Q4 2024 The Western Union Co Earnings Call
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Good day, and welcome to the Western Union fourth quarter and full year 2024 results conference call.
All participants will be in listen only mode.
After todays presentation, there will be an opportunity to ask questions. Please.
Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Tom Hadley, Vice President of Investor Relations. Tom. Please go ahead.
Speaker Change: On today's call, we will discuss the company's fourth quarter and full year 2024 results and then we will take your questions.
Speaker Change: The slides that accompany this call and webcast can be found at Western Union Dot com under the Investor Relations tab.
Speaker Change: Will remain available after the call additional operational statistics have been provided in supplemental tables with our press release.
Speaker Change: Joining me on the call today is our CEO, Devin Mcgranahan, and our CFO Mac Haigwood today's call is being recorded in 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 2023 Form 10-K for additional information.
Speaker Change: Formation concerning factors that could cause actual results to differ materially from the forward looking statements. During the call. We will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures in our earnings release attached to our form 8-K as well as on our website.
Speaker Change: Western Union Dot com under the Investor Relations section I will now turn the call over to our Chief Executive Officer, Devin Mcgranahan.
Speaker Change: Good afternoon, and welcome to Western Union's fourth quarter 2024 financial results Conference call.
Speaker Change: We continue to focus every day on becoming the market leader in providing accessible financial services to the aspiring populations of the world.
Speaker Change: Our customers are inspiration as we improve our products and services and position ourselves as their trusted partner, we are privileged to have over 100 million customers around the world.
Speaker Change: That has stabilized over the last several years.
Speaker Change: Since October of 2022, our team has been hard at work executing our evolve 25 strategy to improve our value proposition expand our product offerings and most importantly ensure high quality execution.
Speaker Change: Today, we reported another quarter of improving adjusted revenue growth as we continue to implement our evolve 2025 strategy, which is focused on returning western union to sustainable profitable revenue growth.
Speaker Change: Over the last two years, we have driven meaningful improvements in our business and this quarter's results continue to demonstrate that our efforts are working.
Speaker Change: These results give us confidence that we are well on our way to achieving our previously stated financial objectives. As we continue to report solid transaction trends and improving adjusted revenue growth ex Iraq.
Speaker Change: For the fourth quarter, our revenue reached $1 billion $60 million, excluding Iraq. Our adjusted revenue growth was a positive one 4% now the third consecutive quarter of positive positive adjusted revenue growth.
Speaker Change: Consumer services led the way with another strong quarter at 23% adjusted revenue growth driven by our media network business. The expansion of our foreign exchange services and continued growth in retail money order.
Speaker Change: Our strategy of growing beyond CMT continues to show promise and momentum.
Speaker Change: In addition, our branded digital business continued to perform well with 13% transaction growth and 8% adjusted revenue growth in the quarter.
Speaker Change: Adjusted earnings per share came in strong at 40, <unk> or up <unk> relative to this quarter a year ago.
Speaker Change: The improving performance of our core business is readily apparent as in Q4 2023 benefited meaningfully from higher revenues and operating profits from Iraq, which were not repeated in the current quarter, Matt will discuss our financial results in more detail and provide our 2012.
Speaker Change: Five outlook later.
Matt: I have recently returned from nearly two weeks in Asia visiting with our local teams aligning on plans for 2025.
Matt: This region is it microcosm of our larger companywide efforts.
Matt: In 2022, the region shrank transactions, 12% and adjusted revenue 9%.
Matt: In 2024 that improved to 8% transaction growth with adjusted revenue down only 3%.
The turnaround in Asia is one example of why we remain confident of the trajectory we're on.
Matt: Throughout the visit I saw progress on our strategic agenda.
Matt: And still plenty of opportunity to continue to accelerate our performance.
Matt: The region has embraced our new approach to both digital and retail.
Matt: On the retail distribution side, we are moving away from a heavy dependence on postal systems and master agents do a much more dynamic system.
Matt: With owned locations at the top of the pyramid branded exclusive concept agents and strategics in the middle and a broad base of independents at the bottom.
Matt: For example, Singapore now has our highest performing one location network with 7% revenue growth and 10% transaction growth in 2024 and includes one of the single highest volume locations in the company.
Matt: While I was there I went to the opening of our first owned location in Malaysia.
Matt: Trip reinforced my belief that around my belief around the value of having a small network of owned locations. We believe there is significant opportunity in Malaysia to go after high volume retail corridors, where we can win with an owned location strategy.
Matt: Australia, New Zealand have seen significant growth through our independent agent network expansion, we have seen over 20% growth in agent locations. Since 2022, and these networks grew revenue, 17% and transactions, 25% in 2024.
Matt: Sure.
Matt: While stabilizing the retail business. The Australia team has also embraced our next generation digital platform and is now one of the best performing digital businesses in the company within.
Matt: In 2020 for our revenue growth in the mid teens and transaction growth at nearly 30%.
Matt: Our team there will continue to accelerate this region in 2025 with the launch of our new digital platform into more countries.
Matt: Expansion of our independent agent networks and owned locations.
Matt: The anticipated completion of the Dash acquisition and the launch of a new digital wallet offering in Australia.
Matt: We expect 2025, we will see the region grow both transactions and revenue positively for the first time in seven years, excluding the COVID-19 grow over.
Matt: As in 2000, and our 2022 Investor day, we laid out plans to showcase our retail business as the gateway to Western Union.
Matt: This plan included rationalizing our footprint enhancing our value proposition and improving the agent and customer experience.
We do not subscribe to the melting ice cube thesis that many discuss.
Matt: We believe the retail market globally is stable and that we have many opportunities to grow our share.
Matt: Historically, we were a share donor.
Matt: But in places, where we have successfully implemented our strategy we have seen a turnaround in performance and are achieving positive revenue and transaction growth in many of these markets.
Matt: While we are lagging in these goals, we can identify the drivers whether they be short term macro effects or the incremental work that is still required to achieve our full transformation.
Matt: Excluding Russia, Belarus, and Iraq since 2022, our global retail business has seen a 500 basis point improvement in transaction growth.
Matt: We continue to fully expect that over time, our retail business will be a net positive contributor to overall company performance.
Matt: As an example, our global retail originated paid out to account business grew transactions roughly 30% last year.
Matt: Highlighting the potential of the network when we have the right product and the right value proposition.
Matt: Our retail business is a strategic asset for the company driving brand awareness.
Matt: Porting, a lower cost of digital acquisition and.
Matt: In providing a core set of customers in stores that help enable the growth of our consumer services businesses.
Matt: It is now much better positioned to compete.
Matt: Got any fitting for more competitive pricing improved agent and customer value proposition with both better experiences and improved products.
Matt: And the benefit of a great brand and significant scale that few if any others can match.
Matt: It can now grow by taking share in important corridors that we have previously shied away from because we were uncompetitive.
Matt: Key opportunities for example include retail heavy corridors like the U S to Guatemala, which we estimate is a $20 billion corridor U K to India, a $10 billion corridor.
Matt: To the Philippines, a $1 billion of corridor.
Matt: These are important corridors, which we believe we currently have a sub 10% market share position.
Matt: And thus provide significant opportunities to continue to drive retail growth.
Matt: Often overlooked and often overlooked advantage of our retail business is the strong connection to our digital business.
Matt: A substantial part of our digitally initiated transactions are still paid out to cash by us and our competitors and we own that experience end to end.
Matt: Our several hundred thousand payout locations give us customer experience advantages relative to our digital only peers.
Matt: Better financial economics, and allows us to engage directly with potential future customers.
Matt: Cade or more before they become remittance customers themselves.
Matt: We do not think enough credit also is given to the millions of page views on our websites and digital properties from around the world.
Matt: Our retail customers.
Matt: These retail customers are using our store locator or checking the status of a transfer.
Matt: This traffic improves our position in most organic search algorithms and drives down our cost of digital customer acquisition.
Matt: With the assistance of our retail our retail network volume, our CAC last year was down roughly 10%, which enabled us to effectively compete in a market where many digital players routinely spend significantly more and remain mostly unprofitable.
Matt: The key to winning in the retail market as being competitive you need to have the right price with a seamless and easy experience and the right locations.
We continue to work on all three but when we get it right we can win.
Matt: Last year, our retail business in Spain grew transactions, 25% and revenue 18%. Another example is the improvement we've seen in our retail business in the U K, which grew transactions, 20% and revenue 9% in 2024. These are very competitive markets.
Matt: Where we have executed our strategy and we are seeing the results.
Matt: More globally in the last year, we introduced several new point of sale improvements like remember me and quick <unk> and have now embedded those functions and our updated point of sale system, which takes much of their required processing out of agent hardware and moves it into the cloud.
Matt: We continue to seek improvements in speed reliability agent support and customer satisfaction.
Matt: We are pleased with the progress we have made so far and look forward to additional improvements that we have planned for 2025.
Matt: On the last call I mentioned, we are aiming to have our new cloud based point of sale system available in 25000 locations by the end of the year.
Matt: I am pleased to report that we substantially past that goal and now have roughly 70000 active locations.
Matt: In the last 30 days alone we have run over 2 million transactions through this platform.
Matt: We have rollouts underway in North America, and APAC and we have just begun expanding this technology into Europe and locker.
Matt: As we improve our operating model, we are increasing our pace of execution and rollout. Our goal for 2025 is to have all relevant agents globally on this platform by the end of the year.
Matt: Now shifting to our digital business as part of our evolve 2025 strategy returning our digital business to double digit revenue growth is a key priority for our organization and is essential to driving top line revenue growth for the overall company.
Matt: Over the past year, we've been focused on improving the onboarding experience driving marketing effectiveness and improving our value proposition as well as our overall user experiences.
Matt: I am happy to report disease. These efforts are paying dividends with more customers more transactions and more revenue.
Matt: Since 2022, we have launched our next generation digital platform in over 10 countries, including a launch in India in the fourth quarter of this year.
Matt: We are seeing significant improvements in our digital business performance this year in Mexico, Japan.
Matt: The U K and Chile.
Matt: As a result, we saw an increase in total customers and a higher frequency in which they transacted all of which leads us to double digit transaction growth and high single digit revenue growth, which we believe positions us well for 2025.
Matt: We plan to launch our next generation platform and more than 10 additional countries in 2025, including several in Africa, where we will see where we see a real opportunity.
Matt: We are significantly improving our account payout network with increased direct connections and better volume discounts.
Matt: We have also launched a global initiative to improve our <unk> experiences in many parts of the world by moving to a more localized approach that we believe should greatly benefit onboarding rates.
We look forward to updating you as the year progresses.
Matt: Finally, I'd like to spend a minute discussing our consumer services segment we.
Matt: We have made it a goal to grow this segment of our business double digits annually by providing new products and services to our existing customers through our existing channels I.
Matt: I am pleased to report, we generated 20% plus adjusted revenue growth in the fourth quarter and acceleration of the growth we saw in the third quarter.
Matt: We continue to see solid growth in our money retail money order business, where we believe we have one of the most consumer friendly products in the marketplace.
Matt: In addition to <unk>, we saw strong growth from several of the products and services. We have launched are meaningfully expanded over the last 18 months.
Matt: The two biggest contributors to growth in the quarter, where our media network business in the United States and our foreign exchange business in Europe, which benefited from a larger footprint.
Matt: We are happy to report that we renewed our long standing relationship with our whole delhaize USA one of the nation's largest grocery retail groups for an additional five years. We are pleased to extend this agreement and continue to provide our customers the opportunity in convenience to meet their cross border.
Matt: Remittance needs at all hold Delhaize USA brand locations.
Matt: Additionally, we are pleased to announce our co branded partnership with your PE owned by Al Rehaut Bank.
Matt: <unk> is the largest digital wallet in Saudi Arabia, and has over $6 5 million customers.
Matt: This partnership enhances our brand and one of the largest digital financial ecosystems and Saudi Arabia.
Matt: Lastly, we are also pleased to announce our collaboration with do pay the advanced digital financial services arm of Dew and licensed by the Central Bank of the UAE through.
Matt: Through this white label partnership we are enabling international money transfer services on their App further strengthening our digital footprint in the country.
Matt: In conclusion, we believe we are roughly six months ahead of where we plan to be at this point relative to our initial 2022 Investor day guidance, having just achieved positive full year company wide adjusted revenue growth, excluding Iraq for me.
Matt: Regional perspective, we have improved adjusted revenue growth in North America, Europe, the middle East ex Iraq, and APAC, which gives us optimism about the trajectory we're on and what we can accomplish in 2025 and beyond.
Matt: Looking ahead, we remain very positive on our market position and the progress we are making to deliver on our strategic initiatives. Every day, we can see the improving health and performance of our core business and are now beginning to deliver the ongoing and sustainable revenue and operating profit growth required to propel.
Matt: Propel the value of the company upward.
Matt: I remain confident that we are tracking well to achieve our evolve 2025 goals.
Matt: More importantly, our setting the company up for a much more prosperous future.
Matt: Thank you for joining the call today I will now turn it over to Matt to discuss our financial results in more detail.
Matt: Thank you Devin and good afternoon, everyone I'm pleased to be here today to walk you through our 2020 for fourth quarter and full year results.
Matt: As well as our 2025 financial outlook.
Matt: For the full year, we delivered GAAP revenue of $4 2 billion.
Matt: Our results landed us comfortably above the mid point of our improved 2024 adjusted revenue outlook.
Matt: Adjusted revenue growth, excluding Iraq was positive 50 basis points in 2024, which is about six months ahead of where we anticipated we'd be at our Investor day in October 2022.
Matt: These results were driven by 15% growth in consumer services and improving trends in our CMT business supported by 8% branded digital revenue growth.
Matt: In the fourth quarter GAAP revenue was $1 1 billion.
Matt: For the third consecutive quarter adjusted revenue grew ex Iraq and was positive one 4%.
Matt: Adjusted operating margins in the quarter were 17% compared to 16% in the prior year.
Matt: With the improvement primarily due to efficiencies in our marketing and technology areas.
Matt: In 2024, our full year adjusted operating margin was 19% compared to 20% in the prior year with the decline primarily due to lower revenue from Iraq offset by efficiencies in our core cost base.
Matt: Fourth quarter, adjusted EPS was <unk> 40 compared to 37.
Last year benefiting from higher adjusted operating profit lower share count and lower adjusted tax rate.
Matt: For the full year, we delivered adjusted EPS of $1 74, which benefited from lower share count.
Matt: And lower adjusted tax rate, which landed us comfortably in our improved guidance range of $1 70 to $1 80.
Matt: In the fourth quarter, we reported a significant noncash tax benefit exceeding $250 million stemming from the reorganization of our international operations to realign and consolidate our international hub.
Matt: This positively impacted our GAAP EPS by <unk> 75.
Matt: What was excluded from adjusted EPS.
Matt: Okay.
Matt: The adjusted tax rate for the quarter was 12% compared to 14% last year, whereas our full year adjusted tax rate was 13% compared to 15% the prior year.
Matt: Our adjusted tax rate was lower this year due to the mix of income and a few minor discrete tax items.
Matt: Now turning to our CMT business.
Matt: In the fourth quarter CMT adjusted revenue, excluding Iraq was flat year over year, while CMT transactions, excluding Iraq grew 3%.
Matt: For the full year CMT adjusted revenue, excluding Iraq was down 1%, while transactions, including Iraq grew 4%.
Matt: These results were driven by improvements in branded digital.
Matt: In digital White label, and a consistent retail business.
Matt: We have made significant strides in our customer and agent experience.
Matt: And our overall value proposition over the past two years, which has contributed to our ability to improve overall customer retention by almost 40 basis points in 2024.
Matt: Yeah.
Matt: Now turning to our branded digital business in the fourth quarter. We grew adjusted revenue by 8% with a 13% increase in transactions.
Matt: This marks the seventh consecutive quarter of double digit transaction growth.
Matt: Account payout transactions that originated digitally continue their strong momentum growing 30% in the quarter.
Matt: For the full year adjusted revenue growth improved 800 basis points compared to 2023, while average new cross border monthly active customers grew high single digit in 2024.
Matt: Now turning to our retail business in the quarter, we saw improvements in both Europe.
Matt: And Lisa excluding Iraq, partially offset by North America, and Latin America.
Matt: Europe, so minimum resulted in 9% transaction growth as they benefited from stronger distribution expanded debit acceptance and lapping an agent loss.
Matt: Now transitioning to our consumer services segment, which accounted for 11% of our total quarterly revenue.
Matt: Fourth quarter adjusted revenue rose, 23% driven by growth in media network retail foreign exchange and retail money order.
Matt: I am pleased to report that in 2024, we achieved our goal of double digit revenue growth in consumer services with a 15% increase in adjusted revenue.
Matt: This marks our third consecutive year of double digit growth in consumer services.
Matt: And we continue to target, 10% plus adjusted revenue growth rate in consumer services as we continue to introduce and expand offerings to the aspiring populations globally.
Matt: In the fourth quarter consumer services operating margin was 11% a 200 basis point improvement over the third quarter.
As these products scale, we continue to expect that our margins will improve and be at or above our total company margin.
Matt: Now shifting to our top from our topline to our expense base.
Matt: As part of our ongoing commitment to disciplined cost management I am pleased to provide an update on our five year $150 million expense redeployment program.
Matt: In 2024, we continue to make significant strides in optimizing our cost base and reallocating resources to drive efficiency and growth.
Matt: <unk> total savings of $60 million.
Matt: This is in addition to the $50 million that we freed up in 2023.
Matt: To illustrate in our global operations function, which includes areas like customer experience and support real estate.
Matt: Compliance processes and agent care, we have reduced our cost base by nearly 20% between 2021 and 2024.
Matt: Within the overall $100 million of savings that we've achieved to date nearly $30 million was related to the efficiencies that we have made in customer experience and support.
Matt: We continue to see further opportunities throughout our business continue to optimize our cost base.
Matt: Looking ahead, we expect to complete our five year commitment two years ahead of schedule, achieving our target of $150 million this year.
Matt: This accelerated timeline underscores our ability to leverage scale drive continuous improvement and maintain financial flexibility.
Matt: Now turning to our cash flow and balance sheet.
Matt: In 2024, we generated $406 million of operating cash flow, which was negatively impacted by higher taxes paid including $160 million related to the tax deferred tax payments under the tax act and $70 million related to the IRS settlement earlier this year.
Matt: As a reminder, we will make our final deferred tax payment related to the tax act of $220 million in the second quarter of this year.
Matt: In 2024 capital expenditures were $131 million or roughly 3% of total company revenues, we remain committed to strategically investing in key areas and aligning our agent compensation to performance.
Matt: Over the past three years, we've averaged roughly 100% adjusted free cash flow conversion.
Matt: We define adjusted free classic over free cash flow conversion is free cash flow less unusual tax items divided by adjusted net income.
Matt: I am pleased to report that in 2024, we have returned almost $500 million to our shareholders with.
Matt: With $318 million paid in dividends and $177 million used to repurchase shares.
Matt: I'm also pleased to announce the board of directors recently approved a $1 billion.
Matt: Share repurchase authorization, which will allow us to continue our historical practice of strong cash returns to our shareholders through our dividend, which is yielding 9% <unk>.
Matt: And our strong share repurchase program.
We also continue to maintain a strong balance sheet with cash and cash equivalents of $1 5 billion and debt of $2 9 billion.
Matt: Our leverage ratios were two nine times and one five times on a gross and net basis, which we believe.
Matt: <unk> has ample flexibility for capital return.
Matt: Or potential M&A, while maintaining our investment grade credit rating.
Matt: These levels may appear to be higher than what you're used to.
Matt: As you May remember, we announced in the second quarter last year.
Matt: We entered into an $800 million delayed draw term loan facility, which we used to refinance our bond that matured in January of this year as a result, our cash and our debt balance were elevated at year end, which affected our gross leverage ratio.
Matt: Now moving on to 2025 outlook, which assumes no material changes in macroeconomic conditions relative to last year.
Matt: However, some uncertainty exists in the United States as we are two weeks into the new administration.
Matt: We forecast adjusted revenue to be in the range of $4.115 billion to $4 $215 million. This range reflects continued growth in our branded digital business.
Matt: And 10% to 15% growth in consumer services as we continue to stay and as we as well as we continue to stabilize our retail business.
Matt: The midpoint of this range is 1% adjusted revenue growth, excluding Iraq, which puts us on track to achieve our investor day target of flat to 2% revenue growth.
Matt: We forecast that our adjusted operating margins to be in the range of 19% to 21% and lastly, we forecast adjusted EPS to be in the range of $1 75 to $1 85.
Matt: From a quarterly phasing perspective, please keep in mind that Iraq contributed $65 million in the first quarter of 2024 and $34 million in the second quarter of last year.
Matt: Before normalizing the latter half of the year, we do not anticipate that Iraq will return to the elevated levels experienced the first half of last year, which will result in a headwind in the first and second quarter of this year.
Matt: Additionally, please keep in mind that the first quarter of last year was impacted by leap year, which benefited us in the first quarter of last year.
To conclude we are two thirds of the way through our evolve 2025 transformation and we are confident that we have laid the foundation needed to drive long term profitable and sustainable revenue growth.
Matt: As we embark on this pivotal year, we remain committed to driving growth innovation and value to our shareholders.
Matt: Thank you for joining the call operator, now 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.
Matt: All participants will be in listen only mode.
Speaker Change: Our first question comes to us from Tien Tsin Huang from Jpmorgan. Please ask your question.
Speaker Change: Thank you so much thank you for going through all that.
Speaker Change: The details here just thinking about the outlook.
Speaker Change: On the revenue side.
Speaker Change: And the range and what might.
Speaker Change: Cause you to be at the low end versus the high end is maybe going through some basic assumptions there that might influence the outcome.
Speaker Change: Hey, Tien tsin, thanks for joining the call today.
Speaker Change: The variability between the high and low end of the range. There is a lot of uncertainty in the market things don't move lumpy. We are super proud and excited about where we've come from if you look back two years ago. The company was <expletive>.
Speaker Change: Declining mid single digits, we were able to exit last year with 50 bps growth full year and 1441, 4% full year.
Speaker Change: So super excited about what we've accomplished the assumptions that are underlying that is continued consistent macroeconomic conditions, we experienced last year. So no major changes in currency or inflation.
Speaker Change: We have in our core businesses, we expect to have high single digit low double digit branded digital growth was a highlight in my prepared remarks, we expect to have 10% to 15% growth in consumer services, what could move us to the upper end of the range further stability in the retail market acceleration in branded digital.
Speaker Change: This year higher consumer service, we had later in the year. So there's many things that could put us at the upper end or even above.
Speaker Change: But it's obviously an uncertain market, where we are as we highlighted in the prepared remarks.
Speaker Change: Yes, Thats fair.
Speaker Change: Consumer services, you mentioned that.
Speaker Change: Alright.
Speaker Change: Go ahead.
Please.
Speaker Change: Yes.
Speaker Change: Just a quick follow up just on the consumer services, you called it out there 10% to 15%.
Speaker Change: You're running in the lower <unk> exiting the year Youre at mid teens for 'twenty for what's driving the acceleration and how much of that is conservatism or were there. Some one timers that may be.
Speaker Change: Lifted the consumer services sounds like some initiatives could actually drive acceleration. So just trying to reconcile all of that.
Speaker Change: Tien Tsin, it's a great question I mean, you've known me now for three years. So it can move around a lot of different places.
You've called me conserve it before but.
But there are things in there that we had some strong Q4, our media network usually media is very strong in the latter part of the year as you know from other businesses that may not continue for all of next year. We have launched a couple of business that we started to cycle through as we go forward, but we do have line of sight to get us to our commitment of 10 to 15 <unk>.
Speaker Change: <unk>.
Speaker Change: Our next question comes to Us from Darrin Peller from Wolfe Research. Please ask your question.
Darrin Peller: Hey, guys. Thanks.
Darrin Peller: Just wanted to ask about the digital aspiration to drive double digit growth on revenues, obviously the spread.
Darrin Peller: It continues to be in that.
Darrin Peller: Six to seven percentage point range.
Darrin Peller: And you are continuing to show great results on double digit growth on transactions, but help us understand the driving factors through a lap or double digit revenue growth to appear in that digital transaction side and the digital business.
Darrin Peller: Maybe just remind us like what is your what is your timing expectation on that.
Speaker Change: Thanks, guys, Yeah, Darren Great question. Thank you and it's something we continue to spend a lot of time talking about.
Darrin Peller: I think it's important just to reflect on the progress we've made.
Darrin Peller: Two years ago, our digital business were shrinking revenue, 1% now its growing revenue in the high single digits.
Darrin Peller: That has been the function of driving our customer acquisition in our transactions and the double digit range, we expect to be able to continue to do that as we've now done for seven quarters in a row. So this becomes an exercise of managing what is.
Darrin Peller: In the base and as you know some of the factors that we've talked about is the increasing growth or the relative speed of growth to payout to account, which is a different revenue per transaction profile than our historic path to cash and our continued attrition of the legacy book, which has a different pricing profile.
Darrin Peller: And all of the customers that we've acquired in the last two years as we've become market competitive new and repeat transactions. So as that book continues to shift and manage we continue to expect and we've talked about a three to 400 basis point gap between transactions and revenue.
Darrin Peller: As we've talked about in the past if we accelerate.
Darrin Peller: Transactions that range might increase, but we would be okay with that but as we continue we believe it will stabilize over the course of the next 18 to 24 months.
Will Nance: Our next question comes to Us from will Nance from Goldman Sachs.
Speaker Change: Please ask your question.
Will Nance: Hey, guys. Good afternoon. Thanks for taking the question I was wondering if you could maybe touch on some of the.
Will Nance: Dynamic that led to the modest DSL and the North American revenues. If you could just kind of go through what Youre seeing there and I guess, specifically you called out a few macro.
Will Nance: Impact that you were seeing last quarter I think one of them what it related to North America like the U S Mexico border or the other only been a lack of there would be helpful to get an update on that as well. Thank you.
Speaker Change: Hey, well hope you're doing well.
Speaker Change: Let us remember that we are in fact, a global business and highly diversified only 30% of our revenue comes from the U S. We did see as we talked about in the third quarter. Some sluggishness in North America, but I remind we had one 4%.
Iraq adjusted revenue growth in the quarter, which is the second best quarter. The company has had an adjusted revenue basis in the last 20 quarters. So even with the slowness in North America, we continued to propel our business. According to our strategy around the world.
Speaker Change: We are still seeing the effects of the macro events down below the border and the elections that we talked about in the third quarter as the migratory patterns of people shift and we're obviously seeing some effect of the election in November as we normalize to a different environment here in the U S for migrants.
Speaker Change: Got it that's very helpful. And then just maybe a separate follow up I know one of the bigger drivers of that.
Speaker Change: The positive revenue growth. This quarter was the consumer revenue I was wondering if you guys hit on the margins in that segment and just how you think about margins over time.
Speaker Change: What level of revenue.
In order to kind of achieve your target margins in that segment.
Speaker Change: Hey, guys, Hey, well thanks for the question.
Speaker Change: As we talked about in the prepared remarks today, we did progress.
Speaker Change: Progress by about 200 basis points from Q3 to Q4, we expect each product that we've launched whether it'd be the media network prepaid business the wallets.
Speaker Change: I can keep going through them. We believe each one of those has companywide margins are better once you're fully at scale as we've talked about in prior quarters. Each one of them will rollout at a different pace, we launched the prepaid business little over a year ago now in the U S. We're now starting to launch in other parts of the market. Each one of those will have a ramping process.
Speaker Change: Media network is largely in the U S.
Speaker Change: So we think youre going to continue to make progress towards our company average, but it will happen over the next couple of years, we rollout products.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Talk philosophically for a second.
Speaker Change: If I could grow the whole company, 23% at 11% I might take that trade. So we're pleased with the fact that we've launched businesses, we're seeing adoption by customers and acceleration of revenue growth profile that looks significantly.
Speaker Change: Different than our historic norms. So we will continue to invest in these businesses and as we see market opportunities continue to grow them.
Speaker Change: Im not in the business of trying to slow the growth to improve the margin in that particular segment.
Speaker Change: Our next question comes to Us from Ramsey El <unk> from Barclays. Please ask your question.
Ramsey El: Hi, Thanks, so much for taking my questions today.
Ramsey El: Branded digital transactions decelerated, a bit versus last quarter, although still.
Mentioned solidly in double digit territory, but the spread to branded digital revenue actually tightened a little bit by 100 basis points.
Speaker Change: I think about 5% can you give us your thought on spread dynamics in 'twenty five and what we should expect through the year in terms of your I think longer term goal to sort of tighten that up.
Speaker Change: Hey, Ramsey thanks for joining the call today.
Speaker Change: You heard our tone earlier, we're super excited we've come a long way over the last two years, we were plus 1% in 2020.
Speaker Change: Two this year were able to grow <unk> 13, and took revenue from basically being flattish to high single digit. This year. So huge progress we still there's a lot more room to go as we talked about our Investor day two years ago. We think this business is a mid teens overall business and we still got some more progress to get there as far as the pace of.
Speaker Change: Closing the gap between transactions revenue, we're going to manage the overall business to drive top line growth adding.
Speaker Change: Adding more customers and we're very focused on growing the overall business. The output is delivering revenue growth and EPS. We do think it will narrow over time as we lap the pricing and we have more of the.
Speaker Change: Legacy clients that are a little bit higher rates than market.
Speaker Change: Right away and we add new but you also have a little bit of pressure coming from as I talked about my prior prepared remarks, our account payout business is growing 30%. That's both on the retail side as Devin highlighted and I highlighted on my prepared remarks that comes at a lower RPT was very profitable it doesn't come with a commission. So we're we're very happy to have it.
Speaker Change: And a quick follow up just on M&A, you made some smaller acquisitions dash and I think that Mexico digital wallet, but recently, maybe update us on your appetite and then given all the changes in the environment.
Speaker Change: And also you feel.
Speaker Change: Right.
Speaker Change: There any inorganic contribution in the quarter Thats material.
Speaker Change: Two to clarify neither deal has officially closed yet we are waiting for regulatory approval in both Singapore and Mexico. So there would be no contribution.
Speaker Change: To the quarter from either transaction.
Speaker Change: We remain a.
Speaker Change: Interested buyer of properties that fit, particularly well with our strategy and as I have talked about allow us to accelerate that strategy in a cost effective way with strong returns on our capital deployment.
Speaker Change: The addition of Dash was a acquisition that as I highlighted in my comments on APAC allows us to accelerate our digital wallet capabilities in that region and strengthens what's already a pretty good franchise for us in Singapore acquired cost effectively and we believe will be additive to both.
Speaker Change: The strategy in the company once it closes in the latter half of 2025 as we look around the world. When we see other things like that I would anticipate that we'll be prepared to act.
Speaker Change: Got it thank you.
Speaker Change: Our next question comes to Us from Jason Kupferberg from Bank of America. Please ask your question.
Jason Kupferberg: Hi, I wanted to ask about <unk>.
Speaker Change: Retail transaction growth trend.
Obviously.
Speaker Change: And on an improving trajectory here and I'm just I'm just wondering what you think could be drivers of further improvement is it just broader rollout of the new point of sale.
Speaker Change: Or some other dynamics.
Speaker Change: Most of the incremental improvement we will continue from the strategies that we've already launched which is optimizing our distribution network continuing to grow our independent agent footprint, improving the level of service and customer experience, which includes the point of sale rollouts and strategically manner.
Speaker Change: <unk>, our go to market against specific corridors and customer segments. The biggest opportunity as you can tell us probably now in North America relative to the performance that we're getting in most of the rest of the world's retail networks.
Speaker Change: We continue to wait for the market to stabilize a bit in locker, but that has been and was last year a mid single digit grower. So we believe that will continue as we settled through some of these transitory post election issues. So I would look forward to lock a returning to mid single digits and is continuing to exit.
Speaker Change: <unk> strategy in North America, which will propel the overall retail business into that stable to slightly positive zone that we believe it can be.
Speaker Change: Okay, and then just coming back to your comments earlier that you've seen a little bit of.
Impact on <unk>.
Speaker Change: <unk> patterns.
Speaker Change: Election thinking about Mexico.
Speaker Change: Is there any headwind for that kind of factored into your guidance and maybe can we just get an update on what percent of your total.
Speaker Change: <unk> revenue is coming from the U S. Mexico corridor. Thank you.
Speaker Change: So as far as our guidance we've got a.
Speaker Change: Honestly, a zero to 2% range of revenue growth.
Speaker Change: It depends on how severe something has to be impact whether it's included or not but we think it's a.
Speaker Change: Pretty wide range to provide us some flexibility as far as how big is the U S. The Lac business. It represents all of North America represents around 30% of our business U S locker.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: Mid twenties.
Speaker Change: Low to mid twenties.
Speaker Change: Thank you.
Speaker Change: Our next question comes to Us from <unk> Colville from K BW. Please ask your question.
Colville: Hi, Thanks for taking my question I wanted to follow up on that question about migration patterns.
Colville: This is Matt and Devin just can you help us think at a high level.
Colville: Some of the initiatives that the new administration is taking work to continue to accelerate in terms of deportation and thats how to think about the potential impact on your business.
Colville: And then I have a follow up.
Colville: So I think in <unk>.
Colville: You've seen it over the course of the two weeks, what's going to happen is youll probably see.
Colville: Some decline in transactions and an increase in principal per transaction. So frequency will go down and principal will go up.
Colville: But also I think you have to put into context. This is largely a retail phenomenon and it's largely on what I would call recent arrivals in the United States and so if you look at our business in 2024, new to franchise new to retail customers.
Lending to the locker region. So that's more than just Mexico with only about two 5% of our total revenue. So that's the that's the risk right. There is that number slows a bit.
Colville: Last year, it was kind of growing.
Colville: And then negative single digit high single digit range. So it wasn't a strong.
Colville: Pro forma for us anyways, all of last year, which you can see in some of the softness for.
Colville: The numbers in North America so.
Colville: Is there some risk without a doubt do we need to keep a close eye on this administration and the changes in perspective, but the vast majority of our business our customers that have been here for a while who have good paying jobs, who send money home to loved ones on a regular basis and we anticipate that that will continue.
Speaker Change: Thank you that's very helpful color and I guess my second question was on crypto, which seems to be having a resurgence any updated thoughts on your view on how you see that impacting your business long term.
Speaker Change: So I've said this publicly a number of times.
Speaker Change: We pride ourselves in being.
Speaker Change: One of the best in terms of managing our risk compliance and protecting our customers from fraud and protecting the integrity of the international financial payment system.
Speaker Change: If there is an opportunity in which you can do that legally.
Speaker Change: And with high protections for customers and financial integrity with crypto, we will certainly explore that and in fact, we would welcome an opportunity and there are places in the world, where we are exploring this where we could actually settle funds via crypto and enable us to reduce both the float that we have in the system as Matt usually.
Speaker Change: <unk> talked about any given day, we have a 1 billion plus dollars floating around to enable our business to reduce the float in the system, which will certainly help our balance sheet, but also to speed up some of the inefficiencies of using the traditional swift based banking system to move money and settled transactions. So we look forward to the innovation, but we only.
Speaker Change: Look forward to the innovation in a manner that would be consistent with our perspective of being.
Speaker Change: And continuing to be a highly regulated and high integrity financial institution.
Speaker Change: Our next question comes to Us from Rufus home.
Please from BMO. Please ask your question.
Speaker Change: Hey, guys. Good afternoon, thanks very much.
Speaker Change: I wanted to ask about the retail business ex Iraq.
Speaker Change: And if I'm doing the math correctly it looks like this quarter that was down about.
Speaker Change: 3% year over year, a slight improvement from last quarter I'm, just curious to get your view about how you think that will trend through 2025.
Speaker Change: Thanks for joining the call.
Speaker Change: As we talked about earlier and Devin share during his prepared remarks.
Speaker Change: We're super excited about the progress we've made in our retail business, we've taken it from being down two years ago high high single digit too.
Speaker Change: We got to the point now where transactions were down more load up low single digit we think with the items that Devin talked about a minute ago for one of the questions two or three people back. We think we can continue to make progress there whether that be through continuing to rollout our new point of sale improving our customer service agent service continuing to improve our value proposition. We think we can.
Speaker Change: When you make progress on that.
Speaker Change: As Youll recall two quarters ago, we were getting the retail business closer to negative one.
Speaker Change: And the slowdown that we've seen in the Americas has obviously caused the third quarter now we're calling some of that back in the fourth quarter, which you appropriately note. So theres going to be some volatility in that it's a large scale business, but the trajectory, which is upward into the right in two years ago our <unk>.
Speaker Change: Retail transactions were down 7%. This year they were only down two so we've seen a 500 basis point improvement and we see strength in many regions around the world, including the Middle East ex Iraq, including the comments I made about locker about APAC and obviously the strength you can see in the numbers in the quarter from you.
Speaker Change: Europe.
Speaker Change: Our next question comes to Us from Chris Zhang from UBS. Please ask your question.
Chris Zhang: Hi, Thank you for taking our questions Christopher <unk> from UBS I wanted to hear your thoughts about your investment needs longer term and I'm wondering if you could rank order the areas up your investment priorities beyond this year.
Speaker Change: And related to that you've been tracking ahead of your five year expense redeployment plan. So I guess could you talk about how youre planning on funding potentially incremental Fisher investments once the redeployment programs completed.
Speaker Change: Hey, Chris Thanks for joining the call today tell Tim Hello for Us.
Speaker Change: We feel very good about our ability to make investments has not been any of our challenges here about the level of capacity. We feel that there is still plenty of room left and redeploying cost within our business. We highlighted the current program, we have which is the $150 million five year, which were $110 million through.
Speaker Change: We've got our Investor day coming up in November and we'll talk about something there as well, but we feel that there's tons of opportunity.
Speaker Change: We think we have enough capacity on our balance sheet, we had any strategic M&A that makes sense that again and help us accelerate our path. We think we've got it we believe we have enough space within our technology budget to invest in new products and technology builds.
Speaker Change: So really our focus is going to be to continue to bring it build out consumer services to address the needs that are 100 million plus customers. We have around the world would want to expand our Tam and help them have better financial lives.
Speaker Change: And that's really our path for the next three to five years, but Kevin would you, yes, I'd add two things right and I think Matt highlighted in his commentary the success and I'll just use the operations.
Kevin: Area as an example in reducing operating costs by 20% over the three year period, we continue to see plenty of opportunities within the company within the existing cost base.
Kevin: To have year over year performance improvement.
Kevin: Which can both drive the bottom line, but also provide money.
Kevin: To invest in our growth initiatives, so even though we're completing the $150 million I don't think thats an end to the opportunities.
Kevin: We see and certainly I commented on from.
Matt: 2022, when I arrived is that going to Matt also highlighted that.
Matt: We are going to finish the last of the tax act deferred tax payments in April of $220 million.
Matt: For most of my tenure as CEO that has been a burden on our cash.
Matt: Flow conversion and cash flow.
Matt: Capital return opportunities and so getting that behind us actually changes the dynamics of our capital creation potential and thus allows us the opportunity to both return more capital to our shareholders <unk> invest in inorganic opportunities to drive the business.
Speaker Change: Alright, I appreciate all the color definitely look forward to the Investor day, and I'll save the follow up for the group called back and leave time for our colleagues. Thank you.
Speaker Change: Our next question comes to Us from Chris Kennedy from William Blair. Please ask your question.
Chris Kennedy: Great. Thanks for taking the question.
Chris Kennedy: You've talked about the strength of the digital business in Australia can you.
Chris Kennedy: <unk> that a little bit what's the dynamic in that market and is that.
Chris Kennedy: Can you kind of replicate that success in other markets. Thank you.
Chris Kennedy: Yes so.
Speaker Change: I just came from Australia, and it's a it's a super interesting and Super competitive marketplace. Our competitors are spending an enormous amount on advertising. It's on bus stops it's on television.
Speaker Change: And it's even some of our competitors, who historically not relied on advertising to drive their growth. So it's a fascinating dynamic.
Speaker Change: Our growth is driven by the quality of the product and the brand that we have in the marketplace. We have a strong business throughout APAC because of our long history of being a payout partner in many of these regions and much of the growth from Australia.
Speaker Change: Into other APAC countries, So, it's Australia, India, Australia, the Philippines, Australia to China, Australia, Indonesia.
Speaker Change: So the strength of our brand across both send and receive markets the quality of the product if youll remember we launched our next generation digital product in Australia first so we've been there the longest and so we have very high conversion rates for new customers to become customers and then we have high repeat.
Speaker Change: <unk> transaction and product usage, given the quality of the experience that they have we believe it's completely repeatable and as you heard in my prepared comments, we're looking to accelerate the rollout of that next generation digital platform in 2025.
Speaker Change: Up to 10 more countries.
Speaker Change: To help accelerate our global business.
Speaker Change: We have time for one more question and that question will come from Andrew Schmidt from Citi. Please ask your question.
Speaker Change: Yes.
Speaker Change: Hey, Devin Hey, Matt Thanks for squeezing me in here.
Speaker Change: I wanted to just dig in to the the building blocks of for digital growth for 2025, when I think about it there's user growth transaction frequency pricing and mix.
Speaker Change: Think about 2025.
Speaker Change: Are there differences in terms of just the buildup of the building blocks digital growth versus 'twenty four or is it more of the same. Thank you so much.
Speaker Change: So I would add one dimension to your those are the right underlying dimensions for us. There's also geography. So we have a digital business and think 50 some countries around the world as we've gone on our transformation and you can remember all the way back to 2023 I know it's hard.
Speaker Change: We had talked about as we saw the business accelerate how we were rolling out our new go to market around the World. We started first in North America and then we went to Europe and then we went into the Middle East and then we went into APAC and finally in locker and we're now going through and doing that same process rolling out our next generation platform.
Speaker Change: And so we also see some geographic enhancements against the dimensions of new customers increased transactions increased principle etsy.
Speaker Change: Et cetera, and so I think the building blocks remained fairly consistent we are growing new customers at a relatively consistent rate over the last couple of years on a very effective CAC.
Speaker Change: Those new customers are in fact higher quality customers than we were historically acquiring so they have better retention and they have better transactions per customer. Although they are lower revenue per customer given our more competitive pricing and as I talked about we're rolling out the technology platform like we have in Australia.
Speaker Change: And two more marketers in the world in which those benefits tend to accelerate relative to our existing business on our old legacy technology platform.
Thank you for joining the Western Union fourth quarter and full year 2024 results Conference call. We hope you have a great day.
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Speaker Change: Goodbye.