual obligations, aggregated by type of contractual obligation as of December 31, 2022:
Payments due by period
(Amounts in millions) Total Less than
1 year 1-3 years 3-5 years More than
5 years
Debt, including interest payments (1)
$ 955.7 $ 49.3 $ 99.9 $ 806.5 $ -
Non-cancellable leases (2)
55.3 9.1 17.4 13.8 15.0
Signing bonuses (3)
35.9 19.5 14.1 - -
Marketing (4)
102.5 37.5 65.0 - -
Unrecognized tax benefits (5)
9.1 2.9 - - -
Total contractual cash obligations $ 1,158.5 $ 118.3 $ 196.4 $ 820.3 $ 15.0
(1) Our Consolidated Balance Sheet at December 31, 2022 includes $785.4 million of debt, netted with unamortized debt issuance costs and debt discount of $9.6 million. The above table reflects the principal and interest that will be paid through the maturity of the debt using the rates in effect on December 31, 2022 and assuming no prepayments of principal.
(2) Noncancellable leases include operating leases for buildings, vehicles and equipment and other leases. For more detail see Note 18 - Leases of the Notes to the Consolidated Financial Statements contained in Part II, Item 8 of this report.
(3) Signing bonuses are payments to certain agents and financial institution customers as an incentive to enter into long-term contracts. Signing bonuses include $2.3 million of transaction volume-related obligations for which it is not possible to reasonably estimate the timing of payments.
(4) Marketing represents contractual marketing obligations with certain agents, billers and corporate sponsorships.
(5) Unrecognized tax benefits include $6.2 million for which timing of conclusion cannot be determined with certainty.
We have other commitments as described further below that are not included in this table as the timing and/or amount of payments are difficult to estimate.
We have a Pension Plan that is frozen to both future benefit accruals and new participants. It is our policy to fund at least the minimum required contribution each year plus additional discretionary amounts as available and necessary to minimize expenses of the plan. We made contributions of $2.0 million to the Pension Plan during 2022. The Company has no minimum contribution requirement for the Pension Plan in 2023.
The Company has certain unfunded defined benefit plans: supplemental executive retirement plans ("SERPs"), which are unfunded non-qualified defined benefit pension plans providing postretirement income to their participants and a postretirement plan ("Postretirement Benefits") that provides medical and life insurance for its participants. These plans require payments over extended periods of time. The Company will continue to make contributions to the SERPs and the Postretirement Benefits to the extent benefits are paid. Aggregate benefits paid for the unfunded plans are expected to be $5.5 million in 2023.
Merger Agreement
Up to the completion of the Merger, our liquidity requirements will remain funded by our cash flow from operations, borrowings under our existing credit facility and certain other capital activities allowed under the Merger Agreement. In particular, we are subject to restrictions under the Merger Agreement on assuming additional debt, issuing additional equity or
debt, repurchasing equity, making certain capital expenditures, and entering into certain acquisition, disposition and leasing transactions, among other restrictions, subject to the restrictions under the Merger Agreement.
Analysis of Cash Flows
(Amounts in millions) 2022 2021
Net cash provided by operating activities $ 85.7 $ 37.1
Net cash used in investing activities (62.6) (44.5)
Net cash used in financing activities (402.8) (21.0)
Net change in cash and cash equivalents and settlement cash and cash equivalents $ (379.7) $ (28.4)
Cash Flows from Operating Activities
In 2022, net cash provided by operating activities increased by $48.6 million primarily due to interest savings as a result of our refinancing activities in the third quarter of 2021.
Cash Flows from Investing Activities
In 2022, net cash used in investing activities increased by $18.1 million, primarily due to an increase in capital expenditures.
Cash Flows from Financing Activities
In 2022, net cash used in financing activities increased by $381.8 million, primarily due to the change in receivables included in settlement assets and the change in payment service obligations. For further discussions, see Note 2 - Settlement Assets and Payment Service Obligations of the Notes to the Consolidated Financial Statements. The changes in receivables, net and payment service obligations are due to the timing of the remittance of funds by our agents and financial institution customers.
Stockholders' Deficit
Stockholders' Deficit - Under the terms of our outstanding New Credit Facilities, we are restricted in our ability to pay dividends on and repurchase shares of, our common stock. No dividends were paid on our common stock in 2022 and we do not anticipate declaring any dividends on our common stock. Further, we are also restricted in our ability to pay dividends under the Merger Agreement.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts and related disclosures in the 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 contained in Part II, Item 8 of this report.
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. Based on these criteria, management has identified and discussed with the Audit Committee the following critical accounting policies and estimates, including the methodology and disclosures related to those estimates.
Goodwill - We have two reporting units: GFT and FPP. Our GFT reporting unit is the only reporting unit that carries goodwill. We evaluate goodwill for impairment annually as of October 1, or more frequently upon occurrence of certain events. When testing goodwill for impairment, we may elect to perform either a qualitative test or a quantitative test to determine if it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. During a qualitative analysis, we consider the impact of any changes to the following factors: macroeconomic, industry and market factors, cost factors and changes in overall financial performance, as well as any other relevant events and uncertainties impacting a reporting unit. If our qualitative assessment does not conclude that it is more likely than not that the estimated fair value of the reporting unit is greater than the carrying value, we perform a quantitative analysis. In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of valuation. A discounted cash flow analysis requires us to make various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections by reporting unit. In addition, an assumed terminal value is used to project future cash flows beyond base years. Assumptions used in our impairment testing are consistent with our internal forecasts and operating plans. Our discount rate is based on our debt and equity balances, adjusted for current market conditions and investor expectations of return on our equity. If the fair value of a reporting unit exceeds its carrying amount, there is no impairment. If not, we compare the fair value of the reporting unit with
its carrying amount. To the extent the carrying amount of the reporting unit exceeds its fair value, a write-down of the reporting unit's goodwill would be necessary.
We did not recognize a goodwill impairment loss for 2022, 2021 or 2020. The carrying value of goodwill assigned to the GFT reporting unit at December 31, 2022 was $442.2 million.
Pension - Through the Company's Pension, we provide defined benefit Pension plan coverage to certain of our employees and certain employees of Viad Corporation, our former parent. Our Pension obligations under these plans are measured as of December 31, the measurement date. Pension benefit obligations and the related expense are based upon actuarial projections using assumptions regarding mortality, discount rates, expected long-term return on assets and other factors.
Our assumptions reflect our historical experience and management's best judgment regarding future expectations. Certain of the assumptions, particularly the discount rate and expected return on plan assets, require significant judgment and could have a material impact on the measurement of our Pension obligation.
In order to estimate the interest cost components of net periodic benefit expense for its Pension and Postretirement Benefits, the Company utilizes a full yield curve approach by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows.
At each measurement date, the discount rate used to measure total benefit obligation for the Pension and Postretirement Benefits is based on the then current interest rate yield curves for long-term corporate debt securities with maturities rated AA comparable to our obligations.
Our Pension Plan assets are primarily invested in commingled trust funds. Our investments are periodically realigned in accordance with the investment guidelines. The expected return on Pension Plan assets is based on our historical market experience, asset allocations and expectations for long-term rates of return. We also consider peer data and historical returns to assess the reasonableness and appropriateness of our assumption. Our Pension Plan asset allocations are reviewed periodically and are based upon plan funded ratio, an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments.
Lower discount rates increase the Pension and Postretirement Benefits obligation and subsequent year Pension expense, while higher discount rates decrease the Pension and Postretirement Benefits obligation and subsequent year Pension expense. Decreasing or increasing the discount rate by 50 basis points would have had an immaterial impact on the 2022 Pension and Postretirement Benefits net periodic benefit expense. Decreasing the expected rate of return by 50 basis points would have increased the 2022 Pension Plan net periodic benefit expense by $0.2 million and increasing the expected rate of return by 50 basis points would have decreased the 2022 Pension Plan net periodic benefit expense by $0.2 million.
Income Taxes, Tax Contingencies - We are subject to income taxes in the U.S. and various foreign jurisdictions. In determining taxable income, income or loss before income taxes is adjusted for differences between local tax laws and U.S. GAAP.
We file tax returns in all U.S. states and various countries. Generally, our tax filings are subject to audit by tax authorities for three to five years following submission of a return. With a few exceptions, the Company is no longer subject to foreign or U.S. state and local income tax examinations for years prior to 2017. The U.S. federal income tax filings are subject to audit for fiscal years 2017 through 2021.
The benefits of tax positions are recorded in the Consolidated Statements of Operations if we determine it is more likely than not, based on the technical merits of the position, that the tax position will be sustained upon examination, including any related appeals or litigation. The one exception to the more-likely-than-not recognition threshold is the reliance on past administrative practices and precedents, where a taxing authority with full knowledge of all relevant facts will accept a position as filed. In these limited situations, the Company will recognize the associated tax benefit.
Changes in tax laws, regulations, agreements and treaties, non-U.S. dollar exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact on the amount of income taxes that we provide during any given year. The determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions and the sources and character of income and tax credits.
These assumptions and probabilities are periodically reviewed and revised based upon new information.
Changes in our current estimates due to unanticipated events, or other factors, could have a material effect on our financial condition and results of operations. Actual tax amounts may be materially different from amounts accrued based upon the results of audits due to different interpretations by the tax authorities than those of the Company. While we believe that our reserves are adequate to cover reasonably expected tax risks, an unfavorable tax settlement generally requires the use of cash
and an increase in the amount of income tax expense that we recognize. A favorable tax settlement generally requires a decrease in the amount of income taxes that we recognize.
Income Taxes, Valuation of Deferred Tax Assets - Deferred tax assets and liabilities are recorded based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted statutory tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid.
The carrying amount of deferred tax assets must be reduced through valuation allowances if it is more likely than not that the deferred tax asset will not be realized. In the period in which a valuation allowance is recorded, we would record tax expense, whereas a tax benefit would be recorded in the period a valuation allowance is released.
In assessing the need for valuation allowances, we consider both positive and negative evidence related to the likelihood that the deferred tax assets will be realized. Our assessment of whether a valuation allowance is required or should be adjusted requires judgment and is completed on a taxing jurisdiction basis. We consider, among other matters: the nature, frequency and severity of any cumulative financial reporting losses; the ability to carry back losses to prior years; future reversals of existing taxable temporary differences; tax planning strategies and projections of future taxable income. We also consider our best estimate of the outcome of any on-going examinations based on the technical merits of the position, historical procedures and case law, among other items.
As of December 31, 2022, we have recorded valuation allowances of $76.8 million against deferred tax assets of $131.3 million. The valuation allowances primarily relate to basis differences in revalued investments, capital loss carryover, U.S. tax credit carryovers, U.S. interest expense carryovers and certain state and foreign tax loss carryovers. While we believe that the basis for estimating our valuation allowances is appropriate, changes in our current estimates due to unanticipated events, or other factors, could have a material effect on our financial condition and results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements contained in Part II, Item 8 of this report for information regarding recent accounting pronouncements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Enterprise Risk Management
Risk is an inherent part of any business. Our most prominent risk exposures are credit, interest rate and non-U.S. dollar currency exchange. See Part 1, Item 1A Risk Factors of this 2022 Form 10-K for a description of the principal risks to our business. Appropriately managing risk is important to the success of our business and the extent to which we effectively manage each of the various types of risk is critical to our financial condition and profitability. Our risk management objective is to monitor and control risk exposures to produce steady earnings growth and long-term economic value.
Management implements policies approved by our Board of Directors that cover our investment, capital, credit and non-U.S. dollar practices and strategies. The Board of Directors receives periodic reports regarding each of these areas and approves significant changes to policy and strategy. The Asset/Liability Committee ("ALCO"), composed of senior management, routinely reviews investment and risk management strategies and results. The Credit Committee, composed of senior management, routinely reviews credit exposure to consumers and our agents.
The following is a discussion of the risks we deem most critical to our business and the strategies we use to manage and mitigate such risks. While containing forward-looking statements related to risks and uncertainties, this discussion and related analyses are not predictions of future events. Our actual results could differ materially from those anticipated due to various factors discussed under Cautionary Statements Regarding Forward-Looking Statements and under Risk Factors in Part 1, Item 1A of this 2022 Form 10-K.
Credit Risk
Credit risk, or the potential risk that we may not collect amounts owed to us, affects our business primarily through receivables, investments and derivative financial instruments. In addition, the concentration of our cash, cash equivalents and investments at large financial institutions exposes us to credit risk.
Investment Portfolio - Credit risk from our investment portfolio relates to the risk that we may be unable to collect the interest or principal owed to us under the legal terms of the various securities. Our primary exposure to credit risk arises through the concentration of a large amount of our investment portfolio at a few large banks, also referred to as financial institution risk, as well as a concentration in securities issued by U.S. government agencies.
At December 31, 2022, the Company's investment portfolio of $2.7 billion was primarily composed of cash and cash equivalents, consisting of interest-bearing deposit accounts, non-interest-bearing transaction accounts and money market funds backed by U.S. government securities and interest-bearing investments consisting of time deposits and certificates of deposit. Based on investment policy restrictions, investments are limited to those rated A- or better by two of the following three rating agencies: Moody's, S&P and Fitch. 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. No maturity of interest-bearing investments exceeds 24 months from the date of purchase.
The financial institutions holding significant portions of our investment portfolio may act as custodians for our asset accounts, serve as counterparties to our non-U.S. dollar transactions and conduct cash transfers on our behalf for the purpose of clearing our payment instruments and related agent receivables and agent payables. Through certain check clearing agreements and other contracts, we are required to utilize several of these financial institutions.
The concentration in U.S. government agencies includes agencies placed under conservatorship by the U.S. government in 2008 and extended unlimited lines of credit from the U.S. Treasury. The implicit guarantee of the U.S. government and its actions to date support our belief that the U.S. government will honor the obligations of its agencies if the agencies are unable to do so themselves.
The following table is a detailed summary of our investment portfolio as of December 31, 2022:
(Amounts in millions, except percentages and financial institutions) Number of
Financial
Institutions (1)
Amount Percent of
Investment
Portfolio
Cash held on-hand at owned retail locations N/A $ - - %
Cash equivalents collateralized by securities issued by U.S. government agencies 1 - - %
Available-for-sale investments issued by U.S. government agencies N/A 1.5 - %
Cash, cash equivalents and interest-bearing investments at institutions rated AAA (2)
1 49.6 2 %
Cash, cash equivalents and interest-bearing investments at institutions rated AA 5 140.0 5 %
Cash, cash equivalents and interest-bearing investments at institutions rated A 15 1,551.1 58 %
Cash, cash equivalents and interest-bearing investments at institutions rated BBB 2 - - %
Cash, cash equivalents and interest-bearing investments at institutions rated below BBB 4 424.8 16 %
Asset-backed and other securities N/A 1.5 - %
Investment portfolio held within the U.S. 28 2,168.5 81 %
Cash held on-hand at owned retail locations N/A 20.3 1 %
Cash, cash equivalents and interest-bearing investments held at institutions rated AA 7 187.1 7 %
Cash, cash equivalents and interest-bearing investments at institutions rated A 15 144.9 5 %
Cash, cash equivalents and interest-bearing investments at institutions rated below A 50 151.5 6 %
Investment portfolio held outside the U.S. 72 503.8 19 %
Total investment portfolio $ 2,672.3 100 %
(1) Financial institutions, located both in the U.S. and outside of the U.S., are included in each of their respective total number of financial institutions.
(2) Inclusive of deposits with FDIC-insured institutions and where such deposits are fully insured by the Federal Deposit Insurance Corporation.
At December 31, 2022, all but $1.5 million of the investment portfolio is invested in cash, cash equivalents, interest-bearing investments and investments issued or collateralized by U.S. government agencies. Approximately 81% of our total investment portfolio is invested at financial institutions located within the U.S.
Receivables - We have credit exposure to receivables from our agents and partners through the money transfer, bill payment and money order settlement process. These receivables originate from independent agents and partners who collect funds from
consumers who are transferring money or buying money orders and agents and partners who receive proceeds from us in anticipation of payment to the recipients of money transfers. Agents and partners typically have from one to three days to remit the funds, with longer remittance schedules granted to certain agents and partners on a limited basis. The Company has a credit risk management function that conducts the underwriting of credit on new agents and partners as well as conducting credit surveillance on all agents and partners to monitor their financial health and the history of settlement activity with us. The Company's credit risk management function also maintains daily contact with agents and partners and performs a collection function. For the year ended December 31, 2022, our annual credit losses from agents, as a percentage of total fee and other revenue, was less than 1%. As of December 31, 2022, we had credit exposure to our agents of $436.0 million in the aggregate spread across 6,378 agents, of which two owed us in excess of $15.0 million.
In addition, we are exposed to consumer credit risk directly from transactions through our digital solutions, where transactions are originated through means other than cash, and therefore are subject to credit card chargebacks, non-insufficient funds or other collection impediments, such as fraud. As the digital solutions become a greater proportion of our money transfer business, these losses may increase.
We also have credit exposure from our financial institution customers for business conducted by the FPP segment. Financial institutions collect proceeds for official checks and money orders and remit those proceeds to us. We actively monitor the credit risk associated with financial institutions such as banks and credit unions and have not incurred any losses associated with the failure or merger of any bank or non-bank financial institution customer. As of December 31, 2022, we had a credit exposure to our official check and money order financial institution customers of $379.0 million in the aggregate spread across 961 financial institutions, of which one owed us in excess of $15.0 million.
With respect to our credit union customers, our credit exposure is partially mitigated by National Credit Union Administration insurance and we have required certain credit union customers to provide us with larger balances on deposit and/or to issue cashier's checks only. While the value of these assets is not at risk in a disruption or collapse of a counterparty financial institution, the delay in accessing our assets could adversely affect our liquidity and potentially our earnings depending upon the severity of the delay and corrective actions we may need to take.
While the extent of credit risk may vary by product, the process for mitigating risk is similar. We assess the creditworthiness of each potential agent before accepting them into our distribution network. This underwriting process includes not only a determination of whether to accept a new agent, but also the remittance schedule and volume of transactions that the agent will be allowed to perform in a given timeframe. We actively monitor the credit risk of our existing agents by conducting periodic financial reviews and cash flow analyses of our agents that average high volumes of transactions and monitoring the timeliness of payments and remittance patterns versus reported sales on a daily basis.
The timely remittance of funds by our agents and financial institution customers is an important component of our liquidity. If the timing of the remittance of funds were to deteriorate, it would alter our pattern of cash flows and could require us to liquidate investments or utilize our Revolving Credit Facility to settle payment service obligations. To manage this risk, we closely monitor the remittance patterns of our agents and financial institution customers and act quickly if we detect deterioration or alteration in remittance timing or patterns. If deemed appropriate, we have the ability to immediately deactivate an agent's equipment at any time, thereby preventing the initiation or issuance of further money transfers and money orders.
Derivative Financial Instruments - Credit risk related to our derivative financial instruments relates to the risk that we are unable to collect amounts owed to us by the counterparties to our derivative agreements. Our derivative financial instruments are used to manage exposures to fluctuations in non-U.S. dollar exchange rates. If the counterparties to any of our derivative financial instruments were to default on payments, it could result in a delay or interruption of payments to our agents. We manage credit risk related to derivative financial instruments by entering into agreements with only major banks and regularly monitoring the credit ratings of these banks. See Note 6 - Derivative Financial Instruments of the Notes to the Consolidated Financial Statements contained in Part II, Item 8 of this report for additional disclosure.
Interest Rate Risk
Interest rate risk represents the risk that our operating results are negatively impacted, and our investment portfolio declines in value, due to changes in interest rates. Given the short maturity profile of the investment portfolio and the low level of interest rates, we believe there is an extremely low risk that the value of these securities would decline such that we would have a material adverse change in our operating results. As of December 31, 2022, the Company held $624.7 million, or 23%, of the investment portfolio in fixed rate investments, with a legal final maturity that is two years or less.
Our operating results are impacted by interest rate risk through our net investment margin, which is investment revenue less investment commissions expense. As the money transfer business is not materially affected by investment revenue and pays commissions that are not tied to an interest rate index, interest rate risk has the most impact on our money order and official check businesses. We are invested primarily in interest-bearing deposit accounts, non-interest-bearing transaction accounts, money market funds backed by U.S. government securities, time deposits and certificates of deposit. These types of
investments have minimal risk of declines in fair value from changes in interest rates. Our commissions paid to financial institution customers are determined using a variable rate based primarily on the federal funds effective rate and are reset daily. Accordingly, both our investment revenue and our investment commissions expense will decrease when rates decline and increase when rates rise.
Our results are impacted by interest rate risk through our interest expense for borrowings under the New Credit Agreement. The New Credit Facilities permit base rate borrowings and LIBOR borrowings plus a spread above the base rate or LIBOR, as applicable. With respect to the Revolving Credit Facility, the spread for base rate borrowings will be either 3.25% per annum or 3.00% per annum depending upon the Company's total net leverage ratio (as defined in the Credit Agreement), and the spread for LIBOR borrowings will be either 4.25% or 4.00% per annum depending on the Company's total net leverage ratio. The interest rate spread applicable to loans under the Term Loan is 3.25% per annum for base rate loans and 4.50% per annum for LIBOR loans subject to a LIBOR floor of 0.50%. Accordingly, any increases in interest rates will adversely affect interest expense and declines in LIBOR may not result in lower interest expense. As of December 31, 2022, the Company had no borrowings under the Revolving Credit Facility.
The tables below incorporate substantially all of our interest rate sensitive assets and assumptions that reflect changes in all interest rates pertaining to the balance sheet. The "ramp" analysis assumes that interest rates change in even increments over the next 12 months. The "shock" analysis assumes interest rates change immediately and remain at the changed level for the next twelve months. Components of our pre-tax loss that are interest rate sensitive include "Investment revenue," "Investment commissions expense" and "Interest expense." Many of the Company's assets reset or can be repriced when interest rates change, generally in line with changes in the Company's floating rate liabilities. Therefore, our risk associated with interest rates is not material.
The following table summarizes the changes to affected components of the Consolidated Statements of Operations under various ramp scenarios for the year ended December 31, 2022:
Basis Point Change in Interest Rates
Down Down Down Up Up Up
(Amounts in millions) 200 100 50 50 100 200
Investment revenue $ (17.7) $ (8.8) $ (4.4) $ 4.4 $ 8.8 $ 17.7
Investment commissions expense 12.4 5.9 2.8 (2.8) (5.9) (12.4)
Interest expense 3.5 1.7 0.9 (0.9) (1.7) (3.5)
Change in pretax income $ (1.8) $ (1.2) $ (0.7) $ 0.7 $ 1.2 $ 1.8
The following table summarizes the changes to affected components of the Consolidated Statements of Operations under various shock scenarios as of December 31, 2022:
Basis Point Change in Interest Rates
Down Down Down Up Up Up
(Amounts in millions) 200 100 50 50 100 200
Investment revenue $ (33.1) $ (16.1) $ (7.5) $ 9.5 $ 18.1 $ 35.1
Investment commissions expense 23.7 11.4 5.2 (6.2) (12.4) (24.7)
Interest expense 6.9 3.5 1.7 (1.7) (3.5) (6.9)
Change in pretax income $ (2.5) $ (1.2) $ (0.6) $ 1.6 $ 2.2 $ 3.5
Non-U.S. Dollar Risk
We are exposed to non-U.S. dollar risk in the ordinary course of business as we offer our products and services through a network of agents and financial institutions with locations in more than 200 countries and territories. By policy, we do not speculate in non-U.S. dollars; all non-U.S. dollar trades relate to underlying transactional exposures.
Our primary source of non-U.S. dollar exchange risk is transactional risk. This risk is predominantly incurred in the money transfer business in which funds are frequently transferred cross-border and we settle with agents in multiple currencies. Although this risk is somewhat limited due to the fact that these transactions are short-term in nature, we currently manage some of this risk with forward contracts to protect against potential short-term market volatility. The primary currency pairs, based on volume, that are traded against the U.S. dollar in the spot and forward markets include the European euro, Mexican peso, British pound and Indian rupee. The tenor of forward contracts is typically fewer than 30 days.
Realized and unrealized gains or losses on transactional currency and any associated revaluation of balance sheet exposures are recorded within "Transaction and operations support" in the Consolidated Statements of Operations. The fair market value of
any open forward contracts at period end are recorded within "Other assets" or "Accounts payable and other liabilities" on the Consolidated Balance Sheets. The net effect of changes in non-U.S. dollar exchange rates and the related forward contracts for the year ended December 31, 2022 was a gain of $1.6 million.
Additional non-U.S. dollar risk is generated from fluctuations in the U.S. dollar value of future non-U.S. dollar-denominated earnings. In 2022, fluctuations in the euro exchange rate (net of transactional hedging activities) resulted in a net decrease to our operating income of $7.7 million.
In 2022, the euro was our second largest currency position in the world following the U.S. dollar. Had the euro appreciated or depreciated relative to the U.S. dollar by 20% from actual exchange rates for 2022, operating income would have increased or decreased approximately $17.8 million for the year, as applicable. There are inherent limitations in this sensitivity analysis, primarily due to the assumption that non-U.S. dollar exchange rate movements are linear and instantaneous, that the unhedged exposure is static and that we would not hedge any additional exposure. As a result, the analysis cannot reflect the potential effects of more complex market changes that could arise, which may positively or negatively affect income.
Translation risk is generated from the accounting translation of the financial statements of foreign subsidiaries (from their functional currency) into U.S. dollars for consolidation and does not have a significant impact on our results. These translation adjustments are recorded within "Accumulated other comprehensive loss" on the Consolidated Balance Sheets.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Item 8 is found in a separate section of this 2022 Form 10-K starting on page. See the Index to Financial Statements on page.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the Company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are designed, without limitation, to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, the Company's management carried out an evaluation, under the supervision and with the participation of the 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 Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, the Company's disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting
Management's annual report on internal control over financial reporting is provided on page of this 2022 Form 10-K. The attestation report of the Company's independent registered public accounting firm, KPMG LLP, regarding the Company's internal control over financial reporting is provided on page of this 2022 Form 10-K.

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ITEM 9B. OTHER INFORMATION
Item 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information on executive officers called for by this Item is contained in Part I, Item 1 of this 2022 Form 10-K under the caption Executive Officers of the Registrant. The remaining information required by this Item 10 is incorporated herein by reference from an amendment to the Company's Annual Report on Form 10-K to be filed with the SEC.
All of our employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, also referred to as the Principal Officers, and our directors are subject to our Code of Conduct. Our Code of Conduct is posted on our website at ir.moneygram.com in the Corporate Governance section, and we will disclose any amendments to, or waivers of, our Code of Conduct for directors or Principal Officers on such website. The information on our website is not part of this 2022 Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by reference from an amendment to the Company's Annual Report on Form 10-K.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER. MATTERS
The information regarding beneficial ownership required by this Item 12 is incorporated herein by reference from an amendment to the Company's Annual Report on Form 10-K. The information with respect to securities authorized for issuance under our equity compensation plans required by this Item 12 is incorporated herein by reference from an amendment to the Company's Annual Report on Form 10-K.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 is incorporated herein by reference from an amendment to the Company's Annual Report on Form 10-K.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item 14 is incorporated herein by reference from an amendment to the Company's Annual Report on Form 10-K.
PART IV.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) The financial statements listed in the "Index to Financial Statements" are filed as part of this 2022 Form 10-K.
(2) All financial statement schedules are omitted because they are not applicable or the required information is included in the Consolidated Financial Statements or notes thereto listed in the "Index to Financial Statements."
(3) Exhibits are filed with this 2022 Form 10-K or incorporated herein by reference as listed in the accompanying Exhibit Index.
(b) (1) 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 Securities Exchange Act of 1934 under Commission File No. 1-31950.
EXHIBIT INDEX
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 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).
3.6 Amended and Restated Bylaws of MoneyGram International, Inc., dated October 28, 2015 (Incorporated by reference from Exhibit 3.5 to Registrant's Quarterly Report on Form 10-Q filed on November 2, 2015).
3.7 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).
4.1 Form of Specimen Certificate for MoneyGram Common Stock (Incorporated by reference from Exhibit 4.1 to Amendment No. 4 to Registrant's Form 10 filed on June 14, 2004).
4.2 Description of the Registrant's Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (Incorporated by reference from Exhibit 4.4 to the Registrant's Annual Report on Form 10-K filed on February 25, 2022).
4.3 Tax Preservation Plan, dated as of July 28, 2020, by and between MoneyGram International, Inc. and Equiniti Trust Company, as Rights Agent (Incorporated by reference from Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed July 28, 2020).
4.4 Amendment No. 1 to the Tax Benefits Preservation Plan, dated as of June 3, 2021, by and between MoneyGram International, Inc. and Equiniti Trust Company, as Rights Agent (Incorporated by reference herein from Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Commission on June 3, 2021).
4.5 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).
4.6 Form of 5.375% Senior Secured Notes due 2026 (included as Exhibit A to the Indenture incorporated by reference herein from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 26, 2021).
Exhibit
Number
Description
10.1 Employee Benefits Agreement, dated as of June 30, 2004, by and among Viad Corporation, MoneyGram International, Inc. and Travelers Express Company, Inc. (Incorporated by reference from Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed on August 13, 2004).
10.2 Tax Sharing Agreement, dated as of June 30, 2004, by and between Viad Corporation and MoneyGram International, Inc. (Incorporated by reference from Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q filed on August 13, 2004).
10.3† Form of Amended and Restated Non-Employee Director Indemnification Agreement between MoneyGram International, Inc. and Non-Employee Directors of MoneyGram International, Inc. (Incorporated by reference from Exhibit 10.02 to Registrant's Current Report on Form 8-K filed on February 13, 2009).
10.4† Form of Employee Director Indemnification Agreement between MoneyGram International, Inc. and Employee Directors of MoneyGram International, Inc. (Incorporated by reference from Exhibit 10.03 to Registrant's Current Report on Form 8-K filed on February 13, 2009).
10.5*†
MoneyGram International, Inc. Performance Bonus Plan, as amended and restated February 16, 2023.
10.6† Deferred Compensation Plan for Directors of Viad Corp, as amended August 19, 2004 (Incorporated by reference from Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed on November 12, 2004).
10.7† MoneyGram Supplemental Pension Plan, as amended and restated December 28, 2007 (Incorporated by reference from Exhibit 99.01 to Registrant's Current Report on Form 8-K filed on January 4, 2008).
10.8† First Amendment of MoneyGram Supplemental Pension Plan (Incorporated by reference from Exhibit 10.28 to Amendment No. 1 to Registrant's Annual Report on Form 10-K/A filed on August 9, 2010).
10.9† The MoneyGram International, Inc. Outside Directors' Deferred Compensation Trust, dated January 5, 2005 (Incorporated by reference from Exhibit 99.05 to Registrant's Current Report on Form 8-K filed on November 22, 2005).
10.10† Form of Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement (Incorporated by reference from Exhibit 10.27 to Registrant's Quarterly Report on Form 10-Q filed on May 12, 2008).
10.11† MoneyGram International, Inc. Deferred Compensation Plan, as amended and restated February 16, 2011 (Incorporated by reference from Exhibit 10.01 to Registrant's Current Report on Form 8-K filed February 23, 2011).
10.12† MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive Plan, as amended and restated on May 6, 2020 (Incorporated by reference from Exhibit 99.1 to Registrant's Registration Statement on Form S-8 filed on June 15, 2020).
10.13+ Amended and Restated Master Trust Agreement dated January 29, 2016 by and between MoneyGram Payment Systems, Inc. and Wal-Mart Stores, Inc. (Incorporated by reference from Exhibit 10.1 to Registrant's Current Report on Form 8-K filed February 1, 2016).
10.14+ Amendment No. 1 to Amended and Restated Master Trust Agreement, dated August 26, 2016 by and between MoneyGram Payment Systems, Inc. and Wal-Mart Stores, Inc. (Incorporated by reference from Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed October 31, 2016).
10.15+ Amendment No. 2 to Amended and Restated Master Trust Agreement, dated October 25, 2016 by and between MoneyGram Payment Systems, Inc. and Wal-Mart Stores, Inc. (Incorporated by reference from Exhibit 10.75 to Registrant's Annual Report on Form 10-K filed March 16, 2017)
10.16 Amendment No. 4 to Amended and Restated Master Trust Agreement, dated January 25, 2017 by and between MoneyGram Payment Systems, Inc. and Wal-Mart Stores, Inc. (Incorporated by reference from Exhibit 10.11 to Registrant's Quarterly Report on Form 10-Q filed May 5, 2017)
10.17 Amendment No. 5 to Amended and Restated Master Trust Agreement, dated January 1, 2017 by and between MoneyGram Payment Systems, Inc. and Wal-Mart Stores, Inc. (Incorporated by reference from Exhibit 10.12 to Registrant's Quarterly Report on Form 10-Q filed May 5, 2017)
10.18 Amendment No. 6 to Amended and Restated Master Trust Agreement, dated February 20, 2017 by and between MoneyGram Payment Systems, Inc. and Wal-Mart Stores, Inc. (Incorporated by reference from Exhibit 10.13 to Registrant's Quarterly Report on Form 10-Q filed May 5, 2017)
10.19 Amendment No. 1 to the Co-Branded MTaaS Website Addendum to the Amended and Restated Master Trust Agreement, dated February 22, 2017 by and between MoneyGram Payment Systems, Inc. and Wal-Mart Stores, Inc. (Incorporated by reference from Exhibit 10.14 to Registrant's Quarterly Report on Form 10-Q filed May 5, 2017)
10.20 Amendment No. 7 to Amended and Restated Master Trust Agreement, dated July 28, 2017 by and between MoneyGram Payment Systems, Inc. and Wal-Mart Stores, Inc. (Incorporated by reference from Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed November 2, 2017)
Exhibit
Number
Description
10.21*** Amendment No. 11 to the Amended and Restated Master Trust Agreement by and between MoneyGram Payment Systems, Inc. and Walmart Inc. (Incorporated by reference from Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed November 6, 2019)
10.22*** Amendment No. 13 to the Amended and Restated Master Trust Agreement by and between MoneyGram Payment Systems, Inc. and Walmart Inc., effective September 25, 2020 (Incorporated by reference from Exhibit 10.2 to Registrant’s Quarterly Report filed on October 30, 2020).
10.23*† Non-Employee Director Compensation Arrangements, effective February 16, 2023.
10.24† Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Global Stock Option Agreement (Incorporated by reference from Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q filed May 3, 2013).
10.25† Amended and Restated Employment Agreement, dated March 2, 2018, by and between MoneyGram International, Inc. and W. Alexander Holmes (Incorporated by reference from Exhibit 10.1 to Registrant's Current Report on Form 8-K filed March 5, 2018).
10.26 Form of Amended and Restated Severance Agreement (Incorporated by reference from Exhibit 10.6 to Registrant's Quarterly Report on Form 10-Q filed on August 2, 2019).
10.27 Credit Agreement, dated as of July 21, 2021, by and between MoneyGram International, Inc., as borrower, the lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent and as Collateral Agent (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Commission on July 26, 2021).
10.28 Letter Agreement Amendment dated August 9, 2021, to Credit Agreement, dated as of July 21, 2021, by and between MoneyGram International, Inc., as borrower, the lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent and as Collateral Agent (Incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on October 29, 2021).
10.29† Form of Executive Officer Performance-Based Cash Award Agreement under the MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive Plan, as of May 6, 2020 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 7, 2021).
10.30† Form of Executive Officer Time-Based Restricted Stock Unit Award Agreement under the MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive Plan, as of May 6, 2020 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q on Form 10-Q filed with the Commission on May 7, 2021 ).
10.31† Form of Executive Officer Performance-Based Restricted Stock Unit Award Agreement under the MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive as of May 6, 2020 (Incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 7, 2021).
10.32† Non-Employee Director Deferred Compensation Plan, effective October 1, 2021 (Incorporated by reference from Exhibit 10.53 to the Registrant's Annual Report on Form 10-K filed on February 25, 2022).
10.33* Form of Executive Officer 2023 Performance-Based Cash Award Agreement under the MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive Plan, as of May 6, 2020.
10.34* Form of Executive Officer 2023 Time-Based Restricted Stock Unit Award Agreement under the MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive Plan, as of May 6, 2020.
10.35* Form of Executive Officer 2023 Performance-Based Restricted Stock Unit Award Agreement under the MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive as of May 6, 2020.
10.36* Form of Chief Executive Officer 2023 Performance-Based Cash Award Agreement under the MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive Plan, as of May 6, 2020.
10.37* Form of Chief Executive Officer 2023 Performance-Based Restricted Stock Unit Award Agreement under the MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive Plan, as of May 6, 2020.
10.38* Form of Chief Executive Officer 2023 Time-Based Restricted Stock Unit Award Agreement under the MoneyGram International, Inc. Amended and Restated 2005 Omnibus Incentive Plan, as of May 6, 2020.
21* Subsidiaries of the Registrant
23* Consent of KPMG LLP
24* Power of Attorney
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
Exhibit
Number
Description
101* The following materials from MoneyGram's Annual Report on Form 10-K for the year ended December 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive (Loss) Income, (iv) Consolidated Statements of Stockholders' Deficit, (v) Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements.
104* Cover Page Interactive Data File (formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101).
* Filed herewith.
** Furnished herewith.
*** Portions of this exhibit have been omitted because they are both not material and would be competitively harmful if publicly disclosed.
† Indicates management contract or compensatory plan or arrangement.
+ Confidential information has been omitted from this Exhibit and has been filed separately with the SEC pursuant to a confidential treatment request under Rule 24b-2.