Q4 2023 Western Union Co Earnings Call
Operator: Good day, and welcome to the Western Union fourth quarter 2023 results conference call. All participants will be in listen-only mode.
Good day and welcome to the Western Union fourth quarter 2023 results conference call.
All participants will be in listen only mode.
Operator: After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Tom Hadley, Vice President of Investor Relations. Tom, please go ahead.
After todays presentation, there will be an opportunity to ask questions.
Note. This event is being recorded.
I'd now like to turn the conference over to Tom Hadley, Vice President of Investor Relations. Tom. Please go ahead.
Tom McCrohan: Thank you. On today's call, we will discuss the company's fourth quarter and full year 2023 results, and then we will take your questions. The slides that accompany this call and webcast can be found at westernunion.com under the Investor Relations tab and will remain available after the call. Additional operational statistics have been provided in supplemental tables with our press release.
Tom McCrohan: Thank you.
Tom McCrohan: On today's call, we will discuss the company's fourth quarter and full year 2023 results and then we will take your questions.
Tom McCrohan: The slides that accompany this call and webcast can be found at Western Union Dot com under the Investor Relations tab and will remain available after the call additional operational statistics have been provided in supplemental tables with our press release.
Tom McCrohan: Joining me on the call today is our CEO, Devin McGranahan, and our CFO, Matt Kegwin. 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's filings with the Securities and Exchange Commission, including the 2022 Form 10-K for additional information concerning factors that could cause actual results to differ materially from the forward-looking statement. During the call, we will discuss some items that do not conform to generally accepted accounting principles.
Tom McCrohan: Joining me on the call today is our CEO, Devin mcgranahan, and our CFO Mac Hegwood.
Speaker Change: Today's call is being recorded in our comments include forward looking statements.
Speaker Change: Please refer to the cautionary language in the earnings release and in Western Union's filings with the Securities and Exchange Commission <unk>.
Speaker Change: Including the 2022 Form 10-K for additional information concerning factors that could cause actual results to differ materially from the forward looking statements.
Speaker Change: 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 GAAP measures in our earnings release attached to a form 8-K as well as on our website Western Union Dot com under the Investor Relations section.
Tom McCrohan: We have reconciled those items to the most comparable gap measures in our earnings release attached to our Form 8K as well as on our website, westernunion.com, under the Investor Relations section. I will now turn the call over to our Chief Executive Officer, Devin McGranahan. Good afternoon, and welcome to Western Union's fourth quarter 2023 Financial Results Conference. Now, two years into my tenure as CEO, I am pleased with the improvements we are seeing in our trajectory under our Evolve 2025 strategy. As you know, over the last 18 months, we have focused on returning our digital business to double-digit revenue growth and achieving stability in our retail business. The fourth quarter is further evidence that we are indeed on the right path.
Speaker Change: I will now turn the call over to our Chief Executive Officer, Devin Mcgranahan.
Devin Mcgranahan: Good afternoon, and welcome to Western Union's fourth quarter 2023 financial results Conference call.
Devin Mcgranahan: Now two years into my tenure as CEO I am pleased with the improvements we are seeing in our trajectory under our evolve 2025 strategy as you know over the last 18 months. We are focused on returning our digital business to double digit revenue growth and achieving stability in our REIT.
Devin Mcgranahan: Rail business the fourth quarter is further evidence that we are indeed on the right path today, we are reporting a strong finish to the year with positive adjusted revenue growth and improved transaction trends across both our retail and digital businesses with transaction growth North.
Devin Mcgranahan: Today, we are reporting a strong finish to the year with positive adjusted revenue growth and improved transaction trends across both our retail and digital businesses, with transaction growth north of 5% for the second consecutive quarter. Consistent and sustainable transaction growth is the strongest indicator of the future health of our business. It has been nearly ten years since the company has delivered 5% plus transaction growth for multiple quarters in a row, excluding the COVID recovery period. We are pleased with this significant change in our trajectory. Digging in, looking at quarterly level trends, you can see the change in trajectory is both widespread and meaningful, whether looking at the US to Mexico, France to Africa, or the world to the Philippines.
Devin Mcgranahan: A 5% for the second consecutive quarter, consistent and sustainable transaction growth is the strongest indicator of the future health of our business.
Devin Mcgranahan: It has been nearly a decade since the company has delivered 5% plus transaction growth for multiple quarters in a row, excluding the COVID-19 recovery period, we are pleased with the significant change in our trajectory.
Devin Mcgranahan: Digging in and looking at a quarter level trends you can see the change in trajectory is both widespread and meaningful whether looking at the U S to Mexico, France to Africa or the world to the Philippines. These core doors show the same picture considerable.
Devin Mcgranahan: These corridors show the same picture, considerable improvements in transaction growth rates over the last 18 months. As this graph illustrates, our work over the last 18 months to improve our customer experience, streamline our operational processes, and accelerate our market effectiveness is driving significantly improved outcomes. Our confidence in achieving sustainable, profitable revenue growth by 2025 increases each quarter as we stabilize our retail business, accelerate our digital business, expand our ecosystem offerings, enhance our customer and agent experiences, and maintain industry-leading margins like we did this past quarter. For the fourth quarter, our revenue reached $1,050,000,000, reflecting a 3% increase on a constant currency basis when excluding the contribution from business solutions compared to the same period last year. Adjusted earnings per share came in strong at $0.37, up 16% on a year-over-year basis, and it allowed us to achieve the upper end of our EPS guidance.
Devin Mcgranahan: <unk> in transaction growth rates over the last 18 months as this graph illustrates our work over the last 18 months to improve our customer experience streamline our operational processes and accelerate our market effectiveness is driving significantly improved outcomes.
Devin Mcgranahan: Our confidence in achieving sustainable profitable revenue growth by 2025 increases each quarter as we stabilize our retail business accelerate our digital business expand our ecosystem offerings enhance our customer and agent experiences and maintain industry.
Devin Mcgranahan: <unk> margins like we did this past quarter.
Devin Mcgranahan: For the fourth quarter, our revenue reached $1 billion and $50 million, reflecting a 3% increase on costs on a constant currency basis, when excluding the contribution from business solutions compared to the same period last year adjust.
Devin Mcgranahan: Adjusted earnings per share came in strong at 37.
Devin Mcgranahan: Up 16% on a year over year basis.
Devin Mcgranahan: And allowed us to achieve the upper end of our EPS guidance.
Devin Mcgranahan: Maintaining our long history of returning capital to shareholders, we produced another year of solid cash flow with operating cash flow of $800 million, of which $650 million was returned to our shareholders via dividends and stock buybacks. As discussed at our Investor Day in 2022, to date, we have funded all the required investments in our transformation while maintaining our 19 to 21% adjusted margins and continuing strong returns of capital to our investors. Matt, we'll further discuss our financial results in more detail and provide our 2024 outlook later in this call. In addition to improving financial results, we continue to execute well on our strategic priorities. Over the last year, we have made meaningful progress on our most important initiatives, including improving our retail operations, updating our digital platforms and go-to-market strategy, refining our customer and agent experiences, and enhancing our overall value proposition in the marketplace. While our journey is not over, I would like to share some of the highlights from this past year, starting with our retail business.
Devin Mcgranahan: Maintaining our long history of returning capital to shareholders. We produced another year of solid cash flow with operating cash flow of $800 million of which $650 million was returned to our shareholders via dividends and stock buybacks.
Devin Mcgranahan: As we discussed at our Investor day in 2022 to date, we have funded all the required investments in our transformation transformation, while maintaining our 19% to 21% adjusted margins and continuing strong returns of capital to our investors.
Devin Mcgranahan: Matt will further discuss our financial results in more detail and provide our 2024 outlook later in this call.
Devin Mcgranahan: In addition to improving financial results, we continue to execute well on our strategic priorities over the last year, we have made meaningful progress on our most important initiatives, including improving our retail operations updating our digital platforms and go to market strategy refining.
Devin Mcgranahan: Our customer and agent experiences and enhancing our overall value proposition in the marketplace.
Devin Mcgranahan: While our journey is not over I would like to share some of the highlights from this past year.
Starting with our retail business in 2023, we made material enhancements to our point of sale system with new functionality like remember me quick resend debit payment enablement digital receipts and enhanced payout to account capabilities. These improvements while now ground.
Devin Mcgranahan: In 2023, we made material enhancements to our point-of-sale system with new functionalities like Remember Me, Quick Resend, Debit Payment Enablement, Digital Receipts, and Enhanced Payout-to-Account Capabilities. These improvements, while not groundbreaking, have made our retail customer and agent experience more competitive and have contributed significantly to the improvements you see in our retail transaction trends over the last 18 months. Additionally, we will continue to roll out these functionalities across the globe and anticipate further benefits in 2024. In addition to our point-of-sale improvements, we also made significant progress on expanding our controlled distribution strategy, which includes both owned and concept stores in LACA, Europe, the Middle East, and APAC. Recall that by enabling an exclusive Western Union experience in high-impact locations, we believe we have more control over the customer experience, can test new products and services, and create a new low-cost acquisition engine for our digital business. This strategy, which prior to 2023 was largely a Latin American phenomenon, Networks in both Argentina and Brazil have now been expanded to every region in the country.
Breaking have made our retail customer and agent experience more competitive and have contributed significantly to the improvements you see in our retail transaction trends over the last 18 months.
Devin Mcgranahan: Additionally, we will continue to roll out these functionalities across the globe and anticipate further benefits in 2024.
Yes.
Devin Mcgranahan: In addition to our point of sale improvements. We also made significant progress on expanding our controlled distribution strategy, which includes both owned and concept stores in locker Europe, the middle East and APAC.
Recall that by enabling an exclusive western Union experience and high impact locations. We believe we have more control over the customer experience can test new products and services and creates a new low cost acquisition engine for our digital business.
Devin Mcgranahan: This strategy, which prior to 2023 was largely a Latin American phenomena.
Devin Mcgranahan: Networks in both Argentina, and Brazil has now been expanded to every region in the company.
Devin Mcgranahan: In 2023, we opened 100 new owned locations and 200 new concept stores, which increased our controlled distribution strategy by over 35%. In addition to new store openings, we also updated roughly 30,000 high-impact retail locations around the world with our new Western Union brand format, presenting a more contemporary and omni-channel message to our retail customers. To complement our controlled distribution strategy, last year we also enhanced our digital capabilities, including launching our next-generation digital app now in 12 countries around the globe, launching a digital wallet in four European and one Latin American country, and implementing a new digital go-to-market strategy. This strategy has allowed us to drive more traffic to our digital platforms, increase our conversion rates, improve our marketing messages, and enhance our value proposition while materially lowering our customer acquisition costs
Devin Mcgranahan: Yeah.
Devin Mcgranahan: In 2023, we opened 100, new owned locations and 200, new concept stores, which increased our controlled distribution strategy by over 35%.
Devin Mcgranahan: In addition to new store openings, we also updated roughly 30000 high impact retail locations around the world with our new Western Union brand format, presenting a more contemporary and omnichannel message to our retail customers.
Devin Mcgranahan: To complement our controlled distribution strategy last year, we also enhanced our digital capabilities, including launching our next generation digital App now in 12 countries around the globe launching a digital wallet in four European and one Latin American country and implementing.
Devin Mcgranahan: In a new digital go to market strategy. This.
Devin Mcgranahan: This strategy has allowed us to drive more traffic to our digital platforms increase our conversion rates improve our marketing messages and enhanced our value proposition, while materially lowering our customer acquisition costs.
Devin Mcgranahan: As evidence of this, in 2023, we were able to grow new digital customers by double digits while at the same time lowering our customer acquisition costs by over 15%. Scalable, cost-effective new customer acquisition is the foundation for continued double-digit growth of new digital transactions. Given the journey we are on, ongoing operational performance improvement is a powerful driver of agent and customer satisfaction and ultimately will lead to improved retention. Last year, we made significant changes across key elements of our customer and agent experiences. These changes resulted in millions of fewer phone calls to our call center and improvements in both agent and customer satisfaction. For example, we improved self-service tools like our Track-a-Transfer to integrate across channels so that customers can get status updates on their transfer through the Western Union mobile app, regardless of whether that transfer was initiated on the app or at more than 400,000 retail active locations around the world.
Devin Mcgranahan: As evidence of this in 2023, we were able to grow new digital customers double digits, while at the same time lowing lowering our customer acquisition costs by over 15%.
Devin Mcgranahan: Scalable cost effective new customer acquisition is the foundation for continued double digit growth of new digital transactions.
Devin Mcgranahan: Okay.
Devin Mcgranahan: Given the journey, we're on ongoing operational performance improvement is a powerful driver of agent and customer satisfaction and ultimately will lead to improved retention.
Devin Mcgranahan: Last year, we made significant changes across key elements of our customer and agent experiences.
Devin Mcgranahan: These changes resulted in millions of fewer phone calls to our call center and improvements in both agent and customer satisfaction. For example, we improved self service tools like our track a transfer to integrate across channels. So that customers can get status updates on their transfer through the.
Devin Mcgranahan: Western Union mobile App, regardless of whether that transfer was initiated on the app or at more than one.
Devin Mcgranahan: I had more than over 400000 retail active locations around the world.
Devin Mcgranahan: As you will recall, in late 2022, we started rolling out our new digital go-to-market strategy. This strategy included revised marketing, a focus on funnel effectiveness, improved onboarding processes, promotional pricing for new customers, and market-based pricing on subsequent transactions. The program led to double-digit new customer growth and double-digit transaction growth throughout 2023. By the end of the first quarter of 2024, we will anniversary both the U.S. and the European launches of this strategy, and as such, we expect the gap between transaction growth rates and revenue growth rates to continue to narrow throughout the year. Likewise, on the retail side, last year, we also began rolling out a new go-to-market program to complement our focus on location productivity. That program included revised marketing, seasonal and holiday promotions, and some corridor and geographic-specific pricing initiatives.
Devin Mcgranahan: As you will recall in late 2022, we started rolling out our new digital go to market strategy. This strategy included revised marketing a focus on funnel effectiveness improved onboarding processes promotional pricing for new customers and market based pricing on <unk>.
Devin Mcgranahan: Sequent transactions the program as led to double digit new customer growth and double digit transaction growth throughout 2023 by the end of the first quarter of 2024, we will anniversary both the U S and the European launches of this strategy and as such we expect the gap.
Devin Mcgranahan: Between transaction growth rates and revenue growth rates to continue to narrow throughout the year.
Devin Mcgranahan: Okay.
Devin Mcgranahan: Likewise on the retail side last year. We also began rolling out a new go to market program to complement our focus on location productivity that program included revised marketing seasonal and holiday promotions and some corridor and geographic specific pricing initiatives the <unk>.
Devin Mcgranahan: The majority of these actions occurred in the second and third quarters of last year, and we are now holistically happy with the results that they are producing. We believe these changes have helped us deliver positive retail transaction growth for the first time in many years and have reinforced our belief that we can achieve a stable retail business in the near future. One of the regions that has benefited immensely from these changes implemented over the last year is our APAC region, a region that has been in cyclical decline for over five years.
Devin Mcgranahan: Majority of these actions occurred in the second and third quarters of last year and we are now holistically happy with the results that they are producing we believe these changes have helped us deliver positive retail transaction growth for the first time in many years and has reinforced our belief that we can achieve a stay.
Devin Mcgranahan: Well retail business in the near future.
Devin Mcgranahan: One of the regions that have benefited immensely from these changes implemented over the last year is our APAC region a region that has been in cyclical decline for over five years.
Devin Mcgranahan: APAC was early in the launch of our next-generation digital app, and they have been advancing our efforts through controlled distribution. This region now has some of the highest digital new customer growth rates, the highest digital conversion rates, and has the most significant change in transaction growth rates we have seen anywhere in the world, led by Australia. Transaction growth rates in APAC have improved by a thousand basis points or more year over year in every quarter of 2023. This type of improvement can be seen when you have the right technology, the right distribution strategy, and great customer and agent experience. We believe the right user interface and a keen focus on funnel management will help us meet our expectations of returning our digital business to double-digit revenue growth. Looking ahead.
Devin Mcgranahan: APAC was early in the launch of our next generation digital App and they have been in advancing our efforts through controlled distribution.
Devin Mcgranahan: This region now has some of the highest digital new customer growth rates, the highest digital conversion rates and has the most significant change in transaction growth rates, we have seen anywhere in the world led by Australia.
Devin Mcgranahan: Transaction growth rates in APAC have improved a thousand basis points or more year over year in every quarter of 2023.
Devin Mcgranahan: This type of improvement you can see you have when you have the right technology, the right distribution strategy and great customer and agent experience.
Devin Mcgranahan: We believe the right user interface and a keen focus on funnel management will help us meet our expectations of returning our digital business to double digit revenue growth.
Devin Mcgranahan: Looking ahead, while there is more work to be done and the team is committed to the ongoing continuous improvement of our core remittance business. We are also working diligently to expand our total addressable market beyond cross border remittances.
Devin Mcgranahan: While there is more work to be done, and the team is committed to the ongoing continuous improvement of our core remittance business, we are also working diligently to expand our total addressable market beyond cross-border remittance. Given the strength of our brand, the reach of our distribution, and the trust of nearly 120 million customers, we are focused on creating and delivering additional products and services that cater to the needs of the aspiring populations of the world. This strategy currently includes our digital wallet, our retail money order business, our bill payment business, and we have recently added products like our prepaid debit card, lending services in Argentina and Australia, and a forex currency conversion business that we have launched in select locations across Europe and APAC. We now have over 200,000 customers onboarded to our digital wallet in Europe and over 50,000 in Argentina.
Devin Mcgranahan: Given the strength of our brand the reach of our distribution in the trust of nearly 120 million customers. We are focused on creating and delivering additional products and services that cater to the needs of the aspiring populations of the world.
Devin Mcgranahan: This strategy currently includes our digital wallet, our retail money order business, our bill payment business and we have recently added products like our prepaid debit card lending services in Argentina, and Australia, and a forex currency conversion business that we have launched in select locations across <unk>.
Devin Mcgranahan: Europe and APAC.
Devin Mcgranahan: We now have over 200000 customers on boarded to our digital wallet in Europe and over 50000 in Argentina.
Devin Mcgranahan: Our retail money order business, which we have focused on over the last 18 months has grown substantially over the last couple of years with principal up nearly 20% and investable assets up over $135 million.
Devin Mcgranahan: Our retail money order business, which we have focused on over the last 18 months, has grown substantially over the last couple of years, with principal up nearly 20 percent and investable assets up over $135 million. Growth in investable assets has been important for a business that generates substantial revenue from its asset portfolio. This business now accounts for roughly one-third of our consumer services revenue, formerly referred to as "other" in our financials.
Devin Mcgranahan: Growth in investable assets has been important for a business that generates substantial revenue on its asset portfolio.
Devin Mcgranahan: This business now accounts for roughly one third of our consumer services revenue, formerly referred to as other in our financials with a revamped value proposition improved distribution and a new point of sale system on the horizon. We are excited about continuing to see strong growth.
Devin Mcgranahan: With a revamped value proposition, improved distribution, and a new point-of-sale system on the horizon, we are excited about continuing to see strong growth in this product. As we continue this journey, our goal is not only to drive organic growth but also to seek acquisition opportunities that will enable us to build stronger customer loyalty and an increase in our portion of our customers' financial wallets over time. As one of the key pillars of our Evolve 2025 strategy, we believe we are in the very early innings of this market expansion opportunity and will continue to invest accordingly. Finally, I would like to walk you briefly through our automation journey and highlight a new partnership that we entered into in the fourth quarter.
Devin Mcgranahan: In this product ahead.
Devin Mcgranahan: As we continue this journey our goal is not only to drive organic growth, but also seek acquisition opportunities that will enable us to build stronger customer loyalty and an increase in our portion of our customers' financial wallets overtime.
Devin Mcgranahan: As one of the key pillars of our revolve 2025 strategy. We believe we are in the very early innings of this market expansion opportunity and we'll continue to invest accordingly.
Devin Mcgranahan: Finally, I would like to walk briefly talk briefly about our automation journey and highlight a new partnership that we entered into in the fourth quarter.
Devin Mcgranahan: We have a long history of innovation and have continued to expand our automation capabilities, resulting in cost efficiencies, higher quality output, improved customer and agent experiences, and risk reduction. For example, over the past two years, we have made significant investments in robotic process automation, building capabilities in agent collections and reactivation, customer refund processing, risk exception decisioning, proactive agent credit limit increases, and receiver name changes. While the elimination of manual processes drives cost efficiencies, the speed and quality of the outputs have also led to better experiences. We are now taking a similar approach to artificial intelligence, as we have with robotics, including exploring ways to use generative AI in areas like software development, marketing content creation, price decisioning, customer care assistance, and translation services.
Devin Mcgranahan: We have had a long history of innovation and it continued to expand our automation capabilities.
Devin Mcgranahan: <unk> cost efficiencies higher quality output improved customer and agent experiences and risk reduction.
Devin Mcgranahan: Over the past two years, we have made significant investments in robotic process automation building capabilities in agent collections and reactivation customer refund processing risk exception, decisioning proactive agent credit limit increases and receiver.
Devin Mcgranahan: I'm changes.
Devin Mcgranahan: While the elimination of manual processes drives cost efficiencies the speed and quality of the output have also led to better experiences.
Devin Mcgranahan: We are now taking a similar approach to artificial intelligence as we have with robotics, including exploring ways to use generative AI and areas like software development marketing content creation price decisioning customer care assistance and translation.
Devin Mcgranahan: Services.
Devin Mcgranahan: While early in the journey, we believe generative AI has the potential to increase revenue, further improve efficiency and productivity over time, and thus provide additional value to our shareholders. Last, we are pleased to announce a meaningful expansion of our relationship with Visa. This long-term global strategic relationship covers issuance, Visa Direct, and further enables collaboration between the two companies across 40 countries and five regions. Visa has been a long-term strategic partner of Western Union, and we are thrilled to extend this relationship for years to come.
Devin Mcgranahan: While early in the journey, we believe generative AI has the potential to increase revenue further improve efficiency and productivity over time, and thus provide additional value to our shareholders.
Devin Mcgranahan: Last we are pleased to announce a meaningful expansion of our relationship with visa.
Devin Mcgranahan: This long term global strategic relationship covers issuance visa direct and further enables collaboration between the two companies across 40 countries and five regions visa.
Devin Mcgranahan: Visa has been a long term strategic partner of Western unions, and we are thrilled to extend this relationship for years to come.
Devin Mcgranahan: Looking ahead, we remain optimistic about our strategic direction and the positive progress we have made. We are pleased with the change in the underlying trajectory of our business, driven by improved transaction trends across both digital and retail businesses, while continuing to deliver improved top-line results and strong cash flow. We have also made substantial progress on our talent evolution, including a meaningful realignment of the top 100 executives at the company.
Devin Mcgranahan: Looking ahead, we remain optimistic about our strategic direction and the positive progress. We have made we are pleased with the change in the underlying trajectory of our business driven by improved transaction trends across both digital and retail businesses, while continuing to.
Devin Mcgranahan: Deliver improved top line results and strong cash flow. We have also made substantial progress on our talent evolution, including a meaningful realignment of the top 100 executives at the company.
Matt Kegwin: This has been done through both internal promotions and external hires, and I believe we now have the right people in the right roles to allow us to continue to execute on our Evolve 2025 strategy. We have a loyal customer base that trusts our brand and values our service. We have a global network that provides unparalleled access and convenience to nearly 120 million people around the world and has now achieved a turnaround in transaction trends, thus validating the relevance of our offering and our brand. We have a talented and dedicated team that is focused on executing our strategy and driving innovation. And we have a clear vision in early progress of how we can leverage our assets to create new revenue streams and growth opportunities. I am confident that we have the right strategy, the right capabilities, the right team, and the right mindset to achieve our strategic priorities. Thank you for joining the call today. I will now turn the call over to Matt to discuss our financial results and our forecast for next year in more detail. Thank you, Devin. And good afternoon, everyone.
Devin Mcgranahan: This was done through both internal promotions and external hires and I believe we now have the right people in the right roles to allow us to continue to execute on our evolve 2025 strategy.
Devin Mcgranahan: We have a loyal customer base that trust, our brand and values. Our services, we have a global network that provides unparalleled access and convenience to nearly 120 million people around the world and have now achieved a turnaround in transaction trends, thus validating the relevance of our offering and our brand.
Devin Mcgranahan: <unk>.
Devin Mcgranahan: We have a talented and dedicated team that is focused on executing our strategy and driving innovation and we have a clear vision and early progress on how we can leverage our assets to create new revenue streams and growth opportunities I am confident that we have the right strategy the right capabilities, the right team and the right mindset.
Devin Mcgranahan: To achieve our strategic priorities.
You for joining the call today I will now turn the call over to Matt to discuss our financial results and our forecast for next year in more detail.
Matt: Thank you Devin and good afternoon, everyone I'm pleased to be here today to walk you through our 2023 fourth quarter and full year results and our 2024 financial outlook.
Matt Kegwin: I'm pleased to be here today to walk you through our 2023 fourth quarter and full year results and our 2024 financial outlook. Before I begin, I would like to share with you the updated names of our segments to more accurately reflect the underlying businesses associated with them. Our C2C segment will now be referred to as Consumer Money Transfer, or CMT, and our other segment will be referred to as Consumer Services, or CS, as Devin mentioned earlier. The names of the segments are the only thing to change.
Matt: Before I begin I would like to share with you the updated names of our segments.
More accurately reflect the underlying businesses associate with them. Our <unk> segment will now be referred to as consumer money transfer or CMT.
Matt: And our other segment will be referred to as consumer services or CFS as Devin mentioned earlier.
Matt: The names of the segments are the only thing that changed.
Matt Kegwin: We have not changed the composite of the businesses within them. For the full year, adjusted revenue grew 4%, which is meaningfully better than our original outlook of down 2% to 4% due to better core results, the benefit of Iraq, and Argentinian inflation. In the fourth quarter, we delivered adjusted revenue of $1.1 billion, representing a 3% increase year-over-year. Results benefited from a 400 basis point impact from Argentinian inflation, a revenue increase from Iraq, and the ongoing progress of our Evolve 2025 strategy. Fourth quarter results were above our expectations, as discussed during our last call. Iraq volume slowed in the fourth quarter, and they've benefited our results by 3 percentage points versus an 8% benefit in the third quarter and a 10% benefit in the second quarter. For the full year, Iraq contributed 6% to adjusted revenue growth. However, uncertainty remains high in Iraq due to the challenging regulatory environment. When we last spoke in October, our largest agent in the country had recently been suspended, leading us to believe that volumes would return to levels closer to 2022. This agent, though, has been reactivated in early December.
Matt: We have not changed the composite of business within them.
Matt: Yeah.
For the full year adjusted revenue grew 4%, which is meaningfully better than our original outlook of down 2% to 4% due to better core results the benefit of Iraq and Argentinean inflation.
In the fourth quarter, we delivered adjusted revenue of $1 $1 billion, representing a 3% increase year over year.
Matt: Results benefited from a 400 basis point impact from Argentinian inflation.
Matt: A revenue increase from Iraq, and the ongoing progress of our revolve 2025 strategy.
Matt: Fourth quarter results were above our expectations.
Matt: As discussed during our last call Iraq volume slowed in the fourth quarter.
Matt: They've benefited our results by three percentage points versus 8% benefit in the third quarter and a 10% benefit in the second quarter.
Matt: For the full year IRR, Iraq contributed 6% to adjusted revenue growth.
Matt: Uncertainty remains high in Iraq, due to the challenging regulatory environment.
Matt: When we last spoke in October our largest agent in the country had recently been suspended leading us to believe that the volumes will return to levels closer to 2022.
Matt: This agent.
Matt: <unk> has been reactivated in early December.
Matt: CMT transactions grew 5% in the quarter led by continued momentum of our branded digital business, which grew double digits growth in our digital white label business and continued stabilization of our retail transaction trends ex Iraq.
Matt Kegwin: CMT transactions grew 5% in the quarter, led by continued momentum of our branded digital business, which grew double digits, growth in our digital white label business, and continued stabilization of our retail transaction trends ex-Iraq. Adjusted operating margin was 16.1% compared to 15.8% last year. With the increase due to net savings related to our Operating Expense Redeployment Program and changes in foreign currency, partially offset by higher marketing investment. In 2023, our full-year adjusted operating margin was 19.6%, which was in line with our outlook. Adjusted EPS was $0.37 versus $0.32 last year, with the current period benefiting from higher operating profit and a lower share count.
Matt: Adjusted operating margin was 16, 1% compared to 15, 8% last year.
Matt: With the increase due to net savings related to our operating expense redeployment program and changes in foreign currency, partially offset by higher marketing investments.
Matt: In 2023, our full year adjusted operating margin was 19, 6%, which was in line with our outlook.
Matt: Adjusted EPS was <unk> 37.
Matt: <unk> 32 last year with the current period benefiting from higher operating profit and lower share count.
Matt: For the full year, we delivered adjusted EPS of $1 74, which was meaningfully above our original outlook of $1 55 to $1 65.
Matt: This was driven by better revenue performance and the benefit of our operating expense redeployment program, which we partially reinvested back into the business by accelerating our go to market programs in both retail and branded digital as well as incremental technology investments.
Matt Kegwin: For the full year, we delivered adjusted EPS of $1.74, which was meaningfully above our original outlook of $1.55 to $1.65. This was driven by better revenue performance and the benefit of our operating expense redeployment program, which we partially reinvested back into the business by accelerating our go-to-market programs in both retail and branded digital, as well as incremental technology investments. Now turning to our CMT business, revenue declined 1% on a constant currency basis with transaction growth of 5%. Excluding our CMT domestic money transfer business, revenue and transaction growth would have been 1% higher for both.
Matt: Okay.
Matt: Now turning to our CMT business revenue declined 1% on a constant currency basis with transaction growth of 5%.
Matt: Excluding our CMT domestic money transfer business revenue and transaction growth would have been 1% percentage point higher for both.
Matt: Yeah.
Matt: Branded digital revenue was up 4% on a constant currency basis with transaction growth of 13% driven by our go to market strategy launched in the third quarter of 2022.
Matt: Which showed continued momentum after reaching positive revenue growth last quarter.
Matt: We're excited about the sustainability of our transaction growth, which increased double digit for the third consecutive quarter.
Matt Kegwin: Branded digital revenue was up 4% on a constant currency basis, with transaction growth of 13%, driven by our go-to-market strategy launched in the third quarter of 2022, which showed continued momentum after reaching positive revenue growth last quarter. We're excited about the sustainability of our transaction growth, which has increased double-digits for the third consecutive quarter, while achieving positive revenue growth for the second consecutive quarter. Leading the way is North America, the first region where we launched our new go-to-market strategy, which drove mid to high teens transaction growth in the fourth quarter and revenue in the high single digit range. We're also seeing impressive results in APAC, as Devin discussed earlier, led by Australia, which was an earlier adopter of our new digital platform.
Matt: While achieving positive revenue growth for the second consecutive quarter.
Matt: Leading the way as North America, the first region, where we launched our new go to market strategy.
Matt: Which drove mid to high teens transaction growth in the fourth quarter and revenue in the high single digit range.
Matt: We're also seeing impressive results in APAC as Devin discussed earlier.
Matt: Led by Australia.
Matt: Which was an early adopter of our new digital platform APAC drove mid teens transaction growth.
Matt: Mid single digit revenue growth in the fourth quarter.
Matt: Which we expect will continue to improve as we lap the new go to market launch in mid 2023.
Matt: Yeah.
Matt: Moving to our retail business.
Matt: We maintained stable transaction trends for the second consecutive quarter as we continue to make progress against our strategic priorities, including operational improvements optimization to our network and enhancing our value proposition in the marketplace.
Matt: When normalizing for Russia, Belarus, and Iraq, we improved full year retail transaction growth by 500 basis points.
Matt Kegwin: APAC drove mid-teens transaction growth and mid-single-digit revenue growth in the fourth quarter, which we expect will continue to improve as we approach the new go-to-market launch in mid-2023. Moving to our retail business, We maintain stable transaction trends for the second consecutive quarter as we continue to make progress against our strategic priorities, including operational improvements, optimization of our network, and enhancing our value proposition in the marketplace. When normalizing for Russia, Belarus, and Iraq, we improve full-year retail transaction growth by 500 basis points. Europe and CIS led the improvement in our retail transaction trends in the fourth quarter, with transactions growing in the low single-digit range driven by our Evolve 2025 strategy We also benefited as we lapsed in agent loss in the fourth quarter and have executed well on our remediation plan for the second agent that we're losing. Over the last couple years, our European retail business has not only faced macro-related challenges like war and inflation but has also lost two important agents.
Matt: Europe and Cif led the improvement in our retail transaction trends in the fourth quarter with transactions growing in the low single digit range driven by our evolve 25 strategy.
Matt: We also benefitted as we lapsed and agent loss in the fourth quarter and have executed well on our remediation plan for the second agent that we're losing.
Matt: Over the last couple of years, our European retail business has not only face macro related challenges like war and inflation, but has also lost two important agents.
Matt: With this backdrop, we have taken the opportunity to test new approaches in the marketplace. For example, we opened 100 concept stores across Europe in nearly 20 markets in 2023.
Matt: We also improved our value proposition in key markets driving double digit transaction growth in our independent channel during the second half of 2023.
Matt: North America grew retail transactions low single digit in the fourth quarter, continuing its momentum from the third quarter.
Matt: Prior to this year, our North America retail business hadn't seen positive transaction growth since the second quarter of 2017.
Matt: Enhancements, we've made like one step refund and quick reasoned helped.
Matt Kegwin: With this backdrop, we've taken the opportunity to test new approaches in the marketplace. For example, we opened 100 concept stores across Europe and nearly 20 markets in 2023. We also improved our value proposition in key markets, driving double digit transaction growth in our independent channel during the second half of 2023. North America grew retail transactions low single digit in the fourth quarter, continuing momentum from the third quarter.
Matt: Help to drive better customer and agent experience.
Matt: Now moving to our consumer services segment, formerly known as other which.
Matt: Which represents 7% of total company revenue in the quarter.
Matt: Revenue for the full year was up 13% on a reported basis, while revenue in the fourth quarter was down 1%.
Matt: Revenue in the fourth quarter was impacted by tougher tougher comparisons due to the portfolio optimization that we completed last year further optimization of our flow portfolio in the current period, which resulted in a loss in the current quarter.
Matt Kegwin: Prior to this year, our North America retail business hadn't seen positive transaction growth since the second quarter of 2017. Enhancements we've made, like One Step Refund and Quick Resend, help to drive a better customer and agent experience. Now moving to our consumer services segment, formerly known as other, which represents 7% of total company revenue in the quarter. Revenue for the full year was up 13% on a reported basis, while revenue in the fourth quarter was down 1%.
Matt: But we'll add value over time as well as a five percentage point drag related to the net impact of Argentine peso devaluation.
Matt: Yeah.
Matt: We are excited about our consumer services segment with 2023, marking the second consecutive year of double digit revenue growth.
Matt: With the innovations that Devin highlighted earlier today and over the past few quarters, such as our new retail money order platform launch in the fourth quarter, our prepaid card that was relaunched in the third quarter or our digital wallet. That's currently live in five countries. We are bullish that we can continue to grow consumer services.
Matt Kegwin: Revenue in the fourth quarter was impacted by tougher comparisons due to a portfolio optimization that we completed last year. Further optimization of our float portfolio in the current period, which resulted in a loss in the current quarter, will add value over time, as well as a five percentage point drag related to the net impact of the Argentine peso devaluation. We are excited about our consumer services segment, with 2023 marking the second consecutive year of double-digit revenue growth. With the innovations that Devin highlighted earlier today and over the past few quarters, such as our new retail money order platform launched in the fourth quarter, our prepaid card that was relaunched in the third quarter, or our digital wallet that's currently live in five countries, we are bullish that we can continue to grow consumer services in the low double-digit range going forward.
Matt: In the low double digit range going forward.
Matt: At our Investor Day, we launched a five year $150 million operating expense redeployment program.
Matt: And we feel very good about the progress we've made to date.
Speaker Change: <unk> speaking, we see opportunity to continue to drive efficiency manage our cost structure and leverage our scale.
Speaker Change: In 2023, we took action that allowed us to save over $50 million.
Speaker Change: Yeah.
Speaker Change: The savings last year were primarily driven by talent reallocation technology efficiencies marketing improvements call center enhancements and optimizing our real estate footprint.
Speaker Change: As a result of these savings we were able to invest in technology advancements benefiting our ecosystem platform and our retail point of sale system as well as other opportunities like expanding our controlled distribution network.
Speaker Change: Heading into 2024.
Speaker Change: I remain optimistic of our continued efficiency opportunities and I'm confident that we can hit a similar savings amount again this year.
Speaker Change: Now turning to our cash flow and balance sheet.
Speaker Change: In 2023, we generated $783 million of operating cash flow, which includes a transition tax payment of $119 million paid in the second quarter.
Matt Kegwin: At our Investor Day, we launched a five-year, $150 million operating expense redeployment program, and we feel very good about the progress we've made today. Broadly speaking, we see opportunity to continue to drive efficiency, manage our cost structure, and leverage our scale. In 2023, we took action that allowed us to save over $50 million. The savings last year were primarily driven by talent reallocation, technology efficiencies, marketing improvements, cost and enhancements, and optimizing our real estate footprint.
Speaker Change: These tax payments will continue to step up to $160 million in 2024 and $200 million in 2025.
Speaker Change: I was proud of how well the organized organization embraced a more diligent approach to free cash flow and capital expenditure management.
Speaker Change: Capital expenditures were $31 million in the fourth quarter and $148 million in 2023.
Speaker Change: Capital expenditures were over 25% lower than 2022 and 2021.
Matt Kegwin: As a result of these savings, we were able to invest in technology advancements benefiting our ecosystem platform and our retail point-of-sale system, as well as other opportunities like expanding our controlled distribution network heading into 2024. I remain optimistic about our continued efficiency opportunities, and I am confident that we can hit a similar savings amount again this year. Now turning to our cash flow and balance sheet. In 2023, we generate $783 million of operating cash flow, which includes a transition tax payment of $119 million paid in the second quarter. These tax payments will continue to step up to $160 million in 2024 and $200 million in 2025. I was proud of how well the organization embraced a more diligent approach to free cash flow and capital expenditure management. Capital expenditures were $31 million in the fourth quarter and $148 million in 2023. However, capital expenditures were over 25% lower than 2022 and 2021.
Speaker Change: We are going to remain vigilant on investing in the right areas and shifting our agents from large signing bonuses to performance driven commission structures.
Speaker Change: Okay.
Speaker Change: Our strong free cash flow and disciplined expense management allowed us to continue to maintain a strong balance sheet with cash and cash equivalents of $1 3 billion.
Speaker Change: And debt of $2 5 billion.
Speaker Change: Our leverage ratio remained strong.
Speaker Change: And we're at two four times and one two times on a gross and net basis, which provides us flexibility for potential M&A, while maintaining our investment grade credit rating.
Speaker Change: This strong free cash flow also allowed us to return almost $650 million to our shareholders in 2023, which.
Speaker Change: Which included roughly $350 million in dividends and $300 million in share repurchases, including $200 million in the fourth quarter.
Speaker Change: Now moving onto our outlook today, we provided our financial outlook for 2024, reflecting current macroeconomic conditions.
Speaker Change: We expect adjusted revenue to be in the range of $4 $1 billion to $4 2 billion.
Speaker Change: This range reflects continued growth in our branded digital business. The continued stabilization of our retail business.
Speaker Change: And double digit growth in our consumer services segment, driven by the advancements in our ecosystem strategy.
Speaker Change: We also expect Iraq to generate between 50 and $100 million during the year.
Speaker Change: Yeah.
Speaker Change: We also expect adjusted operating margins to be in the range of 19% to 21%.
Matt Kegwin: We are going to remain vigilant in investing in the right areas and shifting our agents from large signing bonuses to performance-driven commission structures. Our strong free cash flow and disciplined expense management allowed us to continue to maintain a strong balance sheet with cash and cash equivalents of $1.3 billion and debt of $2.5 billion. Our leverage ratio remains strong, and we're at 2.4 times and 1.2 times on a gross and net basis, which provides us with flexibility for potential M&A while maintaining our investment grade credit rating. This strong free cash flow also allowed us to return almost $650 million to our shareholders in 2023, which included roughly $350 million in dividends and $300 million in share repurchases, including $200 million in the fourth quarter.
Speaker Change: And we expect EPS to be in the range of $1 65 to $1 75.
Speaker Change: Finally, we would like to provide an update on our four key performance indicators that we shared at our Investor day.
Starting with retention in 2023 retail retention improved 70 basis points versus 2022.
Speaker Change: As we believe improving retention as a critical component to our strategy of achieving long term sustainable growth across both our retail and digital channels. Starting this year, we will report our total consumer money transfer retention.
Speaker Change: Our long term aspiration to improve retention 200 basis points annually Hasnt changed, but we've learned a lot in 2023, including the effects of the effects of a downward pressure that growing new customers can drive.
Speaker Change: We also made good strides on improving branded digital retention with 120 basis point improvement in 2023.
Speaker Change: Okay.
Speaker Change: We continued to believe that customer acquisition is a key metric and accelerating our growth of our branded digital business to drive more customers to our digital platform and remain committed to growing this double digit annually.
Matt Kegwin: Moving on to our outlook, today we provide our financial outlook for 2024, reflecting current macroeconomic conditions. We expect adjusted revenue to be in the range of $4.1 billion to $4.2 billion. This range reflects continued growth in our branded digital business, the continued stabilization of our retail business, and double-digit growth in our consumer services segment, driven by the advancements in our ecosystem strategy. We also expect Iraq to generate between $50 and $100 million during the year.
In 2023, we grew customer acquisition by 13%, which.
Speaker Change: Which was even higher on a cross border basis.
Speaker Change: Next moving to our Omnichannel.
Speaker Change: Our Investor day, we shared that the small customer base with a vie was valuable to western Union generating two five times more transactions than a single channel customer.
Speaker Change: While we initially thought our Omnichannel is a permanent state for our customers. We have found that omnichannel largely serves the pass through as they migrate between channels.
Matt Kegwin: We also expect adjusted operating margins to be in the range of 19 to 21 percent, and we expect EPS to be in the range of $1.65 to $1.75. Finally, we would like to provide an update on our four key performance indicators that we shared at our investor day. Starting with retention.
Speaker Change: Only 30% of our 2022 Omnichannel customers remained omni channel at the end of 2023.
Speaker Change: While retail to digital migration accounted for 5% of our new branded digital customers in 2023.
Matt Kegwin: In 2023, retail retention improved 70 basis points versus 2022. As we believe improving retention is a critical component to our strategy of achieving long-term, sustainable growth across both our retail and digital channels, starting this year, we will report our total consumer money transfer retention. Our long-term aspiration to improve retention, 200 basis points annually, hasn't changed. But we've learned a lot in 2023, including the effects of the downward pressure that growing new customers can drive. We also made good strides on improving branded digital retention with a 120 basis point improvement in 2023.
Speaker Change: We will continue to focus on a seamless omnichannel customer experience and building an account based relationship with our customers instead of a transactional one and believed that these benefits will be captured in other metrics.
Speaker Change: However, we will no longer report this metric going forward as we believe it is not significant to our overall business.
Speaker Change: Lastly at Investor Day, we shared our goal to add 100000 digital banking customers each month.
Speaker Change: However, since Investor day, we have shifted our focus from Neo bank customers to high quality Cross border remittance customers do.
Speaker Change: Additionally, as Devin highlighted today, our ecosystem strategy includes not only a digital wallet, but it's broader and includes an array of products and services, including retail money order bill payments pre.
Speaker Change: Prepaid cards lending products in foreign currency exchange.
Speaker Change: These results will address the reflected in the consumer services segment and not our consumer money transfer segment.
Matt Kegwin: We continue to believe that customer acquisition is a key metric in accelerating our growth of our branded digital business to drive more customers to our digital platform and remain committed to growing this double-digitally annually. In 2023, we grew customer acquisition by 13%, which was even higher on a cross-border basis.
Speaker Change: We continue to believe the benefits of these new products and services will drive not only higher engagement, but over time will help us improve retention as we shift to an account based relationship.
Speaker Change: As a result, our goal moving forward or be grow our profitable consumer services segment revenue double digit annually, which better reflects the progress of our ecosystem strategy.
Matt Kegwin: Moving to our omnichannel. At our Investor Day, we shared that this small customer base was valuable to Western Union, generating 2.5 times more transactions than a single channel customer. While we initially thought our omnichannel was a permanent state for our customers, we have found that it largely serves as a pass-through as they migrate between channels. Only 30% of our 2022 Omnichannel customers remained Omnichannel at the end of 2023.
Speaker Change: To recap.
Speaker Change: We're pleased with the progress we've made so far and our evolve 2025 strategy and we remain optimistic for the year ahead. Thank you for joining the call today and operator, we're ready to take questions.
Speaker Change: We will pause momentarily to compile the Q&A roster as a reminder, each person is allowed one question with one follow up question all participants will be in listen only mode.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Our first question comes to Us from will Nance from Goldman Sachs. Please ask your question.
Will Nance: Hey, guys I appreciate all the details today, maybe I can start off with some of the comments that you made around omnichannel customers I know you've previously talked around the retail digital escalator over time and.
Matt Kegwin: While the retail to digital migration accounted for 5% of our new branded digital customers in 2023, we will continue to focus on a seamless omni-channel customer experience and building an account-based relationship with our customers instead of a transactional one, and believe that these benefits will be captured in other metrics. However, we will no longer report this metric going forward as we believe it is not significant to our overall business.
I know you are not focusing on having omnichannel customers anymore, but I guess when you see these customers get off the escalator.
Will Nance: Do you still see them.
Will Nance: Transacting at much higher levels and is there any kind of overall change in your in your thought process about the value of the customers.
Will Nance: Hey will it's Devin thanks for joining the call. Indeed, you are correct one of the reasons as Matt highlighted that we're making this change is the real economic benefit to us is that retail to digital escalator and as Matt highlighted 5% of our new customers digital customers in 2020.
Matt Kegwin: Lastly, at Investor Day, we shared our goal to add 100,000 digital banking customers each month. However, since Investor Day, we have shifted our focus from neobank customers to high-quality, cross-border remittance customers. Additionally, as Devin highlighted today, our ecosystem strategy includes not only a digital wallet, but it's broader and includes an array of products and services, including retail money orders, bill payments, Prepaid Cards, Lending Products, and Foreign Currency Exchange. These results will be directly reflected in the consumer services segment and not our consumer money transfer segment.
Will Nance: Three were prior retail customers those customers turn out to have better retention and stronger <unk> than customers that we acquire de novo as new to franchise digital customers, so growing and increasing our ability through omnichannel activities, but the focus really is on the escalator and less on <unk>.
Pool of customers, who live in both retail and digital.
Speaker Change: Got it that makes sense and then just a question on <unk> and we think it gives will it gives us a cost benefit advantage in terms of our overall Tac.
Matt Kegwin: We continue to believe the benefits of these new products and services will drive not only higher engagement but, over time, will help us improve retention as we shift to an account-based relationship. As a result, our goal moving forward will be to grow our profitable consumer services segment revenue double digits annually, which better reflects the progress of our ecosystem strategy. To recap,
Speaker Change: So our ability to continue to grow the digital customer base and using the retail base as a theater is an important part of the strategy and will be reflected in our ability to continue to grow new digital customers.
Speaker Change: Got it that makes sense and then just maybe a different question on some of the guidance.
Speaker Change: Kind of the guidance philosophy, particularly around around reinvestment.
Operator: We're pleased with the progress we've made so far in our Evolve 2025 strategy, and we remain optimistic for the year ahead. Thank you for joining the call today, and operator, we're ready to take questions. We will pause momentarily to compile the Q&A roster. As a reminder, each person is allowed one question with one follow-up question. All participants will be in listen-only mode.
A couple of data points that are picking up I guess it came a little bit ahead of expectations on revenue. We saw the expenses come in much higher bottom line kind of roughly in line with expectation sort of a similar dynamic going on in the full year Guide I think if we look at revenue ex Iraq coming down a little bit lower than maybe what you previously talked about kind of later last year.
Speaker Change: We're still saying earnings overall coming in roughly in line with expectations in the Iraq revenues kind of helping out. So when you. When you constructed that guide how did the incremental Iraqi revenues that maybe you werent expecting when you spoke to us and on December how does that kind of factor into the construction of the guide is there any conservatism in the <unk>.
Devin Mcgranahan: Our first question comes to us from Will Nance of Goldman Sachs. Please ask your question. Hey guys, I appreciate all the details today. Maybe I can start off with some of the comments that you made about omnichannel customers. You know, you know, I know you previously talked about the retail digital escalator over time. And, you know, I know you're not focusing on having omnichannel customers anymore. But I guess, you know, when you see these customers get off the escalator, do you still see them transacting at much higher levels? And, you know, is there any kind of overall change in your thought process? About the value of these customers? Hey, Will, it's Devin.
Speaker Change: Raul numbers to account for the uncertainty in Iraq and did you guys make any incremental investments on the revenue side that may have impacted the <unk> numbers in light of this need ecmo revenues. Thanks.
Speaker Change: Well thanks for the question.
<unk> main focus we've got is obviously on the topline and EPS, sometimes you end up with items down and other which while they make further investments if you've got the right things invest in but on your question about Iraq itself.
Devin Mcgranahan: Thanks for joining the call. Indeed, you are correct. One of the reasons, as Matt highlighted, that we're making this change is the real economic benefit to us of retail, the digital escalator. And as Matt highlighted, 5% of our new customers, digital customers, in 2023 were prior retail customers. Those customers turn out to have better retention and stronger ARPUs than customers that we acquire de novo as new franchise digital customers. So, growing and increasing our ability through omnichannel activities. But the focus really is on the escalator and less on a pool of customers who live in both retail and digital. Got it, yeah that makes sense, and then just a question. And we think it gives us a cost-benefit advantage in terms of our overall CAC, and so our ability to continue to grow the digital customer base and use the retail base as a feeder is an important part of the strategy and will be reflected in our ability to That makes sense.
Speaker Change: We have made a fair bit of pricing actions during 2023 that I have a carryover effect into 2024.
Speaker Change: Well, we continue to monitor that so that's been factored into our thinking here.
Speaker Change: The opportunity as we get into 'twenty four as we gave in the $50 million to $100 million range is slightly higher than we would've thought back in December we matter November I think maybe that actually.
Speaker Change: But not meaningfully higher we just knew we had a carryover effect of the actions we took this past year.
Speaker Change: The other thing I'll add.
Speaker Change: Our next question Oh, and secondly, it's still a highly uncertain situation.
Speaker Change: We are our main settlement partner.
Speaker Change: <unk> has notified us that they will not settle for us.
Speaker Change: For our cash exchange retail customers in Iraq.
Speaker Change: At the end of the first quarter, that's a significant portion of our volume and while we continue to look for alternatives to that we really.
Speaker Change: I think it put into the guide a reasonable outcome given the uncertainty of what may or may not transaction post March.
Matt Kegwin: And then maybe a different question on some of the guidance and the kind of the guidance philosophy, particularly around reinvestment. Just a couple of data points that I'm picking up, I guess, came a little bit ahead of expectations on revenue. We saw the expenses come in much higher, bottom line, kind of roughly in line with expectations, sort of a similar dynamic going on in the full year guide. I think if we look at revenue XRAC, that's coming in a little bit lower than maybe what you previously talked about, kind of later last year. We're still seeing earnings overall coming in roughly in line with expectations and the Iraq revenues kind of helping out. So just when you constructed that guide, how did the incremental Iraqi revenues that maybe you weren't expecting when you spoke to us in December? How did that kind factor into the construction of the guide?
Speaker Change: Our next question comes to Us from Vasu <unk> from <unk>. Please ask your question.
Vasu: Hi, Thank you for taking my call.
Vasu: Our hand, I'm going to shift to a different call.
Vasu: Jeremy.
Vasu: Okay.
Jeremy: Hi, good evening guys.
Jeremy: We can hear you Roger.
Speaker Change: Uh huh.
Speaker Change: <unk> go ahead and ask your question.
Speaker Change: Let's go to the next one thing getting back on later.
Speaker Change: Our next question comes to Us from Andrew Schmidt from Citi. Please ask your question.
Speaker Change: Okay.
Andrew Jeffrey: Hey, guys. Thanks for taking my questions. Here. This is just a higher level question.
Andrew Jeffrey: Start off with obviously you look at U S migration trends been pretty robust only one market, but clearly the biggest outbound market in the world I'm wondering if to what extent.
Youre seeing that show up in our results I know that.
And you mentioned pretty positive I think double digit transaction growth in the independent channel.
Andrew Jeffrey: The mix of self improvement initiatives.
Andrew Jeffrey: Also in there, but I'm curious to what extent youre seeing that positive remittance or I should say positive migration trends show up in your results. Thanks, a lot guys.
Matt Kegwin: Is there any conservatism in the overall numbers to account for the uncertainty in Iraq? And did you guys make any incremental investments on the revenue side that may have impacted the XRAC numbers in light of these incremental revenues? Thanks.
Andrew Jeffrey: <unk>.
Andrew Jeffrey: Andrew It's a great question. Thank you for joining the call today.
Andrew: We are seeing the benefit in fact, our business is driven by as you know too.
Matt Kegwin: Thanks for the question. The main focus we've got is obviously on the top line and EPS. Sometimes you end up with items down and others, which allows you to make further investments if you have the right things to invest in.
Andrew: Primary factors overall global macroeconomic growth and by migration and so the increased migration into North America over the last couple of years is benefiting particularly those outbound corridors.
Matt Kegwin: But on your question about IRAC itself, we have made a fair bit of pricing actions during 2023 that have a carryover effect into 2024, as well as we continue to monitor that. So that's been factored into our thinking here. The opportunities we get in 24, as we gave them the 50 to 100 million dollar range, are slightly higher than we would have thought back in December when we met or November. I think it may actually be, but not meaningfully higher. We just knew we had a carryover effect of the actions we took this past. Our next question. One second, please.
Andrew: From the U S to certain regions in Latin America.
Andrew: And so we see double digit transaction growth in those corridors.
Andrew: As a result of the migration theres less of that when Matt was talking about the improved transaction trends in retail in Europe, there's been less net migration into Europe over the last year or two and so that is more of a result of kind of ongoing performance improvement.
Andrew: Enhance the quality of our distribution network and our stronger go to market value proposition there.
Devin Mcgranahan: It's still a highly uncertain situation. We are, our main settlement partner has notified us that they will not settle for us for our cash exchange retail customers in Iraq at the end of the first quarter. That's a significant portion of our volume, and while we continue to look for alternatives to that, we really, you know, I think have put into the guide a reasonable outcome given the uncertainty of what may or may not happen post-trade. Our next question comes to us from Vasu Govil from KBW. Please ask your question. Hi, thank you for taking my question. Hey, Chipotle, can you lower our hand? I'm going to shift to a different... Hi, can you guys hear me?
Andrew: And doing that build on <unk> comment is.
Andrew: Youre focusing on the specific question you asked but Holistically, we believe the hard work, we're doing with our agents and our customers are really driving the progress we're making I think we have a modest tailwind as Devin just described but when you look at it we've now starting to move from being a share donor to holding our fair share with a little bit of tailwind from this.
Andrew: And Mexico is the perfect Corridor example, where for many years, we were probably losing share.
Andrew: U S to Mexico in the last 12 months, we've returned back to growing share in that important corridor and obviously its in a corridor that.
Andrew: The Central Bank of Mexico publishes is growing in the mid.
Operator: um, Vasu, go ahead and ask your question. Our next question comes to us from Andrew Schmidt from Citi. Please ask your question. Hey, guys, thanks for taking my questions here. This is just a higher level question.
Andrew: To high single digits year over year.
Speaker Change: Super helpful. I appreciate that and then if I could dig into just the branded.
Branded digital transaction growth up 13% this quarter and I know you elaborate on this a little bit but.
Devin Mcgranahan: To start off with, obviously, you look at US migration trends, which have been pretty robust, only one market, but clearly the biggest outbound market in the world. I'm wondering to what extent you're seeing that show up in your results. I know that you mentioned pretty positive, I think, double digit transaction growth in the independent channel. And I know it's a mix of self improvement initiatives also there. But I'm curious to what extent you're seeing that positive remittance, or I should say positive migration trends, show up in your results. Thanks a lot, guys. Andrew, it's a great question.
Speaker Change: The breakdown just the drivers of that whether it's.
Speaker Change: New customer growth, whether it's retention, whether it's behavior transactions per customer any additional just.
Speaker Change: <unk> of that would be helpful. Just so we can get a better understanding of the underlying mechanics of that transaction growth growth. Thanks, a lot guys. Thanks, Andrew for the question I mean really it's all three I highlighted a few of the components back into the third but I highlighted in the metro conversation at the end that our retention has improved in branded digital by 110 basis points in 2023.
Speaker Change: We've also highlighted we continue to grow our new customers in.
Speaker Change: The double digit range full year was 13%.
Devin Mcgranahan: Thank you for joining the call today. We are seeing the benefit. In fact, our business is driven by, as you know, two primary factors, overall global macroeconomic growth and migration. And so the increased migration into North America over the last couple of years is benefiting, particularly those outbound corridors from the U.S. to certain regions in Latin America.
And then we are seeing a little bit of an uptick in transactions per customer, but that's the lower three.
Speaker Change: Thanks for your question.
Speaker Change: We are going to go back to <unk>.
Speaker Change: Yeah.
Speaker Change: Hi, Thanks for taking my question hopefully you can hear me refer.
Speaker Change: Sure.
Speaker Change: I guess my first question for you Darren on the deeper wallet strategy historically, you've been focused on sort of positioning that wallet to drive more retention and engagement and I think today.
Darren: Can you guys sort of seem like youre, focusing a little bit on the revenue per ton per man hour with Robert Baird.
Darren: Lastly, I might slightly reframe that.
Darren: We are focusing on growing revenue from our overall ecosystem strategy and we believe that that is a important metric to gauge our ability to return western union to profitable revenue growth as part of our goal of 2025 strategy a component of that is in fact.
Devin Mcgranahan: And so we see double-digit transaction growth in those corridors as a result of the migration. But there's less of that when Matt was talking about the improved transaction trends in retail in Europe. There's been less net migration into Europe over the last year or two.
Darren: Growing our digital wallet, which we believe will primarily benefit retention as a b as it is a more account based relationship and thus will drive increased revenue through lower customer churn and obviously the increased our approved from extended customers.
Matt Kegwin: And so that is more of a result of kind of ongoing performance improvement, enhancing the quality of our distribution network and our stronger go-to-market value proposition. Devon Common says, You're focusing on the specific question you asked, but holistically, we believe the hard work we're doing with our agents and our customers is really driving the progress we're making. I think we have a modest tailwind, as Devin just described, but when you look at it, we've now started to move from being a share donor to holding our fair share with a little bit of a tailwind. And Mexico is the perfect corridor example where, you know, for many years, we were probably losing share to Mexico.
Darren: So while we still have a strong focus on growing our digital wallet, we're doing so more with a focus on our remittance business and on driving retention with our digital remittance customers by them, having more of an account based relationship, which we believe will drive revenue of ancillary products and services, including interchange.
Darren: Including bill payment, including other.
Darren: Other services that are available digitally in the wallet is not available in our traditional transaction cross border remittance platform.
Matt Kegwin: In the last 12 months, we've returned to growing our share in that important corridor. And obviously, it's in a corridor that, you know, the Central Bank of Mexico publishes is growing in the mid to high single digits year over year. Super helpful; I appreciate that.
Speaker Change: Okay helpful. And then a quick one for you.
Darren: Right.
Speaker Change: Wondering on.
Speaker Change: Our margin guidance.
Boy, if you could help us think about what to expect for the cadence throughout the year.
Speaker Change: So it's going to bounce around it's going to be not linear we kept the guidance of the 19% to 21, because we think as revenue accelerates that can provide us incremental profitable revenue growth.
Matt Kegwin: And then I could dig into just the branded digital transaction growth, up 13% this quarter. And I know you elaborated on this a little bit, but if you could break down just the drivers of that, whether it's new customer growth, whether it's retention, whether it's behavior, transactions per customer, any additional new disaggregation of that would be helpful just so we can get a better understanding of the underlying mechanics of that transaction growth. Thanks a lot, guys. Thanks, Andrew, for the question. I mean, really; it's all three.
Speaker Change: As you have opportunity to make investments that will pull it down our goal to hit the number throughout the full year.
Speaker Change: But any given quarter can bounce around I can't really.
Speaker Change: We guide to that at this point.
Speaker Change: Okay.
Speaker Change: Our next question comes to Us from Tien Tsin Huang from Jpmorgan. Please ask your question.
Speaker Change: Hi, Thanks, I just wanted to ask on the customer additions I know this is trending nicely with double digits, but also the acquisition costs has been.
Speaker Change: Lower.
Speaker Change: How do you expect those two dynamics to trend here in.
Speaker Change: <unk> 2004 ahead can we count on acquisition cost stay lower or is there potential that maybe turn that dial differently.
Matt Kegwin: I highlighted a few of the components going back into the third, but I highlighted in the metrics conversation at the end that our retention has improved in branded digital by 110 basis points in 2023. We've also highlighted that we continue to grow our new customers in the double digit range. The full year was 13%. And we are seeing a little bit of an uptick in transactions per customer, but that's lower than. Thanks for the question. We're going to go back to Vasu Govil.
Speaker Change: Hey, Tim this is Matt.
I think we saw further opportunity as Devin talked about earlier, we have generative AI, we're working on we've done some things around robotics.
Matt: Bob who lead that organization has been at the company now for 18 months and is continuing to add skills into the organization. So we think there is further opportunity as we enhance that is as far as we rolling out incremental our new digital platform different countries that'll provide additional opportunity. So we don't see pressure on that I can't say it can be the same level of reduction in 'twenty.
Devin Mcgranahan: Hi, thanks for taking my question. Hopefully, you guys can hear me this time. I guess my first question for you, Devin, is on the digital wallet strategy. Historically, you've been focused on sort of positioning that wallet to drive more retention and engagement. And I think today, the description you guys gave, it seemed like you were focusing a little bit on the revenue potential there as well. Is that a fair assessment? Vasu, I might slightly reframe that.
Matt: 2024, as we did in 'twenty, three but we do see opportunity to keep making enhancements there.
Matt: Okay contingent one of the things we talked a lot about.
Matt: <unk>, which is our ability to scale at cost effective tax.
Matt: Around the world right and so in some markets that are exceptionally well developed like the U S. The team has done a very nice job of that what you see in the store.
Matt: Strong customer growth in the mid to upper teen transaction levels that we saw last year as we work our way around the world increasing our capabilities to scale marketing acquisition and to do it cost effectively will be one of our priorities in 2024.
Devin Mcgranahan: We are focusing on growing revenue from our overall ecosystem strategy, and we believe that that is an important metric to gauge our ability to return Western Union to profitable revenue growth as part of our Evolve 2025 strategy. A component of that is, in fact, growing our digital wallet, which we believe will primarily benefit retention, as it is a more account-based relationship, and thus will drive increased revenue through lower customer churn and, obviously, increased ARPU from extended customers. So, while we still have a strong focus on growing our digital wallet, we're doing so more with our digital wallet. [inaudible] other services that are available digitally in the wallet that are not available in our traditional transaction cross-border remittance platform. Super helpful. And then I have a quick one for you.
Matt: The focus on the last call.
Matt: Just the consumer services.
Matt: Expectations for double digit growth again in 'twenty four.
Matt: The other component is going to be different I noticed float and other things to consider but anything to call out there or rank.
Matt: Bigger contributors yes.
Speaker Change: Yes, I think as you think about this year and last year. The vast majority of the growth has come through our legacy products that we had there bill pay or money order as you highlighted there's been a little bit of a tailwind from higher interest rates.
Speaker Change: We do have a relatively moderate term it will be disclosed as part of its about four four and a half years is the duration for our investments there. So feel good about 'twenty four for where we arent interest debt.
Matt Kegwin: I was wondering about the margin guidance for 2024. If you could help us a little bit about what to expect for the cadence throughout the year, Hey Vas, it's going to bounce around.
Speaker Change: Devin talked about on these calls the number of new prostate put there whether it be pre.
Speaker Change: Prepaid Forex.
Speaker Change: Revamping, our money order business and so forth.
Speaker Change: And 'twenty 'twenty four and beyond we think that we are seeing a larger portion of our growth coming from these new product additions.
Matt Kegwin: It's not going to be linear. We kept the guidance of the 19 to 21 because we think as revenue accelerates, that's going to provide us incremental profitable revenue growth. As you have opportunity to make investments, that will pull it down. Our goal is to hit the number throughout the full year. But any given quarter can bounce around. I can't really die die today.
Speaker Change: Thank you.
Speaker Change: Our next question comes to Us from Darrin Peller from Wolfe Research. Please ask your question.
Darrin Peller: Hey, guys.
Darrin Peller: I guess my question is really more around just the trend line Devin I'd like to comment about the narrowing between the transaction growth trends, which we've seen improve and consistently and the revenue growth trends, which is still I mean, if you calculate the Iraq in Argentina impact still I think around negative four are unchanged. So you've seen transactions improve revenue.
Operator: Our next question comes to us from Tin Jin Wong from J.P. Morgan. Please ask your question. Hi, thanks.
Darrin Peller: Seems like Theres going to be a lag to it but you did comment on the narrowing. So can you just get a little more detail on that because I think that's the crux of what I know we had some investors are looking for.
Matt Kegwin: I just want to ask about customer additions. I know that's trending nicely with double digits, but also, the acquisition cost has been lower. How do you expect those two dynamics to trend here? In 24 ahead, can we count on acquisition costs staying lower? Or is there a potential to maybe turn that dial differently? Hey, Tenzin, this is Matt.
Darrin Peller: To follow on from the obvious improvements you are having in the transaction side of the business.
Speaker Change: Hey, Darren and thanks for joining the call.
Darren: Indeed, we are closely monitoring that gap and I think we've talked about three things in the past, which I'll reiterate one our long term aspiration is to maintain the ratio between transactions and revenue to be a two to 300 basis point gap.
Matt Kegwin: I think we still have further opportunities. As Devin talked about earlier, we have generative AI we're working on, and we've done some things around robotics. Bob, who leads that organization, has been at the company now for 18 months, and he's continuing to add skills to the organization. So we think there's further opportunity as we enhance that as far as we are gradually rolling out our new digital platform in different countries, that will provide additional opportunities. So we don't see any pressure on that.
Darren: As we kind of continue to evolve our business and so our goal is to get revenue up to reach that two to 300 basis point gap.
Darren: During the duration of our evolve 2025 strategy. The second is the way we rolled out, particularly on the digital side, but also on the retail side. Our revised go to market strategy, which was kind of on a region by region basis create some lumpiness.
Devin Mcgranahan: I can't say it's gonna be the same level of reduction in 20, 2024 than we did in 23, but we do see opportunity to keep making enhancements. Intention, one of the things we talk a lot about, which is our ability to scale at cost-effective tax around the world, right? And so in some markets that are exceptionally well developed, like the US, the team's done a very nice job of that, which you see in the, you know, strong customer growth in the mid to upper teen transaction levels that we saw last year. As we work our way around the world, increasing our capabilities to scale marketing acquisition and to do so cost effectively will be one of our priorities in 2024. Good
Darren: As to how you see that gap closed because of the effects of the new region rolling into it as I commented on the <unk>.
Darren: Public prepared notes, we will be lapping at least on the digital side.
Darren: The North American and European which is the preponderance of our digital business by the end of this quarter. So the acceleration in closing the gap will the.
Darren: The gap closure will accelerate in the second half of this year.
Darren: And then third we are continuing to iterate as.
Darren: As we go across segments geographies and channels and so as we've always said we compete in a lot of different places around the world. So we will continue to optimize but our goal really is to close that gap and to close it over the course of the duration of our strategy.
Matt Kegwin: No, I'm glad it's a focus. Just my last follow-up, just the consumer services. Expectations for double-digit growth, again, in 24, are the components going to be different? I know there's a flow to consider things to consider, but anything to call out there or rank?
Speaker Change: Got it that's really helpful. I guess, just one quick follow up would be around.
Any is there any read on retention metrics on cohorts you gained.
Speaker Change: Via the promotional efforts now over the last year or so in the U S.
Matt Kegwin: Bigger Contributors. Yes, I think as you think about this year and last year, the vast majority of the growth has come through our legacy products that we had there, bill pay, and money order. As you highlighted, there's been a little bit of a tailwind from higher interest rates. We do have a relatively moderate term that we disclosed as public. About four, four and a half years is the duration of our investments there. So feel good about 24 for where we are in interest. Devon talked about on these calls the number of new profits put there, whether it be prepaid or forex. And I think that's a really good point.
Speaker Change: It looks like it's great to see the transaction trends just curious to know a little more on the puts and takes of net new versus retention.
Speaker Change: Hey, Darren Thanks for the question.
Darren: We can do we've probably been two quarters now, but we continue to see strong results in the 90 day 180 day retention for the newer cohorts are coming in through promotional pricing.
Darren: It's driven through the Reengagement campaigns, we've talked about in past calls.
Darren: Having better market based pricing more streamline transaction processing as well as where target were starting to target.
Darren: Companies that are doing APM transactions, which have a higher retention rate as well and we continue to see a high <unk> low 30% growth rate in our APM business, both in the retail and digital side.
Matt Kegwin: Revamping our money order business, and so forth. In 2024 and beyond, we think that we're going to start seeing a larger portion of our growth coming from those new product additions. Thank you.
Darren: <unk> payout to account.
Darren: The other thing I think Darren you can look at.
Darren: Matt talked about the 110 basis point improvement in digital transactions.
Devin Mcgranahan: Our next question comes to us from Darrin Peller from Wolf Research. Please ask your question. Hey guys.
Darren: Year over year.
Darren: That is the composition of our <unk>.
History, Ied accumulated book and as you know as customers tenure in this category retention goes up so we've been growing new customers aggressively.
Devin Mcgranahan: I guess my question is really more around just the trend line. You know, Devin, I liked your comment about the narrowing between the transaction growth trends, which we've seen improving consistently, and the revenue growth trends, which are still, I mean, if you calculate the Iraq and Argentina impacts, it's still, I think, around negative four unchanged. So you've seen transactions improve, revenue seems like there's going to be a lag, but you did comment on the narrowing. So can you just get a little more detail on that? Because I think that's the crux of what we and some investors are looking for to follow on from the obvious improvements you're having in the transaction side of the business. Hey Darrin, thanks for joining the call.
Darren: But increasing the overall retention of the book, which says something about the quality of the new customers and the retention in that subset of the portfolio in order to achieve that.
Darren: Yeah.
Speaker Change: Our next question comes to us from Ken So Celski from autonomous please ask your question.
Speaker Change: Hi, good afternoon, everyone. Thanks for taking the question I just wanted to ask a couple on the physical retail business and maybe we can exclude Iraq just to strip out some of the noise.
Speaker Change: The revenue per transaction that part of the business has declined over the last handful of quarters. So I was wondering if you could talk about what's causing it.
Devin Mcgranahan: Indeed, we are closely monitoring that gap. And I think we've talked about three things in the past, which I'll reiterate. One, our long-term aspiration is to maintain the ratio between transactions and revenue to be, you know, a two to 300 basis point gap as we can continue to evolve our business. And so our goal is to get revenue up to reach that two to 300 basis point gap during the duration of our Evolve 2025 strategy. The second is the way we rolled out, particularly on the digital side, but also on the retail side, a revised go-to-market strategy, which was kind of on a region-by-region basis, creates some lumpiness as to how you see that gap closed because of the effects of the new region rolling into it. As I commented in the public prepared notes, we will be lapping, at least on the digital side, both North America and Europe, So the acceleration in closing the gap will accelerate in the second half of this year.
Speaker Change: That revenue per transaction decline in physical retail ex Iraq.
Speaker Change: Then it looks like over the last few quarters pricing adjustments were needed to.
Speaker Change: To accelerate transaction growth in that part of the business.
Speaker Change: So do you think.
Speaker Change: I think the lower pricing in that physical retail <unk> is sort of behind you or do you feel like you need to be more aggressive on that front to accelerate transaction growth even further.
Speaker Change: <unk> as you go throughout the year.
Speaker Change: Hey, Ken. Thank you very much for the question as you think about the change in RPT ex Iraq over the last call. It year about two thirds of that is really mix driven and you have about.
The remaining portion being more conscious price reductions that we've done.
Ken: So are doing some tests, we talked about last call and a large European country, where we change our FX yields multiple times throughout the day to be competitive which is driving pricing.
Ken: We've done some other tests around the world that we've now kept permanent for many of them.
Ken: So it's a little bit of a mix of both of mix and a conscious decision to drive performance and one that will highlight you've seen in our charts. Both this quarters past you can see improvements in our transaction trends.
Ken: To sort of push in price changes in Q2 and Q3.
Devin Mcgranahan: And then third, you know, we are continuing to iterate as we go across segments, geographies, and channels. And so, as we've always said, we compete in a lot of different places around the world, so we'll continue to optimize. But our goal really is to close that gap and to close it over the course of the duration of our. Yeah, I mean, that's really helpful.
Ken: We're starting to do additional work with our agents and our customers on both the product side and customer service. So to US we believe that really all three elements are making a difference it's not a battle about price only it's about having market competitive prices.
Ken: Great service, great product as far as the future.
Ken: We're always going be adjusting the market looking at our competitors do.
Ken: So, but we are committed to our guidance yes.
Speaker Change: Okay. That's helpful and then what's the expectation around revenue growth in the physical retail business in 2020 for I guess, including and excluding in Iraq, because it looks like youll start to lap some of the Iraq revenue contribution in the first quarter of this year.
Matt Kegwin: I guess just one quick follow-up would be around, you know, the any read on retention metrics on cohorts you gained via the promotional efforts now, over the last year or so in the US? It's just, again, it looks like it's great to see the transaction trends. Just curious to know a little more on the puts and takes of net new versus retention.
Speaker Change: So Ken we're not going to give out guidance.
Ken: Segment level really for most things.
Ken: Yes.
Ken: Our next question comes to Us from Tyler Dupont from Bank of America. Please ask your question.
Matt Kegwin: Hey, Darren, thanks for the question. It's probably been two quarters now, but we continue to see strong results in the 90 day, 180 day retention for the newer cohorts are coming into promotional pricing. It's driven through the reengagement campaigns we've talked about in past calls, having better market-based pricing, more streamlined transaction processing, as well as targeting companies that are doing APN transactions, which have a much higher retention rate as well. And we continue to see a high 20s to low 30% growth rate in our APN business, both in retail and digital. APN being payout to account.
Hi, good.
Tyler Dupont: Good afternoon, Kevin and Matt This is Tyler on for Jason Thanks for taking the question.
Tyler Dupont: I wanted to first touch on the current geopolitical events in the Middle East.
Tyler Dupont: Given your geographic footprint.
Tyler Dupont: Israel or anything but the region more broadly are there any dynamics youre seeing worth calling out whether those are changing money transfer volumes or mix between retail and digital or just any other dynamics that are worth considering that havent dimension so far.
Hey, Thanks for the question, we've seen very obviously overall volumes in the region are down.
Speaker Change: But they haven't gone to zero and there has been little change in terms of the mix of retail and digital it's predominantly a retail environment in that part of the world.
Devin Mcgranahan: The other thing I think, Darren, you can look at... Matt talked about the 110 basis point improvement in digital transactions year over year. That is the composition of our history, i.e. The accumulated book, and as you know, as customers tenure in this category, retention goes up. So we've been growing new customers aggressively but increasing the overall retention of the book, which says something about the quality of the new customers and the retention in that subset of the portfolio in order to achieve that. Our next question comes to us from Ken Suchowski from Autonomous. Please ask your question. Hi, good afternoon, everyone.
Speaker Change: We continue to monitor it but the overall region itself is.
Speaker Change: Relatively small relative to our total business.
Speaker Change: So we're more concerned about the lives of the people protecting our agents our employees and hoping that the conflict ends quickly then the economic impacts for our business.
Speaker Change: Okay.
Speaker Change: That's helpful. And then just as a follow up I believe you mentioned in the prepared remarks that customer acquisition cost declined by around 15% in the year.
Speaker Change: Can you speak to how the company is LTV to CAC has evolved throughout 2023, and how you anticipate this metric will continue to evolve through 2024, particularly as we're shifting the mindset more of an omnichannel focus to selling services to just sort of the dynamics there on any pieces to the puzzle work.
Operator: Thanks for taking the question. I just wanted to ask a couple on the physical retail business. And maybe we can exclude Iraq, just to strip out some of the noise.
Matt Kegwin: You know, the revenue per transaction for that part of the business has declined over the last handful of quarters. So I was wondering if you could talk about what's causing that revenue per transaction decline in physical retail ex-Iraq. And then it looks like over the last few quarters, pricing adjustments were needed to accelerate transaction growth in that part of the business. So do you think you're, you know, do you think the lower pricing in that physical retail ex-Iraq is sort of behind you? Or do you feel like you need to be more aggressive on that front to accelerate transaction growth even further as you go throughout the year? Hey Ken, thank you very much for the question.
Speaker Change: Got it.
Speaker Change: Yeah, Hey, Tyler Thanks for the question as you think about it we've highlighted a couple of the key drivers of that math.
Speaker Change: We've talked about the fact that our digital retention has improved by 110 basis points, that's pushing the life out longer.
Speaker Change: Our historical customers over before making this change.
Speaker Change: We've reduced our rates to some degree and then we've obviously lowered our CAC holistically. It's a it's about the same as it was before but those moving parts.
Speaker Change: And I would add two things to it.
As you know when we launched this program.
Speaker Change: Which is now 18 months into the program, we made the explicit shift which.
Speaker Change: Hereto before we had not manage do which was to a target LTV to CAC goal.
So we've maintained that goes throughout the program and as either LTV or Tac.
Matt Kegwin: As you think about the change in RPT, Ex-Iraq over the last, call it year, about two-thirds of that is really mixed driven, and you have about. The remaining portion being more conscious price reductions that we've done. We've started doing some tests. We talked about the last call in a large European country, where we changed our FX yields multiple times throughout the day to be competitive, which is driving pricing. We've done some other tests around the world that we've now kept permanent for many of them. So, it's a little bit of a mix of both, mixing and conscious decisions to drive performance.
Speaker Change: <unk>, we adjust accordingly in terms of our <unk>.
Speaker Change: Marketing spend and our ability to drive new programs into the marketplace and so as LTV goes up that enables us to spend more as cat goes down that enables us to spend more and obviously in reverse.
Speaker Change: Hopefully that won't happen, but if it did then we would spend less.
Speaker Change: Our next question comes to Us from Ramsey El <unk> from Barclays. Please ask your question.
Ramsey El: Our next question in the queue comes to us from James Faucette from Morgan Stanley. Please ask your question.
Matt Kegwin: The one thing I will highlight, you've seen in our charts both this quarter and the past, you can see improvements in our transaction trends prior to us starting to push for price changes in Q2 and Q3, as we were starting to do additional work with our agents and our customers on both the product side and customer service. So, to us, we believe that really all three elements are making a difference. It's not a battle about price only; it's a matter of having market competitive prices, great service, and a great product. As far as the future, we're always going to be adjusting to the market, looking at what competitors do, but we are committed to our gui. Yeah, okay, that's helpful, Matt. And then what's the expectation around revenue growth in the physical retail business in 2024, I guess, including and excluding Iraq, because, you know, it looks like you'll start to lap some of the Iraqi revenue contribution in the first quarter of this year. So, again, we're not going to give out guidance at the segment level, really, for most of it. Our next question comes to us from Tyler DuPont from Bank of America. Please ask your question. Hi. Good afternoon, Governor Matt. This is Tyler on for Jason.
Ramsey El: Our next question comes to Us from Jamie Friedman.
Speaker Change: <unk> please.
James Eric Friedman: Please ask your question.
James Eric Friedman: We have no additional questions in the queue at this time.
James Eric Friedman: Thank you for joining the Western Union fourth quarter 2023 results Conference call. We hope you have a great day.
James Eric Friedman: Okay.
James Eric Friedman: Okay.
James Eric Friedman: Okay.
James Eric Friedman: Okay.
Operator: Thanks for taking the questions. I wanted to first touch on the current geopolitical events in the Middle East. Given your geographic footprint, you know, not specific to Israel or anything but sort of the region more broadly, are there any dynamics you're seeing worth calling out, whether those are changes in money transfer volumes or a mix between retail and digital or just any other dynamics that are worth considering that haven't been mentioned so far? Hey, thanks for the question. We've seen very obviously that overall volumes in the region are down, but they haven't gone to zero, and there's been little change in terms of the mix of retail and digital. It's predominantly a retail environment in that part of the world, and we continue to monitor it. But the overall region itself is relatively small relative to our total business. So we're more concerned about, you know, the lives of the people, protecting our agents, our employees, and hoping that the conflict ends quickly than the economic impacts on our business. Okay, that's helpful.
Devin Mcgranahan: And then just as a follow-up, I believe you mentioned in the prepared remarks that customer acquisition costs declined by around 15% in the year. Can you speak to how the company's LTV to CAC has evolved throughout 2023? And how do you anticipate this metric will continue to evolve through 2024, particularly as we're shifting the mindset from more of an omnichannel focus to selling consumer services? Just sort of the dynamics there and any pieces to the puzzle worth noting? Hey, Tyler, thanks for the question.
Matt Kegwin: As you think about it, we've highlighted a couple of key drivers, the math. We talked about the fact that our digital retention has improved by 110 basis points, that's pushing the life out longer for historical customers before making this change. We've reduced our rates to some degree, and then we've obviously lowered our CAC. Holistically, it's about the same as it was before for those moving, and I would add two things to that. As you know, when we launched this program, which is now 18 months into it, we made an explicit shift which, hereto before, we had not managed to do, which was to a target LTV to CAC goal. And so we've maintained that goal throughout the program.
Devin Mcgranahan: And as either LTV or CAC adjusts, we adjust accordingly in terms of our marketing spend and our ability to drive new programs into the marketplace. And so, as LTV goes up, that enables us to spend more. As CAC goes down, that enables us to spend more. And obviously, in reverse, hopefully, that won't happen, but if it did, then we would spend less.
Operator: Our next question comes to us from Ramzi El-Assal from Barclays. Please ask your question. Our next question in the queue comes to us from James Faucette from Morgan Stanley. Please ask your questions. We have no additional questions in the queue at this time. Thank you for joining the Western Union fourth quarter 2023 results conference call. We hope you have a great day. www.westernunionco.com, Goodbye.
James Eric Friedman: <unk>.