Western Union(WU) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported second quarter revenue of approximately $1.1 billion, a decline of 17% compared to the prior year period, while adjusted constant currency revenue declined 11% [19] - GAAP earnings per share for the quarter was $0.39, down from $1.42 in the prior year period, primarily due to the gain on sale from divestitures in 2019 [29] - Adjusted operating margin for the second quarter was 20.4%, compared to 20.3% in the prior year period, driven by productivity savings and cost management measures [27] Business Line Data and Key Metrics Changes - The consumer-to-consumer (C2C) segment revenue declined 12% or 11% on a constant currency basis, with transaction volume down 8% for the quarter [19] - Digital money transfer revenues, including westernunion.com and digital partnerships, increased 48% or 50% on a constant currency basis, accounting for 22% of total C2C revenue [21] - Digital-initiated transactions accounted for 31% of C2C segment transactions, up from 15% in the second quarter of 2019 [11] Market Data and Key Metrics Changes - North America revenue declined 6% on a reported basis, while transactions declined 7%, with improvements noted each month throughout the quarter [22] - Revenue in the Europe and CIS region decreased 10% on a reported basis, but transactions grew 4% due to strength in Russia [23] - Latin America and Caribbean region revenue decreased 45% on a reported basis, attributed to restrictive government policies [24] Company Strategy and Development Direction - The company is focused on three key objectives: driving digital growth, enhancing the global network, and optimizing the organization [14] - The current environment has benefited the broader digital money transfer market, with a focus on acquiring new customers and enhancing services like real-time payments [15] - The company continues to enhance its global distribution network, renegotiating agreements with agents and increasing real-time account payout capabilities [16] Management's Comments on Operating Environment and Future Outlook - Management noted that while the macro environment has improved since the significant drop-off in March and April, uncertainty remains due to COVID-19 [13] - The company is not reissuing 2020 financial targets at this time, citing continued caution in the operating environment [13] - Management expressed confidence in the company's ability to deliver solid margins despite softer revenue trends, with a flexible cost structure allowing for adjustments [33] Other Important Information - The company generated healthy cash flow, returning nearly $93 million in dividends to shareholders in the second quarter [30] - The company has an undrawn $1.5 billion revolving credit facility and no significant debt maturities until 2022, maintaining a strong financial position [30] Q&A Session Summary Question: Transaction growth and principal growth expectations - Management indicated that while the World Bank forecasts a 20% decline in the remittance market, they believe their growth trajectory is different, with low single-digit growth in cross-border principal and over 20% growth in June and July [37] Question: Performance of the white label business - Management highlighted strong performance in the white label business, primarily with financial institutions, and noted that the sales cycle is longer but the opportunity is significant [40] Question: Digital versus retail customer mix - Management confirmed that 80% of new customers on the digital platform are new to Western Union, indicating a strong customer acquisition trend [44] Question: Impact of stimulus on transaction trends - Management noted that while government stimulus has helped the economy, it does not have a direct impact on sending principals, as customers are primarily looking for trusted brands [49] Question: Growth in specific corridors or geographies - Management reported broad-based improvement across key geographies, with Europe showing strong recovery and Latin America lagging due to later onset of COVID-19 [55]