Western Union(WU)2024-10-24 00:19Financial Data and Key Metrics - Revenue for Q3 2024 reached $1.040 billion, with adjusted revenue growth of 1% excluding Iraq, marking the second consecutive quarter of positive revenue growth [7][22] - Adjusted EPS was $0.46, up $0.03 compared to the same quarter last year, driven by higher revenues and operating profits from Iraq in the previous year [7][22] - Adjusted operating margins were 19.1%, slightly down from 19.6% last year, primarily due to elevated Iraq revenue in the prior year and strategic investments in Consumer Services [23] - Year-to-date adjusted operating margin was 19.2%, with adjusted EPS at $0.46 versus $0.43 last year, benefiting from higher adjusted revenue, lower share count, and a lower adjusted effective tax rate [24] Business Line Performance - Consumer Money Transfer (CMT) transactions grew 4% excluding Iraq, driven by the strength of the branded digital business and digital white label business [25] - Branded digital business accelerated with transaction growth of 15% and revenue growth of 9%, approaching double-digit growth aspirations [6][25] - Consumer Services segment saw 15% adjusted revenue growth, driven by expansion in FX business and Media Network business [6][17] - Retail business improved with debit card acceptance in Europe, showing transaction growth rates hundreds of basis points faster than cash-only agents [13][14] Market Performance - Latin America faced challenges due to geopolitical volatility, impacting intra-LACA migration and slowing transaction growth, particularly in the U.S. to Mexico corridor [8][54] - Europe, Middle East, and APAC regions improved, with revenue growth rates increasing by 500 to 1,000 basis points compared to Q2 [9][25] - Australia's branded digital performance was strong, reaching 25% revenue growth in Q3, driven by the new digital solution deployed in late 2022 [26] Company Strategy and Industry Competition - The company is executing its Evolve 2025 strategy, focusing on improving value proposition, expanding product offerings, and ensuring high-quality execution [4][5] - Two M&A transactions were signed, including the acquisition of Singaporean digital wallet business Dash and a digital wallet in Mexico, aimed at accelerating the company's mission to provide accessible financial solutions [18][20] - The company is investing in digital transformation, including improving the onboarding experience, marketing effectiveness, and user experience, which has translated into more customers, transactions, and revenue [10][11] Management Commentary on Operating Environment and Future Outlook - Management remains optimistic about the company's market position and progress in delivering strategic initiatives, with improving transaction trends across digital and retail businesses [21] - The company reaffirmed its 2024 adjusted outlook, expecting adjusted revenue in the range of $4.15 billion to $4.225 billion and adjusted EPS in the range of $1.70 to $1.80 [32] - The company is ahead of its original plan for the Evolve 2025 strategy, with better momentum in the retail business outside the U.S. and acceleration in Consumer Services [41][42] Other Important Information - The company entered into a settlement with the IRS, resolving one of two open disputes related to 2017 and 2018 tax returns, resulting in a $140 million noncash tax benefit and a $90 million cash payment [24] - Year-to-date, the company has returned $460 million to stockholders through dividends and share repurchases, maintaining a strong balance sheet with cash and cash equivalents of over $1 billion and debt of $2.6 billion [31] Q&A Session Summary Question: Impact of Latin America elections on Q4 guidance and U.S. election implications - The impact of Latin America elections is still fluid, but the company feels confident in its guidance for Q4 [34] - The U.S. election is not expected to have a dramatic effect on the business in the near to intermediate term, as the majority of clients are already in the U.S. and gainfully employed [35] Question: Spread between branded digital transactions and revenue growth - The spread between branded digital transactions and revenue growth widened due to the growth in payout to account transactions, which typically come at a lower revenue per transaction but are stickier customers [37] - The company targets a long-term spread of 200 to 300 basis points and is happy to keep it wide as it accelerates both revenue and transactions [38] Question: Progress towards Evolve 2025 targets and opportunities for further investment - The company is six months ahead of its original plan for the Evolve 2025 strategy, with better momentum in the retail business outside the U.S. and acceleration in Consumer Services [41] - The company is working on guidance for 2025 and plans to provide an outlook beyond 2025 in the second half of next year [44][45] Question: M&A strategy and vision for digital wallets in Singapore and Mexico - The company is focused on thoughtful and prudent deployments of capital to accelerate its strategy, with acquisitions providing access to licenses, technology, and local talent [47][48] - The acquisitions of digital wallets in Singapore and Mexico are expected to accelerate the company's ecosystem strategy and build on its momentum in key markets [18][20] Question: Retail business stability and growth drivers - The company is focused on improving operational excellence, agent network support, and customer experience at the point of sale to stabilize or grow the retail business [52] - Controlled distribution, including Western Union branded exclusive independent agents and own stores, is a key part of the strategy to achieve stable retail business [53] Question: Performance in North America, particularly U.S. to Mexico corridor - The slowdown in the U.S. to Latin America corridor, particularly Mexico, is largely macro in nature, with similar trends observed by competitors [54] - The slowdown in migration patterns in Latin America is impacting transaction growth rates, particularly in regions with high one-time customers [56] Question: Competitive environment and impact of competitor outages - The company saw some upticks in transaction volumes in markets where it competes directly with MoneyGram, but the outage did not fundamentally change the competitive environment [58] - The company remains vigilant in maintaining high-quality security and safety for its customers [58] Question: Debit card acceptance rollout and margin profile - The company is rolling out debit card acceptance in Europe and the U.S., with positive results in Europe showing higher principal per transaction and lower costs compared to cash-only transactions [69][72] - The company is monitoring the uplift in principal per transaction and transactions per location in the U.S. to determine if pricing adjustments are needed [73] Question: Expectations for Iraq in Q4 and revenue trends - The company expects Iraq revenue to be at the lower end of the $10 million to $30 million range in Q4, with volatility expected to continue [77] - The company is cautious about narrowing its public guidance due to the uncertainty in Iraq's revenue contribution [77] Question: Owned store strategy and expansion plans - The company is disciplined in selecting locations for owned stores to ensure sufficient revenue to cover fixed expenses and achieve critical mass in key markets [79] - The company is expanding its owned store network in Europe and Asia, with plans to add more locations in select countries [80] Question: Adjusted operating margins and guidance - The company has maintained a wide range for adjusted operating margins (19% to 21%) and does not expect to be at the upper end of the range, focusing instead on delivering revenue and EPS growth [83]