Hi, everybody. Thank you for joining us. I'm Jason Kupferberg, the Payments, Processors, and IT Services Analyst here at Bank of America, and we have Matt Cagwin here, CFO of Western Union. Matt, first time in our conference, thank you for being here, 'cause you haven't been in the role for that long. I think of the first time you kind of spoke to the investment community was at the Analyst Day last October in New York. You and Devin unveiled the Evolve 2025 strategy. Here we are, you know, we're eight months after that. Just take us through some of the key components, the highlights of the strategy, give us a bit of a progress update, we can go a little deeper from there. Awesome. Jason, thank you very much for- Yeah. ...having me here. Our pleasure. Very exciting. Much more enjoyable than doing an Investor Day or 90-day anniversary. If you think about our Evolve strategy, which we launched last October, it's built on four pillars, and it was really using the storefront assets that we have at Western Union. I got that. The first one was returning retail to stabilizing our retail business. It's been an asset that's been under pressure for a couple of years, had not made the right investments in it. We've been working on that very carefully over the last year or 18 months, working with our partners, a lot of blocking and tackling there on how do you get the right engagement in the field, we've been working on the technology side, getting the right technology in place. Our second pillar is returning our digital business to double-digit revenue growth. As we've talked about in the past, we launched a new program back in Q3, overhauling our go-to-market strategy, and that program has allowed us to go from negative transaction growth in Q2 to 7% transaction growth in Q1 this year. That's happened through accelerating our new customer acquisition. We pushed this out in the U.S. in August, and we, ever since we've launched it, in any territory we've put it in place, we've been getting double-digit new customer acquisition, averaging mid-single, mid-double digit in Q1 and Q4 last year. That's then led to the transaction we talked about. The third pillar is our ecosystem, and our goal there is to drive financial services, successful financial services to our client base, giving us a chance to expand our TAM, but more importantly, to drive retention. One of the things we highlighted in our Investor Day was every 1% improvement in our retention is worth $30 million in retail and about $10 million in our digital business. Our real focus around the ecosystem is giving our customers more opportunity to transact with us, interact with us, and keep us top of mind when they want to do their next activity. The last pillar is overall operational efficiency, freeing up some money for redeploying into building out new products and technologies. We think we have enough space within our $3 billion expense base to be able to fund all the innovation we have in mind. Excellent. Okay. No, that's a good recap. Maybe, let's hone in on the digital. Yep. Piece of it. I know you put out a couple of metrics there, talking about some of the re-acceleration, the new customer adds fueling the transaction growth. You had taken some pricing actions, right? It seems like you really did stimulate demand as a result. Where do we go from here on that? I mean, how long do these kind of promotional pricing strategies remain intact? Then, how should we be thinking about, let's say, over the next several quarters, transaction growth in digital versus revenue growth? Fantastic question. I would say the easy answer to the first part of that is we do not anticipate promotional pricing going away. Okay. Many of our competitors already do it, have been doing it for years. We think it's important, looking at the lifetime value of our customers versus the individual transactions. We think getting them into the Western Union family, trying our services. To your question about how do you think about transactions and revenue, what we highlighted in our last earnings call is that we believe that Q2 will be the wide inflection point, then we'll start narrowing as you get into the latter part of the year. We highlighted the fact that we anticipate having, in the third quarter, positive revenue growth. In North America, we launched the program in the third quarter last year. We anticipate having positive revenue growth in the fourth quarter, for the world, for digital. Okay, fourth quarter for on a global basis? Yeah. Okay, understood. Understood. Let's maybe zoom out for a second, talk about the macro. I mean Western Union has always been a macro-sensitive business, and right now, you've got crosscurrents in the sense that, you know, inflation's still elevated, but easing. Good thing, right? Rates, elevated, but hopefully not too much more to go in that regard. Unemployment's low. How does that all add up for Western Union, you know, how would you evaluate, like, the overall health of the average C2C customer right now? I'm sure it varies a little bit by, you know, region and corridor. Maybe you can touch on that. Yep, certainly. We've seen a lot of stability over the last two years. We've obviously been working our way through from a principle per transaction basis, which is how we really look at the maturity of the customers that we have. It has been positive, low single digit for the last eight quarters. That's a good sign for us that our customers have money to send to their families. Right. And have that ability to do it. When we look at this overall the remittance business, it largely follows GDP. This one is, and it can be varied from quarter to quarter sometimes, but it largely follows that. Where I think this might be a different environment is if unemployment starts to get high, a lot of the change in employment has been at the more white-collar type jobs, where our customer base is more the blue-collar workers, the service personnel in this hotel, and those, you can't find them. We're optimistic that we're not gonna see any kind of problems if we go into a recession, but we're watching and monitoring it very carefully. Okay. If we think about some of the digital banking initiatives, digital wallet initiatives, I think, you know, initially you had started with some pilots over in Europe. Maybe just refresh everyone on kind of the genesis of that, how it's expanded. What sort of traction have you seen with it? I mean, it's essentially moving towards being kind of a neobank, for lack of a better word. It's our third pillar, we call it our ecosystem. One of the parts of our strategy for the ecosystem is a digital wallet, which we launched the first two digital wallets last year in the second quarter in Romania and in Germany. One of those countries is a big send market, which is Germany. One of them is a very big receive market, Romania. Then later in the year, in Q4, we launched in two additional markets. We launched it in Poland and in Italy. Again, one big large receive market, one big send market. Our objective of putting them in send and receive markets is to build a test and see behaviors. Just a reminder that you know this, but historically we made no money in a receive market. The money we get sent in, it actually was a cost to us because we had to pay agents to do payout. We're now, with the wallet, we're able to have people keep the money in the wallet. We're adding ancillary products, such as you can get a prepaid card, you can get a debit card, you can hold currency, earn interest in certain geographies. You can hold things in up to 13 different foreign currencies. There's a myriad of other services that we've attached to the wallet that allows us now, both in a send market, to provide additional services, as well now having services in the receive market, which we never had before. What we're starting to see from a transaction, it's very early days still, we've only been in these markets for a few, a little less than a year for some or most. We're seeing transactions generally 3-4 times higher than what we were seeing with the traditional remittance clients. Mm. The good news there is that means they're more active with us. That will, we hope and expect, it will drive better retention because they're more active with us. What we've also noticed is that there's three types of customers we're getting. We're getting customers that fit your, the way you opened the question with the neobank-type customer- Mm-hmm. ...that aren't core remittance clients as. We're also getting people who are migrating from our retail business or our digital business into the wallet. Right. We're getting the third grouping is people who were clients of ours more than 12 months ago, have gone dormant for a period of time, and are coming back because now we have new services. Oh, interesting. interesting. Okay. When you break it up, the first group, not gonna be great economics. It's no different than all the neobanks you probably monitor. Right. That lose money left and right. Right. We balance how we're going to market, focusing our marketing and our tracking of clients away from that group- Okay. ... and into the two second buckets. Because the economics in the 2 second buckets are similar on the second group around our remittances, plus the incremental- Mm-hmm. ... products we have. The third one had no revenue, but they needed our services. Right. They had our services at one time. Mm. But moved away for whatever reason, have now come back because of the additional product set. How do you go about kind of reactivating those former users? Is that just kind of direct email marketing? We're doing web marketing through Facebook, other things. Okay. We're doing some direct marketing where allowed by geography. Okay. Great. Not all of them are finding us because we had their email or phone number. A lot of them are finding us through the other, the other ways we were attracting clients. Okay. Maybe just circling back on digital, because that's where I think there's always a lot of attention paid. You know, huge growth during the pandemic, obviously. Some normalization, some deceleration, but revitalized strategy. You're stimulating the transaction growth. Underneath all of that, what does the competitive landscape look like in digital money transfer? As you have re-accelerated the transaction growth recently, any sense of who you've captured share from? Yeah. Let's keep competitors you know very well. Yeah. Obviously you've got Wise, who we would not really consider a key competitor for us. They're targeting a different customer, typically account to account. Yeah. You've got Remitly, which we find is a very formidable competitor, but they're able to do it with a very high marketing budget and very low rates and no profit. Beyond that, you have a few other competitors have some small competitive set. Where we're getting it, I don't exactly know. We don't ask that question when we're getting new people signing up. You look at what our competitors are doing for their growth rates and not seeing a bunch of visibility or deviations in it. Mm. I don't know how to answer that question per se, but we are seeing some really strong traction, obviously. Any sense, I guess, these newer users that are coming on, are they possibly new to digital remittances, or is there any way for you to know that, or? We know that they are not coming from our retail business. Okay. We know that. You're not cannibalizing. We're not cannibalizing our business. Yeah. Yeah. Okay. We're not seeing- That's important, yeah. ... massive movement. Yeah. We're able to track customers between both sides. We're not seeing a massive shift- Right ... or any meaningful shift between the two. Right. Okay. They are net new to us as digital. Mm-hmm. Mm-hmm. Versus the last 12 months retail. We're not looking back forever, but they're coming- Right ... they're not moving from an active retail to a now active digital. Yeah. Yeah. Um. Okay. Oh, sorry, go ahead. The only other thing I'd point out, too, is when we first launched this program, we were cautious. Would you get people seeking the free? You would basically have these people who just would come in for the one transaction- One and done, yeah. ...then leave. Right. What would that do? The one that we're proud and happy about is that we're seeing- Yeah ...equal to or slightly better than a lot of geographies, retention rates to what we had prior. It's telling us we're getting similar type customers. Mm. Therefore, you're gonna continue with what we've always talked about, where you're gonna have your customers come first, then you're gonna see your transactions, and then revenue as you continue to build the pipeline. That's right now panning out and working out a little better than we thought. The nature of the promotional pricing is basically first transaction free? It's generally first time free. Yeah. We, in some places, have half off. Okay. We're gonna continue to experiment with it and try to figure out. Right What's the right plan, right point to get the right level of growth. Right. I mean, if you could do half off but still get 20% growth, we're gonna do that all day long. Yeah, exactly. If it falls to 2%, I'd much rather give away one transaction and get 20% growth and new customers. Right. Okay, after the first free transaction, you're paying? Market-based pricing. Okay. Yeah. Okay, got it. I did actually want to ask more broadly on pricing. Like, I mean, I've covered the company for a long time, and, you know, there was a time when it felt like C2C pricing, just in general, this was kind of before digital was really a thing, you know, could just be, like, headed down a real slippery slope. For years now, C2C pricing in aggregate has actually been stable, maybe even up a little bit, you know, some quarters here and there. Maybe you can just touch on how Western Union has kind of improved pricing strategy using analytics, whatever it might be, because it's almost counterintuitive, I think, to a lot of people, that the C2C pricing in aggregate has stayed pretty solid and steady. Yeah. It's a great point. I mean, we average about 4% yield- Yeah ...across the board. You're typically a little bit higher for a retail transaction than you are pure digital, but that will vary whether it's a cash payout for digital. Our sophistication here is great. One of the things that we thankfully inherited is a technology that allows you to price in a retail market a myriad of ways. You can do it by day of week, you can do it by street corner, you can do it by DMA, which would be like an area. Okay. The sophistication we have to do is pretty sophisticated or very good. Mm-hmm. On the digital side, we have the ability to scrape what our competitor pricing is. Just, I think, do ours probably. Right. You can see to a corridor level, what are you pricing for a account to account or account to cash payout? You have the ability to see what the key competitors are doing in the marketplace. Our strategy and approach for it, though, is we used to have a strategy of maximize revenue per transaction. Mm-hmm. We've pivoted that as we've moved away from being a very transaction-focused company to being more customer-focused, and we now have the ability to look at customers between both retail and digital and make them a person rather than a transaction. Mm. We've moved to lifetime value. When we price now, we're not gonna be the highest price in the market all the time. We're gonna try to figure out where is that right point where Jason wants to be a client of Western Union for as long as possible. We look at a basket of market prices, and we're gonna be in that basket and try and find that place where you're happy to be with us. Yeah. Yeah, okay. No, no, it definitely makes sense. Why don't we move over to the retail channel? Because you talked about that as one of the pillars, too. You know, Western Union's talked for a while about there, you know, being some element of just structural decline, but still a massive business for you, right? Throwing off some good yields and cash flow and all that. Let's just go a layer deeper into some of the initiatives that you guys are employing to try and stabilize that business. Yes, I earlier mentioned technology, but I didn't go into the detail. Yeah. There's two early advancements we've put out in technology recently. One is Quick Resend. This is the technology where the system will be able to pull up your last transactions. If you want to send to your family member in Guatemala that you've already sent to before, no longer do you need to input all the information. It can automatically pull that up. You can change the amount. If it's the exact same amount, the time is very fast to send that transaction. The other one we have is Remember Me. With Remember Me, you walk in. Before you'd have to give us your email address, your phone number, your driver's license or whatever identification you're using. All that information had to be put in, then you could send your transaction. When we get one of those elements, it'll pull up the rest of them and pre-populate. Our goal of doing this is it makes it faster for the customer, but also makes it faster, most importantly, for our agents, who their biggest, most expensive commodity is usually people. Yeah. How do you get the queue moving, and how do you use them effectively? Right. Those are two things we put in place. We launched both on a pilot four months ago in D.C., had great results out of it, and we've now started launching it more broadly here in the U.S. It's been launched in a fair bit of the country, and we're seeing good penetration for that, and we're gonna continue rolling it out from here. Is that essentially some of the. I remember you guys talking about, like, point-of-sale enhancements back at the analyst day. Is this essentially the initiatives, or is it actual- The, the- ...change in the technology, like, literally within the point of sale? Yeah. Infrastructure. These are a offshoot of what we talked about Investor Day. Okay. Investor Day, we talked about rolling out a whole new POS. Right. The project name was Phoenix. Right. We're still working on that. It's in pilot phase. It is. These were two of the- Okay ...t hese were two of the early support points we saw. We're like: We could wait and roll it out around the world. This is the new POS. We're making it the best it could be. We can carve this off and push it into our legacy systems to get the benefit today. I see. As we're rolling out Phoenix, as we see things that we can push into the old technology, we're gonna do that. Yeah. Uh, and we're- Got to get the ball rolling. Get the ball rolling, because we're building in a modular fashion where you can plug and play, which allows us to get the speed of rollout. Let's just stay with the retail channel for a minute. Talk about the agent network a bit. You know, how long are average contracts these days? You know, what percent of the retail business is under exclusive contracts? You know, what are you seeing in terms of, you know, when you go through a renewal cycle, what type of, you know, impact do you have to commission rates, typically? Just a reminder, we have about 400,000 active locations. For those that have followed us for a while, you might have heard us talking about a 600,000 location number. We used to brag a lot about the flags planted, irrespective of what they actually had. The activity's been around 400,000 for a number of years on an active basis. To your question around how long the contracts, they're typically 3-7 years, with an average around five. To your question around exclusivity, generally, when we think about it, we are exclusive. Like, here in the U.S., most of the big box stores were exclusive, other than Walmart and Kroger. In Europe, we've got a lot of the post offices, and around the world, the post offices are generally pretty exclusive. Throughout Latin America, we've got a lot of master agents that are exclusive in a number of the countries. There are some geographies where you can't have exclusivity, law prohibits it. Where that happens, we will typically go to market with two prices, or two commission rates. One is, if the agent chooses to be exclusive, they'll get X, and if they want to be non-exclusive, they're gonna get a much, much lower rate. Yeah. The goal is to financially incent them to be exclusive, but you contractually cannot force them to be exclusive or, by law, it's a choice. Okay. To your last question, I think was around, rates? On renewals, yeah. Yeah, on renewals. Yeah. I'm going to back up. We also announced at Investor Day that we're moving away from having large signing bonuses. If you look back at the history of the company, we typically would pay between 2% and 3% of our revenue every year in signing bonuses. Our goal there is you're paying someone just for the right of signing. We're pivoting that. It won't necessarily change the net take-home to a agent. We're pivoting that to more performance-based incentives, that when we grow together, we're both rewarded together, versus writing a big check for signing. You will see our cash flow change on that. Yeah, I see. We had one last one that was a lingering one from early last year we paid out in Q1. It doesn't mean you won't see any, but the days of 90, $100 million signing bonuses I would expect to be over. As far as the average rates, they're largely consistent when you include the incentive bonus relatively signing bonuses. Like, the way it all nets out. Yeah, when it all nets out- Yeah ... it's relatively similar. Yeah. Okay. Okay, got it. Latin America has been a pretty bright spot for you guys. I think there's been some significant acceleration there in the revenue growth the past couple of quarters. Talk about the trends underpinning that, sustainability? Yeah. It has been one of the biggest bright spots for us. We've got a great management team down there. As I mentioned a minute ago, it got a fair bit of exclusivity in the marketplace. It has the largest concentration of company stores in the world. They represent about 90%-95% of our company-owned stores. They were a early mover on the digital market. The level of competition we're seeing on the digital side has been more nascent, and we've been intentionally driving as fast as we can there, to make sure that we have a frontrunner position. We also have some other ancillary products down there. we have a very big bill pay business down there, which we leverage our company stores for, which then strengthens your retail to digital escalator, because we're able to control that experience. Do you see this strength as being kind of sustainable as we go through the balance of 2023? I mean, at least directionally, or. I would anticipate them to continue to have strong results. Yeah. The comps get a lot harder as you get in the back half of this year, because if you remember. Right, fair. Last year, they were mid-double digit growth. Last year's comps will get harder. Yeah. They, if you look over time, they've always been a very strong market for us, and we've anticipated it to continue to be a strong growing market. Right. Right, right. What areas of your business can you potentially apply generative AI to? Are you guys experimenting there at all? Yeah, it's a. We get these questions all the time. Yeah. To me, we're a technology company. We've been using robotics, AI, a myriad of things for years. Automation. Some of these- Automation. Right. You can call a lot of it. There's different definitions of it. Yeah. To the definition now of generative AI, we're looking at lots of different things. One of the things that we're piloting right now is in our call centers. We've got 1,5000- 2,000 call center agents spread around the world, and today, we will actually have testing listening of those calls. Is Jason doing a good job? Is his tone going well? Is the customer receptive? Yeah. Are you using the right words? All that is done by a human listening, grading, putting on a report card, sending in, is the way it historically happens. Very labor intensive. Very labor intensive- Right ...you have to sample it. Right. We've got some technology we're testing right now that allows us to do it for all calls. It can do it across the 30, 40 languages that we- Hmm ... we take, and then can score them and can help us understand that agent A needs to have more training and support versus agent B, he's your front runner. We're excited about this, because it's not only a, maybe you can drive down cost, because you don't have to have the people listen anymore. More importantly, I mean, the more you have satisfied customers calling in and get their issues resolved first time, will then drive retention. Yeah. It's one of the things we're piloting from that angle. I wanted to touch on margins as well for 2023, specifically. I think you'd hinted at the fact that first half margins may be below full year, right? Second half improves. Just walk us through some of the puts and takes, kind of driving some of that dichotomy between the two halves. Yep, the world's made minorly change or had a minor change versus when I shared that. Our margins came in pretty solid in Q1 at 20.4%, 20.5%. Our guidance for the year is 19%-21%. Q1 margins were very solid from two major aspects. One is we had some upside in our revenue from Iraq due to the monetary policy change. The second major driver is, as we talked about in Investor Day, we've got a program to drive continuous improvement, and our goal is to redeploy those funds into our strategic initiatives, our Evolve strategies. We were able to save more in Q1 than, I drive that project, than Devin was able to spend, he drives all the initiative side. Right. I was able to outpace him on our redeployment initiatives. Okay. Then, maybe just touching on the Iraq piece, 'cause depending on how closely people may have followed the print, they may or may not be aware, what was the change in monetary policy? Do you expect some of that lift, which was pretty material to revenue and margin, to persist beyond Q1? Yeah. The change was basically, the Central Bank of Iraq made it more challenging for banks to do eKYC or Know Your Customer rules. Mm-hmm. The banks were not prepared to do that, which basically turned you wanting to send a remittance outside the country through a bank, go from being days to over 30 days. Which made it really challenging for you to want to wait 30 days. Right. We already had really strong compliance programs in place, so you were able to come to Western Union and continue to get your money in minutes or, depending on what corridor, within the normal time frames. We were able to fill that void that was left by the change in monetary policy. We do anticipate, as we talked about in our Q1 earnings call, the banks are going to figure out a way to make this work. It's not a permanent change. Right. How long it will last? Yeah Only time can tell. Okay. What have you assumed in your guidance? The guidance we published, in Q1 assumed that it ended at the end of April. At the end of April. Okay. Yep. Okay. All right. Anything you can share since then? We will share that in July. Okay. Um. All right. Fair enough. Fair enough. Let's kind of bring it back full circle to that Analyst Day again. You provided some longer-term financial targets to, I think, give the street a sense of, you know, how you saw the strategic pillars translating into the numbers. You talked about revenue growth improving in 2023 versus 2022 and 2024 versus 2023, and then aiming for 2% growth, I believe, in 2025. Share with us a little bit about how you sort of built up that plan, kind of the confidence intervals around, you know, particularly looking out at the 2025 piece and how you're feeling about it. Yeah. Um. I'm very confident about where we are right now on the path. Okay. We're a little bit ahead of where we thought we'd be at this point in time. We think we have a lot of levers to pull between now and then that give us flexibility to get there. As we talked about at our Investor Day, we exited last year down 6%. We expected a 2% sequential improvement each year between now and then. You can kind of our guide this year was down 2%-4%. Right. I'm very confident we can get there. You keep getting better by 2% each year. The large driver of that early on is going to be on the digital space we had talked about last October, we're already starting to see that on the transaction side, we know the revenues are coming later this year. The retail is the one that we got to get these things in place we're starting to get. We talked about in Q1 that we've seen 200 basis points in almost every geography around the world on a transaction basis. In retails, we're starting to see some traction there, which is a little bit faster than we had anticipated. We're very bullish about where we are, but it's three years. A lot can happen between now and then. True Where we are today, I'm pretty happy. Okay. No, that's fair enough. I mean, you have a strong balance sheet. You don't have much debt. You throw off pretty good free cash flow. Just take us through your latest thoughts on capital allocation and deployment. Yep. We are committed to our very high dividend yield of the current dollar amount, not the yield. Right. Hopefully, our stock will go back up where it belongs. Our second focus is strategic M&A. We've not been a massive acquisitive company over the last decade. Since my time, it's not because we're not looking for things, but we want to make sure we buy things that make logical sense. Our focus really are, as we talked about Investor Day, we're looking to continue to get digital to be half our company's revenue. We're looking at things that can be helping us on the digital side or help us on adding to our surrounds for our ecosystem. If there's any of the ancillary products or things along that nature, that the areas we're looking at. Ultimately, when we look at all those things, if there's no good, logical place to put the money, that would be a great return for our shareholders, we'll return it through share buyback. Very similar to what we did in Q4, when we bought back $175 million. Right. Right. On the M&A point, I mean, what are you seeing in the pipeline that could h ave the valuations normalized? Is, you know, have seller expectations become more realistic or? People they're more realistic, but that's, we're now slicing shades of gray. Yeah. There's still a belief I did around a year or two ago. I got X. What we believe or the market believe, is way less than X. They're someplace between the two. They're still not down to where the reality is with interest rates and growth rates and access to capital. Okay. There are some interesting properties out there- There is, yeah. It's just a matter of being patient. Patient. Right. Yep. Okay. With that, we are hitting zero on the clock. Thank you very much, Matt. Thank you. Really appreciate it. Great conversation.