Q1 2021 Western Union Co Earnings Call
Good day and welcome to the Western Union Company first quarter 2000 for you wanted her name's release conference call.
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I would now like to turn the call for server to Bourbon, what's on or Vice President on the Best Relations. Please go ahead.
Thank you on today's call, we will discuss the company's first quarter of 2021. The results are financial outlook for 2021, and then we'll take questions.
Five for the company. This call webcast can be found at Western Union Dot com on the the industrial waste on staff and will remain available what call.
Additional operational statistics have been provided and supplemental tables with that press release on.
When I call today is R. C E O Hikmet <unk> are CFO Raj alcohol and head of Treasury Investor Relations bread one day for.
Today's call is being recorded and our comments include forward looking statements.
Please refer to the cautionary language in the earnings release and in Western Union filings with the Securities and Exchange Commission, including the 2020 form 10-K.
For additional information concerning factors that could cause actual results for different materially 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 for the most comparable GAAP measures on our website. What can you do dot com under the Investor Relations section.
We will also disgusted adjusted metrics the expenses that have been excluded from adjusted metrics are specific for certain initiatives, but maybe some art for the types of expensive. The company has previous occurred and can reasonably expect to occur in the future I'll.
All statements made by Western Union officers on this call are the property of the Western Union company and subject to copyright protection other than the replay noted in our press release Western Union does not authorized in disclaims responsibility for any recording replay or distribution of any transcription of this call.
I will now turn on the call over to a C E O hikmet or second.
Thank you Brandon and thank you all for joining us this afternoon.
As noted in today's press release, our business is up to a good start and what we believe it's a very important for your for receive Union.
The weather COVID-19, better than many companies in between between T. A link to a reasonably in fundamentals enter for sites behind our leading digital business. That's head does radio for accelerated demands for digital services.
For it I give you an update about encouraging for his quota results and cheered on my thoughts about the rest of the year I would like to take a moment and mentioned that although we do see some more this economic improvement and there are signs of some COVID-19 recover you'd like in the U S parts of Europe, and parts of Asia Pacific due to progress.
<unk> nations at.
At the same time I am saddened by the heartbreaking current situation in countries like India bread, you and many others are quotes are with all of the people who are current and maybe gaping this challenging situations the.
The recent outbreaks mini con to show us that as a global community. We still have work to do in the fight against the wires. However at the same time I am hopeful and I know that all my colleagues and all our partners more than 200 countries, you'll be their best to recover from the one.
Iris as soon as possible.
Back to our business the conditions for fairly stable in the first quarter I.
I am please the trends for our business improved over the quota and held up Beldon April giving us confidence to push forward with an ambitious agenda and reaffirm 20th 21 financial targets. On then adjusted Beezus project will discuss our outlook in more detail in a few minutes.
That let's review business highlights for Dakota.
Starting with the Big picture are close for the calls you move to consumer or <unk> principal 20th person, which was the highest quoted the goat and years and the towards <unk> with gold over 20%.
Is really shows the momentum we are seeing today, especially when compared to forecasts from Turkey parked is projecting modest growth or even declines in principle for 20 between two on.
Total company Arabian you'd go to person on a constant currency basis or on the 300 basis points increase from declines in the third and fourth quarter of last year.
She to see Reuben use and transactions goop for per cent of nine per cent, respectively, and both digital and retail revenue trends improve sequentially.
Digital pro from exceptionally well again, maybe news for our up from the fourth quarter and grew for two five per cent you over you over $240 million, putting us on target to exceed $1 billion in 2021.
Digital comprised co to 4% of transactions and 23% of revenues for the CGC segment, and the buzzer Q source of new customers and incremental appropriate.
Dot com dilute impressive results and showed the potential B C. As a foundation for a consumer ecosystem for.
This is the Ford consecrate, the Pulitzer of transection growth or 50% or more and everage monthly active users gold of over 40%.
Wood Dot Com led Monday transfer appears in mobile app downloads by a wide margin and blue principles, 7% to 8% of open old radio large base, which we believe is well ahead of the markets.
Our customer engagement. It for it's also appear to be paying off with favorable trends in retention transection per customer and principal for customer.
Digital partnerships revenue more than doubled year over year and it has exceeded our expectation over the past 18 months seems to be a non seed in late 2019.
You continue to have more encouraging development pipeline.
Retail trends improved sequentially from the Ford quota to the first quarter. Despite the effects of additional Batesville COVID-19.
While the business is not back to pre pandemic levels, yet it has demonstrated resilience and we expect contempt improvement does the rest of the year, assuming the pandemic and global economy, those and worse.
Our business solution trance also improved be made progress on key initiatives, including launching our payment solutions in Spain, and implementing technology upgrades that will allow us to Ed differentiated solutions and capabilities. We are optimistic that's the business will continue to re bump or.
Would the Corcell for Ya.
Shifting to an update on operating on strategic objectives. During this quota.
Starting with rude Dot com, you can TMT invest in clumsy more exposition and marketing.
Which drove 46% growth and it will each month active users for the first quarter.
On the branding site relaunch one of our highest rated television campaigns in recent years send more than money.
[noise] Futured, who dot com. The also made progress on a number of products and you said it gets to improve our customer experience Foster's registration bedroom web page performance and enhance visibility into transfection status.
B, a sheep and important platform milestone by completing a major phase of our multi your settlement transformation project.
You also advance and number of and you said if that will make us more nimble and efficient like clubs migration and ending occupational intelligence and machine learning into processes to reviews project on times and and Hans analytics.
Moving on to our global network. The team has done a great job optimizing commission costs, while still enhancing the quality of our global payments distribution cable glitches.
During the quarter be renewed agreements with towards your for existing agents and edit for two one new agents with favorable terms.
Over 50% of our global it can't pay on Transection, William was deliberate thrilled time.
Ah lunch, which walnut is off to a good start and we look forward to getting old 4700 U S locations up and running in the second quarter.
To wrap up the first for the discussion despite ongoing challenges from depended make we are off to an encouraging start with financial and operating performance on course with our expectations for 2021.
Given the strong customer trance, we have seen over the last year in our cheetah citizens, including almost 9 million booed dot com and you'll active users in 2020 agenda for the rest of 2021 is largely centered around enhancing the customer experience.
Convenience the liability and speed are fundamental for a good customer experience in payments each makes a high quality network important.
On the digital side, we can reach billions of a constant day that's.
But we are expanding access to even more at cons, new partnerships speed is increasingly valued by customers and we already have one of the road. This bill time cost for the payment networks in the industry.
So the focus this year is making it more robust by adding additional direct towards part to relationships and multiple partners markets, a retail distribution to compute to benefit from ongoing agent optimization upgrading the colorbearer of agents and filling gaps and distribution.
But for me and he said gives for 2021 include upgrading and modernizing technology, incorporating cutting H solutions and bolstering our executive talent.
These people enhance customer experience and a number of ways, such as better processing speed and enabling more innovation. Ultimately we are working two words building a best in class Tech spec that can support the range of cross for the use kids, including CTC C. B B C N B b.
And serve as a foundation for eco systems.
I'm really excited about the slate product instead of this year that can be impactful for customer experience.
A few examples include improving the function loads of our mobile lab advancing dynamic pricing revamping, our customer loyalty program and the pilot in Europe with a receding to National Bank nature of this you're extending our offerings for wider said they'll financial services.
Given the customer centred agenda of you have for 2021, I think it makes sense to discuss why he'd be are so optimistic about the long term prospects will shogun are called customer segment, the global migrant community.
Let me start by saying, we are extremely proud and privileged to serve the global migraines community and we are honored that day Trust rescue Union with one of the most important financial aspects of their life supporting loved ones and home countries.
As highlighted in R. E. S. Two reports for 2018 between 219 and our twin to twin to report coming in June got proud of the contribution our business makes are on the road by promoting economy growth and prosperity for the people who serve.
Our purpose underpins our market position and Friday G. N V believe our business for a strong potential value creation for all stakeholders.
First the migraines on their loved ones is a large customer segment for western Union. According to the United Nations are more than 270 million migrant residents globally and many of them send trimmer dances.
Factoring in remittance, they citizens and home country, who also use our services and desire more options for financial services could more than double the potential customer base to overhaul for build when people.
Second.
My parents are a growing hardworking and upload the mobile group.
They are expected to drive a significant share of future population growth in higher income countries and how about average labor pet for submission rates higher rates of Intrapreneur ship and contribute significantly to innovation.
The third and final point migraines have significant spending power.
According to a 2019, new American economy study migrants represented 1.3 trillion dollars of spending power in D. U S alone and obviously globally just a month is even higher.
To summarize have you believe migraines and their families and loved ones are special group of people that have on important role in societies and economies around throat, serving our customers needs is that good business. That's all for the rest of union organic growth and important to expend into new services on.
On top of this.
The cross for their expertise on kibbutz is begin to serving our core customer segments enables us to offer.
Our cost for the platform for financial institutions, and other third parties extending our market opportunity beyond are on the scene and clumsy My services.
In closing I'm pleased with the direction of our business based on what we see internally and in the market for your confidence in the strategy and plan for the year and we are off to a good start.
With that I'll turn the call over to watch.
Thank you and good afternoon, everyone. Please note that my comments on gross refer to first quarter results compared to the prior year period, unless otherwise noted.
Moving to first quarter results revenue of $1.2 billion increased 2% on 12, a reported on constant currency basis currency translation net from the impact from Hedgers had a limited impact on first quarter revenues.
And the C. C segment revenue increased for percent on a reported basis or 2% constant currency with transaction gross partially offset by mix.
Did you see transactions grew 9% for the quarter led by 77% transaction Grill from digital money transfer retail money transferred transactions were down on the quarter back the business continue to move in the right direction with trends improving sequentially from the fourth quarter.
It makes impact from the high growth digital White label partnerships and account for your account digital transactions, both lower revenue for transaction for our P. T continue to contribute to spread between CDC transaction and revenue growth here in the quarter.
We do expect this captain moderate over the next three quarters.
Total to see to see cross border principle increased 20th% on a reported basis or 26% constant currency driven by gross and schedule money transfer and retail.
Total CDC principal for transaction or P. P. T was up 15% or 12% constant currency led by retail Andrew Dot com evolving.
<unk> Albany business mix, coupled with changes in consumer behavior more widely contributed to a higher P. P T.
Schedule on Monday transfer revenues, which includes we dot com and digital partnerships increased 45% on a reported basis for 44% constant currency.
Similar to the broader CDC business that mixed impact from digital White label partnerships and account for account digital transactions contributed to a spread between transaction and revenue grill and from our vantage for the pricing environment and the digital market remains constructor.
As Hikmet mentioned, we dot com had another very strong quarter.
Revenue grew 38% for 37 per cent constant currency on transaction grow for 55%.
Cross border revenue was at 49% of the quarter P. P. T trends were impressive and we saw continued double digit gross.
Digital partnerships transactions and revenues more than doubled in the quarter.
As you may recall for the business experienced a step up from transactions in the second quarter of 2020 would be initial global wave of COVID-19, and then another step up for the second half of 2020.
A strong prior your gross is expected to cost of moderation and gross for for the rest of 2021.
Moving to the regional results North America revenue was flat on a reported basis or increased 1% constant currency on transaction grow for 1%.
The increase in constant currency revenue and transaction growth was driven by U S.
Partially offset by declined that you estimate sick money transfer and Cuba, where current U S regulations limit our ability to operate.
Revenue in Europe, and see I asked region increased 8% kind of reported basis for for percent constant currency on transaction gross or 28% constant currency revenue growth was led by France and Russia.
Growth in Russia, It was driven by the incremental digital white label business, which continue to contribute to a spread between transaction in constant currency revenue growth.
Revenue in the Middle East Africa, and South Asia region increased 1% kind of reported cases for was black constant currency transactions grew 13%.
Petard had solid constant currency revenue grill, and the quarter Wow for United Arab Emirates continued to expand soft tramps.
Incremental digital White label business in Saudi Arabia was the primary driver spread between transaction grill and concentrate to your revenue growth.
Revenue growth in Latin America, and Caribbean region continue to it for a sequentially and was on 3% for 8% constant currency on transaction declines at 8%.
Consequently revenue growth was driven by broad increase in principle across the region with higher P. P. T V driving the spread between constant currency revenue gross and transaction grow for the quarter.
Revenue in the APEC region increased 9% on a reported basis for 3% constant current so you might buy strength in Australia transactions declined two per cent, primarily driven by the Philippines domestic business, which has limited impact on revenue.
Here's the solutions revenue decreased 2% on a reported cases for 8% constant currency as COVID-19 continue to get it back certain verticals can hedging activity. However revenue trans continue to improve sequentially and we expect will remain on improving trajectory for the remainder of the year with a broader recovering cross border trade.
For a segment represented eight per cent of company revenues in the quarter.
Other revenues represented five per cent of total company revenues Candy credit 18 per cent of the quarter.
Other avenues, primarily consist of retail bill payments and the U S in Argentina and retail money orders.
Revenue decline was due to the ongoing impact of COVID-19, and the depreciation of the Argentine peso.
Turning to margins and profitability consolidated operating margin in the quarter was 19.2% compared to the prior year periods margin of 19.6% on a GAAP basis, Okay 25 for sure on and adjusted basis, which excluded cost related to our restructuring program.
A decrease in the operating margin primarily reflects how COVID-19 impacted the level and timing of certain expenses and investments in 2021, compared to 2020, including investments and strategic initiatives and marketing and compensation related expenses, partially offset by changes in effects.
Foreign exchange hedges had a negative impact for $4 million on operating profit in the quarter and the benefit of $10 million and the prior year period.
Moving to segment margins note that segment margins for it would last year's restructuring charges.
For you to see operating margin was 19.6% compared to 27% in the prior year period.
Given that are <unk> segment comprises almost 90% of total company operating income a decrease in operating margin was driven by the same factors that impact your total company margin.
Here's a solutions operating margin was 13.1 for sending the quarter compared to 14.1 for starting in there for <unk> your period for.
The decline in operating margin was primarily due to an increase in compensation related expenses.
Other operating margin was 20% to 46% compared to 26.1% in the prior year period for declined primarily due to lower revenue.
The effective tax rate on the quarter was $10 for percent compared to a 12.5% effective tax rate on both GAAP and adjusted basis from the prior year period for.
A decrease in the companies that effective tax rate was due to changes in composition between higher taxes and lower tax for an earnings kind of an increase in discrete tax benefits.
Earnings per share or EPS was 44 cents compared to the prior your appeared GAAP D. T. S on 42 cents and adjusted EPS of 44 cents.
Your over your comparisons of EPS on the quarter reflect benefits of revenue growth lower effective tax rate can share repurchases offset by increased investments and strategic initiatives and marketing kind of compensation ready expenses.
For any store cash flow on balance sheet cash flow from operating activities in the first quarter was $176 million.
Capital expenditures in the quarter, where approximately $97 million driven by agent signing bonuses and should be in the normal range for the for year.
At the end of the quarter, we had cash on $1.5 billion and get a $3.2 billion. During the quarter. We took advantage of historically low interest rates to issue in your notes for.
Proceeds we're used to pre K a portion of the term loaded in the first quarter and we repaid our notes to you in 2022 in early April.
He returned $172 million to shareholders for the first quarter, consisting of $97 million on dividends and $75 million in share repurchases.
Yeah standing chair count at quarter, and was 410 million chairs and we had seven or $8 million remaining under our share repurchase authorization, which expires in December of this year.
As Hikmet noted a few minutes ago and today's earnings release, we updated on 2021 financial outlook affirming expectations for revenue growth and operating margin and raising GAAP ETS. We're also on track to achieve our digital revenue target exceeding $1 billion.
Increasing GAAP EPS reflects the sale of an investment partially offset by expenses related to the early retirement uhm for the companies notes to you in 2022.
Both of these items will be reflected in second quarter results fixed.
Excluding the impact of these two items for 2021, Aps outlet for the unchanged, which we have reflected within adjusted EPS outlook.
Note that are I'll look at Sam's no material worsening of current global macroeconomic conditions for the COVID-19 pandemic.
We expect full year 2021 revenues will grow mid to high single day on a gap basis for mid single digits on a constant currency basis, which also excludes the impact of Argentina inflation.
Operating margin is expected to be approximately 21.5%, reflecting revenue grill, Ken benefits for my three year productivity program that for you expect to generate approximately $150 million in annual savings by the end of 2022, partially offset by higher operating expenses and investments or a strategic initiatives.
We expect our effective tax rate will be in the mid range on a gap and adjusted basis GAAP EPS for the year is now expected to be in a range of $2.06 to $2.16, including approximately a six cent net benefit and other income on an investment sale in debt retirement expenses that occur.
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Early in the second quarter of 2021.
Adjusted EPS, which exclude those items is expected to be in a range of $2 for $2 and character.
Given the variability you got COVID-19 caused on 2020th quarterly results I will provide some context for how we think results me progressive over the remainder of the year.
Note that are underlying assumptions and for no material worsening and the effects of the pandemic and moderate improvement global macro environment.
As the quarters progress.
Starting with revenue we saw continued positive momentum in April and for the second quarter, we expect to see the strongest year over your gross great as we cycle over the largest quarterly declined up for prior year for.
For the third and fourth quarter of 2021, given the stability we had in the back half of last year, we expect general stability and trends similar your of your gross.
Keep in mind that as a result of COVID-19, or digital business delivered exceptional gross from the second quarter on work in 2020, so gross weight fishy or should moderate somewhat for the remainder of 2021, although we still expect to generate more than $1 billion on digital money transfer revenues this year.
Or retail business experienced a significant decline in the second quarter of 2020, and while it began to come back quickly. We expect the cover you will occur gradually as a result, we expect retail will generate growth in 2021.
Their business solutions segment, and other revenues were adversely impacted by COVID-19, or 2020. So we expected those businesses will continue to rebound this year.
Moving on to margin based on her current you we expect that second quarter margin will be below that for your margin outlook, while the back half of the year will be above that for your margin outlook.
To wrap up we're off to a solid start for the your optimistic at the macro environment will remain constructive confident in our competitive position and underlying fundamentals and we are enthusiastic that our strategic agenda for the year will provision us to realize the significant opportunities we see for our business over the next few years and beyond.
Thank you for joining our call today and operator, we are now ready to take questions.
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Okay. First question comes from Jason Kupferberg with Bank of America. Please go ahead.
Thanks, Good afternoon, guys nice job here on the quarter and and that's what I wanted to start with here. So you're you know you're adjusted constant currency revenue growth came in it up 2% I think you had been expecting it to be more in line with queue for which was down one percentage. So that was materially better and I wanted to get a sense of whether the upside.
Rise here was primarily the digital side I've I've see to say, where there are other areas of the of the business that also outperformed your expectations.
I think it's a good question, Jason Hi, how are you doing.
I believe that's all over the company received really the business coming back obviously, the digital business has that'd be extraordinary again, delivering and if you think that's the growth rates coming for my huge phase already a compared with the competition and I think you know you have targeting 1 billion plus for you and.
Well on the way to assume Dot com business has been performing very well and B C. Also a lot of customer exposition on lithium dot com business, new customers and that has been doing well and the most important one on the part part of our business retail businesses recovery right and this is and it's a two hour two per cent gross and.
<unk> B C look for COVID-19, it's not over it's still there, but we do see some recover is and that helps us business people are using more digital but certainly coming back to a retail business.
And just a quick follow up maybe the woo dot com constant currency revenue growth accelerated for 37% from 26% last quarter. It looks like the transaction growth there was pretty stable. So I'm. Just wondering if there was some mixed factors that worked in your favor during the first quarter and <unk> Dot com.
And thanks.
Yeah, Hi, Hi, Jason not not really <unk>, we continued to get gross throughout the dotcom business I would say that the yields on dotcom, we're relatively stable from queue for to Q1.
And but then the transaction grilled steak quite stable to queue for as you said on so that just provided the overall left in the in the business and you know the R. P. T was quite stable as well and yeah. I think it's really playing on according to our expectations and we received good thanks for the entire digital business.
This this year.
Okay. Thank you.
And our next question today comes from there in color with Wolf research.
<unk>.
Hey, guys. Thanks, if we look at the trends if you if you can give us a little more detail on the trends call. It second half March exiting the quarter and day April specifically on the digital side, because I think folks are looking into how sustainable that growth rate will be as we start to lap the big growth you had on digital sometime last year.
And then the second part of this question is also on the retail gross you're saying, it's gonna grow when we compare retail to 2019.
Do you actually anticipated getting back to those levels again, so if we can get that on top of digital strength, you'll be good to see.
Yeah, Hi idea and let me try to address those questions. The first one we as we had mentioned when we gave the outlet. Initially earlier this year digital is gonna moderate and second third and fourth quarter and you know that's that's what we expect to happen because we got the largest for all through the strongest growth begins.
And the second quarter of last year, and so that's what you should expect but we're still going to get above a billion dollars in total digital revenue. So that should give you a sense of the overall gross potential in that business uhm with respect to retail.
We're probably not gonna get back to 2019 levels Uhm this year, but it's gonna be it really depends on what happens uhm certainly there'll be some grow over impact, but we have other things that are coming into the business like a Walmart and other initiatives on the second half of the year. So those will also play a big part and where the reach.
Till business goes.
Okay. I guess my follow up is really around the digital transformation, you're having a company Hikmet you know there's been a lot of discussion over taking some of those active user gross on western Union Dot com and try to monetize it more and I think you alluded to some of the profile of the the you know underbanked are migrant.
Customer base being pretty strong, so where what kind of progression can we expect to see from from you guys around that throughout this year. Thanks again.
Yeah good.
Good question, obviously, <unk> Dot com you have direct access the customers <unk> really do I read communicate directly with our customers you know that the scene dot com customers more loyal to a C union. They use more often and we can call me to get started with that and what we do we are in 75 countries. These customers are migraine customers for instance.
Okay to Albania, and customers be speaking to Albanian and and utility to Romanian customers be speaking, Romania, right and we get you know they trust us. They also tell us that <unk> new products. Besides for so Union services financial services will be <unk> will be to focus area, which we are looking at that'd be started.
<unk> this year in Europe, with our European that'd be the arrest of Union International Bank license and are you Gonna do you know learn more on that but long term I really see people for two into here for you have about 9 million customers with a C N dot com and it's growing you just so the numbers coming in your new customer acquisition and this is a <unk>.
Timothy Besides you know, having our co business beaches, the money's transfer business really are adding additional services longterm.
Understood Okay guys.
Thanks.
Instead of next question for it comes on Timson long would J P. Morgan. Please go ahead.
Thanks for that day, and I I I appreciate the the disclosure on the digital <unk> I'm curious about the 9 million.
Active user figure, if I remember and I could be wrong.
I think at some point you just goes 150 million active customers in your traditional retail business. So I'm curious how you think about that 9 million today and.
Where it can go how much of it is new anything to that you've learned in terms of customer acquisition cost things like that thank you.
Sure High tension Great question, you asked me that earlier also I remember if you have on about 150 million customers globally half of them are you know more than half of them are senders on half of them are kind of receive a strike. So our focus with the obviously with the financial services additional customer segment of the seem dot com.
Is obviously from the sense sites right in the beginning and but also on the we received sites. We know that the customers wants to get more services is it didn't Romania as in Poland or is it moral code. They tell us we did some customer service here.
So that day or two ways to go first of all would be on going direct to get out of a senior dot com business, which for yard the agent that is good to our customers acquiring them Monday it'd be no day or use itches more more often with that the second thing is that we do have is you know some locations gotta have higher traffic kind of you know focus on the groups of.
Ethnic groups, saying that Okay day would like to send money from France Tomorrow, So I'd like to send money from Germany, Turkey on this kind of our customers. We have dedicated locations and these are also repeat customers and we are also acquiring them and you know building to our calls you more ecosystem because they for.
Tell us also they would like to have additional services. One example is our our test with the insurance services with <unk>. As you know <unk> is one of the largest insurance companies worldwide and with that'd be all for being a test in France, and really extending our tests. So the next stages thing that are cut.
<unk> additional services and I see logged on really a really know puts on for your for the for the company.
Okay, Great that's great to hear see I'm listening to our conversation checkmate, that's I'm glad that you're able to share that my my quick follow up for you don't mind, just on the India front and that's that's really great that you guys are doing a lot of relief effort there by the way thanks for that I'm I'm curious if he could see any.
Any interesting trends there because I know India is an important receive nation for Ya.
Yeah.
I mean, obviously, India is very important for US first of all you know as I said in my in my remarks, we have a union so customers there they make the change there. When you received money you have thousands of employees there they have the <unk> going to that to make it very difficult times, but not on the need to deal with all over the world and you know private day will will.
So firmly there as you can imagine B R. You know we've taken care looking at that day to.
From the business sites I mean, all the locations are sloping finjan <unk> essential services that are postal for locations bank locations. As you know if you have huge networks there, but we also have a dedicated retail locations. They are they are open and then the biggest growth is coming from a comp payouts.
We have a huge <unk> in India, you can send direct it might need to an account in real time and many people are using on <unk> basically I'll go fast is going I mean on absolute numbers, it's not that big but this the fastest growing part of our business paying off in their <unk> and that helps people in India a lot because believe me this is sufficient.
Any day is not easy and but for people are really getting that you know the b C. Also the sense sites. All our you know people are on through all sending to I'm thinking about the relative been sending money on the the money is used for essential services for health services and other things so.
Thank you for asking that question.
Thank you.
Thank you and our next question for very comes from ran out Tomorrow was over for please go ahead.
Good evening Heckman and Roger as you mentioned in your commentary there was that there was a spot between your seat a few for Avenue on your transaction, which is likely driving by the white labeled partnership he talked specifically about if there were any price, saying I can't get positive or negative that may have impacted that spread.
I'll ask my follow up Uhm upfront, you've had dynamic pricing initiative in price for quite a while now can you talk about how that's for farm fresh with your expectation. Thank you.
Yeah Arena, let me take the first part on the spread Uhm, what you're seeing is really the year over your changes that are causing the spread from a pricing standpoint, the yields have been relatively stable since for third quarter of last year, and I and I and as well.
L. As the digital White label makes that's also having an impact uhm, but as I mentioned in my comments uhm that the spread between revenues and transactions is going to narrow the next three quarters and you'll see that happening in their reasons. Why we have you know that we will not have as much of an incremental number of transactions from digital white label.
We also you know the pricing is relatively stable for <unk> Dot Com and then retail is having a significant rebound this year and you'll see that starting in the second quarter. So the spread is gonna narrow quite a bit and then in terms of dynamic pricing. We have a number of things that we've been putting in place we are doing a lot.
Testing you know all the time looking at various technology improvements.
If I have a <unk> you know if you're just another business review on that's right. That's a great question on it does have a beachy back to our for our our you know gross and our customer acquisition and still keep keeping the revenues and a very good good growth area. We do extend that we started the best <unk> oldest also do it in <unk>.
Sales business, especially in the day to get locations N. B C. Did returned there and you know this dynamic pricing will be really maybe one of the best worldwide in the future because to be high those are really great people, who are experts and that was my comment those 680 for firing on the on the <unk> pardon the hard great people there really.
Show Us how that works and I'm very encouraged by dynamic pricing I submit this and see about keeps really the pricing very flexible.
Thank you for our next question for very comes from James Faucet was Morgan Stanley. Please go ahead.
Thank you very much and and thanks for all the details and color on on your business. Thus far the sure a couple of questions for me to kind of follow up on things that you've mentioned.
Last year, particularly in the June quarter and is is the pandemic was first setting in you talked to a little bit about how the the nature of some of your <unk> dot com customers their profiles and in their activity was was different I'm. Just wondering if if you have any color on.
How retention of those customers that were added at that period has developed if you continue to see ongoing engagement from now I'm just trying to get a little bit of of idea. If if there has been any incremental change in in your customer profile generally.
I would say James this is Raj and I would just say that the profile of a customer has continued to be very strong. The retention levels have can you continue to increase uhm. These customers are transacting at a frequent level and at higher or a P. P. T. As a principal for transaction in the business and that's <unk>.
<unk>, having a positive impact for me overall company that the digital part of the business was one of the key drivers of the overall cross-border principle grill. So it's a high quality customer digital apartment just to put things in perspective, that'd be <unk> announced that in late 2019.
And since then on digital Pug, Michelle partners Rubina doubled [laughter] I mean, there's this is really incremental hallmark to our core business and on the car on the on the our customer on investing in both come look. These are you know that there are more loyal and they use moral from in the eight per cent of the customers are on the eighth at first I still need to rest of Union friend.
Which is great stripes on me you are really to do from <unk> customer segment and their behavior, a little bit different than the retail behavior. They do use sometimes <unk> P. T. Sometimes lower RP day really are flexible more often but also they send a lot of money to a wallets art on account. So it is.
Incremental to us and it's really it's not like you know suddenly all the retail customers switching to a union best of Union with that approach extended the portfolio and extended the markets markets. You know share that that's that's a good good good news here and I think.
<unk> you know for the other factors that need to receive money hasn't gone away. It's it's it's the higher than ever before in terms of people on receive market wanting to get money in in the digital customers continue to send money at a frequent pace.
Yeah, No. That's that's great incremental information, there and and it seems like you're doing a good job retaining them on my other question was as it relates to the Walmart relationship and I'm, just looking for a little bit more detail. There from your expect or is it really so your expectations can you talk about what contribution you for.
Thank you can get from Walmart and.
And I guess, specifically as well does this relationship makes you available and Walmart's International stores.
Yeah, I'm very excited about that done for you had Walmart relationship. It makes it in Canada for multi yours novia, they're enrolling as we speak the U S relationship would be over the <unk> like 10, 20% or 10 or 20 for some of the locations and by two two V will have all 4007 on the locations on.
<unk>, you'll need to see good signs of customers, which we you know spot to enroll we didn't even start with the marketing activities yet to announce it and that will definitely give additional incremental revenue from I've got to be it seems to be on those but it just you know get done on our forecast the number.
B hope that that will be.
Be especially in the late part of this year have an impact to our growth rates and we are very excited about that and I I know that Walmart. She's also very excited about that a relationship that things definitely customers incremental customers to their stores and the corporation bit bold month has been extra that'd be.
Upgrade the appointment of sales for a talk with them to have the best of class customer experience on the point of sale and this is important for me for Walmart and beautifully adapted and the teamwork got for you have that on <unk> management, there really focus on the on the you know if you build a new organization that are on the walnuts we have it on.
On T account management, there to drive the transactions and the revenue at Walmart locations.
Thank you. Our next question today comes from Ashworth on the survey for with City. Please go ahead.
Thank you uhm hanging on that to get from you but.
For sure assuring cake.
Hi, So my first question is with with regards to the defendant average monthly active use it for <unk> dot com, obviously or the last four quarters. You guys are maintained sort of this nice made for fees Upper forties, you know going on the trajectory.
Do you you know does it necessarily have to go back down too.
You know try as levels and debate teams type of growth or can you sustain for.
For a few more quarters this type of gross.
And and maybe if you could comment on.
What you saw in April that might be I could puke is that I.
I don't know if he could talk about.
Corporate for date type of change.
Hi, Ashley Yeah on the on the mostly acted average users I'd say the absolute level will continue to be strong, but because of the significant growth from last year. We will start to go over that like we are for the revenues and transactions of that business. So it's just.
A function of numbers growing over but the the level of customers on the level of the healthiness other customers on what they're doing with our business has been very heightened we expect that to continue.
And we are still.
So it's an amazing number at a screen a billion plus a dollar on the on digital revenue right. So I mean this is you know at a senior news I'd be contributor off that always Michigan Dot com, maybe comforter off that and you should take just think about that you know a billion plus it's like an all too the next <unk>.
There's bolts revenue on most or you know on that day area. So it is really impressive number and I'm very proud of my team and I Hope you are expanding that so it is definitely something you know really growing very fast.
Thank you and our next question for that it comes from just say as well with no on security.
Hi, good afternoon, and thanks for taking my question Nice results here Uhm I wanted to ask you what about digital.
When we all talk about the issue I think I'll, sometimes that focused on it to be on what's occurring on the phone and I'm moving on how you go ahead and get you the revenue how your address on your customer base, but it's also sounding now based on your prepared remarks, like we might want to be thinking about digital on the other side of that coin as well, which is the things we do.
<unk> to modernize slash deputize yourself internally, maybe it stayed on maybe it's cloud migrators cloud et cetera. So.
I wanted to ask you if you could talk a little bit about that what have you been doing interest looking toboggan nicer to digitize yourselves operationally and one of the reasons I'm asking is cause we saw that called out by snowflake in their partnership with you guys and it got us thinking maybe there's been some progress for making on the back and so I was hoping you can maybe share with us it seems like it might be a nice day to February some cost savings pretty.
Century, so was hoping you could talk about that thanks.
Yes, I think it's what I understood sorry, the connection was that that well, but then so does that whole day Digitalized also on plus for what do we do here and also on the receive side how do we do that for you know not on the on the scent sides with this that was the question I guess Uhm Uhm I'll, let me start on <unk> like <unk> like to add some.
<unk> more than welcome well, obviously visualization on the frontline didn't happen if you'd on digital day to do the law is your <unk> invest your and your Technologic recent announcement like artificial intelligence recent on insulin what we did putting you know our system into cloths and also.
New multi your settlement transformation program has been big announcement to L. O. That's b R. So successful on the from line on the digitalization and that's gonna come to you. That's only the beginning I seen on a big part of our investments are really having to being a tech company being a tech spec company and it's really.
Going that direction and look just to put things in perspective, we are settling and hundred and 80 on them towards your current says yeah doing moving built ins on billions of money monthly yearly or on in in hundred 31 currencies and that's that's a huge huge benefits.
Due to I've taken allergic due to a settlement program too dark artificial intelligence, which for using compliance programs. So that's gonna come to your to do with it doing this are are plus for more nimble and faster and more agile on the other side on that is that maybe if I got your second question a second part of your.
Question on the receive site, we do also Ah see more on more sending money to wallets, sending money to icons and people are if that's available in the area that people are getting money on bullets on using their wallets and you know they use sometimes for emergence sometimes cash at all for.
From there while it's sometimes they put it on their accounts I think there's a really a new customer segment B C V. Dark digitalization anything you when I turned the Thrutch broke up at the beginning Jamie This is you're right.
This is Jeff.
Oh, sorry, you broke up at the beginning I couldn't tell it today, but yeah. I mean, I think it's really you know we we talked about settlement system. That's a brand new settlement system. We went live with the biggest piece of it and we are moving many of our operations for the class. All of these things are gonna translate into efficiencies down the road not just in terms.
[noise] of cost savings, but also in terms of how we can interact with the customer and and even provide more feedback and information to the customer making that engagement passes very strong so.
Uhm, so you're you're right on the Mark there that is exactly what we are doing and they need to continue to do.
Thank you. Our next question today comes from to repeat Yoda was for the trees. Please go ahead.
Thanks, a lot I wanted to change gears, a little bit you mentioned some of your partnerships too.
Help expand some of your local pay out options, whether it be direct to a counter for <unk> essentially two cards and also just didn't light a visa talking about their partnerships with you why's for <unk> Moneygram and they publicly calling out multiple times very strong transaction gross within remittances with the visa direct an airport combination just wanted to see if he could get.
Bring that to life, a little bit more I know, we talked about this in the past, but when would be a good use case that your platform would utilize that is cause it come down to the consumer choice day would like to send a card or is it to extend your account to account payout capabilities or what are the other use cases.
So it'd be use cases, obviously it depends on the customer needs cases, right and if you send money you know we have what why do we have partnerships Mastercard visa.
<unk> you have with the other other companies department should be do the same thing that the others do also and the most important thing also if you have direct access to day cons. Most of our account payout is we don't use a switch <unk> dialect. It to the bank accounts, which is more efficient foster and in real time. So if you send money from here to for let's say from from Denver.
Two Bihar.
Location in India to a bank account, we could do that directed to a bank accounts and real time and these are a big advantage, but with so you need and has it and it depends also we do have bonus payouts, we've sent direct to money to wallets and really depends on the on the customer use cases, saying that though.
Two day most of the customers to have cash pay off we do cash payout.
The gross faucet going part is <unk> digital <unk>, but the most of the customers real still have cash payout. The reason is very very you know you have to understand to send on send a receipt dynamics on some parts of the world. There there there's no infrastructure to do online payments, there's no infrastructure to do credit.
<unk> payments to the point of sales systems are not there yet.
Mobile payments is sometimes challenge, we do definitely the day read sometime headlines for you all get excited but the reality is also to paying off the survey for the last miles to the customers. They can go pick up the money on go to a pharmacy and get healthy for Oh, probably with that money on pay school fees. If he should not for get that there's someone building people.
Gold whites and they have different needs, saying, that's you know best Union adopted this the process is the customer needs. All the time as I said earlier day fast is going to receive sites.
Dropping money is the account and is the wallet, but the biggest part is still cash payout on the retail locations.
<unk>.
Thank you. Our next question for that comes from Bryan King of Deutsche Bank. Please go ahead.
Hi, guys How're you doing.
Okay.
I'm doing well on doing well.
Solid results here just wanted to ask on digital I'm, just trying to think about that as we anniversary the large growth rage wooden wooden normalize growth rate might look like and some on the driver's they're thinking about partnerships, maybe how fast retail comes back some of the things we think about on what a normal.
Digital business might look like as we get through some of the tougher comps and then secondly, just on the margins Raj you know typically if you had faster revenue growth or higher revenue growth, you'll have higher margin, but it sounds like you're gonna, maybe take that opportunity to push them. The investment in two Q and then maybe some of those <unk>.
Fire is you're getting a three cute for Q and why margins will get a little bit larger on the back half. Thanks.
Sure Uhm, Brian So let me, let me try to address both men can jumping as well if you'd like to on anything on.
On the on the digital gross.
If if I just take you back 18 months that Investor day for that we had in the fall of 2019, we thought we could grill digital and the 20% range. None of US expected to have happened what happened last year with the level of digital girlfriend, we had but we would love to see if it can get back to 20 per cent range on an ongoing basis.
For you know, we're not giving a longterm outlook right now, but you know that that would be a good place for it to be because then it becomes a significant contributor to the overall company I've seen line, Brian just said on that sorry, I am interrupted you, but do you think about that the <unk> business is a much bigger base today.
So if you do a stronger gross it's just possible lumped on <unk>, you don't give long term guidance, but it just possible the stronger growth longterm, because we are growing from a digital business with a stronger growth with a bigger base and off this your billion dollar plus hopefully and going from that'd be that'd be good strong. So I'm confident about long term for two days off the company.
Yeah and it it's certainly one thing for sure is that it's changed the overall business mix of the company into a 2019, we were thinking about a 600 million dollar business now we're talking about 1 billion dollar business that becomes a bigger piece of the overall pie and it will have a bigger impact and then on your question around margin.
Uhm I V. As you said it right. We are gonna have some continued spending in the second quarter, a second quarter is probably going to have the the best revenue growth of the year, given what happened last year with the depth that we had in the second quarter Uhm and then margins will gradually improve the next three quarters and so the.
Second half is gonna be above the for your average based on our current view in the first half is gonna be below the for your average, but it's not about uhm any other component of it doesn't interest the timing of spending I would say on on those components.
Thank you. Our next question Tonight comes from Ramsey I'll actually with for.
Please please go ahead.
Hi, Thanks for taking my question today Uhm, there I'm, just I Wonder I Wonder if you.
You could comment on your M&A strategy in in particular.
Easy evolving in the context of your more intense focus on kind of consumer product development and innovation or are you position now to maybe do some some deals to kind of expand the breath of your product offerings that maybe weren't sort of in your in your viewer you know a year or two ago.
I think for the first of all our them and they said just very much aligned with our corporate started the Govt operating strategy and you know if you look at our our business model, obviously expanding to the consumer consumer ecosystem, which is very.
Exciting is there any thing, which can you know help us to communicate with the customers no better way is there you know really connect with the customer you're no better way not pick mojang environment. That's something we are looking at that are they companies. They are you know you could support to in our vision to grow to be foster 12 for it.
<unk> services that could be some eggs I think thing, but then the other side also we are looking on the <unk>. We do all the time, which would you know may car make our plus for more agile Foster higher technology and the third one is probably you know is there also.
Other other companies, which will we could find synergy effect. So that's the really our our strategy. It's nothing that's it's I'll read off the ordinary our existing strategy and uhm. So this is the environment you're looking at I mean, it has to be also visit the most important thing of tests to have a good you turn on for.
Shareholders.
Thank you and our next question today comes from Andrew Jeffrey which for security is please.
Hi, Good afternoon, John I appreciate you taking question Uhm.
Noted state.
I noticed that capitalized.
Jean costs have risen making for for for.
Having standard for quite some time can you speak up a little bit on.
Yeah, you're free to ensuring out there. Thank you. Okay. Thank you sorry about that hopefully this is better I've I've, just asking about capitalized agent cost subtract noticed have risen for quarters in a row after having been pretty low for an extended period of time. So I'm wondering if you just talk about agent.
Agent economics from the competitive environment on that front.
Yeah, Uhm, Andrew <unk>, you know for for Capex Uhm, If you look at our history historical numbers, we've been in the 3% to 5% of revenues range for capital expenditures and we expect that to be the case again. This year. The last couple of years, you're right now we were at the lower end of that range.
You know, but it's been in the 3% to 5% range and signing bonuses agent bonuses can be lumpier nature, just depends on when the renewals actually comes through but nothing unusual I mean, you're on any given year because our most of our contracts for five years and maturity. We have on about 20 per cent of our contracts renewing in a given year.
And so sometimes that's gonna need some decorated Jones and smaller agent. So nothing unusual there. It's it's part of the plan and you know but.
<unk> well within the range again for the for Ya.
Thank you and it looks like we have time for one more question on our next question comes from Jamie Free Linwood Susquehanna on please go ahead.
Good results for you guys I just wanted to ask the two major digital partners that you showcase that the analysts day when was that bag of 2019 is there you know.
Is there one that's more pronounced sending on that I mean, obviously, they're both doing great, but yeah. If we could just compare on like the the Saudi versus the Russia that would be helpful. Thank you.
Yeah, I think so home performers why is the <unk> exciting book, both partners day or the largest if it will see as we said then you know they'll come to you via does it contribute an incremental transactions on revenue two R. B. The high <unk> contribution margins are amazing of this two partners, which would be really like if you see that does incremental we do.
Also by the way we do also other partners striped it's not on the day do you have on the two part Mosby do have other partners about their smaller that's why we don't call them up but you know if you have on about I would say 50, plus almost on department's like that but smaller banks hold on for financial institutions. They don't have that amount of you know big transactions.
I'm very excited though so about the Saudi Arabia Telecom company as you know if you saw that we invest it there and I saw that it'll be a telephone company and to be able to hopefully clothes. We didn't this quarter. This this deal with them and this still gives US also the opportunity to expand and learn with them and expenses.
System into Saudi Arabia, and being a partner with them really serving day, the Saudi Arabian customer more than on the sending money. It's is on line with our <unk> you know it could previous question would emanate gold.
$90 a strategy. It's so we didn't they are ecosystem. We are doing together you have a good partner he already so long term, it's better if possible and partner and we are excited about that.
<unk>.
Great Wanna, Thank everybody for your time today and your interest in Western Union and look forward to speaking on the future.
Thank you that concludes for thank you on stay healthy day.
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