The Western Union Company

Good day and welcome to the Western Union Company second quarter 2020 earnings release conference call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Brendan Luciano, Vice President, Investor Relations at Western Union. Please go ahead.

Thank you. On today's call, we will discuss the company's results for the second quarter of 2020, 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. Western Union is still following the work-from-home policy, so on our remote call today is our CEO, Hikmet Ersek, our CFO, Raj Agrawal, and Head of Treasury and Investor Relations, Brad Windigler. 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 2019 Form 10-K, for additional information concerning factors that could cause actual results to differ materially from 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 gap measures on our website, westernunion.com, under the Investor Relations section. We will also discuss certain adjusted metrics. Although the expenses that have been excluded from adjusted metrics are specific to these initiatives, the types of expenses may be similar to types of expenses the company has previously incurred and can reasonably be expected to incur in the future. All statements made by Western Union officers on this call are the property of the Western Union Company and subject to copyright protection. Other than the replay noted in our press release, Western Union has not authorized and disclaims responsibility for any recording, replay, or distribution of any transcription of this call.

I will now turn the call over to our CEO, Hikmet Ersec. Thank you, Brendan, and thank you all for joining our earnings call this afternoon. We hope you and your families are safe and well during these unprecedented times. On today's call, Raj and I will discuss the company's performance during the second quarter, underlying business conditions, and plans to drive our growth strategy forward. As we all are aware, the second quarter continues to be a tiring time for people around the world facing the COVID-19 pandemic. At the onset of the pandemic, Western Union took swift action to support the safety and well-being of all our stakeholders with a focus on Western Union employees and customers, but also our agent partners and the communities we are operating. And we continue to operate with the same diligence. In addition, during the quarter, concerns over social justice came to the forefront globally. have long stood for values of equity and inclusion, which are core to our mission as a global, socially conscious company with a diverse customer base and workforce. For details about our holistic COVID-19 response and Western Union social values, please refer to our annual ESG report published in June and available on Western Union Investor Relations website. Let me tell you that I am personally proud and humbled to lead a company with these values. Now let me give you some color on business performance. On our first quarter earnings call in May, we noted that COVID-19 had caused a sudden and steep decline in our business in the later part of March and early April and led us to withdraw our 2020 financial outlook. I'm pleased to say that since then our business began to bounce back. Our CTC segment finished the quarter with solid transaction growth of 6% in June, which increased to 10% in July. In fact, our CTC cross-border principle increased 3% on a constant currency basis in the second quarter. For June, our CTC cross-border principle grew over 20%, which also carried into July. So for the first half of the year, our cross-border principal grew 2% constant currency. This starkly contrasts with the World Bank's forecast for a 20% decline in remittances for 2020, which we believe indicates that we are winning in the marketplace for both retail and digital money transfers. This isn't surprising to us. We have invested substantially over the past decade to build a leading omnichannel platform for cross-border, cross-currency money transfers and payments. Western Union can deliver money and payments effectively through multiple channels to more places than anyone else in our space. So the disruptive impact of the current environment has actually enhanced the competitive advantage of our combined physical and digital capabilities. When COVID-19 hit, we were ready. with a proven digital platform when consumers and clients sought fast, convenient, and reliable methods to transfer money on their smartphone or computer. This enabled strong digital customer acquisition with Western Union.com monthly average active customer up 45% year-over-year. And according to the mobile marketing firm Sensor Tower, they are leading significantly in downloads The strong momentum of WesternUnion.com combined with acceleration in digital partnership transactions drove 50% constant currency digital revenue growth for the second quarter to approximately $220 million. Digital initiated transactions accounted for 31% of C2C segment transactions, up from 15% in the second quarter of 2019. Importantly, this digital growth is largely incremental to our business and has strong profit and customer lifetime value. Customers also knew they could turn to Western Union to send money virtually anywhere with confidence given the quality of our network. Most of our agents are well-established essential businesses like financial institutions, postal institutions, or large retailers. The large majority of our agent locations have been open and able to serve customers during the crisis, unlike some other providers. Our research shows the availability of our platform was one of the reasons money transfer consumers switched to Western Union during the quarter. Our resilience over the second quarter shows the strong fundamentals of our business, which combined with the new growth strategy we laid out at the Investors Day last September, positions Western Union for profitable long-term growth. For the second quarter, revenues declined 11% on an adjusted constant currency basis, but grew in June. While the digital business demonstrated impressive results, retail trends got better over the quarter and drove monthly improvement in overall C2C trends. We continued to deliver solid profitability with adjusted operating margins of 20.4% due to targeted productivity savings and expense management enabled by the WuWei Lean program and organizational efficiencies. We generated healthy cash flow, returned capital to shareholders through our quarterly dividend and continue to maintain a strong financial position. So our business is moving in the right direction. Consumer behavior appears to be relatively stable and the macro environment has improved from the significant drop off in March and April. However, there is still uncertainty from COVID-19, evidenced by concerns of second wave and even third base in some markets. We think these conditions warrant continued caution and therefore we are not reissuing 2020 financial targets at this time. Ross will provide a detailed review of our financial results and offer some additional insights into our expectation in a few minutes. Looking forward, We have a robust agenda for the second half of the year that should help position the company to emerge from this destructive time in a very strong competitive position. We will continue to focus on three key objectives of our new strategy. Driving digital growth, enhancing our global network, and optimizing our organization. The current environment has benefited the border digital money transfer market and not just from retail customers switching. It is also bringing in new consumers to the market, some from informal channels or banking system and others with recently developed needs. To keep the WesternUnion.com momentum going, we will continue to invest in acquiring new customers and enhancing services like real-time payments. Our partnerships have been a big contributor to our digital money transfer business this year. offering our unique cross-border cross-currency platform to third parties gives us an access to a previously untapped segment of the remittance market that currently relies on correspondent banks. While the sales cycle is somehow longer than agent signings, we have strong pipelines of potential business focused on financial institutions and a team dedicated to capturing this exciting long-term growth opportunity. Moving on to network, we continue to enhance our industry-leading diverse global distribution network. So far this year, we have renegotiated agreements with nearly 150 existing agents with more than 125,000 locations, added over 60 new agents with 16,000 locations, and increased our real-time account payout capabilities to over 60 countries at the end of June. We also added additional wallet and card capabilities. So I am pleased with the progress here and we will continue to focus on improving coverage, cost, and quality of our network. In business solutions, we continue to evaluate new ways to help businesses address their need for cross-border services. We also continue to develop our payment network and make progress on our edge platform that will enable customers to digitally self-serve. On the organization efficiency front, our Wuwei lean and effective management mindset has enabled good progress in creating a more effective organization. We are on pace to deliver at least $50 million in annual productivity savings be targeted for this year, as well as the three-year target of $150 million. In closing, I am very pleased with our performance under challenging circumstances in the second quarter. While macro uncertainty remains, we are focused on serving our customers globally and executing against our growth agenda for this year. Looking at longer term, we are well positioned in a resilient market with a strong financial position and we are pursuing a growth strategy that will enable us to drive meaningful, profitable growth for the years to come. With that, I will turn the call over to Raj.