Western Union (NYSE:WU) reported its fourth-quarter 2024 earnings, showcasing a revenue of $1.1 billion, surpassing expectations. The company’s earnings per share (EPS) of $0.40 fell short of the forecasted $0.43. Despite the earnings miss, Western Union’s stock rose by 7.21% after hours, reflecting investor optimism about its strategic initiatives and market position. According to InvestingPro data, the company trades at an attractive P/E ratio of 4.09x and maintains a robust dividend yield of 8.39%, making it an interesting value proposition for income-focused investors.
Key Takeaways
- Western Union’s Q4 2024 revenue exceeded forecasts, reaching $1.1 billion.
- EPS fell short of expectations, with actual EPS at $0.40 versus a forecast of $0.43.
- The stock surged 7.21% in after-hours trading, closing at $11.01.
- Strategic initiatives include a new digital platform and expanded consumer services.
- Operating margins and cost reductions remain focal points for future growth.
Company Performance
Western Union demonstrated mixed performance in Q4 2024, with revenue reaching $1.1 billion. While the quarter showed growth, InvestingPro analysis reveals a 3.38% revenue decline over the last twelve months. The company continues to capitalize on its strengths in the global remittance market, maintaining a strong presence in over 50 countries. Its digital platform and retail network expansions are key drivers of growth, with the digital business experiencing double-digit transaction growth. InvestingPro subscribers can access 8 additional key insights about Western Union’s performance and prospects through the platform’s comprehensive Pro Research Report.
Financial Highlights
- Revenue: $1.1 billion in Q4 2024, exceeding the forecast of $1.03 billion.
- Earnings per share: $0.40, below the forecast of $0.43.
- Full-year 2024 GAAP revenue: $4.2 billion.
- Adjusted operating margins: 19% for the full year, 17% in Q4.
- Significant non-cash tax benefit exceeding $250 million in Q4.
Earnings vs. Forecast
Western Union’s actual EPS of $0.40 missed the forecasted $0.43 by 7%. The revenue, however, came in at $1.1 billion, surpassing the expected $1.03 billion. This revenue beat by approximately 6.8% highlights the company’s ability to generate higher-than-expected sales despite the EPS miss.
Market Reaction
Following the earnings announcement, Western Union’s stock climbed 7.21% in after-hours trading to $11.01. This positive market reaction suggests investor confidence in the company’s strategic direction and future growth prospects, despite the EPS miss. InvestingPro’s Fair Value analysis indicates that Western Union is currently undervalued, with the stock trading significantly below its calculated Fair Value. The company maintains a solid Financial Health Score of 2.61 (GOOD), supported by its consistent dividend payments over the past 20 years.
Outlook & Guidance
Looking ahead, Western Union forecasts adjusted revenue between $4.115 billion and $4.215 billion for 2025, with an adjusted EPS range of $1.75 to $1.85. The company anticipates 10-15% growth in consumer services and aims for high single-digit to low double-digit growth in its branded digital segment. Adjusted operating margins are expected to be between 19% and 21%.
Executive Commentary
CEO Devin McGranahan emphasized the company’s focus on becoming a market leader in accessible financial services, stating, "We continue to focus every day on becoming the market leader in providing accessible financial services to the aspiring populations of the world." CFO Matt Hagwin expressed confidence in the company’s investment capabilities, adding, "We feel very good about our ability to make investments."
Risks and Challenges
- Potential impact of migration patterns on key remittance corridors, such as US-Mexico.
- Compliance and risk management in exploring cryptocurrency opportunities.
- Competitive pressures from digital payment platforms and fintech companies.
- Economic fluctuations affecting global remittance volumes.
- Execution risks in expanding digital and retail networks.
Q&A
During the earnings call, analysts inquired about Western Union’s strategies for digital business growth and consumer services margin expansion. The company addressed the potential impact of migration patterns on the US-Mexico corridor and discussed opportunities in cryptocurrency, focusing on compliance and risk management.
Full transcript - Western Union Co (WU) Q4 2024:
Conference Operator: Good day, and welcome to the Western Union Fourth Quarter and Full Year twenty twenty four 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. I would now like to turn the conference over to Tom Hadley, Vice President of Investor Relations.
Tom, please go ahead.
Tom Hadley, Vice President of Investor Relations, Western Union: Thank you. On today’s call, we will discuss the company’s fourth quarter and full year twenty twenty four results, and then we will take your questions. The slides that accompany this call and webcast can be found at westernunion.com under the Investor Relations tab and will remain available after the call. Additional operational statistics have been provided in supplemental tables with our press release. Joining me on the call today is our CEO, Demar McGranahan and our CFO, Matt Hagwin.
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 2023 Form 10 ks for additional information concerning factors that could cause actual results to differ materially from the forward looking statements. During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures in our earnings release attached to our Form eight K as well as on our website, westernunion.com under the Investor Relations section. I will now turn the call over to our Chief Executive Officer, Devin McGranahan.
Devin McGranahan, Chief Executive Officer, Western Union: Good afternoon, and welcome to Western Union’s fourth quarter twenty twenty four financial results conference call. We continue to focus every day on becoming the market leader in providing accessible financial services to the aspiring populations of the world. Our customers are our inspiration as we improve our products and services and position ourselves as their trusted partner. We are privileged to have over a hundred million customers around the world, a base that has stabilized over the last several years. Since October of twenty twenty two, our team has been hard at work executing our Evolve ’25 strategy to improve our value proposition, expand our product offerings, and most importantly, ensure high quality execution.
Today, we reported another quarter of improving adjusted revenue growth as we continue to implement our Evolve 2025 strategy, which is focused on returning Western Union to sustainable, profitable revenue growth. Over the last two years, we have driven meaningful improvements in our business, and this quarter’s results continue to demonstrate that our efforts are working. These results give us confidence that we are well on our way to achieving our previously stated financial objectives as we continue to report solid transaction trends and improving adjusted revenue growth ex Iraq. For the fourth quarter, our revenue reached $1,060,000,000 Excluding Iraq, our adjusted revenue growth was a positive 1.4%, now the third consecutive quarter of positive adjusted revenue growth. Consumer services led the way with another strong quarter at 23% adjusted revenue growth driven by our media network business, the expansion of our foreign exchange services and continued growth in retail money order.
Our strategy of growing beyond CMT continues to show promise and momentum. In addition, our branded digital business continued to perform well with 13% transaction growth and 8% adjusted revenue growth in the quarter. Adjusted earnings per share came in strong at 40¢ or up 3¢ relative to this quarter a year ago. The improving performance of our core business is readily apparent as in q four twenty twenty three benefited meaningfully from higher revenues and operating profits from Iraq, which were not repeated in the current quarter. Matt will discuss our financial results in more detail and provide our 2025 outlook later.
I have recently returned from nearly two weeks in Asia, visiting with our local teams, aligning on plans for 2025. This region is a microcosm of our larger company wide efforts. In 2022, the region shrank transactions 12% and adjusted revenue 9%. In 2024, that improved to 8% transaction growth with adjusted revenue down only 3%. The turnaround in Asia is one example of why we remain confident of the trajectory we are on.
Throughout the visit, I saw progress on our strategic agenda and still plenty of opportunity to continue to accelerate our performance. The region has embraced our new approach to both digital and retail. On the retail distribution side, we are moving away from a heavy dependence on postal systems and master agents to a much more dynamic system with owned locations at the top of the pyramid, branded exclusive concept agents and strategics in the middle, and a broad base of independence at the bottom. For example, Singapore now has our highest performing own location network with 7% revenue growth and 10% transaction growth in 2024 and includes one of the single highest volume locations in the company. While I was there, I went to the opening of our first owned location in Malaysia.
This trip reinforced my belief that around my belief around the value of having a small network of owned locations. We believe there is significant opportunity in Malaysia to go after high volume retail corridors where we can win with an owned location strategy. Australia and New Zealand have seen significant growth through our independent agent network expansion. We have seen over 20% growth in agent locations since 2022, and these networks grew revenue 17% and transactions 25% in 2024. While stabilizing the retail business, the Australia team has also embraced our next generation digital platform and is now one of the best performing digital businesses in the company within 2024 revenue growth in the mid teens and transaction growth at nearly 30%.
Our team there will continue to accelerate this region in 2025 with the launch of our new digital platform in two more countries, a continued expansion of our independent agent networks and owned locations, the anticipated completion of the Dash acquisition, and the launch of a new digital wallet offering in Australia. We expect 2025 will see the region grow both transactions and revenue positively for the first time in seven years, excluding the COVID grower. As in ’20 at our twenty twenty two investor day, we laid out plans to showcase our retail business as the gateway to Western Union. This plan included rationalizing our footprint, enhancing our value proposition, and improving the agent and customer experience. We do not subscribe to the melting ice cube thesis that many discuss.
We believe the retail market globally is stable and that we have many opportunities to grow our share. Historically, we were a shared donor. But in places where we have successfully implemented our strategy, we have seen a turnaround in performance and are achieving positive revenue and transaction growth in many of these markets. Where we are lagging in these goals, we can identify the drivers, whether they be short term macro effects or the incremental work that is still required to achieve our full transformation. Excluding Russia, Belarus, and Iraq, since 2022, our global retail business has seen a 500 basis point improvement in transaction growth.
We continue to fully expect that over time, our retail business will be a net positive contributor to overall company performance. As an example, our global retail originated, paid out to account business grew transactions roughly 30% last year, highlighting the potential of the network when we have the right product and the right value proposition. Our retail business is a strategic asset for the company, driving brand awareness, supporting a lower cost of digital acquisition, and providing a core set of customers in stores that help enable the growth of our consumer services businesses. It is now much better positioned to compete, better fitting for more competitive pricing, improved agent and customer value proposition with both better experiences and improved products, and the benefit of a great brand and significant scale that few, if any others, can match. It can now grow by taking share in important corridors that we have previously shied away from because we were uncompetitive.
Key opportunities, for example, include retail heavy corridors like The US to Guatemala, which we estimate is a $20,000,000,000 corridor, UK to India, a $10,000,000,000 corridor, or UAA to The Philippines, a $1,000,000,000 corridor. These are important corridors, which we believe we currently have a sub 10% market share position and thus provide significant opportunities to continue to drive retail growth. Often overlooked and often overlooked advantage of our retail business is the strong connection to our digital business. A substantial part of our digitally initiated transactions are still paid out to cash by us and our competitors, and we own that experience end to end. Our several hundred thousand payout locations give us customer experience advantages relative to our digital only peers, better financial economics, and allows us to engage directly with potential future customers a decade or more before they become remittance customers themselves.
We do not think enough credit also is given to the millions of page views on our websites and digital properties from around the world from our retail customers. These retail customers are using our store locator or checking the status of a transfer. This traffic improves our position in most organic search algorithms and drives down our cost of digital customer acquisition. With the assistance of our return retail network volume, our CAC last year was down roughly 10%, which enabled us to effectively compete in a market where many digital players routinely spend significantly more and remain mostly unprofitable. The key to winning in the retail market is being competitive.
You need to have the right price with a seamless and easy experience in the right locations. We continue to work on all three, but when we get it right, we can win. Last year, our retail business in Spain grew transactions 25% and revenue 18%. Another example is the improvement we’ve seen in our retail business in The UK which grew transactions 20% and revenue 9% in 2024. These are very competitive markets.
Where we have executed our strategy and we are seeing the results. More globally, in the last year, we introduced several new point of sale improvements like Remember Me and Quick Resend and have now embedded those functions in our updated point of sale system, which takes much of the required processing out of agent hardware and moves it into the cloud. We continue to seek improvements in speed, reliability, agent support, and customer satisfaction. We are pleased with the progress we have made so far and look forward to additional improvements that we have planned for 2025. On the last call, I mentioned we are aiming to have our new cloud based point of sale system available in 25,000 locations by the end of the year.
I am pleased to report that we substantially passed that goal and now have roughly 70,000 active locations. In the last thirty days alone, we have run over 2,000,000 transactions through this platform. We have rollouts underway in North America and APAC, and we have just begun expanding this technology into Europe and Laca. As we improve our operating model, we are increasing our pace of execution and rollout. Our goal for 2025 is to have all relevant agents globally on this platform by the end of the year.
Now shifting to our digital business, As part of our evolved 2025 strategy, returning our digital business to double digit revenue growth is a key priority for our organization and is essential to driving top line revenue growth for the overall company. Over the past year, we have been focused on improving the onboarding experience, driving marketing effectiveness, and improving our value proposition as well as our overall user experiences. I am happy to report disease. These efforts are paying dividends with more customers, more transactions, and more revenue. Since 2022, we have launched our next generation digital platform in over 10 countries, including a launch in India in the fourth quarter of this year.
We have seen significant improvements in our digital business performance this year in Mexico, Japan, The UK, and Chile. As a result, we saw an increase in total customers and a higher frequency in which they transacted, all of which leads us to double digit transaction growth and high single digit revenue growth, which we believe positions us well for 2025. We plan to launch our next generation platform in more than 10 additional countries in 2025, including several in Africa, where we will see where we see a real opportunity. We are significantly improving our account payout network with increased direct connections and better volume discounts. We’ve also launched a global initiative to improve our KYC experiences in many parts of the world by moving to a more localized approach that we believe should greatly benefit onboarding rates.
We look forward to updating you as the year progresses. Finally, I’d like to spend a minute discussing our consumer services segment. We have made it a goal to grow this segment of our business double digits annually by providing new products and services to our existing customers through our existing channels. I am pleased to report we generated 20% plus adjusted revenue growth in the fourth quarter, an acceleration of the growth we saw in the third quarter. We continue to see solid growth in our money retail money order business, where we believe we have one of the most consumer friendly products in the marketplace.
In addition to RMO, we saw strong growth from several of the products and services we have launched or meaningfully expanded over the last eighteen months. The two biggest contributors to growth in the quarter were our media network business in The United States and our foreign exchange business in Europe, which benefited from a larger footprint. We are happy to report that we have renewed our long standing relationship with Ahold Delhaize USA, one of the nation’s largest grocery retail groups, for an additional five years. We are pleased to extend this agreement and continue to provide our customers the opportunity and convenience to meet their cross border remittance needs at all hold Delhaize USA brand locations. Additionally, we are pleased to announce our co branded partnership with Eurpay owned by El Reha Bank.
Eurpay is the largest digital wallet in Saudi Arabia and has over 6,500,000 customers. This partnership enhances our brand in one of the largest digital financial ecosystems in Saudi Arabia. Lastly, we are also pleased to announce our collaboration with Dupay, the advanced digital financial services arm of Due and licensed by the Central Bank of the UAE. Through this white label partnership, we are enabling international money transfer services on their app, further strengthening our digital footprint in the country. In conclusion, we believe we are roughly six months ahead of where we plan to be at this point relative to our initial twenty twenty two Investor Day guidance, having just achieved positive full year company wide adjusted revenue growth, excluding Iraq.
From a regional perspective, we have improved adjusted revenue growth in North America, Europe, The Middle East, ex Iraq and APAC, which gives us optimism about the trajectory we are on and what we can accomplish in 2025 and beyond. Looking ahead, we remain very positive in our market position and the progress we are making to deliver on our strategic initiatives. Every day, we can see the improving health and performance of our core business and are now beginning to deliver the ongoing and sustainable revenue and operating profit growth required to propel propel the value of the company upward. I remain confident that we are tracking well to achieve our evolved 2025 goals, but more importantly, are setting the company up for a much more prosperous future. Thank you for joining the call today.
I will now turn it over to Matt to discuss our financial results in more detail.
Matt Hagwin, Chief Financial Officer, Western Union: Thank you, Devin, and good afternoon, everyone. I’m pleased to be here today to walk you through our twenty twenty four fourth quarter and full year results as well as our 2025 financial outlook. For the full year, we delivered GAAP revenue of $4,200,000,000 Our results landed us comfortably above the midpoint of our improved 2024 adjusted revenue outlook. Adjusted revenue growth, excluding Iraq, was positive 50 basis points in 2024, which is about six months ahead of where we anticipated we’d be at our Investor Day in October 2022. These results were driven by 15% growth in Consumer Services and improving trends in our CMT business, supported by 8% Branded Digital revenue growth.
In the fourth quarter, GAAP revenue was $1,100,000,000 For the third consecutive quarter, adjusted revenue grew ex Iraq and was positive 1.4. Adjusted operating margins in the quarter were 17% compared to 16% in the prior year, with the improvement primarily due to efficiencies in our marketing and technology areas. In 2024, our full year adjusted operating margin was 19% compared to 20% in the prior year, with the decline primarily due to lower revenue from Iraq offset by efficiencies in our core cost base. Fourth quarter adjusted EPS was $0.4 compared to $0.37 last year, benefiting from higher adjusted operating profit, lower share count, and lower adjusted tax rate. For the full year, we delivered adjusted EPS of $1.74 which benefited from lower share count and lower adjusted tax rate, which landed us comfortably in our improved guidance range of $1.7 to $1.8 In the fourth quarter, we reported a significant non cash tax benefit exceeding $250,000,000 stemming from the reorganization of our international operations to realign and consolidate our international hub.
This positively impacted our GAAP EPS by 75¢, but was excluded from adjusted EPS. The adjusted tax rate for the quarter was 12% compared to 14% last year, whereas our full year adjusted tax rate was 13% compared to 15% the prior year. Our adjusted tax rate was lower this year due to the mix of income and a few minor discrete tax items. Now turning to our CMT business. In the fourth quarter, CMT adjusted revenue, excluding Iraq, was flat year over year, while CMT transactions, excluding Iraq, grew 3%.
For the full year, CMT adjusted revenue, excluding Iraq, was down 1%, while transactions, including Iraq, grew four percent. These results were driven by improvements in branded digital and digital white label and a consistent retail business. We’ve made significant strides in our customer and agent experience and our overall value proposition over the past two years, which has contributed to our ability to improve overall customer retention by almost 40 basis points in 2024. Now turning to our Branded Digital business. In the fourth quarter, we grew adjusted revenue by 8% with a 13% increase in transactions.
This marks the seventh consecutive quarter of double digit transaction growth. Account payout transactions that originated digitally continued their strong momentum, growing 30% in the quarter. For the full year, adjusted revenue growth improved 800 basis points compared to 2023, while average new cost border monthly active customers grew high single digit in 2024. Now turning to our retail business. In the quarter, we saw improvements in both Europe and EMEA, excluding Iraq, partially offset by North America and Latin America.
Europe’s momentum resulted in 9% transaction growth as they benefited from stronger distribution, expanded debit acceptance, and lapping an agent loss. Now transitioning to our Consumer Services segment, which accounted for 11% of our total quarterly revenue. Fourth quarter adjusted revenue rose 23%, driven by growth in Media Network, Retail Foreign Exchange, and Retail Money Order. I’m pleased to report that in 2024, we achieved our goal of double digit revenue growth in Consumer Services with a 15% increase in adjusted revenue. This marks our third consecutive year of double digit growth in Consumer Services.
And we continue to target 10% plus adjusted revenue growth rate in Consumer Services as we continue to introduce and expand offerings to the aspiring populations globally. In the fourth quarter, Consumer Services operating margin was 11%, a 200 basis point improvement over the third quarter. As these products scale, we continue to expect that our margins will improve and be at or above our total company margin. Now shifting to our top from our top line to our expense base. As part of our ongoing commitment to disciplined cost management, I’m pleased to provide an update in our five year one hundred and fifty million dollars expense redeployment program.
In 2024, we continue to make significant strides in optimizing our cost base and reallocating resources to drive efficiency and growth, achieving total savings of $60,000,000 This is in addition to the $50,000,000 that we freed up in 2023. To illustrate, in our global operations function, which includes areas like customer experience and support, real estate, key compliance processes and agent care, we have reduced our cost base by nearly 20% between 2021 and 2024. Within the overall $100,000,000 of savings that we have achieved to date, nearly $30,000,000 was related to the efficiencies that we have made in customer experience and support. We continue to see further opportunities throughout our business continue to optimize our cost base. Looking ahead, we expect to complete our five year commitment two years ahead of schedule, achieving our target of $150,000,000 this year.
This accelerated time line underscores our ability to leverage scale, drive continuous improvement and maintain financial flexibility. Now turning to our cash flow and balance sheet. In 2024, we generated $4.00 $6,000,000 of operating cash flow, which was negatively impacted by higher taxes paid, including 160,000,000 related to the deferred tax payments under the Tax Act and $70,000,000 related to IRS settlement earlier this year. As a reminder, we will make our final deferred tax payment related to the Tax Act of $220,000,000 in the second quarter of this year. In 2024, capital expenditures were $131,000,000 or roughly 3% of total company revenues.
We remain committed to strategically investing in key areas and aligning our agent compensation to performance. Over the past three years, we’ve averaged roughly 100% adjusted free cash flow conversion. We define adjusted free class convert free cash flow conversion as free cash flow less unusual tax items divided by adjusted net income. I’m pleased to report that in 2024, we have returned almost $500,000,000 to our shareholders, with $318,000,000 paid in dividends and $177,000,000 used to repurchase shares. I’m also pleased to announce the Board of Directors recently approved a $1,000,000,000 share repurchase authorization, which will allow us to continue our historical practice of strong cash returns to our shareholders through our dividend, which is yielding 9%, and our strong share repurchase program.
We also continue to maintain a strong balance sheet with cash and cash equivalents of $1,500,000,000 and debt of $2,900,000,000 Our leverage ratios were 2.9 times and 1.5 times on a gross and net basis, which we believe provides us ample flexibility for capital return or potential M and A while maintaining our investment grade credit rating. These levels may appear to be higher than what you’re used to. As you may remember, we announced in the second quarter last year that we entered into an $800,000,000 delayed draw term loan facility, which we used to refinance our bond that matured in January of this year. As a result, our cash and our debt balance were elevated at year end, which affected our gross leverage ratio. Now moving on to 2025 outlook, which assumes no material changes in macroeconomic conditions relative to last year.
However, some uncertainty exists in The United States as we are two weeks into the new administration. We forecast adjusted revenue to be in the range of $4,115,000,000 to $4,215,000,000 This range reflects continued growth in our Branded Digital business and 10% to 15% growth in Consumer Services as we continue to stay and as well as we continue to stabilize our retail business. The midpoint of this range is 1% adjusted revenue growth excluding Iraq, which puts us on track to achieve our Investor Day target of flat to 2% revenue growth. We forecast that our adjusted operating margins to be in the range of 19% to 21%. And lastly, we forecast adjusted EPS to be in the range of $1.75 to 1.85 From a quarterly phasing perspective, please keep in mind that Iraq contributed $65,000,000 in the first quarter of twenty twenty four and $34,000,000 in the second quarter of last year before normalizing the latter half of the year.
We do not anticipate that Iraq will return to the elevated levels experienced in the first half of last year, which will result in a headwind in the first and second quarter of this year. Additionally, please keep in mind that the first quarter of last year was impacted by leap year, which benefited us in the first quarter of last year. To conclude, we are two thirds of the way through our evolved twenty twenty five transformation, and we are confident that we have laid the foundation needed to drive long term profitable and sustainable revenue growth. As we embark on this pivotal year, we remain committed to driving growth, innovation, and value to our shareholders. Thank you for joining the call.
Operator, now we’re ready to take questions.
Conference Operator: Our first question comes to us from Tien Tsin Huang from JPMorgan. Please ask your question.
Tien Tsin Huang, Analyst, JPMorgan: Thank you so much. Thank you for going through all the details here. Just thinking about the outlook on the revenue side, and the range and what might cause you to be at the low end versus the high end, is it worth maybe going through some basic assumptions there that might influence the outcome?
Matt Hagwin, Chief Financial Officer, Western Union: Hey, Tien Tsin. Thanks for joining the call today. The variability between the high and the low end of the range, there’s a lot of uncertainty in the market. Things don’t move lumpy. We are super proud and excited about where we’ve come from.
If you look back two years ago, the company was declining mid single digit. We were able to exit last year with 50 bps growth full year and 1.4 full year. So super excited about what we’ve accomplished. The assumptions that are underlying that is continued consistent macroeconomic conditions we experienced last year. So no major changes in currency or inflation.
We have in our core businesses, we expect to have high single digit, low double digit branded digital growth. As The highlight of my prepared remarks, we expect to have 10% to 15% growth in consumer services. What could move us to the upper end of the range? Further stability in the retail market acceleration in branded digital, this year higher consumer service we had later in the year. So there’s many things that could put us at the upper end or even above, but it’s obviously an uncertain market where we are as we highlight in the prepared remarks.
Tien Tsin Huang, Analyst, JPMorgan: Yeah. No, that’s fair. And then just on the consumer services, you mentioned it. Sorry.
Matt Hagwin, Chief Financial Officer, Western Union: Go ahead. Go ahead, Clyde, please.
Tien Tsin Huang, Analyst, JPMorgan: Yeah. No. Just gonna have a quick quick follow-up just on the consumer services side. You you called it out there, 10 to 15%. You’re running in the lower twenties exiting the year.
You’re mid teens for ’24. What’s what’s driving the the deceleration? How much of that is conservatism? Or were there some one timers that maybe lifted the consumer services? Sounds like some initiatives could actually drive acceleration.
So just trying to reconcile all that.
Matt Hagwin, Chief Financial Officer, Western Union: Yes, attention. It’s a great question. I mean, you’ve known me now for three years, so it could move around a lot of different places. You’ve called me conservative before. But there are things in there that we had some strong Q4 on Media Network.
Usually Media is very strong in the latter part of the year as you know from other businesses. That may not continue for all of next year. We have launched a couple of businesses that we start to cycle through as we go forward, but we do have a line of sight to get us to our commitment of 10% to 15%.
Conference Operator: Our next question comes to us from Darren Peller from Wolfe Research. Please ask your question.
Darren Peller, Analyst, Wolfe Research: Hey, guys. Thanks. Just wanna ask about the digital aspiration to drive double digit growth on revenues. Obviously, the spread, you know, continues to be in that in 06/07 percentage point range. And you’re continuing to show great results on double digit growth on transactions, but help us understand the driving factors to allow for double digit revenue growth to appear in the digital transaction side, the digital business.
Then maybe just remind us, like, what is your what is your timing expectation on that? Thanks, guys.
Devin McGranahan, Chief Executive Officer, Western Union: Yeah. Darren, great question. Thank you. And, you know, it’s something we continue to spend a lot of time talking about. I I think it’s important just to reflect on the progress we’ve made.
Two years ago, our digital business was shrinking revenue 1%. Now it’s growing revenue in the high single digits. That has been the function of driving our customer acquisition and our transactions in the double digit range. We expect to be able to continue to do that as we’ve now done for seven quarters in a row. So this becomes an exercise of managing what is in the base.
And as you know some of the factors that we’ve talked about is the increasing growth or the relative speed of growth to pay out to account which has a different revenue per transaction profile than our historic payout to cash and our continued attrition of the legacy book which has a different pricing profile than all the customers that we’ve acquired in the last two years as we’ve become market competitive on new and repeat transactions. So as that book continues to shift and manage we continue to expect and we’ve talked about a three to 400 basis point gap between transactions and revenue. As we’ve talked about in the past if we accelerate transactions, that range might increase, but we would be okay with that. But as we continue, we believe it will stabilize over the course of the next eighteen to twenty four months.
Conference Operator: Our next question comes to us from Will Nance from Goldman Sachs. Please ask your question.
Will Nance, Analyst, Goldman Sachs: Hey, guys. Good afternoon. Thanks for taking the question. I was wondering if you could maybe touch on some of the, the dynamics that led to the modest desal and the North American revenues. If you could just kinda go through what you’re seeing there, and I guess specifically, you called out a few macro, impacts that you were seeing last quarter.
I think one of them would have related to North America, like The US to Mexico quarter, the other one would have been in Laca. So it would be helpful to get an update on that as well. Thank you.
Devin McGranahan, Chief Executive Officer, Western Union: Hey, Will. Hope you’re doing well. Let us remember that we are in fact a global business and highly diversified. Only 30% of our revenue comes from The US. We did see, as we talked about in the third quarter, some sluggishness in North America.
But I remind, we had 1.4% ex Iraq adjusted revenue growth in the quarter, which is the second best quarter the company’s had on adjusted revenue basis in the last 20 quarters. So even with the slowness in North America, we continue to propel our business according to our strategy around the world. We are still seeing the effects of the macro events down below the border and the elections that we talked about in the third quarter as the migratory patterns of people shift. And we’re obviously seeing some effect of the election in November as we normalize to a different environment here in The US for migrants.
Will Nance, Analyst, Goldman Sachs: Got it. That that is very helpful. And then just maybe a separate follow-up. I know one of the, one of the bigger drivers of that, the positive revenue growth this quarter was the consumer revenue. I was wondering if you could hit on the margins in that segment and just how you think about scaling margins over time and Maybe what, what level of revenue you would need to see in order to kind of achieve your target margins in that segment?
Matt Hagwin, Chief Financial Officer, Western Union: Hey, Will. Thanks for the question. As we talked about in the prepared remarks today, we did progress by about 200 basis points from Q3 to Q4. We expect each product that we’ve launched, whether that be the media network, the prepaid business, the wallets and you can keep going through them, We believe each one of those has company wide margins or better once you’re fully at scale. As we’ve talked about in prior quarters, each one of them will roll out at a different pace.
We launched the prepaid business a little over a year ago now in The U. S. We’re now starting to launch in other parts of the market. Each one of those will have a ramping process. Media Network is largely in The U.
S. So we think you’re going to continue to make progress towards our company average, but it will happen over the next couple of years as we roll out products.
Devin McGranahan, Chief Executive Officer, Western Union: We should just talk philosophically for a second. If I could grow the whole company 23% at 11% I might take that trade. So we’re pleased with the fact that we’ve launched businesses. We’re seeing adoption by customers and acceleration of a revenue growth profile that looks significantly different than our historic norms. So we will continue to invest in these businesses.
And as we see market opportunities continue to grow them. I am not in the business of trying to slow the growth to improve the margin in that particular segment.
Conference Operator: Our next question comes to us from Ramsey L. Asal from Barclays (LON:BARC). Please ask your question.
Ramsey L. Asal, Analyst, Barclays: Hi. Thanks so much for taking my my question, today. Branded digital transactions decelerated a bit versus last quarter, although still, as you as you mentioned, solidly in double digit territory. But the spread to branded digital revenue actually tightened a little bit by a hundred basis points, to about, I think, about 5%. Could you give us your thought on on spread dynamics in ’25 and what we should expect through the year in terms of your, I think, longer term goal to sort of tighten that up?
Matt Hagwin, Chief Financial Officer, Western Union: Hey, Ramsey. Thanks for joining the call today. You heard our tone earlier. We’re super excited. We’ve come a long way over the last two years.
We were plus 1% in 2022. This year, we were able to grow trans 13% and took revenue from basically being flattish to high single digit this year. So huge progress. We still think there’s a lot more room to go. As we talked about our Investor Day two years ago, we think this business is a mid teens overall business and we still got some more progress to get there.
As far as the pace of closing the gap between transactions revenue, we’re going to manage the overall business to drive top line growth, adding more customers and we’re very focused on growing the overall business. The output is delivering revenue growth and EPS. We do think it will narrow over time as we lap the pricing and we have more of the legacy clients that are a little bit higher rates in market, tread away and we add new, but you also have a little bit of pressure coming from, as I talked about my prepared remarks, our account payout business is growing 30. That’s both on the retail side Devin highlighted and I highlighted on the my prepared remarks that comes at a lower RPT, but it’s very profitable. It doesn’t come with a commission.
So we’re very happy to have it.
Ramsey L. Asal, Analyst, Barclays: And a quick follow-up, but just on m and a, you made some smaller acquisitions, Dash, and I think the Mexico Digital Wallet, recently. Maybe update us on your appetite with m and a given all the changes in the environment. And and also, I think these deals reflect small because was there any inorganic contribution in the quarter that’s material enough to call out?
Devin McGranahan, Chief Executive Officer, Western Union: To to clarify, neither deal has officially closed yet. We are waiting for regulatory approval in both Singapore and Mexico. So there would be no contribution to the quarter from either transaction. We remain a interested buyer of properties that fit particularly well with our strategy. And as I have talked about allow us to accelerate that strategy in a cost effective way with strong returns on our capital deployment.
So the addition of Dash was a acquisition that, as I highlighted in my comments on APAC, allows us to accelerate our digital wallet capabilities in that region and strengthens what’s already a pretty good franchise for us in Singapore, acquired cost effectively and we believe will be additive to both the strategy and the company once it closes in the latter half of twenty twenty five. As we look around the world when we see other things like that, I would anticipate that we’ll be prepared to act.
Ramsey L. Asal, Analyst, Barclays: Got it. Thank you.
Conference Operator: Our next question comes to us from Jason Kupferberg from Bank of America. Please ask your question.
Jason Kupferberg, Analyst, Bank of America: Hi. I wanted to ask about the retail transaction growth trend. Obviously, it’s been on an improving trajectory here. I’m just wondering what you think could be drivers of further improvement? Is it just broader rollout of the new point of sale or some other dynamics?
Devin McGranahan, Chief Executive Officer, Western Union: Most of the incremental improvement will continue from the strategies that we’ve already launched, which is optimizing our distribution network, continuing to grow our independent agent footprint, improving the level of service and customer experience, which includes the point of sale rollouts and strategically managing our go to market against specific corridors and customer segments. The biggest opportunity, as you can tell, is probably now in North America relative to the performance that we’re getting in most of the rest of the world’s retail networks. We continue to wait for the market to stabilize a bit in Laca, but that has been and was last year a mid single digit grower. So we believe that will continue as we settle through some of these transitory post election issues. So I would look forward to Laca returning to mid single digits and us continuing to execute the strategy in North America, which will propel the overall retail business into that stable to slightly positive zone that we believe it can be.
Jason Kupferberg, Analyst, Bank of America: Okay. And then just coming back to your comments earlier that you’ve seen a little bit of impact on migration patterns, post election, thinking about Mexico. Is there any headwind for that kind of factored into your guidance? And maybe can we just get an update on what percent of your total C2C revenue is coming from The U. S./Mexico corridor?
Thank you.
Matt Hagwin, Chief Financial Officer, Western Union: So as far as our guidance, we’ve got a obviously a 0% to 2% range of revenue growth. It depends on how severe something is to be impact whether it’s included or not, but we think it’s a pretty wide range to provide us some flexibility. As far as how big is The U. S. LACCA business, it represents all of North America represents around 30% of our business, U.
S. LACCA. Mid-20s.
Devin McGranahan, Chief Executive Officer, Western Union: Low to mid-20s.
Jason Kupferberg, Analyst, Bank of America: Thank you.
Conference Operator: Our next question comes to us from Vasul Govil from KBW. Please ask your question.
Vasul Govil, Analyst, KBW: Hi. Thanks for taking my question. I wanted to follow-up on that question about migration patterns. Just Matt and Devin, just can you help us think at a high level if, you know, some of the initiatives that the new administration is taking were to continue to accelerate in terms of deportation and such, how to think about the potential impact on your business? And then I have a follow-up.
Devin McGranahan, Chief Executive Officer, Western Union: Thank you. So I think and we’ve seen it over the course of the two weeks. What’s going to happen is you’ll probably see, some decline in transactions and an increase in principal per transaction. So frequency will go down and principal will go up. But also I think you have to put into context this is largely a retail phenomena and it’s largely on what I would call recent arrivals in The United States.
And so if you look at our business in 2024 new to franchise new to retail customers sending to the Laca region, so that’s more than just Mexico, was only about two and a half percent of our total revenue. So that’s the that’s the risk right there is that number slows a bit. And you know in last year it was kind of growing you know in a negative single day high single digit rate. So it wasn’t a strong performer for us anyways all of last year which you can see in some of the softness for the numbers in North America. So you know is there some risk without a doubt.
Do we need to keep a close eye on this administration and the changes in perspectives. But the vast majority of our business our customers that have been here for a while who have good paying jobs, who send money home to loved ones on a regular basis, and we anticipate that that will continue.
Vasul Govil, Analyst, KBW: Thank you. That’s very helpful, Gullar. And I guess my second question was on crypto, which seems to be having a resurgence. Any updated thoughts on your view and how you see that impacting your business long term?
Devin McGranahan, Chief Executive Officer, Western Union: So I’ve said this publicly a number of times. We pride ourselves in being one of the best in terms of managing our risk compliance and protecting our customers from fraud and protecting the integrity of the international financial payment system. If there is an opportunity in which you can do that legally and with high protections for customers and financial integrity with crypto we will certainly explore that. And in fact we would welcome an opportunity. And there are places in the world where we are exploring this, where we could actually settle funds via crypto and enable us to reduce both the float that we have in the system.
As Matt usually talks about, any given day we have a billion plus dollars floating around to enable our business to reduce the float in the system, which will certainly help our balance sheet, but also to speed up some of the inefficiencies of using the traditional swift based banking system to move money and settle transactions. So we look forward to the innovation, but we only look forward to the innovation in a manner that would be consistent with our perspective of being and continuing to be a highly regulated and high integrity financial institution.
Conference Operator: Our next question comes to us from Rufus Hone please from BMO. Please ask your question.
Tom Hadley, Vice President of Investor Relations, Western Union0: Hey, guys. Good afternoon. Thanks very much. I wanted to ask about the retail business ex Iraq, and if I’m doing the math correctly, it looks like this quarter that was down about, 3% year over year, a slight improvement from last quarter. I’m just curious to get your view about how you think that will trend through 2025?
Thanks.
Matt Hagwin, Chief Financial Officer, Western Union: Hey, Rufus. Thanks for joining the call. As we talked about earlier and Devin shared during his prepared remarks, we’re super excited about the progress we’ve made in our retail business. We’ve taken it from being down two years ago, high single digit to that at the point now where transactions were down more low double single digit. We think with the items that Devin talked about a minute ago for one of the questions two or three people back we think we can continue to make progress there whether that be through continue to roll out our new point of sale improving our customer service agent service continue to improve our value proposition.
We think we can continue to make progress on that.
Devin McGranahan, Chief Executive Officer, Western Union: Rufus you’ll recall two quarters ago we were getting the retail business closer to negative one. And the slowdown that we’ve seen in The Americas has obviously caused the third quarter. Now we’re calling some of that back in the fourth quarter which you appropriately note. So there’s going to be some volatility in that. It’s a large scale business but the trajectory which is upward into the right mean two years ago our retail transactions were down 7%.
This year they were only down two. So we’ve seen a 500 basis point improvement and we see strength in many regions around the world including The Middle East ex Iraq including the comments I made about LAHCA, I mean about APAC and obviously the strength you can see in the numbers in the quarter from Europe.
Conference Operator: Our next question comes to us from Chris Zhang from UBS. Please ask your question.
Tom Hadley, Vice President of Investor Relations, Western Union1: Hi. Thank you for taking our questions. Chris for Tim Chioda from UBS. Wanted to hear your thoughts about your investment needs longer term and wonder if you could rank order the areas of your investment priorities beyond this year. And related to that, you’ve been tracking ahead of your five year expense redeployment plan.
So I guess could you talk about how you’re planning on funding potential incremental future investments once the redeployment program is completed?
Matt Hagwin, Chief Financial Officer, Western Union: Hey, Chris. Thanks for joining the call today. Tell (WA:OEXP) Tim hello for us. We feel very good about our ability to make investments. There has not been any of our challenges here about the level of capacity.
We feel that there’s still plenty of room left in redeploying costs within our business. We highlighted the current program we have, which is the $150,000,000 5 year, which were $110,000,000 through. We got our Investor Day coming up in November, and we’ll talk about something there as well. But we feel like there’s tons of opportunity. We think we have enough capacity on our balance sheet.
If we had any strategic M and A that makes sense to again help us accelerate our path, we think we’ve got to we believe we have enough space within our technology budget to invest in new products and technology builds. So really our focus is going to be to continue to bring it build out consumer services to address the needs that our hundred million plus customers we have around the world would want to expand our TAM and help them have better financial lives. And that’s really our path the next three to five years. But Gavin would you.
Devin McGranahan, Chief Executive Officer, Western Union: Yeah. I’d add two things right. And I think Matt highlighted in his commentary the success and I’ll just use the operations area as an example in reducing operating costs by 20% over the three year period. We continue to see plenty of opportunities within the company within the existing cost base to have year over year performance improvements which can both drive the bottom line but also provide money to invest in our growth initiatives. So even though we’re completing the 150,000,000, I don’t think that’s an end to the opportunities that we see.
And certainly I commented on from, you know, 2022 when I arrived. The second, Matt also highlighted that, you know we are going to finish the last of the tax act deferred tax payments in April of $220,000,000 And for most of my tenure as CEO that has been a burden on our cash flow conversion and cash flow capital return opportunities. And so getting that behind us actually changes the dynamics of our capital creation potential and thus allows us the opportunity to both return more capital to our shareholders and or invest in inorganic opportunities to drive the business.
Tom Hadley, Vice President of Investor Relations, Western Union1: I appreciate all the color. Definitely look forward to the Investor Day and I’ll save the follow-up for the group call back and leave time for our colleagues. Thank you.
Conference Operator: Our next question comes to us from Chris Kennedy from William Blair. Please ask your question.
Tom Hadley, Vice President of Investor Relations, Western Union2: Great. Thanks for taking the question. You’ve talked about the strength of the digital business in Australia. Can you unpack that a little bit? What’s the dynamic in that market?
And is that, can you kind of replicate that success in other markets? Thank you.
Devin McGranahan, Chief Executive Officer, Western Union: Yeah. So I just came from Australia and it’s a it’s a super interesting and super competitive marketplace. Our competitors are spending an enormous amount on advertising. It’s on bus stops. It’s on television.
And it’s even some of our competitors who have historically not relied on advertising to drive their growth. So it’s a fascinating dynamic. Our growth is driven by the quality of the product and the brand that we have in the marketplace. We have a strong business throughout a pack because of our long history of being a payout partner in many of these regions. And much of the growth from Australia is into other APAC countries.
So it’s Australia to India Australia to Philippines Australia to China Australia to Indonesia. And so the strength of our brand across both send and receive markets the quality of the product if you remember we launched our next generation digital product in Australia First. So we’ve been there the longest. And so we have very high conversion rates for new customers to exit to become customers. And then we have high repeat transaction and product usage given the quality of the experience that they have.
We believe it’s completely repeatable. And as you heard in my prepared comments we’re looking to accelerate the rollout of that next generation digital platform in 2025 to you know up to 10 more countries to help accelerate our global business.
Conference Operator: We have time for one more question, and that question will come from Andrew Schmidt from Citi. Please ask your question.
Ramsey L. Asal, Analyst, Barclays: Hey, Devin. Hey, Matt. Thanks for squeezing me in here. I wanted to dig in to the, the building blocks of, for digital growth for 2025. When I think about it, you know, there’s user growth, transaction frequency, pricing, and mix.
As we think about 2025, are there differences in terms of just the build up or the building blocks digital growth versus 2024? Or is it more of the same? Thank you so much.
Devin McGranahan, Chief Executive Officer, Western Union: So I would add one dimension to your those are the right underlying dimensions. For us. There’s also geography. So we have a digital business and think 50 some countries around the world as we’ve gone on our transformation. And you can remember all the way back to 2023.
I know it’s hard. We talked about as we saw the business accelerate how we were rolling out our new go to market around the world. We started first in North America and then we went to Europe and then we went into The Middle East and then we went into a pack and finally in Laca. We’re now going through and doing that same process rolling out our next generation platform. And so we also see some geographic enhancements against the dimensions of new customers increased transactions increased principal etcetera.
And so I think the building blocks remain fairly consistent. We are growing new customers at a relatively consistent rate over the last couple of years on a very effective CAC. Those new customers are in fact higher quality customers than we were historically acquiring, so they have better retention and they have better transactions per customer, although they are lower revenue per customer given our more competitive pricing. And as I talked about, we’re rolling out the technology platform like we have in Australia into more markets as a world in which those benefits tend to accelerate relative to our existing business on our old legacy technology platform.
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