Q1 2025 The Western Union Co Earnings Call
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Unknown Attendee: Good day and welcome to the Western Union first quarter 2025 results conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.
Speaker Change: Good day and welcome to the Western Union first quarter 2025 results conference call.
All participants will be in listen only mode.
Speaker Change: After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded.
Tom Hadley: I would now like to turn the conference over to Tom Hadley, Vice President of Investor Relations. Tom, please go ahead. Thank you. On today's call, we will discuss the company's first quarter 2025 results, 2025 outlook, and then we will take your questions.
Speaker Change: I would now like to turn the conference over to Tom Hadley, Vice President of Investor Relations. Tom. Please go ahead.
Tom Hadley: Thank you.
Tom Hadley: On today's call, we will discuss the company's first quarter 2025 results 2025 outlook and then we will take your questions.
Tom Hadley: 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 Hadley: 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 Joy.
Tom Hadley: Joining me on the call today is our CEO, Devin McGranahan, and our CFO, Matt Cagwin. 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 2024 Form 10-K, for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements.
Speaker Change: Joining me on the call today is our CEO, Devin Mcgranahan, and our CFO Mac Haigwood today's call is being recorded and our comments include forward looking statements.
Speaker Change: Refer to the cautionary language in the earnings release and in Western Union's filings with the Securities and Exchange Commission, including the 2024 Form 10-K for additional information concerning factors that could cause actual results to differ materially from the forward looking statements during.
Tom Hadley: During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable gap measures in our earnings release attached to our Form 8K, as well as on our website, westernunion.com, under the Investor Relations section.
Speaker Change: During the call we will discuss some items that do not conform to generally accepted accounting principles.
Speaker Change: 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 Western Union Dot com under the Investor Relations section.
Devin Mcgranahan: I will now turn the call over to our Chief Executive Officer, Devin McGranahan. Good afternoon, and welcome to Western Union's first quarter 2025 Financial Results Conference. Today, we reported a reasonable quarter against a difficult macro backdrop as we continue to implement our Evolve 2025 strategy, which, as you recall, is focused on returning Western Union to sustainable, profitable revenue growth.
Speaker Change: I will now turn the call over to our Chief Executive Officer, Devin Mcgranahan.
Speaker Change: Good afternoon, and welcome to Western Union's first quarter 2025 financial results Conference call.
Speaker Change: Today, we reported a reasonable quarter against a difficult macro backdrop as we continue to implement our evolve 2025 strategy, which as you recall is focused on returning western union to sustainable profitable revenue growth.
Devin Mcgranahan: Our strategy is to become a customer-centric company by reversing many years of uncompetitiveness due to overpricing, underinvestment, poor execution, and slow responsiveness to market trends. We've been implementing this strategy while also maintaining our above-average margins, our commitment to our dividend, and paying down our deferred tax obligation. This quarter marks the seventh consecutive quarter of above 3% transaction growth for the company when excluding Iraq, Russia, and Belarus. The company has not delivered this level of consistent transaction growth in over a decade. As we continue to implement our strategy and we become more competitive, we see the potential for future share gains in many regions around the world.
Speaker Change: Our strategy is to become a customer centric company by reversing many years of uncompetitive Miss due to over pricing underinvestment or execution and slow responsiveness to market trends, we have been implementing this strategy, while also maintaining our above average.
Speaker Change: <unk>, our commitment to our dividend and paying down our deferred tax obligations.
Speaker Change: This quarter marks the seventh consecutive quarter of above 3% transaction growth for the company, when excluding Iraq, Russia and Belarus.
Speaker Change: The company has not delivered this level of consistent transaction growth in over a decade as we continue to implement our strategy and we become more competitive we see the potential for future share gains in many regions around the world.
Devin Mcgranahan: We have made significant progress on realigning our market position, improving our customer and agent experience, and building out our non-consumer money transfer business. Where we have gotten this right, like in Europe, we now see strong mid-single-digit revenue growth on double-digit transaction growth, a good result in a competitive market that would have been unimaginable three years ago. Broadly speaking, Q1 results show a continuation of the trends we saw in the fourth quarter and demonstrate the value of our globally diversified business. While the Americas continue to struggle with geopolitical headwinds, rest of world, which represents 50% of our money transfer revenues, continue to perform well with double-digit transaction growth in all three underlying regions.
Speaker Change: We have made significant progress on realigning our market position, improving our customer and agent experience and building out our non consumer money transfer businesses, where we have gotten this right like in Europe. We now see strong mid single digit revenue growth and double digit transaction growth.
Speaker Change: A good result in a competitive market it would have been unimaginable three years ago.
Speaker Change: Broadly speaking Q1 results show a continuation of the trends we saw in the fourth quarter and demonstrate the value of our globally diversified business.
Speaker Change: While the Americas continued to struggle with geopolitical headwinds rest of world, which represents 50% of our money transfer revenues.
Speaker Change: <unk> performed well with double digit transaction growth in all three underlying regions.
Devin Mcgranahan: We did see some deceleration in the Americas, with North America transaction growth about 100 basis points lower in Q1 than the previous quarter, and LACA about 200 basis points lower. The rate of change in the Americas slowed dramatically in Q1 with most of the slowdown happening in the third and fourth quarter of last year. This should set us up for easier comparisons as we get into the back half of the year. For the first quarter, our revenue came in at $984 million. Adjusted revenue, excluding Iraq, declined 2% with 100 basis points dragged from the difficult comparison against leap year last year.
Speaker Change: We did see some deceleration in the Americas was norm North America transaction growth about 100 basis points lower in Q1 than the previous quarter and lock up about 200 basis points lower.
Speaker Change: The rate of change in the Americas slowed dramatically in Q1 with most of this slowdown happening in the third and fourth quarter of last year.
Speaker Change: This should set us up for easier comparisons as we get into the back half of the year.
Speaker Change: For the first quarter, our revenue came in at $984 million.
Adjusted revenue, excluding Iraq declined 2% with a 100 basis points drag from the difficult comparison against leap year last year overall transaction growth was 3% and cross border principal growth was 10%.
Devin Mcgranahan: Overall transaction growth was 3% and cross-border principal growth was 10% on a constant currency ex-Iraq basis, speaking to the resilience of our customer base around the world. While our retail business in the Americas continued to face headwinds associated with the current geopolitical environment, our retail business in Europe is strong, with transaction growth of 10%, which led to regional revenue growth of 5%. Our branded digital business also continues to perform well with 14% transaction growth and 8% adjusted revenue growth in the quarter. Consumer Services Adjusted Revenue was down slightly in the quarter, as our bill payment business in Latin America was off double digits, and the first quarter is a seasonably slow quarter for both our advertising business and for European travel, which is the driver of our expanding FX business.
Speaker Change: On a constant currency ex Iraq basis speaking to the resilience of our customer base around the world.
Speaker Change: While our retail business in the Americas continued to face headwinds associated with the current geopolitical environment, our retail business in Europe is strong with transaction growth of 10%, which led to regional revenue growth of 5%.
Speaker Change: Our branded digital business also continues to perform well with 14% transaction growth and 8% adjusted revenue growth in the quarter.
Speaker Change: Consumer services adjusted revenue was down slightly in the quarter as our bill payment business in Latin America was off double digits in the first quarter is a seasonably slow quarter for both our advertising business and for European travel, which is the driver of our expanding FX business.
Devin Mcgranahan: We expect both businesses to have meaningfully better results in the coming quarter. Adjusted earnings per share came in at $0.41 or down $0.04 relative to this quarter a year ago. A decent result as Q1 2024 benefited meaningfully from higher revenues and operating profits from IRAC, which were not repeated in the current quarter. Our discipline in managing capital and operating costs is starting to come through.
Speaker Change: We expect both businesses to have meaningfully better results in the coming quarters.
Speaker Change: Adjusted earnings per share came in at 41 or down <unk> relative to this quarter a year ago.
Speaker Change: <unk> result, as Q1 2024 benefited meaningfully from higher revenues and operating profits from Iraq, which were not repeated in the current quarter.
Speaker Change: Our discipline in managing capital and operating cost is starting to come through.
Tom Hadley: Matt will discuss our first quarter financial results in 2025 outlook in more detail later in the call.
Speaker Change: Matt will discuss our first quarter financial results in 2025 outlook in more detail later in the call.
Devin Mcgranahan: Our vision is to be a globally diversified provider of everyday financial services to the aspiring populations of the world. We want to be the company that helps everyday people achieve their dreams through better financial products and services. It is one of the reasons that I am excited about our recently announced acquisition of EuroChain. It gives us another building block at the top of our distribution strategy and an important market like the United Kingdom to deliver high quality products and services in an omni-channel manner. Our European team is leading the way with implementation of our controlled distribution strategy and Eurochange will help us accelerate that strategy in the United Kingdom.
Speaker Change: Our vision is to be a globally diversified provider of everyday financial services to the aspiring populations of the world.
Speaker Change: We want to be the company that helps everyday people achieve their dreams through better financial products and services.
Speaker Change: It is one of the reasons that I am excited about our recently announced acquisition of Euro change. It gives us another building block at the top of our distribution strategy and an important market like the United Kingdom to deliver high quality products and services in an omnichannel manner.
Speaker Change: Our European team is leading the way with implementation of our controlled distribution strategy and Euro change will help us accelerate that strategy in the United Kingdom.
Devin Mcgranahan: Now, switching to the Americas. As we discussed last year, migration patterns continue to change across this region, and we have felt the effects in our financial results. These changes began in the second half of last year and have continued throughout this quarter. Our North American business was consistent in the fourth quarter after considering the headwind from leap year, while our Latin American business has continued to slow. Migration across Latin America has been slowing for several quarters, and the first quarter was a continuation of those trends. Slower migration levels in the region have led to lower intraloca remittance volume.
Speaker Change: Now switching to the Americas as we discussed last year migration patterns continue to change across this region and we have felt the effects in our financial results. These changes began in the second half of last year and have continued throughout this quarter.
Speaker Change: Our North American business was consistent in the fourth quarter after considering the headwind from leap year, while our Latin American business has continued to slow.
Speaker Change: Migration across Latin America has been slowing for several quarters and the first quarter was a continuation of those trends.
Speaker Change: Slower migration levels in the region has led to lower intra locker remittance volumes.
Devin Mcgranahan: Looking at Ecuador, for example, outbound remittances in the most recent central bank data were off 25% year over year. We've also seen slowing in the outbound trends in central bank data across other important Latin American countries like Mexico, Colombia, and Bolivia. North America performed largely in line with our expectations in the quarter. Transactions were down about one and a half percent in Q1, which was about 100 basis points slower than the fourth quarter. Principal per transaction in North America was up mid single digits in the quarter as customers sent more money per transaction at less frequent intervals.
Speaker Change: Looking at Ecuador for example, outbound remittances in the most recent central bank data were off 25% year over year.
Speaker Change: We have also seen slowing in the outbound trends in central bank data across other important Latin American countries, like Mexico, Colombia and Bolivia.
Speaker Change: North America performed largely in line with our expectations in the quarter.
Speaker Change: Transactions were down about one 5% in Q1, which was about 100 basis points slower than the fourth quarter.
Speaker Change: Principal per transaction in North America was up mid single digits in the quarter as customer sent more money per transaction at less frequent intervals.
Devin Mcgranahan: As mentioned in the last quarter, most of the slowdown in North America is coming in our retail business and is centered on the U.S. to Mexico corridor.
Speaker Change: As mentioned in the last quarter most of the slowdown in North America is coming in our retail business and is centered on the U S to Mexico corridor.
Devin Mcgranahan: When we look at U.S. outbound to Latin America more broadly, across all channels, and excluding Mexico, we see transactions are up 2% year over year, and revenue is flat in the quarter. Both statistics show negative trends on the retail side, but solid growth in digital.
Speaker Change: When we look at U S outbound to Latin America, more broadly across all channels and excluding Mexico, we seek transactions are up 2% year over year and revenue was flat in the quarter.
Speaker Change: Both statistics show negative trends on the retail side, but solid growth in digital.
Devin Mcgranahan: Stepping out even further, looking at U.S. outbound to the rest of world, excluding Mexico, we see transaction growth of 2.5%, with a similar breakdown across channels, softer in retail, supported by strong digital. We are not as far along in the transformation of our retail, our US retail business, as we are in Europe, and in a tough macro environment, it does show exiting Russia and losing two large agents accelerated our efforts throughout Europe in 2022, 2023 and 2024. from our learnings there. We know we need to more aggressively focus on driving North American agent productivity, implementing our tactical pricing strategy, and strengthening our distribution in both exclusive and non-exclusive channels.
Speaker Change: Stepping out even further looking at U S outbound to the rest of world, Excluding Mexico, we see transaction growth of two 5% with a similar breakdown our cross channels softer in retail supported by strong digital.
Speaker Change: We are not as far along in the transformation of our retail our U S retail business as we are in Europe and in a tough macro environment. It does show.
Speaker Change: Existing Russia, and losing two large agents accelerated our efforts throughout Europe in 2022, 2023 and 2024.
Speaker Change: From our learnings there.
Speaker Change: No we need to more aggressively focus on driving north American agent productivity implementing our tactical pricing strategy and strengthening strengthening our distribution in both exclusive and nonexclusive channels.
Devin Mcgranahan: The North American team is hard at work to accelerate this playbook this year in the region.
Speaker Change: North American team is hard at work to accelerate this playbook this year in the region.
Devin Mcgranahan: If we step outside of the Americas, a brighter picture comes into focus. As we obviously have seen the benefit of a globally diversified business with the European, Middle East, and APAC regions, which account for 50% of CMT revenue, all performing reasonably well. Europe accelerated positively in the first quarter on both transactions and revenue, and all three regions reported double-digit transaction growth in the quarter when excluding Iraq from the Middle East results. Sticking with the Middle East for a moment, we have a lot of momentum in the region driven by our long-term partnership with SDC, which recently launched as a licensed bank in Saudi Arabia.
Speaker Change: If we step outside of the Americas, a brighter picture comes into focus.
Speaker Change: As we obviously have seen the benefit of our globally diversified business with the European Middle East and APAC regions, which account for 50% of CMT revenue all performing reasonably well.
Speaker Change: Europe accelerated positively in the first quarter on both transactions and revenue in all three regions reported double digit transaction growth in the quarter when excluding Iraq from the Middle East results.
Speaker Change: Sticking with the middle East for a moment, we have a lot of momentum in the region driven by our long term partnership with SDC, which recently launched as a licensed bank in Saudi Arabia. We also have multiple new partnerships in the region, including two additional partnerships in Saudi.
Devin Mcgranahan: We also have multiple new partnerships in the region, including two additional partnerships in Saudi. In addition to Saudi Arabia, we are spending a lot of time in the UAE, which is one of the top 10 remittance markets in the world. We are expanding our investments in our digital channel in the country and have begun to ramp our recently launched partnership with DuPay to provide cross-border remittance services. We believe the Middle East is a big opportunity for Western Union, and we'll look forward to continuing to expand our presence in the region.
Speaker Change: In addition to Saudi Arabia, we are spending a lot of time in the UAE, which is one of the top 10 remittance markets in the World. We are expanding our investments in our digital channel in the country and have begun to ramp our recently launched partnership with do pay to provide cross border Remittance services, we believe the middle East.
Speaker Change: <unk> is a big opportunity for Western Union, and we'll look forward to continuing to expand our presence in the region.
Devin Mcgranahan: Now shifting to Europe. After multiple years of negative trends in the region, associated with the conflict in the Ukraine and the loss of two large agents, are European businesses delivering strong performance for the company? The change in trajectory is being driven by the hyper-local nature of the retail business, which has shifted from a high-reliance, enlarged strategic accounts to a more diversified approach with our strategic agents at the base, supported by a very competitive and robust independent agent network, complemented by a small number of owned and agent-controlled concept stores in high-volume locations. are owned in concept stores in Europe are now approaching 500 locations with the continued internal expansion, as well as the recently announced acquisition of Euro change in the UK.
Speaker Change: Now shifting to Europe.
Speaker Change: After multiple years of negative trends in the region associated with the conflict in the Ukraine and the loss of two large agents our European business is delivering strong performance for the company.
Speaker Change: The change in trajectory is being driven by the hyper local nature of the retail business, which has shifted from a high reliance on large strategic accounts to a more diversified approach with our strategic agents at the base supported by a very competitive and robust independent agent network complemented.
Speaker Change: By a small number of owned and agent controlled concept stores in high volume locations.
Speaker Change: Our owned and concept stores in Europe are now approaching 500 locations with the continued internal expansion as well as the recently announced acquisition of Euro change in the UK.
Devin Mcgranahan: The Eurochange acquisition will bring in-house a longstanding partner and will allow us to expand our FX services with over 200 owned locations in the country and 100 plus partner locations throughout the United Kingdom. We are excited about the opportunity to expand our cross-border travel money business. Our core customers, by definition, are travelers. They leave home and travel in search of economic opportunities, many times over great distances. When they return home, they almost always bring money back with them. In remittance parlance, this is often referred to as the informal market. It is for this reason that many of our agents around the world offer foreign exchange services alongside Western Union consumer money transfer.
Speaker Change: ROE change acquisition will bring in house, a longstanding partner and will allow us to expand our FX services with over 200 owned locations in the country and a 100 plus partner locations throughout the United Kingdom.
Speaker Change: We are excited about the opportunity to expand our cross border travel money business.
Speaker Change: Our core customers by definition are travelers.
Speaker Change: They leave home and travel in search of economic opportunities many times over great distances, when they return home they almost always bring money back with them.
Speaker Change: And remittance parlance. This is often referred to as the informal market.
Speaker Change: It is for this reason that many of our agents around the world offer foreign exchange services alongside Western Union consumer money transfer.
Devin Mcgranahan: We believe we have a natural right to play in this market and that our brand is well positioned. However, and potentially more important, our core customers are not the only people who travel internationally. Adding foreign exchange services allows us to expand our customer base to a higher-income demographic. with a product that our brand is already positioned to provide. Finally, we believe the travel money segment will continue to grow as consumers prioritize travel and new experiences with their discretionary income, and we know that local currency in hand remains an important element for non-business consumer travel. This acquisition complements our strategy across continental Europe with travel money services now in Spain and Italy, with Germany soon on the horizon.
Speaker Change: We believe we have a natural right to play in this market and that our brand is well positioned.
Speaker Change: However.
Speaker Change: And potentially more important our core customers are not the only people who travel internationally.
Speaker Change: Adding foreign exchange services allows us to expand our customer base to a higher income demographic.
Speaker Change: With a product that our brand is already positioned to provide.
Speaker Change: Finally, we believe the travel money segment will continue to grow as consumers prioritize travel and new experiences with their with their discretionary income and we know that local currency in hand remains an important element for non business consumer travel.
Speaker Change: This acquisition complements our strategy across Continental Europe with travel money services, now in Spain, and Italy with Germany soon on the horizon.
Devin Mcgranahan: We also offer travel money services in Singapore and several countries in Latin America as we look to leverage our controlled distribution strategy by providing multiple financial products and services in each location. We believe that by the end of the year, our travel money segment could be the largest business inside our consumer services segment, surpassing our retail money order business and both our North American and Latin American bill pay business.
Speaker Change: We also offer travel money services in Singapore, and several countries in Latin America, as we look to leverage our controlled distribution strategy by providing multiple financial products and services in each location.
Speaker Change: We believe that by the end of the year, our travel money segment could be the largest business inside our consumer services segment, surpassing our retail money order business and both our North American and Latin American Bill pay businesses.
Devin Mcgranahan: In conclusion, we remain pleased with the progress of our business against a tough macro backdrop in the Americas. From a regional perspective, while North America and Latin America are facing headwinds, Europe, the Middle East, ex-Iraq, and AIPAC continue to perform well, which highlights the value of a globally diversified business and gives us optimism about what we can accomplish in the remainder of 2025 and beyond. I believe that we are tracking well to achieve our Evolve 2025 goals and are setting the company up for a more prosperous future.
Speaker Change: In conclusion, we remain pleased with the progress of our business against the tough macro backdrop in the Americas.
Speaker Change: From a regional perspective, while North America, and Latin America are facing headwinds Europe, the middle East ex Iraq, and APAC continued to perform well, which highlights the value of our globally diversified business and gives us optimism about what we can accomplish in the remainder of 2025 and.
Speaker Change: Beyond.
Speaker Change: I believe that we are tracking well to achieve our evolve $20 25 goals and are setting the company up for a more prosperous future.
Matthew Cagwin: Thank you for joining the call today. I will now turn over to Matt to discuss our financial results in the quarter in more detail. Thank you, Devin. And good afternoon, everyone. I'm pleased to be here today to walk you through our 2025 first quarter results, as well as our 2025 financial outlook. In the first quarter, GAAP revenue was $984 million, and total company adjusted revenue excluding Iraq was down 2%. This decrease in growth was led by a sequential slowing of our retail and consumer services business. and Consistent Branded Digital Growth of 8%. Our expectations was Q1 would be one of the lowest growth rates of the year due to leap year benefit in 2024, and we expect our results will gradually improve as we go throughout the year with some of the new agent blends, benefits from Euro change acquisition, and acceleration in both our digital and consumer services business.
Speaker Change: Thank you for joining the call today I will now turn over to Matt to discuss our financial results in the quarter in more detail.
Matt: Thank you Devin and good afternoon, everyone I'm pleased to be here today to walk you through our 2025 first quarter results as well as our 2025 financial outlook.
Matt: In the first quarter GAAP revenue was $984 million and total company adjusted revenue, excluding Iraq was down 2%.
Matt: This decrease in growth was led by a sequential slowing of our retail and consumer services business.
Matt: And consistent branded digital growth of 8%.
Matt: Our expectations was Q1 would be one of the lowest growth rates of the year due to leap year benefit in 2024, and we expect our results will gradually improve as we go throughout the year with some of the new agent wins benefits from Euro change acquisition and acceleration in both our digital.
Matt: And consumer services businesses.
Matthew Cagwin: Adjusted operating margin was 19% compared to 20% last year, with the decrease primarily due to elevated Iraq revenues last year, partially offset by lower operating costs in the current period. Adjusted EPS was $0.41 in the current quarter versus $0.45 last year. This prior year benefited from a much higher IRAC contribution and was partially offset by lower operating costs, lower share count, and lower adjusted effective tax rate in the current period. The adjusted effective tax rate in the quarter was 10% compared to 16% the prior year. The change in our non-GAAP tax rate is largely due to discrete benefits received related to a resolution of a legacy dispute in the current period.
Matt: Adjusted operating margin was 19% compared to 20% last year with the decrease primarily due to elevated Iraq revenues last year, partially offset by lower operating costs in the current period.
Matt: Adjusted EPS was <unk> 41 in the current quarter versus <unk> 45 last year.
Matt: This prior year the prior year benefited from a much higher <unk> contribution.
Matt: And was partially offset by lower operating costs lower share count and lower adjusted effective tax rate in the current period.
Matt: The adjusted effective tax rate in the quarter was 10% compared to 16% in the prior year.
Matt: The change in our non-GAAP tax rate is largely due to discrete benefits.
Matt: <unk> related to a resolution of a legacy dispute in the current period.
Matthew Cagwin: Now turning to our consumer money transfer or CMT business. CMT transactions grew 3% in the quarter, driven by robust branded digital. business that grew transactions 14%. CMT adjusted revenue was down 2%, driven by a difficult macro environment and tough comparison against last year due to leap years. Our branded digital business grew adjusted revenue by 8% and transactions by 14%. This marks the 8th consecutive quarter of double-digit transaction growth and the 5th straight quarter of high single-digit revenue growth. which was achieved against a tougher comparison with leap year in the previous year period. We have continued to grow our pay-out-to-account business.
Matt: Now turning to our consumer money transfer or CMT business.
Matt: CMT transactions grew 3% in the quarter driven by robust branded digital.
Matt: Business that grew transactions 14%.
Matt: CMT adjusted revenue was down 2% driven by a difficult macro environment and tough comparison against.
Matt: Against last year due to leap year.
Matt: Our branded digital business grew adjusted revenue by 8% and transactions by 14%.
Matt: This marks the eighth consecutive quarter of double digit transaction growth and the fifth straight quarter of high single digit revenue growth.
Matt: Which was achieved against a tougher comparison with leap year and the previous year period.
Matt: We have continued to grow our payout to account business.
Matthew Cagwin: with over 35% growth in the quarter. This channel puts pressure on our spread between revenue and transactions is account payout comes at a lower yield But we're excited to be growing this business is it comes with higher margins and provides for much stickier customer relationship. This sequential improvement in branded digital transactions was driven by an increase in Europe, Middle East, and APAC. Branded digital revenue growth in the quarter was muted by the relaunch of our loyalty program in the United States, which provided a modest headwind to our revenue as we accounted for accruals of future loyalty benefits.
Matt: With over 35% growth in the quarter.
Matt: This channel puts pressure on our spread between revenue and transactions as account payout comes at a lower yield.
Matt: But we're excited to be growing this business as it comes with higher margins and provides for much stickier customer relationships.
Matt: This sequential improvement in branded digital transactions was driven by an increase in Europe middle East and APAC.
Matt: Branded digital revenue growth in the quarter was muted by the relaunch of our loyalty program in the United States, which provided a modest headwind to our revenue as we counted for accruals of future loyalty benefits.
Matthew Cagwin: We expect this headwind to continue into the second quarter. We are pleased with the progress we're making on the digital side of our business.
Matt: We expect this headwind to continue into the second quarter.
Matt: We are pleased with the progress we're making on the digital side of our business.
Matthew Cagwin: Now turning to the retail business. In the quarter, we saw continued improvement in Europe, offset by weaker results in the Americas. which are underperforming primarily due to geopolitical issues, as well as slowing migration trends that Devin discussed earlier. Europe's retail momentum resulted in 10% transaction growth in the quarter, the first time we saw double-digit transaction growth in the region for at least a decade, excluding one quarter in 2021 during the COVID grow-over period. We continue to believe there are numerous compelling opportunities for our retail business to recapture share, and we look forward to executing those opportunities as we work to return our retail business to growth.
Matt: Now turning to the retail business in the quarter. We saw continued improvement in Europe offset by weaker results in the Americas.
Matt: Which are underperforming primarily due to geopolitical issues as well as slowing migration trends that Devin discussed earlier.
Matt: Europes retail momentum resulted in 10% transaction growth in the quarter. The first time, we saw double digit transaction growth in the region for at least a decade, excluding one quarter in 2021 during the COVID-19 grow over period.
Matt: We continue to believe there are numerous numerous compelling opportunities for our retail business to recapture share and we look forward to executing against those opportunities as we work to return our retail business the growth.
Matthew Cagwin: Now transitioning to our consumer services segment, which accounted for 11% of total quarterly revenue. First quarter, adjusted revenue was down 3%, driven by softness in our consumer bill pay business in Argentina and a delay in a media network contract. We expect growth to accelerate in the second quarter as we enter a seasonally stronger period for our FX business, which is largely driven by summer travel in Europe. In April, we completed an acquisition of a long-term partner in the United Kingdom. And we would like to welcome the EuroChange group to the Western Union family. Using trailing 12-month revenue.
Matt: Now transitioning to our consumer services segment, which accounted for 11% of total quarterly revenue.
Matt: First quarter adjusted revenue was down 3% driven by softness in our consumer Bill pay business in Argentina, and a delay in our media network contract.
Matt: We expect growth to accelerate in the second quarter as we enter a seasonally stronger period for our FX business, which is largely driven by summer travel in Europe.
Matt: In April we completed an acquisition of a long term partner in the United Kingdom.
Matt: And we would like to welcome the Euro change group to the Western Union family.
Matt: Using trailing 12 month revenue.
Matthew Cagwin: The acquisition of this very well-regarded FX house is expected to add roughly one percentage point of growth to Western Union this year. We expect this acquisition to be accretive in 2025 and to help us accelerate our money transfer business.
Matt: The acquisition of is very well regarded FX house is expected to add roughly one percentage point of growth to western Union. This year.
Matt: We expect this acquisition to be accretive in 2025 and to help us accelerate our money transfer business.
Matthew Cagwin: Now switching briefly to the Operational Efficiency Program. In the quarter, we were able to save $30 million, bringing our total savings to date to $140 million. This puts us on pace to exceed our $150 million target, two full years ahead of schedule. In light of a more uncertain macro backdrop and lower revenue from Iraq, we anticipate a larger portion of our operational efficiencies will fall to the bottom line this year than they have in the recent past.
Matt: Now switching briefly to the operational efficiency program.
Matt: In the quarter, we were able to save $30 million, bringing our total savings to date to $140 million.
Matt: This puts us on pace to exceed our $150 million.
Matt: Target two full years ahead of schedule.
Matt: In light of a more uncertain macro backdrop and lower revenue from Iraq, We anticipate a larger portion of our operational efficiencies will fall to the bottom line this year than they have in the recent past.
Matthew Cagwin: Now turning to our cash flow and balance sheet. We generated $148 million in operating cash flow in the first quarter. This is up 50% year over year. In the first quarter, capital expenditures was $24 million, down 30% year-over-year, and we remain committed to strategically investing in key areas of our business while aligning our agent compensation to performance. We also continue to maintain a strong balance sheet with cash and cash equivalents of $1.3 billion and debt of $2.8 billion. Our leverage ratios were at 2.8 times and 1.5 times on a gross and net basis, which we believe provides us ample flexibility for capital returns or potential M&A while maintaining our investment grade credit rate.
Matt: Now turning to our cash flow and balance sheet, we generated $148 million in operating cash flow in the first quarter. This is up 50% year over year.
Matt: In the first quarter capital expenditures was $24 million down 30% year over year.
Matt: And we remain committed to strategically investing in key areas of our business, while aligning our agent compensation to performance.
Matt: We also continue to maintain a strong balance sheet with cash and cash equivalents of $1 3 billion and debt of $2 8 billion.
Matt: Our leverage ratios were at two eight times and one five times on a gross and net basis, which we believe provides us ample flexibility for capital returns or potential M&A, while maintaining our investment grade credit rating.
Matthew Cagwin: In the quarter, we returned over $150 million to our shareholders via both dividends and stock repurchase. Post-quarter end, we made our final $200 million tax payment to the IRS, which concluded our $800 million 2017 Tax Act commitment. Going forward, we now have greater flexibility to use our free cash flow to drive shareholder value. to further share count reduction or to invest in the business through inorganic growth opportunity.
Matt: In the quarter, we returned over $150 million to our shareholders via both dividends and stock repurchases.
Matt: Post quarter end, we made our final $200 million tax payment to the IRS, which concluded our $800 million.
Matt: 2017 tax act commitment.
Matt: Going forward, we now have greater flexibility to use our free cash flow to drive shareholder value.
Matt: Through further share count reduction or to invest in the business through inorganic growth opportunities.
Matthew Cagwin: Now moving to our 2025 outlook, which assumes no material change in the macroeconomic condition. However, due to increased uncertainty, it has become more difficult to forecast revenue. Although we do see a path to achieving our 2025 guidance. As such, we are reaffirming our guidance today, which includes adjusted revenue to be in the range of $4,115,000,000 to $4,215,000,000. This range reflects continued growth in our brand digital business, double digit growth in consumer services, as well as continued stabilization of our retail business. We forecast adjusted operating margins to be in the range of 19 to 21 percent.
Matt: Now moving to our 2025 outlook, which assumes no material changes in the macroeconomic conditions. However, due to increased uncertainty it has become more difficult to forecast revenue, although we do see a path to achieving our 2025 guidance.
Matt: As such we are reaffirming our guidance today, which include adjusted revenue to be in the range of $4 billion $150 million to $4 $215 million.
Matt: This range reflects continued growth in our branded digital business double digit growth in consumer services as well as continued stabilization of our retail business.
Matt: We forecast adjusted operating margins to be in the range of 19% to 21%.
Matthew Cagwin: And lastly, we forecast adjusted EPS to be in the range of a dollar seventy five to a dollar eighty five.
Matt: And lastly, we forecast adjusted EPS to be in the range of $1 75 to $1 85.
Matthew Cagwin: As a reminder, from a quality phasing perspective, Iraq contributed $34 million in the second quarter of 2024. which will create a headwind for the company from a revenue and EPS perspective in the second quarter of this year.
Matt: As a reminder, from a quarterly phasing perspective, Iraq contributed $34 million in the second quarter of 2024.
Speaker Change: Which will create a headwind for the company from a revenue and EPS perspective in the second quarter of this year.
Unknown Attendee: Thank you for joining the call, and operator, we're now 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.
Speaker Change: Thank you for joining the call and operator, we're now 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.
Speaker Change: All participants will be in listen only mode.
William Nance: Our first question comes to us from Will Nance from Goldman Sachs. Please ask your question. Yes, thanks for taking the question.
Speaker Change: Our first question comes to Us from will Nance from Goldman Sachs. Please ask your question.
Speaker Change: Yeah.
Will Nance: Yes, thanks for taking the question I wanted to ask about some of the pressures you guys are seeing on the North American retail side I'm curious if you guys can speak to any kind of channel remixing that may be happening under the surface from the retail channel to the digital channel I guess are you seeing that.
William Nance: I wanted to ask about some of the pressures you guys are seeing on the North American retail side. And I'm curious if you guys can speak to any kind of channel remixing that may be happening under the surface, from the retail panel to the digital channel? I guess, are you seeing behavioral changes? Maybe people looking to, you know, leverage more digital channels and the current kind of political and immigration environment? Have you seen evidence of recapture of that violence? If so, on the on the digital side of this?
Gabriel: Gabriel changes maybe people looking to.
Gabriel: Leverage more digital channels in the current kind of political and emigration environment have you seen evidence of recapture of that volumes. If so on the on the digital side of the business.
Devin Mcgranahan: Hey Will, thanks for joining the call. We have seen a slowing across both digital and retail in North America. The slowing has been more significant, as evidenced by the financial performance in the Americas, in the retail side than in the digital. The same trends that we highlighted in prepared comments with the U.S.
Hey, well thanks for joining the call.
Speaker Change: We have seen a slowing across both digital and retail in North America designing has been more significant as evidenced by the financial performance in the Americas and the retail side than in the digital the same trends that we highlighted in our prepared comments.
Gabriel: With the U S to Mexico corridor.
William Nance: to Mexico corridor, and actually the Bank of Mexico reported in the quarter that principal volume had declined for the first time in many quarters, not a lot, but it stopped being positive, single and sometimes even double digits to a slight negative. So we've seen the volume to Mexico decline in both retail and digital. We've seen very little acceleration of what I would call channel migration. Our channel migration numbers are relatively consistent year over year in North America. Got it. Appreciate you taking that question.
Gabriel: And factually.
Gabriel: Bank to Mexico reported in the quarter the principal.
Gabriel: Principal volume had declined for the first time in many quarters not a lot, but it stopped being positive single and sometimes even double digits to a slight negative.
Gabriel: We've seen the volume to Mexico declined in both retail and digital we've seen very little acceleration of what I would call channel migration, our channel migration numbers are relatively consistent year over year in North America.
Gabriel: Got it I appreciate you taking my question and just maybe one for Matt just a clarification on the guide.
William Nance: And just maybe one for Matt, just a clarification on the guide. So I hear you on reiterating the guide, does that guide include the acquisition in those numbers from here, the 1%? And I think you said it greeted in the first year, presumably on the bottom line. So does it include that impact?
Gabriel: I hear you on reiterating the guide does that include the acquisition in those numbers from here, the 1% and I think you said accretive in the first year.
Gabriel: On the bottom line. So does it include that impact and then a follow up would be I think.
William Nance: And then, you know, a follow up would be I think, you know, you're talking about, it doesn't assume a material change in the immigration or the macro backdrop, I guess, like, to what extent is some of the weakness that you're seeing, like already reflective of that? And I guess, is there any any way you could sort of quantify the deviation of the baseline, the deviation of the business performance today relative to the baseline that's kind of informing that guide? You know, if you are deviating from it so far?
Gabriel: Talking about it doesn't assume a material change in the immigration or the macro backdrop I guess to.
Gabriel: To what extent some of the weakness that youre seeing like already reflective of that and I guess is there any any way you can sort of quantify the deviation of the baseline.
Gabriel: <unk> of the business performance today relative to the baseline that's kind of informing that guide.
Gabriel: If you are deviating from that so far thanks, Yes, hey, well thanks for joining the call for questions on the first part is the Euro change acquisition and our guide to answer. The question is yes, we had been working on this acquisition for a while and do it when we gave our guidance.
William Nance: Thanks.
Matthew Cagwin: Hey Will, thanks for joining the call. Here's the questions. On the first part, is the Euro change acquisition in our guide? The answer to the question is yes. We had been working on this acquisition for a while and knew it when we gave our guidance and something we were planning on doing. As far as the what are we seeing for macros and other immigration changes, is Devin highlighting his prepared remarks. We have seen a leveling off. The major deterioration we saw had happened in the second half of last year and it's really started to level off now over the last quarter.
Gabriel: Suddenly we were planning on doing as.
Gabriel: As far as the what are we seeing for macros.
Gabriel: Other immigration changes as.
Gabriel: As Devin highlighted in his prepared remarks, we have seen a leveling off the.
Gabriel: A major deterioration we saw had happened in the second half of last year, and it's really started to level off now over the last.
Gabriel: Quarter.
Matthew Cagwin: So that's baked into our forecast right now about levels. There have been some different rulings and guidance from the government around ID requirements is actually in about 30 counties in the southwest border. We've adopted those. We obviously can't predict what happens from there has not had a material impact yet to our business, but it's early days. So we're still monitoring that. So it's a very dynamic market is why I made the comment I did around our outlook. We do feel good. We do see line of sight to how to get to our guide. But it's been a very unusual market over the last few months.
Gabriel: So thats baked into our forecast right now at that levels. There had been some different rulings in guidance from the government around.
Gabriel: Sure.
Gabriel: I'd requirements is actually about 30 counties in the southwest border. We've adopted those we obviously can't predict what happens from there has not had a material impact yet to our business, but it's early days. So we're still monitoring that so it's a very dynamic market is why I made the comments I did around our outlook.
Gabriel: We do feel good we do see line of sight to how to get to our guide, but it's been a very unusual market over the last few months as you know.
Devin Mcgranahan: I would add Will and he came through in our hopefully in our public comments. The benefit of diversification and our global footprint really came through again in this quarter and as we look through the rest of the year, the strength that we see in the Middle East and obviously the overperformance that we're having in Europe assuades any concerns that we have about the situation continuing as it is here in the United States of America.
Gabriel: I think the other thing I would add will came.
Gabriel: Came through and are hopefully in our public comments.
Speaker Change: The benefit of diversification and our global footprint really came through again in this quarter and as we look through the rest of the year.
Speaker Change: <unk> that we see in the middle East and obviously the over performance that we're having in Europe.
Speaker Change: Wade any concerns that we have about this situation continuing as it is here in the United States of America.
Speaker Change: Got it.
Devin Mcgranahan: Thanks for that, Devin, and thanks, folks, for taking the questions. Appreciate it.
Devin Mcgranahan: Thanks Devin.
Devin Mcgranahan: For taking the questions I appreciate it thanks Paul.
Tianjin Wong: Our next question comes to us from Tianjin Wong from JP Morgan.
Speaker Change: Our next question comes to Us from Tien Tsin Huang from Jpmorgan. Please ask your question.
Tianjin Wong: Please ask your question. Hey, thanks. Good afternoon. Just a follow up on Will's question. I think he also mentioned that we do expect results to gradually improve consistent with last quarter. You've mentioned Euro Change here is, I think you mentioned new agents and then acceleration and digital and consumer services.
Speaker Change: Hey, Thanks. Good afternoon, just a follow up on Will's question. I think you also mentioned that you expect results to gradually improve consistent with last quarter, you've mentioned euro.
Speaker Change: I think you mentioned new agents and then acceleration in digital and consumer services. So can you elaborate on.
Tianjin Wong: So can you elaborate on on what you see there in terms of the contribution behind the acquisition to drive the improvement?
Speaker Change: What you see there in terms of the contribution beyond the acquisition to drive improvement.
Matthew Cagwin: Hey Tenjin, thanks for joining the call today. There's a couple things that are that we think can actually help improve us. Devin talked about two new a partnership with STC talked about earlier, as well as our Europea partnership, as well as we've got a couple new things in the Middle East we've signed recently, they just just started ramping the latter part of March, that we're very optimistic. Two of the four were competitive takeaways from one of our larger competitors that we see being very meaningful to us over time. And should help us in the back half the year, the EuroChange bit, EuroChange acquisition will obviously help us as we started to integrate that here in the month of April, as well as we've seen strength across our travel, our travel money business, which we think will help our overall consumer services business.
Tien Tsin: Hey, Tien tsin, thanks for joining the call today.
Devin Mcgranahan: There's a couple of things that are that we think can actually help improve us Devin talked about too.
Devin Mcgranahan: New <unk> the partnership with STC talked about earlier as well as our European partnership as Wells, We've got a couple of new things in the Middle East. We've signed recently they just started ramping in the latter part of March that were very optimistic.
Devin Mcgranahan: Two of the four were competitive takeaways from one of our larger competitors that we see being very meaningful to us over time and should help us in the back half of the year the urethane boots.
Devin Mcgranahan: Euro change acquisition will obviously help us as we started to integrate that here in the month of April as well as we've seen strength across our travel locks are travel money business.
Devin Mcgranahan: Which we think will help our overall consumer services business and I alluded to this in my prepared remarks, so hopefully came through.
Matthew Cagwin: And I alluded to this in my prepared remarks that hopefully came through. We, you think about consumer service as a whole, we're off a little bit of where we thought we'd be for Q1, we always anticipated being one of the lowest quarters of the year. If you talk about what was different in that, I highlighted the Argentina business has been much weaker than we anticipated. You've seen the inflation changing and the macroeconomic conditions in Argentina very different than it would have been six months ago. That has been a little bit of a negative surprise for us.
Devin Mcgranahan: When you think about consumer service as a whole we're off a little bit of where we thought we'd be for Q1, we always anticipated being one of the lowest quarters of the year.
Devin Mcgranahan: If you talk about what was different about by highlighted the Argentina business has been much weaker than we anticipated.
Devin Mcgranahan: <unk> seen the inflation changing the macroeconomic conditions in Argentina very different than it would've been six months ago.
Devin Mcgranahan: That has been a little bit of a negative surprise for us we think that some other improvements we have will guarantee and help us get comfortable with our double digit growth. The other one was the delay in our media network contract, we had anticipated having that benefit for half the quarter Didnt happen. We've now executed on and that will help us in Q2 don't anticipate it having any meaningful impact on the.
Matthew Cagwin: We think that some other improvements we have will guarantee and help us get comfortable with our double-digit growth. The other one was the delay in our media network contract. We had anticipated having that benefit for half the quarter. Didn't happen. The expansion we've now executed on that will help us in Q2. Don't anticipate it having any meaningful impact on the full-year growth for our media network business. There are multiple things we think can help us, as well as acceleration in our brand of digital and stabilization.
Devin Mcgranahan: Whole year growth for our media network business. So the multiple things, we think can help us as well as acceleration of our branded digital and stabilization of retail but definitely that.
Devin Mcgranahan: Devin and his dad. Nope. Got it. That's clear. Thanks for going through that. Just my as my follow up. I know you don't usually give month to month Unknown Attendee, Matthew Cagwin, Ramsey El, William Nance, Andrew Schmidt, Devin McGranahan, Unknown Attendee, Matthew Cagwin, Devin McGranahan, Ramsey El, William Nance, Andrew Schmidt, Devin McGranahan, Great question, Tingen. Matt and I are chuckling because he and I have been going back and forth for the last 10 days. As you know, and I'll come back to the principal thing in a second, but as you know, the remittance business is heavily, heavily aligned to the holidays.
Devin Mcgranahan: No.
Devin Mcgranahan: Got it.
Devin Mcgranahan: Clear thanks for going through that.
Speaker Change: As my follow up I know you don't usually give is month to month.
Speaker Change: Updates, but just anything to say on what you saw in April we get the question around pull forward a lot of know amex and others have gotten those questions too I'm curious what you've seen is nipissing interesting.
Speaker Change: Observations from there I heard Kevin you mentioned, the higher principle stand relative to the transactions I'm. Just curious if those are some clues that maybe we should study.
Speaker Change: Beyond what you shared it wrong right.
Speaker Change: Geopolitical stuff.
Speaker Change: Yes, great question Tien Tsin.
Speaker Change: Matt and I are chuckling, because he and I have been going back and forth for the last 10 days as you know and I'll come back to the principal thing in a second but as you know the remittance business is heavily heavily aligned to the holidays and while we have a busy season at the end of the year the true peak for our.
Devin Mcgranahan: And while we have a busy season at the end of the year, the true peak for our business is between Ramadan, Easter, and Mother's Day. And so last year, we had kind of a double or almost triple witching hour, where Ramadan and Easter stacked up in the first quarter, and then Mother's Day followed pretty quickly thereafter. This year, Ramadan started much earlier in the quarter, so it petered out by the end of the quarter. And yet Easter was now here in in April, with Mother's Day still off in early May. And so we've actually seen, you know, calendar-wise slowdown in the early part of this quarter, due to the timing of the holidays.
Speaker Change: <unk> is between Ramadan, Easter and mother's day, and so last year, we had kind of a double almost triple witching hour, where Ramadan and Easter stacked up in the first quarter and then mother's day, followed pretty quickly thereafter this year Ramadan started much earlier.
Speaker Change: In the quarter, so it petered out by the end of the quarter and yet Easter was now here in April with mothers day still off in early May and so we've actually seen.
Speaker Change: Calendar wise.
Speaker Change: Slowdown.
Speaker Change: In the early part of this quarter due to the timing of the holidays and I think we've convinced ourselves mostly that it is timing of the holidays and that the underlying trends as we said in our public comments have started to stabilize particularly here in North America.
Devin Mcgranahan: I think we've convinced ourselves mostly that it is timing of the holidays, and that the underlying trends, as we said in our public comments, have started to stabilize, particularly here in North America, from the fourth quarter into the first quarter, and we feel pretty good about that. But it doesn't show up yet in the April numbers, because of the big holiday shift that we're experiencing this The PPT per transaction, though, is a more interesting dynamic. And my almost three and a half years as the CEO. We spent a lot of time talking about the stability in the PPT and in the face of what was a pretty high inflationary environment 12 and 18 months ago.
Speaker Change: From the fourth quarter into the first quarter, and we feel pretty good about that but it doesn't show up yet in the April numbers because of the big holiday shifts that we're experiencing this year.
Speaker Change: The P. P T per transaction, though is a more interesting dynamic.
Speaker Change: And my.
Speaker Change: Almost three and a half years as the CEO. We spent a lot of time talking about the stability in the ppt and in the face of what was a pretty high inflationary environment 12 months to 18 months ago.
Devin Mcgranahan: Satisfaction that we were seeing PPTs remain roughly flat. This is the first time that we've seen material acceleration in principles per transaction driven a lot here in North America, but also in other parts of the world, as I talked about that 10% PPT per PPT growth ex-Iraq. So that speaks to the resilience of the customer and potentially a slight change in consumer behavior, less frequent, particularly in the retail locations, less likely to want to be potentially out in public sending money home. And so we are keeping a very close eye on this as we think it speaks to what is happening under the surface, particularly in our retail environment, particularly in North America.
Speaker Change: Satisfaction that we were seeing <unk> remained roughly flat. This is the first time that we've seen material acceleration in principal per transaction driven a lot here in North America, but also in other parts of the world as I talked about that 10% Ppt ppt grow.
Speaker Change: <unk> ex Iraq.
Speaker Change: So that speaks to the resilience of the customer and potentially a slight change in consumer behavior less frequent particularly in the retail locations less likely to we want to be potentially out in public sending money home and so we are keeping a very close eye on this dynamic as we think it speaks to what is.
Speaker Change: <unk> under the surface, particularly in a retail environment, particularly in North America.
Devin Mcgranahan: That's really interesting. Thank you for sharing.
Speaker Change: That's really interesting thank you.
Darrin Peller: Our next question comes to us from Darin Peller from Wolf Research. Please ask your question. Guys, thanks. So we're looking at the digital transaction growth 14% was a bit better than even last quarter. And I know there are some nuances in the market.
Speaker Change: Our next question comes to Us from Darrin Peller from Wolfe Research. Please ask your question.
Speaker Change: Yeah.
Darrin Peller: Guys. Thanks, So we're looking at the digital transaction growth, 14% was a bit better than even last quarter and I know there are some nuances in the market.
Darrin Peller: You know, can you touch on the implications of the loyalty update you're providing and what that could be on the business, as well as actually just maybe a little bit more color on the banking payout, or electronic payout, and what that does for the business, maybe just more of an understanding of why that should help improve it further going from here. And then I guess adding on to that, maybe just more directional guidance on the spread between the transaction growth and revenue growth rates from here.
Darrin Peller: Can you touch on the implications of the loyalty update you are providing and what that could be on the business as well as actually just maybe a little bit more color on the banking payout electronic payout and what that does for the business, maybe just more of an understanding of why that should help improve it further going from here.
Darrin Peller: And then I guess, adding on to that maybe just more directional guidance on the spread between.
Darrin Peller: The transaction growth and revenue growth rates from here.
Matthew Cagwin: Hey, Darren, thanks for joining the call today. A couple different questions I'm going to unpack it for you. So as far as your question about the 14% and how does loyalty fit into it? We've had a loyalty program for a while Devin talked about I believe was Q1 last year might have been Q2 but we launched it last year in France and Morocco. We've seen some pretty solid results that gave us some optimism have now brought to the US. The goal of the program is to drive loyalty, and retention in our customer base. As we talked about publicly before, our retail retention is in the mid to high 40s.
Darrin Peller: Hey, Darrin, thanks for joining the call today.
Speaker Change: Couple of different question of impact of for you. So as far as your question about the 14% and how does loyalty fit into it.
Darrin Peller: We've had a loyalty program for awhile Devin talked about I believe it was Q1 last year might have in Q2, but Florida together, we launched it last year in France, and Morocco, we've seen some pretty solid results that gave us some optimism have now brought to the U S. The goal of the program is to drive.
Darrin Peller: Loyalty and retention and our customer base as we've talked about publicly before.
Darrin Peller: Our retail retention is in the mid to high Forty's and we've never given this number publicly but our digital numbers a little bit better than that.
Matthew Cagwin: And we've never given this number publicly, but our digital number is a little bit better than that. And we believe with some strong loyalty programs and creating a way of that connection, in addition to having more products, you can drive a longer customer relationship between the two sides. So that is the goal of the program. So we have relaunched it here in Q1 for our digital business in the US. It had a modest, I intentionally use the word modest on my script because it is in the 10 to 50 BIP range of an impact on the quarter.
Darrin Peller: And we believe with some strong loyalty programs and creating a wave in that connection. In addition have more products you can drive a longer customer relationship between the two sides. So that is the goal of the program.
Darrin Peller: So we have relaunched it here in Q1 for our digital business in the U S. It had a modestly essentially use the word modest on my script because it is in the 10 to 50 bps range of impact on the quarter, it's not massive on the revenue side no impact on transactions that will continue as it grows the accrual into Q2 and then once it's been fully rolled out.
Matthew Cagwin: It's not massive on the revenue side, no impact on transactions. That will continue as it grows the accrual into Q2 and then once it's been fully rolled out. you'll be starting to use points as you earn points and it won't have any more impact on revenue. We're monitoring closely, it's still early days to see if we get the same benefit for retention that we anticipate, but we do believe it should provide us an uplift to our.
Darrin Peller: <unk>.
Darrin Peller: You're you'll be starting to use points as you earn points and it won't have any more impact on revenue. We're monitoring closely it's still early days to see if we get the same benefit for retention that we anticipate.
Darrin Peller: But.
Darrin Peller: We do believe it should provide us an uplift to our retention.
Matthew Cagwin: to your question around APN and what does that mean for a holistic business. The APM business is A relationship where folks have actually connected their bank account to us or connected their outside payout to their receivers. Once that's all been set up, we have noticed the behavior that is a much more sticky customer than the typical cash payout customer. So it's been growing at a very fast clip, and we've been talking about this now probably for about eight to ten quarters, where it's been growing 30% plus. It accelerated here in Q1 to mid-30s. That caused a widening because of the lower RPT associated with those customers, but we're happy with that.
Darrin Peller: To your question around APM, and what does that mean for our wholesale business.
Darrin Peller: The APM business is.
Darrin Peller: A relationship where folks are actually connected their bank account to us or connected there outside payout to their their receivers. Once that's all been setup. We have noticed the behavior that is a much more sticky customer than the typical cash payout customer.
Darrin Peller: So it's been growing at a very fast clip than we've been talking about this now probably for about eight to 10 quarters, where it's been growing 30% Pos it accelerated here in Q1 to mid thirties.
Devin Mcgranahan: That caused a widening because of the lower RPT associated with those those customers, but we're happy with that that's going to provide us a longer relationship and a larger base and that is the fastest growing part of the business and then you'd add Devin I agree with all of that we remain very indexed on that spread and as we've said publicly many.
Matthew Cagwin: That's going to provide us a longer relationship and a larger base, and that is the fastest-growing part of it. I agree with all that. We remain very indexed on that spread. And, you know, as we've said publicly many times, our long term goal is kind of three to 400 basis points in digital relative to the mix happening both across corridors and across kind of retail payout versus account payout or APR.
Times, our long term goal is kind of three to 400 basis points in <unk>.
Digital relative to the mix happening both across corridors and across kind of retail payout versus account payout or APN, Quebec to loyalty for a second I am quite excited about what we're doing in loyalty as Matt highlighted our primary objective function with the loyalty program is increased retention.
Devin Mcgranahan: I'll come back to loyalty for a second. I'm quite excited about what we're doing in loyalty. As Matt highlighted, our primary objective function with the loyalty program is increased retention, which is a powerful economic lever in our business. We launched in France. We also launched in Morocco. So this loyalty program, unlike the past one, is actually two-sided. So both senders and receivers participate in the program. And we've seen big engagement in the U.S. with our base of customers who participated in the last loyalty program actively participating in the new and redeeming are much easier to use and much more aligned incentive program to spur incremental transactions versus just drive rewards back for high-volume customers.
Devin Mcgranahan: <unk>, which is a powerful economic lever in our business, we launched in France. We also launched in Morocco. So this loyalty program. Unlike the past one is actually two sided so both senders and receivers participate in the program and we've seen big engagement in the U S with our base of customers who participated in the last.
Devin Mcgranahan: LT program actively participating in the new and redeeming are much easier to use and much more aligned incentive program to spur incremental transactions versus just drive rewards back for high volume customers.
Devin Mcgranahan: Well, it looks like it's been showing on the transaction growth. So that's good to see.
Devin Mcgranahan: Well it looks like it's been showing on the transaction growth so thats good to see.
Devin Mcgranahan: I guess just quick follow up on the competitive dynamics. When I think about the backdrop, and from a geopolitical standpoint, have you guys seen any changes in behavior from any competitors deciding to move it over their position in the market based on anything going on from a political standpoint in any markets, frankly? I'm reflecting on your question. As you know, we've talked about two trends that I think we continue to see. One is there is a consolidation happening both in retail and digital along the lines of the stronger, more well-capitalized players. This turns out to be a capital-intensive business.
Devin Mcgranahan: Yes.
Speaker Change: Follow up on the competitive dynamics when I think about the backdrop from a geopolitical standpoint have you guys seen any changes in behavior from any competitors deciding to move it over there. They are positioned in the market based on anything going on from a political standpoint in any markets frankly.
Speaker Change: Im reflecting on your question.
Speaker Change: As you know we've talked about two trends that I think we continue to see.
Speaker Change: One is there is a consolidation happening both in retail and digital around along the lines of the stronger more well capitalized players just turns out to be a capital intensive business. The cost of capital has gone up with interest rates around the world.
Devin Mcgranahan: The cost of capital has gone up with interest rates around the world, and we continue to see the largest players consolidating, and smaller players, particularly very small, marginal, niche, geographic, or segment-based players, We have not seen an overly aggressive response by the major competitors to any of the trends in North America that were different prior to the geopolitical changes that happened back last fall, starting with the elections in South America and working their way into North America. It has remained a relatively stable and consistent competitive environment from our view.
Speaker Change: We continue to see the largest players consolidating and smaller players, particularly very small marginal niche geographic or segment based players exiting.
Speaker Change: We have not seen an overly aggressive response by the major competitors to any of the trends in North America that were different prior to the geopolitical changes that happened back last fall starting with the elections in South America and working their way into North America has remained a rare.
Speaker Change: <unk> stable and consistent competitive environment from our viewpoint.
Devin Mcgranahan: guys. Thank you.
Speaker Change: Okay.
Speaker Change: Got it thank you.
Ramsey El: Our next question comes to us from Ramsey L.
Speaker Change: Thanks Darren.
Speaker Change: Our next question comes to Us from Ramsey El <unk> from Barclays. Please ask your question.
Ramsey El: Assal from Barclays. Please ask your question. Hi there, thank you for taking my questions this evening. You know, Devin, you mentioned applying your learnings from Europe into North America in terms of improving, I think you called out agent productivity, distribution, pricing. Can you give us a little more color on that process? Sort of what inning are you in doing that kind of applying the best practices in the North America and what impact maybe could we expect there? Is there an opportunity to sort of outperform your forecast on the back of that? Or is it something that's already sort of in process and baked into your numbers?
Speaker Change: Hi, there. Thank you for taking my questions.
Speaker Change: Devin you mentioned applying your learnings from Europe and to North America in terms of improving I think you called out agent productivity distribution pricing.
Speaker Change: Can you give us a little more color on that process sort of what inning are you in doing that kind of applying the best practices in North America and what impact.
Speaker Change: Maybe could we expect to there is there is there an opportunity to sort of outperform your forecast on the back of that or is it is it something thats already sort of in process and baked into your numbers.
Devin Mcgranahan: Great question. So you guys know, I didn't grow up in this business. And so when we launched the Evolve 2025 strategy, one of the pillars of that strategy was to return our retail business after many, many years of decline to stability. I know there was some skepticism in some parts of the world as that is an objective. But we remained convinced that the power of our brand and the natural course of a consumer's migration journey. Many, if not most of the time, our customer segment, when they land in a new country, begins their remittance experience in the retail channel due to how they are paid, the nature of their documentation, the nature of their language, and many times the familiarity of a person in helping with one of the most important financial transactions that they'll do that week, that month, or that quarter.
Speaker Change: Great question.
Speaker Change: So as you guys know I didn't grow up in this business and so when we launched the evolve 2025 strategy one of the pillars of that strategy was to return our retail business. After many many years of decline to stability I know there was some skepticism in some parts of the world is.
Speaker Change: That is an objective, but we remain convinced that the power of our brand and the natural course of a consumers' migration journey.
Speaker Change: Many if not most of the time, our customer segment when they land in a new country begins their remittance experience in the retail channel due to how they are paid the nature of their documentation and the nature of their language and many times the familiarity of a person and helping with one of the most important financial.
Speaker Change: Transactions that they'll do that week that month or that quarter. So we've invested heavily as I've talked about on public calls into our retail point of sale to make it easier for our agents to do our business as you guys know and have seen in the results. We worked hard to get back to market competitiveness and many of the markets around the world and then we.
Devin Mcgranahan: So, we've invested heavily, as I've talked about on public calls, into our retail point of sale to make it easier for our agents to do our business. As you guys know and have seen in the results, we worked hard to get back to market competitiveness in many of the markets around the world. And then we started to rebuild how we go to market. I think that's where your question is most focused. And that how we go to market is actually three parts. One is getting the right distribution strategy aligned, which is this kind of idea of highly controlled or owned high-volume locations at the top of the pyramid, a base of very competitive, from a market standpoint, from an experience standpoint, independent agents where we compete every day side by side with our competitors, and then a big, large...
Speaker Change: Started to rebuild how we go to market I think Thats, where your question is most focused and that how we go to market is actually three parts. One is getting the right distribution strategy aligned which is this kind of idea of highly controlled or owned high volume locations at the top of the peer.
Speaker Change: Permit.
Speaker Change: A base of very competitive from a market standpoint from an experience standpoint independent agents, where we compete everyday side by side with our competitors and then a big large.
Devin Mcgranahan: base are grounding in our long-term strategic relationships with our post offices, with our grocery stores, with our check cashers around the world. And that pyramid, combined with a much more aggressive management of the local market conditions, and that's what we call either tactical pricing or kind of local market specialization, where on any given street corner on any given day, we can be competitive and want to be local volume as a combination of agent incentives, pricing, and customer demand. The last part is obviously to shift, as we did, some marketing dollars in back into the retail channel to revitalize the brand.
Speaker Change: Base or grounding in our long term strategic relationships with our post offices with our grocery stores with our check Casher has around the world and that pyramid combined with a much more aggressive management of the local market conditions, and that's what we call either tactical pricing or.
Speaker Change: Kind of local market specialization, where on any given street corner on any given day, we can be competitive and want to be competitive to drive profitable volume is a combination of agent incentives pricing and customer demand.
Speaker Change: The last part is obviously to shift as we did some marketing dollars in back into the retail channel to revitalize the brand I think we've rebranded at an amount of 100000 retail locations in the three years and then put the word back out on the street that Western Union's opened for business retail business.
Devin Mcgranahan: I think we've rebranded, I don't know, Matt, 100,000 retail locations in the three years, and then put the word back out on the street that Western Union's open for business, retail business, and that we welcome that with our partners and our customers. That strategy is most advanced in Europe, where we had to struggle and quickly react to the loss of two large agents and exiting Russia with the war in the Ukraine. We.
Speaker Change: And we welcome that with our partners and our customers.
Speaker Change: That strategy is most advanced in Europe, where we had to struggle and quickly react to the loss of two large agents and exiting the exiting Russia with the war in the Ukraine.
Speaker Change: We buy luxury and didn't have the strength of our north American market and also by the strength of our that Big Foundation base in North America is much bigger given our privileged relationships with people like Walmart and Kroger, Publix, and Albertsons and a whole delhaize and so we didn't have to react as quickly.
Devin Mcgranahan: by luxury and dint of the strength of our North American market and also by the strength of our that big foundation base in North America is much bigger given our privileged relationships with people like Walmart and Kroger and Publix and Albertsons and Ahold Delhaize and so we didn't have to react as quickly and so we are probably only in the third inning or fourth inning of the game in the U.S. and in Canada where in Europe we're probably in the seventh or eighth inning so a long way to say there's opportunity and upside in North America by adopting what we now know is a model that works with our brand and our capabilities.
Speaker Change: And so we are probably only in the third inning or fourth inning of the game in the U S.
Speaker Change: And in Canada, we're in Europe, we're probably in the seventh or eighth inning. So a long way to say there is opportunity and upside in North America by adopting what we now know is a model that works with our brand and our capabilities. We know the retail business can in fact, not only be stable as Europe has demonstrated it can be a reasonable mid.
Devin Mcgranahan: We know the retail business can in fact not only be stable as Europe has demonstrated it can be a reasonable mid to upper single digit grower and we believe the same conditions that have existed now in the rest of world can be replicated here in the U.S. by following that formula more aggressively than maybe we have over the last 18 or 24 months. Thanks. Thanks for that.
Speaker Change: To upper single digit grower and we believe the same conditions that have existed now and the rest of the world can be replicated here in the U S. By following that formula more aggressively than maybe we have over the last 18 or 24 months.
Speaker Change: Thanks, Thanks for that.
Matthew Cagwin: A quick follow up from me on modeling the euro change transaction I think that the press release that I read indicated that it was an existing Western Union agent. Does that change the way we think about modeling the P&L impact? I know you mentioned 100 basis points of revenue growth. Maybe I'm overthinking this, but are there any idiosyncrasies to how we would model that deal given they were an existing agent? Well, it's trying to say that if you are able to know what their revenue was, some of that revenue is already in ours, and we'll go away because we already have it.
Speaker Change: A quick follow up for me on modeling the Euro change transaction.
Speaker Change: I think the press release, but I read indicated that there was an existing western Union agent does that change the way, we think about modeling the P&L impact I know you mentioned 100 basis points of revenue growth.
Speaker Change: Maybe I'm over thinking this or have any idiosyncrasy as to how we would model that youll get them they were an existing agent.
Speaker Change: It's really.
Speaker Change: Well, it's trying to say is if you are able to know what their revenue was some of that revenue is already in ours and will go away because we already have it and it will be a shift between their their revenue base will decline.
Matthew Cagwin: And it would be a shift between their, their revenue base will But the overall profit won't change, which is why we want to emphasize it's about 1% of our revenue. It will be an accretive acquisition for us in the year. So I'd model it that way. The vast majority of the benefit helps us within the CSI. Matt also Matt commented on it and I'll reiterate Due to our historic strategy, which I just talked about how we're changing. This particular partner had been in that base of exclusive strategic partner relationships, 200 locations, but over time, prices had gotten out of the market, and this had become a very low volume part of our distribution channel, despite the fact that it was exclusive, and many of these locations are in great areas with good branding and really support our value proposition around safe, secure, easy, in our retail environment, and so by acquiring this, it gives us a chance to implement the new strategy, be much more aggressive in the marketing, be much more aggressive in how we go to market, and the pricing that we take in those.
Speaker Change: But the overall profit won't change, which is why we wanted to emphasize is about 1% of our revenue.
Speaker Change: It will be an accretive acquisition for us in the year.
Speaker Change: So I would model it that way the vast majority of the benefit helps us within the CS business.
Speaker Change: Thank you very much so Matt commented on it and I'll reiterate it because I think it's an interesting point.
Speaker Change: Due to our historic strategy, which I just talked about how we are changing.
Speaker Change: This particular partner had been in that base of exclusive strategic partner relationships 200 locations, but overtime prices had gotten out of the market and this has become a very low volume part of our distribution channel. Despite the fact that it was exclusive and many of these locations.
Speaker Change: <unk> are in great great areas with good branding and really support our value proposition around safe secure easy.
Speaker Change: In our retail environment and so by acquiring this it gives us a chance to implement the new strategy be much more aggressive in the marketing be much more aggressive in how we go to market and the pricing that we've taken those.
Matthew Cagwin: And see this as a way of really bolstering our retail business in the UK by adopting the strategy with this partner, which has a pretty reasonable size base across the country. Thank you very much.
Speaker Change: And see this as a way of really bolstering our retail business in the UK by adopting the strategy with this partner, which has a pretty reasonable sized base.
Speaker Change: Across the country.
Speaker Change: Thank you very much appreciate it.
Matthew Cagwin: Appreciate it.
Tim Chiodo: Our next question comes to us from Tim Chiodo from UBS. Please ask your question. Great. Thank you very much. Two quick ones. The first one on the payout-to-account business, so 35% growth.
Speaker Change: Our next question. Our next question comes to US from Tim Chiodo from UBS. Please ask your question.
Tim Chiodo: Great. Thank you very much two quick ones. The first one on the payout to account business. So 35% growth I was hoping you could give an update on just what percentage of the business is that today, meaning in Q1 relative to <unk> as a percentage of either transaction or revenue or volume or any metric that youre willing to share so 30%.
Tim Chiodo: I was hoping you could give an update on just what percentage of the business is that today, meaning in Q1, relative to – well, as a percentage of either transactions or revenue or volume or any metric that you're willing to share, so 35% growing off of which base. And then the minor, minor follow-up, I'll just say it up front, is on the tax rate, you mentioned for the quarter, of course, there were some discrete items, so it's not about the 10% in Q1.
Tim Chiodo: 5% growing off of which base and then the minor minor follow up I'll just say it upfront is on the tax rate you mentioned for the quarter of course, there were some discrete items. So it's not about the 10% in Q1, but when I look at the overall tax rate and sort of the mid teens can you just talk about some of the reasons for that whether it's geographic mix or maybe.
Matthew Cagwin: But when I look at the overall tax rate in sort of the mid-teens, could you just talk about some of the reasons for that, whether it's geographic mix or maybe other agreements that you have in place that help keep that tax rate low and how we should think about the sustainability and the durability of the kind of mid-teens tax rate? Thanks.
Tim Chiodo: Their agreements that you have in place that help keep that tax rate low and how we should think about the sustainability and durability of the kind of mid teens tax rate. Thanks, Hey, Tim. Thanks, So two questions first ones, probably more easier to answer the second one loss I want a longer answer.
Matthew Cagwin: Hey, Tim. Thanks for the two questions. First one's probably more easier to answer than the second one. The second one's a longer answer. APN, we talked about this in past calls, on the retail side, it's somewhere in the very low double-digit range of our transactions. Revenue's not that different, a little bit lower. And then on the digital side of our business, it's somewhere in the high 30s. So it's been growing at a very fast clip at 30% plus over the last, call it, 8, 10 quarters, and it's taken itself from the 20s up into the mid to upper 30s.
Tim Chiodo: APN and we've talked about this in past calls on the retail side is somewhere in the very low double digit range of our transactions revenue is not that different.
Tim Chiodo: A little bit lower and then on the digital side of our business, it's somewhere in the high Thirty's. So it's been growing at a very fast clip at 30% plus over the last call. It eight to 10 quarters and is taken itself from the twenties up into the mid to upper Thirty's.
Tim Chiodo: <unk> digital side.
Matthew Cagwin: On your second question around the tax side, we feel very good about the durability of it. You've seen our guide in the press release. We've got a little footnote at the bottom there. It talks about our tax rate. There's two numbers on there. One is gap. One is non-gap. The reason why the non-gap is meaningfully lower than the gap side is We have, we're basing the non-GAAP off of a more of a cash tax type basis. We've got some structures that we can provide that's a very stable cash tax basis over time that we think will help provide benefits of keeping us in the mid-teens range for the medium term.
Tim Chiodo: On your second question around the tax side, we feel very good about the durability of it you've seen our guide in the.
Tim Chiodo: Press release, we've got a little footnote the bottom there talks about our tax rate. There is there's two numbers on there one is GAAP one is non-GAAP.
Tim Chiodo: Isn't why the non-GAAP is meaningfully lower than the GAAP side is.
We have basically the non-GAAP off of a more of a cash tax type basis.
Tim Chiodo: We've got some structures that we can provide it as a very stable cash tax basis over time that we think will help provide benefits of keeping us in the mid teens range for the medium term.
Matthew Cagwin: Great, thank you so much.
Speaker Change: Great. Thank you so much.
Jason Kupferberg: Our next question comes to us from Jason Kupferberg from Bank of America. Please ask your question. Thank you.
Speaker Change: Our next question comes to Us from Jason Kupferberg from Bank of America. Please ask your question.
Jason Kupferberg: I wanted to go a little deeper into Europe. I know that the trends there have been pretty positive. And I was curious which corridors you might call out is driving that strength. And then just as we look at the spread between transaction and revenue growth in the European region, I think it was a five point spread this quarter. Do you envision that potentially narrowing a little bit as we move through the year? And if so, what might drive that? Thanks for the question.
Speaker Change: Thank you I wanted to go a little deeper into Europe.
Speaker Change: <unk> been pretty positive and I was curious which card or as you might call out as driving that strength and then just as we look at the spread between transaction and revenue growth in the European region. I think it was a five point spread this quarter do you envision that potentially narrowing a little bit as we move through the year.
Speaker Change: And if so what might drive that.
Speaker Change: Thanks for the question.
Devin Mcgranahan: Two, two quick things. We have seen a lot of what's happening that's driving the European growth is Europe to South America, Europe to Africa, and then Europe to the Middle East, those three. And then again, it's you know, France to Morocco, it's Spain to the Dominican Republic, it's the United Kingdom to Saudi Arabia, those those general geographic is what has, you know, we've seen where the overperformance relative to our traditional business, which was more Western Europe to Eastern Europe, or Europe to Asia, Europe to the U.S. types of corridors. We still do fine in those, but the growth has come in those other three areas.
Speaker Change: Two quick things, we have seen a lot of what's happening that's driving the European growth is.
Speaker Change: Europe to South America.
Speaker Change: Europe to Africa, and then Europe to the Middle East those three and then again, it's France to Morocco, It's Spain to the Dominican Republic, the United Kingdom to SAP.
Speaker Change: Saudi Arabia.
Speaker Change: Lose those general geographic mixes is what as we've seen where the over performance relative to our traditional business, which was more western Europe to eastern Europe, or Europe to Asia Europe to the U S types of corridors, we still do fine in those but the growth has come.
Speaker Change: And those other three areas.
Devin Mcgranahan: The trend, Matt just talked about what the trend is with APN. In Europe, the mix of APN from a retail business is meaningfully higher than in other parts of the world, which is also what's contributing to the accelerated growth, because retail, to pay out to account, is also growing everywhere around the world in the 30 plus percent range, and it's a higher portion of our retail business in Europe, which then causes that spread to be a little bit bigger. As Matt said, we're perfectly comfortable with that. It's a better customer, and even in retail has higher retention rates, and so we're going to continue to drive that 30 plus percent every day.
Speaker Change: The trend, Matt just talked about what the trend is with APN.
Speaker Change: In Europe, the mix of APN from our retail business is meaningfully higher than in other parts of the world, which is also what's contributing to the accelerated growth because retail to payout to account is also growing in the everywhere around the world in the 30 plus percent range and it's a higher portion of.
Speaker Change: Our retail business in Europe, which then causes that spread to be a little bit bigger as Matt said, we're perfectly comfortable with that it's a better customer and even in retail has higher retention rates.
Speaker Change: So we're going to continue to drive that 30 plus percent every day, if we can.
Jason Kupferberg: Great, great.
Speaker Change: Great great.
Matthew Cagwin: And I'm just a numbers question. Again, coming back to Euro change, you said 1% additive to revenue this year. So I'm going to call it $40 million, I guess, kind of kind of rounded. Are you guys saying that you had already assumed Euro change when you gave the initial guide back in February? Just trying to get a sense if there's any like nuanced change and kind of the organic outlook for the business for the year.
Speaker Change: Just a numbers question again coming back to Europe change, you said, 1% additive to revenue this year, so I'm going to call it $40 million I guess kind of round. It are you.
Speaker Change: You guys, saying that you had already assumed euro change when you gave the initial guide back in February I'm, just trying to get a sense. If there is any bike nuanced change in kind of the organic outlook for the business for the year.
Bryan Keane: Tim or so Jason we did contemplate some tuck-in acquisitions this year we had a couple in the works this was one of the ones that's furthest along so the answer the question and yet you're 1% you're you're estimating that correct Our next question comes to us from Bryan Keane from Deutsche Bank. Please ask your question. Hi, guys.
Speaker Change: So Tim so Jason we did contemplate some tuck in acquisitions. This year, we had a couple in the works.
Speaker Change: This was one of the ones that are furthest along so you answered the question is yes.
Speaker Change: And your 1% of your your estimate that correctly.
Speaker Change: Our next.
Speaker Change: <unk> comes to us from Bryan Keane from Deutsche Bank. Please ask your question.
Bryan Keane: Hi, guys.
Devin Mcgranahan: I want to ask you just about the political environment in particular, curious about tariffs, any direct or indirect impacts you guys think might happen to the business as a result of those? Yeah, Brian, great question. Actually, we generally get more questions on the immigration issue than we do the tariff issue. So it's nice to get a tariff question instead of an immigration question. We are like every other consumer business, except that I think we became confident about the resiliency of our customers. You remember there was a lot of concern when inflation rates went way up that consumer staples for our customer base would accelerate and we would see a drop in PPT as people got squeezed.
Bryan Keane: Wanted to ask just about the political environment in particular curious about tariffs any direct or indirect impacts you guys think.
Bryan Keane: Might happen to the business as a result of those.
Bryan Keane: Yes.
Bryan Keane: Brian Great question actually we generally get more questions on the immigration issue than we do the tariff issue. So it's nice to get a tariff question instead of an immigration question.
Bryan Keane: We are like every other consumer business.
Bryan Keane: Except that I think we became confident about the resiliency of our customers you remember theres a lot of concern when inflation rates went way up the consumer staples for our customer base will accelerate and we would see a drop in ppt.
Devin Mcgranahan: We didn't see that. And so we think the same thing is true here. If in some period of time tariffs have an effect on raising consumer prices, which I won't profess whether they will or won't, but that is a theory of the case, we actually believe our customer will remain relatively resilient given the importance of sending money home. And the fact that we've seen PPT accelerate, again, gives us confidence that even in the face of maybe logistics challenges or concerns about being out in public, people are still sending money home and they're increasing the amount of money they send home because the people on the other side of that transaction have a defined set of needs and they're dependent on a certain amount of money regardless of how often it's arriving.
Bryan Keane: As people got squeezed, we didn't see that and so we think the same thing is true here.
Bryan Keane: If in some period of time tariffs have an effect on raising consumer prices, which I won't profess, whether they will or won't but it is a theory of the case, we actually believe our customer will remain relatively resilient given the importance of sending money home and the fact that we've seen ppt accelerate again.
Bryan Keane: It gives us confidence that even in the face of maybe logistics challenges or concerns about being out in public people are still sending money home and they are increasing the amount of money. They sent home because the people on the other side of that transaction have a defined set of needs and theyre and theyre dependent on a certain amount of money regardless of how often.
Matthew Cagwin: So we don't think the impact will be significant on our business, on our consumer, anytime in the relevant or near future. Got it, got it.
Bryan Keane: It's arriving so we don't think the impact will be significant on our business on our consumer.
Bryan Keane: Anytime in the relevant or near future.
Speaker Change: Got it got it and then just as a follow up Matt you talked about potentially dropping more of some of the operating expense savings to the bottom line.
Matthew Cagwin: And then just as a follow up, Matt, you talked about potentially dropping more of some of the operating expense savings to the bottom line, kind of different than prior practices, which typically, you guys were reinvesting in growth or marketing and other programs. I just want to make sure I understand the final point on what you were trying to make there. And is that a little bit of a change in philosophy going forward? It's more of an acknowledgment that the revenue is a bit tougher this year with IRAC slowing down, too. This past quarter was $7 million.
Speaker Change: Different than prior practices, which typically you guys were reinvesting in growth through marketing programs I just wanted to make sure I understand the finer point on what you were trying to make there.
Speaker Change: Little bit of a change in philosophy going forward.
Speaker Change: It's more of an acknowledgment.
Speaker Change: The revenue is a bit tougher this year with Iraq slowing down to this past quarter was $7 million.
Matthew Cagwin: We had last year $65 million in Q1, $35 million-ish in Q2, and then got down to the normal levels we're running at now, Q3 and Q4. So we have a lot of leverage in this business to meet our commitments, and the cost containment redeployment program is one of them. I wanted to make it clear that this year is one of those years where more of that's going to go to the bottom line. to fill our commitment to deliver $1.75, $1.85 than the last couple of years we were planning for. building out new products. And while that's already been invested in the business, and we're starting to see some traction on that.
Speaker Change: We had last year, 65% in Q1 35 ish in Q2, and then got down to the normal levels. We're running at now Q3 and four so we have a lot of levers in this business too.
Speaker Change: Meet our commitments and the cost containment redeployment program is one of them wanted to make it clear that this year is one of those years, where more of that is going to go to the bottom line to help.
Speaker Change: Phil our commitment to deliver $1 $75 85 than the last couple of years, we were planning for.
Speaker Change: Building out new products and while that's already been invested in the business and we're starting to see some traction on that so just want to make sure I knew that that was a little bit of a different angle.
Matthew Cagwin: So just want to make sure you guys knew that that was a little bit of a different Thanks, guys.
Speaker Change: Thanks, guys.
Andrew Schmidt: Our next question comes to us from Andrew Schmidt from Citi. Please ask your question. Hey, Devin. Hey, Matt. Thanks for taking the questions this evening.
Speaker Change: Our next question comes to Us from Andrew Schmidt from Citi. Please ask your question.
Andrew Schmidt: Hey, Devin Hey, Matt Thanks for taking the questions. This evening I wanted to ask about FX volatility.
Andrew Schmidt: I wanted to ask about FX volatility, FX volatility, obviously, we've seen a pretty big spike in April. In the past, you know, there's been gains, losses, obviously hedging impacts, not to mention impacts on, you know, customer behavior, maybe just walk us through kind of what you're seeing in you know, things to consider when we see spikes like this. Thanks so much. Hey, Andrew, it really depends on where the spikes are. But just I'll take a couple steps back and remind everybody how we how FX affects our So FX can have a couple different impacts. One is we do hedge a large portion of the currency, we call it.
Speaker Change: Volatility, obviously, we've seen a pretty big Spike in April.
Speaker Change: In the past there's been gains losses, obviously hedging impacts not to mentioned impacts on customer behavior, maybe just walk us through kind of what youre seeing in things to consider when we see spikes like this thanks so much.
Andrew Schmidt: Hey, Andrew is used so it really depends on where the spikes are.
Speaker Change: I'll take a couple of steps back and remind everybody how we.
Speaker Change: How FX affects our business so.
Speaker Change: So FX can have a couple of different impacts one is we do hedge a large portion of the currency we call it.
Matthew Cagwin: Profit hedging, but it's really we're hedging the top line to help control the bottom line. We do this for all the major currencies around the world, whether that be the euro, the pound, the Canadian dollar, the Aussie dollars, really the largest eight currencies around the world. We do that. We do it over a two to three-year horizon. It really helps us to manage EPS over time to make sure that you're not having any major movements one way or the other. So that's one thing that currency doesn't impact. The other item that currency can have an impact is, let's use Mexico as an example.
Speaker Change: Profit hedging, but it's really we're hedging the top line to help control the bottom line. We do this for all the major currencies around the world whether that be the euro the pound the can.
Speaker Change: Nadine dollar the Aussie dollar is really the largest currencies around the world. We do that we do it over a two to three year horizon. It really helps us to manage EPS over time to make sure that youre not having any major movements, one way or the other.
Speaker Change: So that's one thing the currency does have an impact the other item the currency can have an impact as what we should use Mexico. As an example, when you see a major movement in the peso you can see.
Matthew Cagwin: When you see a major movement in a peso, you can see Our customers' behaviors deviate because they may want to send more or less money in a short window because of the currency impact. If it's favorable to them to be able to send more money to their family, they may pull forward money today and send it to their family because it's helpful because it's a higher, more beneficial exchange rate versus other times. To us, over a couple weeks and months, that typically takes care of itself and just moves between periods. If it happens at the end of a period, that could cause a cutoff or a pull forward or pushback.
Speaker Change: Our customers' behaviors DVA, because they may want to spend more or less money in a short window because of the currency impact if it's favorable to them to be able to send more money or their family. They may pull forward money today and send it to their families. It's helpful because of higher more beneficial exchange rate versus.
Speaker Change: Versus other times to us over a couple of weeks and months that typically takes care of itself. It just moves between periods. If it happens in a period that could cause.
Speaker Change: Cut off or a pull forward or push back implication.
Matthew Cagwin: The last one you've heard us talk about publicly is we do also hold currencies, in particular the Mexican peso, where we hold a large amount for the settlement that's not happened. That can lead to a gain or loss in our P&L. It's more of an accounting loss or gain than it is economic. We're holding what we expect the settlement to be. Coming back to the consumer behavior part. A general-ish perspective. A weaker U.S. dollar is harder for the U.S. outbound market because dollars buy fewer pesos in other parts of the world, particularly in Latin America.
Speaker Change: Last one you've heard us talk about publicly as we do also hold currencies in particular, the Mexican peso, where we hold a large amount of the settlement has not happened that can lead to a gain or loss in our P&L.
Speaker Change: More of a accounting loss or gain than it is economic we're holding what we expect the settlement to be over the couple last couple of days.
Speaker Change: Coming back to the consumer behavior part.
Speaker Change: A general ish perspective.
Speaker Change: A weaker U S dollar.
Speaker Change: Is harder for the U S outbound market.
Speaker Change: <unk> dollars by fewer pesos in other parts of the world, particularly in Latin America, and because the U S that would normally then help in inbound country. If the currency weakened because then people sending money into that country can send more but the U S is not a particularly significant inbound market.
Matthew Cagwin: And because the U.S., that would normally then help an inbound country if the currency weakened, because then people sending money into that country can send more. But the U.S. is not a significant inbound market. So the benefit of a weaker U.S. dollar on inbound is not nearly as much as the implication of it on the outbound. So part of what you see in the consumer behavior and part of what you see in the trends in the U.S. is, in fact, that weaker dollar is allowing our customers or preventing our customers from sending more home while the dollar is lower than it has been.
Speaker Change: So the benefit of a weaker U S. Dollar on inbound is not nearly as much as the implication of it on the outbound so part of what you see in the consumer behavior and part of what you are seeing the trends in the U S is in fact that weaker dollar is allowing our customers are preventing our customers from sending.
Speaker Change: More home.
Speaker Change: While the dollar is lower than it has been historically.
Speaker Change: Yeah.
Cristopher Kennedy: Our final question for today comes from Chris Kennedy from William Blair. Please ask your question. Afternoon, thanks for taking the question. Can you talk a little bit about the competitive landscape within the travel money business? There are two important segments to the travel money business. We have chosen to compete in what we believe is a part of the business that we're better positioned for. So the two segments are what I'll call on-airport, which is what most of us probably have experienced in any major airport around the world. And in the UK, that's in the Heathrow Airport.
Speaker Change: Our final question for today comes from Chris Kennedy from William Blair. Please ask your question.
Chris Kennedy: Good afternoon. Thanks for taking the question can you talk a little bit about the competitive landscape within the travel money business.
Chris Kennedy: There are two important segments to the travel money business.
Chris Kennedy: We have chosen to compete in what we believe is a part of the business that we're better positioned for the two segments are what I'll call an airport, which is what most of US probably have experienced in any major airports around the world and in the UK. That's in the Heathrow Airport and then there's the local business.
Devin Mcgranahan: And then there's the local business, which is what caters to our customers, migrants, who exchange local currency for home currency. And many times for travelers who, in the course of their vacation or trip, need to get foreign currency mid-trip or towards the end of a trip versus at an airport. The local market, which is what Eurochange competes in, also tends to have different pricing characteristics as those customers are less indexed on the trip and the travel and the airport. But as a result, it's also less likely you can have better locations than sharing all of your revenue with an airport.
Chris Kennedy: Which is what caters to our customers' migrants who exchange local currency for home currency and many times for travelers, who in the course of their vacation or trip need to get foreign currency mid trip or towards the end of the trip versus at an airport the local market.
Chris Kennedy: <unk>, which is what euro change competes in also tenders to have different.
Chris Kennedy: Pricing characteristics as those customers are less.
Chris Kennedy: <unk>.
Chris Kennedy: Less indexed on the trip in the travel and the airport.
Chris Kennedy: But as a result, it's also less likely you can have better locations than sharing all of your revenue with an airport so and net the prices are better in the local market and generally they are in the airport market.
Devin Mcgranahan: So in net, the prices are better in the local market than generally they are in the airport market. But potentially the margins are higher because of the dynamics of the channel in which you are in. We like the business. We like the business in Europe. But importantly, we're continuing to look at expanding the business, particularly in Asia and South America, because many of our customers travel across those regions. I was recently in Malaysia, and you could just watch the business. We've opened our first own location in Malaysia with people leaving, working in Singapore, coming back to Malaysia, being in Malaysia, going back to Indonesia, back and forth between China and Malaysia.
Chris Kennedy: But potentially the margins are higher because of the dynamics of the channel in which you're in we like the business.
Chris Kennedy: The business in Europe.
Chris Kennedy: But importantly, we are continuing to look at expanding the business.
Chris Kennedy: Particularly in Asia, and South America, because many of our customers travel across those regions I was recently in Malaysia, and you can just watch the business we've opened our own our first owned location in Malaysia.
Chris Kennedy: With people, leaving working in Singapore, coming back to Malaysia, being in Malaysia, going back to Indonesia back and forth between China, and Malaysia, and so all of those transactions with our customers generally require a currency exchange and so that local market business is where we're focused in our competitive set tends to be people who are.
Devin Mcgranahan: And so all of those transactions with our customers generally require a currency exchange. And so that local market business is where we're focused, and our competitive set tends to be people who are our agents or our competitive agents.
Chris Kennedy: Our agents are our competitive agents they arent your traditional money exchange players like travelex or others.
Matthew Cagwin: They aren't your traditional money exchange players like Travelex or others. Got it. Very helpful. And just squeeze one last one in here. I appreciate the comment on the digital retention. Can you provide any commentary, broad commentary on kind of how unit economics are trending in the digital business? Our unit of economics has been relatively consistent over time. We've talked about this publicly before. We've had seen improvement now. We've talked about probably two or three times over the last couple of years on. We've been able to improve our CAC, LTV to CAC meaningfully by bringing down our CAC.
Chris Kennedy: Got it very helpful and just squeeze one last one in here.
Chris Kennedy: I appreciate the comment on the digital retention.
Chris Kennedy: Can you provide any commentary broad commentary on kind of how unit economics are trending in the digital business.
Chris Kennedy: Our unit economics has been relatively consistent over time as we've talked about this publicly before.
Chris Kennedy: We have seen improvement now we've talked about probably two or three times over the last couple of years on we've been able to improve our CAC LTV to CAC meaningfully by bringing down our attack we have seen a lengthening of our.
Devin Mcgranahan: We have seen a lengthening of our retention or improvement in our retention. It makes our LTVs go up. And then when you think about a digital customer versus a retail customer, you're typically going to have a little bit lower RPT for a digital customer than a retail, but you're going to have a lower transaction cost associated with that. And then the offset is tbdcat. Relatively comparable. And that's particularly true for a digital customer payout to account as we improve the economics in many cases on payout to account around the world relative to a payout to cash where we have a relatively significant cost in our agent base to do cash payout.
Chris Kennedy: Retention or improvement in our retention it makes our Ltvs go up.
Chris Kennedy: <unk>.
Chris Kennedy: And then when you think about a digital customer versus a retail customer you are typically going to have a little bit lower RPT for a digital customer than a retail, but youre going to have a lower transaction costs associated with that and then the offset is the LTV to CAC over time so.
Chris Kennedy: Relatively comparable and that's particularly true for a digital customer path to account as we improve the economics in many cases on payout to account around the world relative to a path to cash where we have a relatively significant cost in our agent base to do cash paths.
Devin Mcgranahan: I go back to what Matt said at the beginning, which was the shift that we did about two, two and a half years ago, to really think about this business on a CAC to LTV basis, managing both the CAC, which has come down appreciably while we've been growing the business, and then focusing on the quality of those customers, the quality of those customer cohorts to drive LTV. And again, you know, when we went on this journey, there was some concern that the quality of the customer, and therefore the LTV part of the CAC to LTV would suffer.
I'd go back to what Matt said at the beginning which was the shift that we did about two two and a half years ago to really think about this business on a CAC to LTV basis, managing both the CAC, which has come down appreciably, while we've been growing the business and then focusing on the quality of those customers the quality of those customer cohorts to draw.
Chris Kennedy: Five LTV and again when we went on this journey there was some concern that the quality of the customer and therefore, the LTV part of the CAC to LTV would suffer but we've seen the exact opposite which since wounds. We launched evolve 2025, we've seen increases in the quality of the customer the retention of the customer.
Devin Mcgranahan: But we've seen the exact opposite, which since when we launched Evolve 2025, we've seen increases in the quality of the customer, the retention of the customer, the transactions per customer. And so we've been very pleased with what we've been able to do with that CAC to LTV ratio. Thanks for taking my questions. Thanks, Chris. Thanks, everybody. Thank you for joining today's Western Union first quarter 2025 earnings results conference call. We hope you have a great day. And a lot more. Thanks for watching. Please subscribe and like. See you next time. Good-bye.
Chris Kennedy: <unk> per customer and so we've been very pleased with what we've been able to do with that CAC to LTV ratio.
Chris Kennedy: Thanks for taking my questions. Thanks, Chris Thanks, everybody.
Speaker Change: Thank you for joining today's the Western Union first quarter 2025 earnings results Conference call. We hope you have a great day.
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