Q1 2020 Earnings Call
Good day and welcome to the Western Union Company first quarter 2020, burnings for at least conference call.
All participants will be English and only mouth.
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I would now like to turn the conference over to Brian Toronto, Vice President Investor Relations. Please go ahead.
Thank you on today's call, we will discuss the company's results for the first quarter of 2020.
And then we will take your questions.
Slides that accompanied us calling webcast can be found at western Union Dot com under the best relations tab and remain available after the call.
<unk> operational statistics have been provided and supplemental tables with our Pressrelease Western Union is still following it work from home policy. So on a remote call today is our C. O picked men are SEC R.C.F.O.s Raj <unk>.
Head of Treasury Investor Relations, Brad one big but.
Today's call is being recorded and our comments include forward looking statements. Please refer to the cautionary language and the earnings release and in Western unions filings, what these securities and Exchange Commission, including the 2019 form 10 K. for additional information concerning factors that could cause actual results to defer material.
Early from the forward looking statements.
During the call we will discuss some items that do not conform to generally accepted accounting principles.
We have reconciled those items to the most comparable gap measures on our website Western Union Dot com under the Investor Relations section.
We will also discussed certain adjusted metrics.
Though the expenses that have been excluded from adjusted tricks are specific to these initiatives. The types of expenses may be similar two types of expenses that the company has previously incurred and can reasonably be expected to encouraged the future.
All statements made by Western Union officers on this call or the property of the Western Union Company.
Are subject to copyright protection.
Other than the replay noted in our Pressrelease Western Union has not authorized and just claims responsibility for any recording replay or distribution of any transcription of this call.
Well now trying to call Overkill Arsenio <unk>.
Thank you Brendan and good afternoon, everyone.
You Hope you and your premises are safe en route.
Are <unk> are we all those who have been affected by Kobe Pete.
<unk> has been determined to do each part by living up to our responsibilities.
As one of the most trusted global brands deliberating essential services.
Millions of customers worldwide during this unprecedented and challenging time.
We are grateful to all of the frontline euros, an essential that goes as well as our employees and partners who are working tirelessly to combine these global health that economic crisis.
Doing our cold today, R.C.F. <unk> and I will share ugly scene is maybe gay think the current environment and discuss our first quarter results.
<unk> also share our views on the market that environment impacted by Kobe, 19, and provide our perspective on economic and customer <unk>.
Kohut 19, pandemic has broad social and business life to grinding halt.
Talk markets have been been tomorrow global G.D.P. growth objection have employment to New York is very close and unemployment rates in many countries have searched.
The effects of this pandemic are likely to getting one of the greatness economic shucks.
Sentry.
Our industry is no exception and B.I. experience.
The impacts of the Kobe 19 pandemic.
Sites migration flows economic indicators like <unk>.
<unk> employment levels are indicative of consumer behavior and business activity.
However, I'm glad to say that the strategic musicians and investment to be made <unk> have laid the foundation for us to navigate to this unprecedented crisis from that position of shrink.
We have one of the most trusted global comes in their friends are just from corporate balance sheet and how could financial position are supported by very strong annual operating cash flow and investment grade credit rating and and I'm drum revolving credit facility.
Oh, breaking mobile and booby, leading management tools, you must admit considering financial flexibility to support our operations as well as are kept the allocation prayed cuts.
Murder, the backdrop of Kobe 19 has highlighted the importance of the new global say that you've laid out at our investors date September of 2019.
It has not only confirmed but accelerate the implementation of.
Did you probably it is for 22 20 and beyond including the expansion apart digital capabilities diversification apart global payments net <unk> <unk> <unk> <unk> cross border platform to new use cases and <unk>.
He's fundamentals paired with the careful and diligent approach we have taken to navigate the first phase of Kuwait 19 will allow us to keep supporting our customers and clients as the growth response to Kobe make cheap.
While the timing quote to recovery from the pandemic and rebounds off the global economy is currently uncertain. We stayed focused on best positioning are competing for success, both during and after 19 broke.
You know take you to the pillars, well far Kobe 19 response.
As an organization are top priority during the crisis safety and they'll be.
All our stake holders.
Oh, here's what that'd be doing.
What are our employees, we are supporting the safety help and financial secrete, though far global talented measures like expended employee assistance programs I've worked from home policy and the technology infrastructure that enables our teams to perform at the same high label, while operating under business continued.
The plants.
Or our customers you already so they're eating the roll out of digital services and introducing new solutions to help customers transfer money and make payments around the world.
For example, the recent they launch <unk> dot com and additional countries, enabling our customers to 10 fun digit to lead to do <unk> <unk> from more than 75 countries.
Insidious that digital location services 10 countries that helps customers complete digital transactions.
Voice and lead your calls.
Additionally, you are expanding our payouts service by working with agents to provide home dilute very <unk> select countries curfews, our restricting the movement or receivers.
You also pets tracked the expansion of a real time pale capabilities.
For decades, we have been paying our transection peanuts.
Approximately 130 currencies within our boss global retail network.
Over the last year's we have diversity <unk> network to include more than four building at cons and bullets in over 100 countries recent enhancements <unk> now a naval customers, who said funds into bank accounts and wallets and 50 countries in minutes.
Berger, we are working with our global agent partners.
Create a safe retail environment by implementing social dispensing measures and safety procedures designed to protect crumbling associates and customers.
<unk> agent locations remain open as essential services.
Right Global AIDS and locate cool tools.
The the multiple times a day to keep our customers.
Informed about is the ability of our agent network.
<unk>.
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<unk> and the rest Union Foundation have played significant fonts in the fight against <unk> 19, it's real support domestic Hungarian leaves airports and global health care systems.
To show our appreciation to frontline euros. This week me the lunch feed discounts on our digital channels for first responders, an essential service, but of course across the road.
Lastly, and importantly, you also come too young to strike at being stewards of shareholder capital.
We put an increase focus on <unk> efficiency and <unk> investments.
Careful management of our financial position ensures that we are prepared to meet current challenges and succeed in long term.
Capital allocation Pride kids remain unchanged.
<unk> <unk> in our operations and in growth you said.
Do you plan to come to you to return cash to quarterly dividend to our shareholders.
Let me know moving to recap our first quarter performance.
Our first quarter started obsolete.
<unk> our business her from the bell and inline with our objectives.
<unk> March transactions significantly due to impact of Kobe 19 global spread.
In light <unk> performance of trends and derived sucked into caused by Kobe 19, we'd be true or to talking about 20 financial outlook on March 27.
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1% on that adjusted constant currency basis, including healthy digit revenue growth of 22%.
Are adjusted operating margin expended to 22.5% and adjusted E.P.S. <unk>, 7% year over year 244 cents.
It's uncertainty regarding Kobe 19 remains height and global economic implications are starting to unfold you are not reinstating at 22 20 outlook.
Time.
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In recent days you are encouraged to see some indications that customers and transactions trends are stabilizing even turning positive in few off bond markets like Germany and Switzerland.
There are also seeing posted it all up some key received markets were locked on policies are losing.
I would like to discuss some perspective on the global market environment currently operate at the customer trends field. So.
Early on a number of industries that rely on Mike Lindbergh Pittsburgh hit hard economic impact of Kobe 19.
<unk> <unk> <unk> <unk> support back to their home countries <unk>.
The end of April the road bike shoot that for cuts protecting 20% decline for global they made that says in 2020.
Well, we think this support cut too pessimistic.
We are expecting <unk> to be done this year.
As it triangulate projections from various institutions.
Is of utmost importance to keep our focus on the meats and sentiment of our customers. Despite the future economic outlook and respective employment uncertainty.
You know through panels and surveys that are consumer still have a strong desire to continue sending money.
Consumers are highly motivated to support families and loved ones back home and.
Are typically resilient in their efforts to do so.
Maybe that's an example of his during the global financial crisis.
<unk> 19 has also accelerated a shift in consumer behavior and led to increased use a digital channels.
Customer tell us that it is important to them to use that trust. The bread went switching to digital send options.
Thing is is affected that are digital transection, performing so about a combination of channels shifts by some excuse 10 consumers and strong you customer acquisition.
Turning to our payments business, our business solutions segment was less affected by Kobe 19, the first call to do to strong foreign exchange edging grabbing yep and some key payments worked it goes like financial institutions performing well.
<unk> 19, <unk> also impact our payments reasons in your term rescue unions trunk French I should be a benefit as the interested navigate to this economic downturn.
What would the long term D. believe our business solutions operations will continue to <unk>.
Summarize <unk> 19 is having a significant impact on our business.
We expect you seem to be temporary best to union as well as our consumers are practically making adjustment to manage to this period of disruption at the same time, we are getting radiate capitalized on opportunities emerging from when we expect to have become a phase of <unk>. They did indeed.
<unk> transformation.
Based on the very early science you see from a few countries into later part of April you expect to be belt position to capture D.'s <unk>.
Our vision to be a leader in cross border of course currency movement.
Payment has been underlined by a strong fundamentalists, including a trust the global Brent over 90% Red three equip nation, Rob Boss Digital Cross border My New <unk> Expending I'm match global payments Nitzberg consisting of 550.
Retail locations and billions of bank accounts and mobile wallets Serb that based on that 50 million global consumers and <unk>.
Oh resilient <unk> delivering sold it profitability has proven vital once more in times of girls and even more in times of crisis.
Been developed emerged from Kobe 19 crisis, we believe so you need to remain bell position to compete in the large and fragmented cross border payments and dreamy dense market, while it'd be are one of the largest players in during the dems market estimated at $700 billion off into the principal our share is still smoke.
Oh and V.C. <unk> you also see <unk> our share we did the cross border payments market.
I would like to provide you with that briefs right did you update.
Continue to execute belt against the new global stayed you'd be laid out at our investors day in September and hunting, our global network driving our digital drought or putting our platform to do you use cases and optimizing our organization.
Built on this triangle far about global retail Nitzberg increase our breath of our bank at <unk> network in the quote tour, which now includes over 100 countries. You see evidence of these actions starting to pay off in the first go through <unk> sections group over.
90%.
That's part of our network optimization initiatives be continued to generate commission savings through a combination of free negotiations and channel mixer ships.
<unk>, our goal to optimize our organization and increase margins with our Wobig productivity program is <unk>.
On the <unk>, our consumer digital <unk> group first quarter rubbing your 22% on a constant currency <unk> and we are seeing accelerating transaction growth.
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<unk> for the month of April approximately 30 per cent before talked to seek to see transactions are generated by digital channels.
We are very pleased to meet this growth and we are currently dating a member of and use it gives to further enhance our digital decent as during this time bin <unk> <unk> <unk> high quality services from trusted breads like Western Union.
Isn't solutions is also herder advancing on it's digital journey be currently see about one third of our business clients digital so served there needs to our own line plot at <unk>.
The first quarter, we reached a significant <unk> transactions on edge with over 90 per cent repeat payments transactions rate.
So overall, we are pleased with our long term digit <unk> and before I pass over the rocks to discuss the financial results in detail. Let me once again recognize and take the millions of our customers around the globe, who plays the trust in our services.
<unk>.
The front line heroes.
Nurses.
Grocery store workers or ambulance drivers <unk>.
Oh, they put their lives at risk and support millions of people that sheltering plays around the globe at the same time they are supporting their loved ones.
Hmm far away from them by sending money home.
I'm confident as a global community and from company B., both get through this challenging time together.
I remain excited about long term prospects and build like to take all our shareholders for their trust.
<unk> four days hard work and commitment.
Without altering the cold <unk>.
Thank you Heck night and good afternoon every one day I will start off with a review of our first quarter results and then offer some insights into our plans for managing through the Tobin 19 crisis.
You're improve compare ability prior year results and to better reflect ongoing operations are adjusted results exclude the impact of the speed pay and came out to pasture. His friend revenue and costs associated written by restructuring initiative and mergers and acquisitions.
Before I get into our first quarter results I would like to provide some contract around big impact Kobe 19 during the quarter.
Through mid March Kobe, Nineteens impact on our business was primarily limited to China.
Some extent.
Overall, our businesses performing in line with the expectations underlying our original 2020 financial outlook.
In the latter part of March as the spread of coping 19, accelerating and stay at home orders were implemented we began to experience significant decline in consumer to consumer transactions in the final days of March race, a decline were around 30%.
Even the extent and I'm certain duration of this disruption it became clear that require not reasonably project the impact that Kobe 19 on our 2020 financial results.
So on March 20 Center, we withdrew are 2020 financial outlook.
Then transfer the monster vehicle improved from March with C.D.C. transactions Department, 21%.
I will provide some thoughts on how cold it 19 may affect our business drained 2020 here a few minutes.
Moving onto our first quarter results.
First quarter Avenue $1.2 billion declined 11% compared to the prior year period, primarily due to the divestitures why majestic tactic currently wrapped in your which excludes our graphic differences in the car your period declined 1%.
Currency translation Netta beat impacts from hedges reduced first quarter revenue by approximately $47 million compared to the party here, primarily due to the depreciation at the Argentine tasteful.
Decline in the taste, so negatively impacted recorded revenue by 3% widely effective inflation on our Argentina business or it is estimated to have positively impacted ball reported and constant cranky revenue by approximately 1%.
And the consumer to consumer segment recorded revenue decline, 4% or 3% on a constant cranky basis.
<unk> decline three per cent, primarily due to the impact the Kobe 19 outbreak on our foreign markets.
We generally expect that demand for money transfers will remain strong for our inbound markets right in the near term economic impact from the crisis will reduce senders ability to meet that inbound demand.
Photos c. to see cross border pencil was flat or increase two per cent pumpkin currency basis principal per transaction increase 2% for 4% talking currency.
Spread between C.D.C. transactions and revenue growth in the quarter was one per cent with a negative one present impactful currency.
Pricing was higher than the first quarter compared to the prior your interior back west offset by the negative impact of next.
Turning to the regional herself my time in carry today will focus on developments that reflect broader trend we're seeing her business.
North America revenue declined 2% on both are recorded concocting currency basis, while transactions requiring 5%.
<unk> 19 performance was ontrack with internal expectations.
How strong growth in the U.S. to Mexico quarter are benefiting from the weaker pace.
Domestic money transfer transaction continued to decline.
North America Digital cross border transaction girls, rename strong likely benefiting from channel chefs retail.
Similarly, we saw an increase in account pay out during the quarter.
Revenue into Europe, Yeah, Yes region decrease 5% on both the reporting and cocking cranky basis.
Transactions here one per cent has grown in Russia benefiting from Mr. Bank partnership was offset by decline in Italy, the U.K. and France.
Recorded in constant currently revenue growth read negatively impacted by softening trends in reach out to your corporate 19.
However, our digital <unk>.
Continued to gain momentum specially in March with strong revenue and transactional grill.
Notable positive trend to highlight is that in recent days.
<unk> <unk> <unk> are now back to create Corbett 19 girls trajectory.
Revenue in the Middle East Africa in South Asia region increase 3% on both the report it and constant cranky basis.
Transaction girlfriend, 1% or.
Saudi Telecom partnership continued to be a key growth driver in the quarter <unk>.
Sense to India, notably from the Gulf region negatively impacted grill.
Revenue in Latin America Caribbean region decreased 11% on a reported basis for three per cent time. So currently I'm transaction declines of five per cent.
Civil unrest that impacted the fourth quarter of 2019, quieter, but gave way to be impacter over at 19.
Argentina was the biggest source or pressure as Tobin 19 policy responses resulted significant location cautious.
Similar to other markets experiencing lockdown, we saw an increase in digital money transfer transaction and also adoption additional wallet payout.
Revenue into a pack region declined 10% on a recording basis for 9% types and currency.
Bashes declined 14% of the region, driven primarily by the Philippines domestic partners, which has limited impact on revenue.
For our overall digital money transferred business revenues increased 21% or 22% toxin currently in the quarter, including Western Union Dot Com and our third party widely Cobranded digital partnerships.
Digital money transfer revenues accounted for 16% of total C.D.C. revenue in the quarter.
Western Union Dot com, rather than you grew 13% or 14% Cox and currently.
Cross border Western Union Dot Com revenue increased approximately 23%, which is partially offset by decline domestic money transfers.
For the month of April Western Union Dot Com transactions Grill accelerated.
Isn't solutions revenue increase 3% on a reported basis for 5% constant currently and represented 8% accompany revenues in the corridor.
Strong foreign exchange hedging revenue in Europe was a key contributor to carve concurrently grow.
Other avenues, which consists primarily of our retail bill payments businesses in the U.S. and Argentina decrease 59% in the corridor, which primarily reflects the impact of the 2019 divestitures.
I'll go plus he'll walk in business in Argentina posted good increase or in transaction and local currency revenue growth.
Other avenues represent at 7% or total company revenues in the corridor.
Bennington margins Unprofitability, we will focus on consolidated margins that segment margins are not comparable where the prior year period, you didn't get passengers another cost allocation changes in the first quarter of 2020, and Kobe 19 impact on the segments.
We are also providing adjusted metrics to exclude restructuring specter emanate unrelated taxes that.
Consolidated gap operating margin was 19.6 per cent in the quarter compared to 18.8% of the prior year period.
Increase was primarily driven by savings from our productivity program and lower compensation expend, partially offset by the passengers and changes in F.X.
We incurred $11 million of restructuring expense and the first quarter related to productivity initiatives. They continue to expect total restructuring expenses over $150 million related to our productivity program and today, we have incurred hundred and $26 million.
Adjusted operating margin in the first quarter was 20, 45% compared to 19.3% and acquire your carrier.
With the increase driven by the same factors faded the bar and adjusted for the restructuring in Germany costs.
Beat pay contributed about 40 basis points to last year's first quarter margins are foreign exchange hedges provided the benefit of $10 million me current quarter, and apparently $3 million to $5 million in the party or period.
The gap in fact, the tax rate was 12.5% in the quarter compared to 19.9% into power, you're carrying well adjusted tax rate was 12.5% compared to 20% of it prior year period.
Decreased and the gap and adjust the tax rates was primarily due to project tax liability from the divestitures in the prior year period, and greater discrete tax benefits in the current period.
Yeah burnings per share in the quarter 42 cents compared to 39 cents and the <unk> and adjusted earnings per share in the quarter was 44 cents compared to 41 sentence into prior year period.
<unk> increase in <unk> gap and adjusted D.P.S. was primarily due to productivity saving lower confrontation expand their lower effective tax rate. It's your share of outstanding partially offset by because <unk>.
Burning two are castle and balance sheet gap cash flow from operating activities was $112 million for a quarter.
Europe year declining operating castle was primarily due to the timing of tables and liabilities.
Expect continued strong free cash flow conversion in 2020.
Capital expenditures in the quarter, where approximately $36 million at the end of the quarter, we had cash at $1.1 billion and that a $3.1 billion.
We return nearly $310 million to shareholders in the first quarter, including $92 million in Devon, and $217 million a share repurchases, which represented approximately 8.5 million shares.
Outstanding share account at quarter, and was 411 million shares and we had $783 million remaining under our share repurchase authorization, which expires in December 2021.
As Hikmet highlighted earlier, our company wasn't as strong position when the coded 19 crisis. It. We believe we can withstand this period of disruption better than many I came out a bit with good momentum to execute our strategy and realize you potential opportunities.
As previously noted we are not reinstating formal financial targets for 2020 due to the high levels of uncertainty.
I'll just got from factors, we consider in our planning efforts.
Our business is tied to global economic activity retire exposure to develop mark.
Correct forecast for 2020 global remains there's Barry anywhere from declines of 3.5% 20 per cent and there's no single factor that predicts that accurately.
Oh for the purpose of our discussion will focus on the potential Patrick global economic activity over the course of 2020.
Prevailing view from a number of forecasts appears to be that global economic activity should bottom out during the second quarter of 2020, and we're using a restrictive policies improve progressively through the second half of 2020 and 2021.
This time, we think this is a reasonable trajectory to consider for our business.
Under this type of scenario, we believe that we can deliver solid margins. Although there is likely to be significant quarterly variation along with rabbit.
Our costs structure is approximately 60% variable and 40% fixed which provide some inherent margin buffer.
In addition are there other fixed costs adjustments, we can make to align with revenue trends. For example, we have to wait a new hiring before it all non essential travel and are prioritizing investments.
The level of additional short term expense reductions we realize also depends in part in Atlanta is that they already have declined.
We continue to target $150 million, an annual cost savings through 2022 related to their productivity program. We started last year and are on track to realize one third of no savings in 2020.
They have in our cash flow generation and solid balance sheet, our financial position remains strong.
This is reflected by our investment grade credit rating, which remains a high priority for the company.
We haven't I'm drawn 1.5 billion dollar revolving credit facility standard financing short term working capital needs through the commercial paper market, which are less than $100 million at the end up the first quarter.
We have no significant that materials until 2022.
Our capital allocation parties remained unchanged.
Our top priorities remain investing to support our existing operation and growth initiatives and returning cash to shareholders through the quarterly dividend, we continue to evaluate them opportunities for M&A and then to the extent we have access cash would return it to shareholders through Chevy purchases.
At this time share repurchases hairpin temporarily par as we feel it is prudent to conserve capital until there is better visibility into how to disrupt for it from corporate 19 plays out.
To recap despite the current economic disruption, we believe we are well positioned for future success.
<unk> inner large and historically stable market.
We have an operating model that provides flexibility with 60% of our costs variable.
We're executing on our strategic objectives to drive grow and we operate from that position of financial strength.
Thank you for joining our call today and operator, we are now ready to get questions.
We will now begin the question and answer session.
The question you may crestar than one on your telephone keypad if.
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At this time to pause momentarily to assemble a roster.
The first question comes from tension one of J.P. Morgan. Please go ahead.
They can't do much too high hope you guys are are well on and safe in time. The yeah. I think you know what you how you laid out the.
The outcomes on revenue you'd make sense in which all guy this make sense barrage on the expense side.
Did I hear correctly it sounds like we should assume that your expenses from here other fix side of it should be relatively.
Flat and then we should just seemed to 50 million in savings coming through is that sort of the base cases that opportunity to maybe bring forward some of the the extra 100 million.
Into this year if need be.
Yeah, I think the way to think about it that engineers that we're still targeting the hundred and 50 million or run rate savings in three years from now programs, we launched last year, but we'd we'd probably do have some additional opportunity this year with fixed costs savings.
Largely depend on how revenue play about two so we we've already stopped hiring any significant new roles, where you've already thing also travel were limited obviously in this environment, where also reprioritizing. So they can your investments to run a marriage. So there's certainly more opportunity for cost savings.
The 15, Marianne on a short term basis, I would say changing.
Okay got it and then just might click follow up on the thinking about second order effects of the.
Of the pandemic and the digital versus tread traditional mic shift you know the assumption is is what are we seeing the traditional customers converting to digital faster or.
The new digital customers still primarily new to Western Union is trying to understand that that into play and then also maybe just an update on your.
You know your profit or margins on the digital side versus traditional thank you.
Yeah, Let me take the first part, saying that you know the most of the cost of <unk>.
As you know if you have two digit <unk> digital partners <unk>, especially in the Western Union Dot com B.C. or a new customers content to be new customers, but we do also see some conversions as people are locked on you know they are subject.
Thumb outdoors through regulators in many countries. They just can't <unk> to the street done make transactions. Many people do Tuesday seen both come Debeer low tar Brent.
And they do use <unk>. Many many customers are joining us as a new customers, especially on the digital site digital partner sites, sorry, I, all our new right denies you know be as being rolled out to get the digital apartments, new customer segments down you two are to our network.
Do you want to talk about the profitability there.
Yeah, Yeah, I mean, it I think just this environment really reinforces why our digital strategy is so good and why it's going to continue to be very beneficial to us.
Our digital bears overall is very profitable both parameter nonbranded offerings.
We look at largely as incremental business incremental customers. If you if you break it down a little bit West Communion Dot com has a relatively high R.P.T. a revenue per transaction, it's a little bit lower than retail, but relatively close kind of gross margins on that business on a percentage basis.
Not too dissimilar from retail sorts are very profitable business and then on that on the partnership side. We are more of a process or transactions as we have we've talked before and.
We don't have a lot of cost in that process. So we we have a lower starting point in terms of revenue per transaction at the margins are very high in the wine label side and and it's still early stages are and we don't have a lot of those partnerships, yet and so will still learning, but it certainly has has driven a lot of big Bro and you have all business.
Yeah, and I would think they're real time account pay out network building out quickly it's got to to help a little bit. So okay. Thank you.
Yeah. It does the engine.
Thank you <unk>.
Okay. Thanks. Thanks.
The next question comes from Jason Kupferberg Bank of America. Please.
<unk>.
Hey, good afternoon, I just wanted to start with a question picking up on some of the comments about April I think you sit down 21% for the month in terms of the C.D.C. transactions versus.
30% exiting March obviously some improvement yeah can you just talk about how you kind of exited April whether that's the last you know two days, we can't whatever you think the right way to talk about it is because it it sounded like it had a couple how pounds.
Word or is that <unk>. So I just wanted to see where we actually I didn't read April.
Yeah, Jason we you know, we we <unk> April I'm Mad about the same rate of decline so about minus 30 or so.
And and it did improve sequentially throughout the month. So we exited the the month better I would just say you know we're we're really focus on the total month performance at minus 21, but certainly we saw some positive signs as we move to the course of the Moms and you know certain markets are began to open up later in the bomb like Germany.
Switzerland, Netherlands, and that they'd have a positive impact and you know for that reason, we think that second quarter is likely to be the lowest quarter for us from our revenue in a profit margin standpoint, then it should improve based on you know what they're the forecast that exists externally or after we get to the second quarter. So here.
Positive remark of April relatively speaking.
I think Oh right <unk> you can look at the digital grow up in April was impressive <unk>, obviously as I mentioned earlier to our digits.
You know you've are coming I mean, the higher 20 per cent no. In April is even took the two per cent growth on transactions on digital or rural April read them, but then why don't forget we are on off the largest in digital you have about 600 million dollar revenue last year right in 2000.
<unk> is really <unk> 75 countries dog <unk> and then we have many many digital partners like quite a little digital partners globally. So I am <unk>. We have done the team has been good thing you know into right I'm, taking the digital.
She had been gets crisis, it's it's it's really great to see.
[noise], Yeah, just to pick up on that I mean, do you have a view at this point how much of the uptake that digital we'll end up manifesting itself in terms of permanent consumer behavior change a lot talk about that more broadly in other parts of the payments industry and curious how you're thinking about it within we met and smart Kate.
I'm going to run the other side of the virus.
Yeah, I think you know as you know you have one <unk> you know I met for golf digital and retail obese global leave you have about 550000 locations and about 4 billion icons. The current customers are new Jason most most of them are new to our network and they are sticky you know that they're loyal and be do have loyal to programs to keep them in.
Met bird and they stay with them than that but I think that once you start with the especially during the crowds with the trust the department I didn't use stay and we do have well.
50 million clones customers as I outlined in the last meeting at our investors. They meeting we are going more on Echo system. <unk> system, we are building that keeping to loyal to adding additional products and making them more loyal to our our brand. So the good news is that the digital customer segments.
And your customer segment does you know you need to fund on on the K. cart or bank account on the the retail continued to be you know find that the font. He has to be collected by a cash and so it's the balance on that and I'm. You know you probably have the best service on that too so I've been both kinds of customer segments.
Just last that quick one for me <unk> him and I know, you're adjusted operating margins were up 120 basis points here in the first quarter. You can obviously feel good amount of revenue pressuring the second quarter, but on a full year basis do you feel like you're adjusted operating margins can increase your every year.
Yeah, I I don't really have no outward to give your for that Jason had a lot of it is.
Depend on the level of revenue trajectory that we get so if we had a better if the old for the exact revenue outcome it'd be able to give you that I do think we're gonna drive strong operating margins were doing a lot of things obviously to drive the original savings programs every launched last year and those are going very well.
<unk>.
And then we're also looking at incremental costs savings. This year. So we can mitigate the impact of some revenue decline obviously not all of that and you know I gave spec second quarter is going to be the law, whereas from a revenue and profit standpoint, but you know hopefully warm through from bear no. You can look at that first quarter, it's not necessarily.
One of our entire year back we were down in revenue, but we actually were able to increase our margins European your and that's positive. So we're going to do everything we can can maximize the profits you know without really without impacting the long term investment investments were on a computer Mad. So you know what more balanced broke those things as bad as well as we can.
Okay. Thanks for the kind of.
Yeah.
And but just a reminder to kindly limit yourself to one question and one follow up next question comes from Darren Keller Research. Please.
Hey, guys down here me, Okay, Hi, Hey, yeah, yeah.
Alright, great glad it ruins doing okay. You know when we look through 2020 and into 21, you know the competitive dynamics in the landscape is probably going to shift a lot and so you hopefully we'll be doing a lot more digital and that's good for growth.
Yeah plays out on on revenue, you'll the margins but.
<unk> well I I think there's also potentially no maybe more competition on digital than retail, but there may be some very large retail competitors, who may not exist or could be challenged him. This given liquidity positions the battery versus you guys.
Can you touch on your position into maybe take share through this from a competitive standpoint versus especially in the retail side.
Sure, let me picked that <unk>.
Within the home offices, so [laughter].
Coordinate that <unk> side, hi, there and how are Ya.
And yeah.
Looked down and I think that first of all on the digital success, that's going to continue to happen I believe you know, especially the combination of our digital network globally and affords me put behind that <unk> network and also in real time pay out that's huge and we believe the are gaining market share here I.
Even do you have a huge <unk> <unk> I think you know some of the competition on the retail Mighty test spare yeah old is looking at the environment. You know as you know our market are kept location has not changed you're going to continue to invest in our.
Isn't as we also look at four during the teenagers or you know bigger Acquisitional <unk> and if it has a good return.
You know the environment is definitely something be content to look at that and but also be well. Most important thing also if you're going to return sure <unk> turn cash back to our shareholders by a dividend. So <unk>. If there is no Portland do that fits in the dark but I did you use it then digital site.
Retail so I'd be to look at the <unk>.
During the other thing on the digital site that.
The thing that other competitors don't have as much as reader is a great retail network rich and you combine that with our digital capabilities. It really is a unique offering and even in this environment you know that retail pay out and capability is is highly sought after and but then where else are expanding intervene.
Digital account password, it's different from the rest of the competition.
Okay. Thanks for US just the follow up is now for U.M. the liquidity position in the dividend in you know again, it's great to see her liquidity position and commitment there now I guess, if April trends, which were down around 20 per cent continue if the world doesn't get that much easier given unemployment levels.
Looked through and unemployment stays high and I was an impact lonely maybe migration I just want to understand from your perspective, where we can get too. So that you can still pay the dividend without having to worry about credit ratings, having to be you know tweaked or anything along those lines, how competent are you and and what kind of environments.
Yeah, I think yeah, you're in there there are a lot of yes in what you're asked and and it's hard to predict exactly how things are going to play outside.
We don't believe that the dividend is at risk we feel very good about where we are and you know we had a strong position coming in and continue to generate a strong cash flows and I I think we would have to be in a very different world that we're having today from wherever in the word today for us to.
That way and I think you know that David is very important to the the board or Western Union and the dividend payout and we understand that it's very important to shareholders as well. So that's something that we were very committed to.
Okay. That's great. Thank you.
The next question constraint games file set of Morgan Stanley. Please go ahead.
Great. Thank you very much first question I wanted to ask was.
You you've given some pretty good color in terms of where you've seen improvement in improving flows I'm wondering if you can dive in a little bit there and provide some more nuanced commentary on.
Where are you are seeing improvement can you tie it back to whether how much maybe related to what the lag was to be getting a breed opening of of economic activity.
Says, perhaps consumer stimulus funds that were being distributed just looking for some color.
You're thinking about like what's driving the improvement and then how that could be extrapolated out.
Yeah, I think that's a good question you know if you look at the thought very obvious the first.
<unk> start that it's always the little bit locked arms, you know subject to lumped on our doors by governments and especially on our did you get locations. There were you know Shelton place orders obese people couldn't goldman's on on the retailer to make a make a transaction that impact.
But we believe that also the financial price pressure is probably the main one beach has on factor to our decline and that.
Combined with that so so in the late March to you know that significant decline in our transactions.
So if you look at them you know the time overtime as the locked gets and the stimulus packages get in and you know in in <unk> in the U.S., but mainly Germany, new Dylan's, Austria, and Switzerland, B.C.C. improvements there.
And as the people could get this stimulus package and they get economical more red ones they'd send it they start to send money.
At the same time, most some Mexico pays a week man weakness or is is U.S.B.C.V. soul, so strong stronger growth there and coming back on that makes it goes pendulous, a weakness helped us to send money.
To Mexico from the U.S. the corridor in fact bank <unk> I believe yesterday day gave to numbered the monthly numbers and you can see that'd be are gaining market share do so in Mexico. So our numbers have been improving p. two out there. So it is hard to get by.
General answer June it is really much better much dependent but <unk> economic economic pressure financial pressure on our customers is definitely I would say the main reason, but at the same time. This the locked on <unk> some to locations did the impact our business.
That's really that's what it useful and then the this my follow up question is just a matter of pricing. If you can talk a little bit about what you've been seen in in the pricing environment variations are changes I'm in where that you know any changes may be coming from and and how that's how your.
Factoring in potential pricing pressure or competition into into that we should general outlook for the rest of your do you expect more pricing competition, then historical last just trying to get a gauge of how your factoring not in.
Yeah, I I would say that no pricing environment has continued to be a relatively stable. When you look at on a global macro basis no big changes. There you know we are continuing to look at all of our thousands of the court orders were it's it's a productive care change pricing and <unk>.
Up and down as we said before or James but yeah, I think that the primary goal. We have is to ensure that we get the best lifetime value of our customers that so we made you promotional bystander than they do other things that attract the customer and that's really what we're going after you know we're doing variety of different.
Things and all of our quarters and by different channels to wherever it makes sense. So I don't think pricing in this environment is really going to be a factor versus what expanded historically it or at least some recent paired up so we don't see that changing dramatically.
Great. Thank you so much and thanks for all the hard work keeping critical lifelines for a lotta people open.
Thanks, so much.
The next question comes Serenity <unk> Barclays. Please.
Hi, guys and think if you take my question Tonight.
As.
<unk> on Jason's question from earlier and <unk> speaking about the end of April trends in the end of April trends. His stimulus. His government stimulant says it had any impact on on out bound volumes for me.
Obviously like in the U.S. in other words that something that benefits. Your your user base and then I also wanted to ask about.
Improvement you were saying in April did you see improvements across the business in terms of walk in.
Versus digital or was it really more digitally focus which I wouldn't be surprised to hear but wanted to ask.
Yeah Ramsey good good questions I would say that you know the the pressure on the business. Initially in late March in early April was really driven by people, having a stay at home and not being able to get out and that really continued on even in the market April we did see optics Wednesday notice.
Checks and other.
ER payments for being made around the world. So that certainly has helped our consumer base. So even though there may be some kind of <unk> that negatively impacting.
Being honest that to some degree by all the other payments that are going out to individuals are and that could sustain for a little while until things get back on track.
And then with respect to April trends or it was more broad based improvement certainly we saw acceleration in our digital business, but we also saw improvement and resell as asking opened up you know Germany is a great example, where people were back during the things that they were doing before and.
But not only that digital accelerate but we also saw improvements in the retail business, which is positive for us.
Hmm Okay.
That's that's really interesting and then <unk> I was wondering if you could speak to the tax rate expectations for the year. The the number came in a little lower than our models and just trying to figure out how to model that after the rest here and then just lastly, Ah home delivery Hey, that's something you could scale that is that could that be a new model that.
Create a little more importance for for Western Union over time or is that more of you know the costs picture may not support it.
Yeah, Let me address their tax question and then given the heck, but I'm not home delivery. The the tax rate you know with 12.5% of the first quarter.
In line with roughly what we expect.
You know getting to the mid Kansas, all sort of four year, obviously, a number of different scenarios could quite out this year and we don't know exactly rich or revolutionary plays out, but we had we modeled a number of different potential outcomes and they are off into spit out something in the mid teens range for a tax rates and that's not really the biggest.
Reiber, obviously this year.
So that's what I would think about and we have some discrete benefits that helped us in the first quarter back I would see everything in the mid teens rash that a four year and maybe I'll give it to your.
Home Directory question.
It's a good question well, we did <unk> start to home delivery in several countries, especially in developing countries in partnership with our agents.
<unk> our agents Oh, they have formed or express services and you know we did do a home builder like Columbia Phillip Adams and be stopped at the M.D. usage is quite good you know down due to lucked on some up to our customers Oh, So some people with elder people or people, who can't go through the location then the only way to pay off.
The cash we do delivered at home and you know it could be a service, especially for developing countries and it's really a partnership with our agents and agents to go to the rule areas deliver to our customers the the transactions.
Great. Thanks, so much take my question.
<unk>.
The next question comes from Andrew Jeffrey of some trust. Please go ahead.
Hey, guys sock it after <unk>, taking a question.
Yeah I'm wondering about is think about the all the emphasis on on expansion of digital globally, which makes a ton of fence.
What what are some indicating factors and I'm thinking I'm on two minds one would be.
The four plus billion accounts I guess, what what is what it could eat a key factor is watching you need can influence in terms of driving pay up to those accounts you know.
Assuming a lot of it's changing the sender behavior and two would be just <unk> heard the company talk about accelerating digital expansion.
I guess I'm wondering you know that opportunistic what are the what are the factors that game the ability to more rapidly expanding to digital markets globally.
Well a a good question and I think you know the investments what would you you'd be paid we invest it is paying back obviously remember as to start that it was on the few years ago <unk> General revenue was or <unk> diesels transactions now in April be even that 30%.
About transaction coming from digital generate transactions I think this this growth you'll continue to grow as more and more customers segments I've joined on network and <unk> not on the pay off in a retail about the same time also on when it comes and on <unk>.
Be can be do have real time payouts in 50 countries billions OPEC onto you can pay a real time and that's that's good so on the <unk> really on the receives side you know it depends on the customer segmentation if the customers want to have money on on on that <unk>.
Money paid all done on a topic they want to have it on my cash pay about living on the cash it but <unk> pale it depends also on the economy economical. So you know eco system up the environment.
The rule area of India, it'd be hard most of the customers want to pay off in in cash or is it in Mumbai. Many customers <unk> you really as Western Union you can do that both in real time pay out in real time, and and then a retail location or and then at cons.
This is a huge I'm just going to continue to happen. It's really the combination on Desensitised received site.
Okay I appreciate that.
Oh I was thinking of the next question comes from Brian <unk> <unk>. Please go ahead.
Hi, Brian.
Hi, guys How're you doing just thinking about that move towards digital can just talk a little bit how the digital competition differs from retail competition for you guys.
Well <unk> do you go ahead go ahead fixing crotch go ahead, why we're just going to say that you know one of the key thing and we sat earlier.
Our digital business is is unique in that the majority of it still is the majority the revenues that we are in today or so or from a retail oriented payout.
In in our total visual business, so and that's not really the area where other digital players are trying to make big inroads because you really that's where the brand are really plays a bigger part time in terms of the end to end transaction and and if you look at the other digital players you know we have already a very large.
They were working from.
<unk>, we can expand our capabilities all over the world faster than others might be able to do we already have more than 75 cents countries. We have account funding capabilities and many of those and we have mobile capabilities also and many of those <unk> markets and then we can send into an account.
You know until hundred marketing as well and then <unk> a real time <unk>. So just creating more back networking infrastructure, we've been on accelerator past there to get there you know over the next years to get really army channel capabilities on both sending and receiving Saturday equation, which is not real.
Something others can match when you start thinking about both retail and digital combined.
In that 30% a percentage of volume and that's going to digital on April is that have any retail in it any retail and one side of the transaction or that's 100% digital.
Oh <unk> digitally initiate digital hundred percent initiated this digital on the sense site, Brian and payout could be <unk> retail or <unk>.
Yeah, and his or a mix of that between how much of that as digital on the on the pay out versus versus <unk> that is retail, but the strong growth comes from a <unk>.
As I mentioned earlier, the <unk> well in April I believe 90 per cent growth.
Got got it and then the only other question I had it's just thinking about migrant movement. What you guys are seeing their did you did you see many migrants you don't move back home. During this time and then you know how do you think the impacts will be on any restrictions on my on immigration going for from you know borders being put up by the <unk>.
Thanks, Oh, the last six seven weeks the Kobe 19, really started even earlier in China and utility it'd be did not see any <unk> changes on the migrant movements on migration patterns.
The big issue. The Big question, Mark is that what economic environment financial environmental these people looked like.
<unk> and employment rate than G.D.P. growth are definitely indicators that some unknown.
That's one of the reason via a the volatility given to will look to live T.V. I'm up giving up 2020 guidance, but <unk> any changes on <unk>.
Oh, My God, moving back or you know mess migrants with.
Got it thanks to stay healthy.
Thank you to think fine.
The next question comes from Tim Wells Fargo. These go ahead.
Hi, Thanks sound good afternoon sort of question on marketing so given the shift in the business.
And and I guess, just the overall environment and then your comments around efficiency in costs is going to talk a bit.
Out, what you're doing with marketing and branding and sort of how much of that is moving digital versus maybe traditional one just sort of how that plays into as sort of the digital grows the productivity. The costs say, if you're talking about just any way to think about <unk> line item with Indian kind of statement.
Well you know obviously, yeah, <unk> marketing right. Because you know you could you also during the crisis. The trust so far consumers is huge too or brands and or the brand awareness on being poured down view of doing a good good good in good times I bet times has been <unk> you know that.
It's going to continue to happen to be are investing definitely from a direct marketing activities on the digital site.
<unk> customer segments, but at the same time or agents.
Or you know continued to promote are together with our our brando the retail sites because as you said earlier to combination between digital and retail pay off is huge and the brand awareness under received site drives also the transaction look if you already know no rule area in the Philippines, and you want to have the money.
Immediate the cold your relatives in in Finland, and say that <unk> send me money whatever so you need because the next corner I can pick up the money in minutes. Oh you are in you have a bank account you send a message to your relative on descent, citing D.U.K.U. Penn send me the money why ever seen into does that count.
This has been this brenda written as is into receiving countries huge you actually I would not be than our consumer 90 per cent brand awareness, which is one of the probably leading button and the marketing investments drive you know that driving to rave in New York and Transection droll. So during this during the.
And then make as you know has been several you know the mother's day is coming there was Easter Easter Orthodox Easter and drama done and these are definitely promotions, we are going to continue to do.
To attract customers dog brands and promote digital and you know also the safety and the trust compute the Mister.
At this time. This concludes our question and answer session I would like to turn the conference back over to Hikmet are sick pretty closing remarks.
Oh, thank you.
Thank you Andrew Thank you everyone for joining the called today.
<unk> during this crisis Kobe 19, it's not easy for <unk> I would like to take personal shareholders plenty of trust on the Western Union.
But also like the <unk>, especially the customers or do loyalty and fighting you know many up our customers. I mentioned earlier are heroes are you on the phone line, they're fighting and you know, helping many people's is is that a nurse or you know is that unbalanced driver.
Quote keeping retail shop opened a really frontline euros and the same problem. They really think about their loved ones back home and it's not easy.
Being you know people and at the same thing about your family members far away from you and one of the things. They do immediately is that they sent back my home money and the trust rebuild over years or decades, the trust the ability to our customers, obviously pays back and make such strong there and.
He liked the thing goes all employees.
Dedication and for their heart Burke. During this time, then you know what's the best C.N.N. as a special company and to be our continued to be very dedicated so if the company does and our shareholders and I would like to thank thank you for drainage <unk>.
The conference has now concluded. Thank you for attending today's presentation, you mean out disconnect.
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