The Western Union Company

Good day and welcome to the Western Union Company first quarter 2021 earnings release conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 today's event is being recorded. I would now like to turn the conference over to Brendan Matrano, Vice President of Investor Relations. Please go ahead.

Thank you. On today's call, we will discuss the company's first quarter 2021 results, our financial outlook for 2021, and then we'll take 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. On our call today is our CEO, Hikmet Ersec, our CFO, Raj Agarwal, and Head of Treasury Investor Relations, Brad Wendigler. 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 2020 Form 10-K, 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 on our website, westernunion.com, under the investor relations section. We will also discuss certain adjusted metrics. The expenses that have been excluded from adjusted metrics are specific to certain initiatives but may be similar to types of expense that the company has previously incurred and can reasonably expect 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 Ersek.

Thank you, Brandon, and thank you all for joining us this afternoon. As noted in today's press release, our business is off to a good start in what we believe is a very important year for Western Union. We weathered COVID-19 better than many companies in 2020, owing to our resilient fundamentals and the foresight behind our leading digital business that had us ready for accelerated demand for digital services. Before I give you an update about the encouraging first quarter results and share my thoughts about the rest of the year, I would like to take a moment and mention that although we do see some modest economic improvements and there are signs of some COVID-19 recovery like in the US, parts of Europe, and parts of Asia Pacific due to progress with vaccinations, at the same time, I am saddened by the heartbreaking current situation in countries like India, Brazil, and many others. Our thoughts are with all of the people who are currently navigating this challenging situation. The recent outbreaks in many countries show us that as a global community, we still have work to do in the fight against the virus. However, at the same time, I am hopeful and I know that all my colleagues and all our partners in more than 200 countries will do their best to recover from the virus as soon as possible. Back to our business, the conditions were fairly stable in the first quarter. I am pleased that trends for our business improved over the quarter and held up well in April, giving us confidence to push forward with an ambitious agenda and reaffirm 2021 financial targets on an adjusted basis. Raj will discuss our outlook in more detail in a few minutes. With that, let's review business highlights for the quarter. Starting with the big picture, our cross-border consumer-to-consumer or C2C business grew principal 28%, which was the highest quarterly growth in years, and the third consecutive quarter with growth over 20%. This really shows the momentum we are seeing today, especially when compared to forecasts from third parties projecting modest growth or even declines in principal for 2021. Total company revenue grew 2% on a constant currency basis, around a 300 basis points increase from declines in the third and fourth quarter of last year. CTC revenues and transactions grew 4% and 9% respectively, and both digital and retail revenue trends improved sequentially. Digital performed exceptionally well again. Revenues were up from the fourth quarter and grew 45% year-over-year to over $240 million, putting us on target to exceed $1 billion in 2021. Digital comprised 34% of transactions and 23% of revenues for the C2C segment and was a key source of new customers and incremental profits. Woo.com delivered impressive results and showed the potential we see as a foundation for a consumer ecosystem. This is the fourth consecutive quarter of transaction growth of 50% or more and average monthly active users growth of over 40%. Woo.com led money transfer peers in mobile app downloads by a wide margin and grew principal 78% of an already large base which we believe is well ahead of the markets. Our customer engagement efforts also appear to be paying off with favorable trends in retention, transaction per customer, and principal per customer. Digital partnership revenue more than doubled year over year, and it has exceeded our expectation over the past 18 months since we announced it in late 2019. We continue to have more encouraging developments in the pipelines. Retail trends improved sequentially from the fourth quarter to the first quarter, despite the effects of additional waves of COVID-19. While the business is not back to pre-pandemic levels yet, it has demonstrated resilience and we expect continued improvement to the rest of the year, assuming the pandemic and global economy doesn't worsen. Our business solution trends also improved. We made progress on key initiatives, including launching our payment solutions in Spain and implementing technology upgrades that will allow us to add differentiated solutions and capabilities. We are optimistic that the business will continue to rebound over the course of the year. Shifting to an update on operating and strategic objectives during this quarter. Starting with Woo.com. We continue to invest in consumer acquisition and marketing, which drove 46% growth in average monthly active users for the first quarter. On the branding side, we launched one of our highest rated television campaigns in recent years, Send More Than Money, which featured Woo.com. We also made progress on a number of product initiatives to improve our customer experience, faster registration, better web page performance, and enhance visibility into transaction status. We achieved an important platform milestone by completing a major phase of our multi-year settlement transformation project. We also advanced a number of initiatives that will make us more nimble and efficient, like cloud migration and adding artificial intelligence and machine learning into processes to reduce project runtimes and enhance analytics. Moving on to our global network, the team has done a great job optimizing commission costs while still enhancing the quality of our global payments distribution capabilities. During the quarter, we renewed agreements with 34 existing agents and added 41 new agents with favorable terms. Over 50% of our global account payout transaction volume was delivered real time. Our launch with Walmart is off to a good start, and we look forward to getting all 4,700 US locations up and running in the second quarter. To wrap up the first quarter discussion, despite ongoing challenges from the pandemic, we are off to an encouraging start with financial and operating performance on course with our expectations for 2021. Given the strong customer trends, we have seen over the last year in our C2C business, including almost 9 million Voo.com annual active users in 2020, the agenda for the rest of 2021 is largely centered around enhancing the customer experience. Convenience, reliability, and speed are fundamental for a good customer experience in payments, which makes a high quality network important. On the digital side, We can reach billions of accounts today, but we are expanding access to even more accounts with new partnerships. Speed is increasingly valued by customers, and we already have one of the broadest real-time cross-border payment networks in the industry. So the focus this year is making it more robust by adding additional direct third-party relationships and multiple partners in markets. Our retail distribution will continue to benefit from ongoing agent optimization, upgrading the caliber of agents and filling in gaps in distribution. Platform initiatives for 2021 include upgrading and modernizing technology, incorporating cutting-edge solutions, and bolstering our executive talent. This will enhance customer experience in a number of ways, such as better processing speed and enabling more innovations. Ultimately, we are working towards building a best-in-class tech stack that can support a range of cross-border use cases, including C2C, C2B, B2C, and B2B, and serve as a foundation for ecosystems. I'm really excited about the slate of product initiatives this year that can be impactful for customer experience. A few examples include improving the functionality of our mobile app, advancing dynamic pricing, revamping our customer loyalty program, and the pilot in Europe with our Western Union International Bank later this year, extending our offerings to a wider set of financial services. Given the customer-centered agenda we have for 2021, I think it makes sense to discuss why we are so optimistic about the long-term prospects of serving our core customer segment, the global migrant community. Let me start by saying we are extremely proud and privileged to serve the global migrant community, and we are honored that they trust Western Union with one of the most important financial aspects of their lives, supporting loved ones in home countries. As highlighted in our ESG reports for 2018, 2019, and our 2020 report coming in June, we are proud of the contribution our business makes around the world by promoting economic growth and prosperity for the people we serve. Our purpose underpins our market position and strategy, and we believe our business offers strong potential value creation for all stakeholders. The migrant and their loved ones is a large customer segment for Western Union. According to the United Nations, there are more than 270 million migrant residents globally, and many of them send remittances. Factoring in remittance recipients in home country who also use our services and desire more options for financial services could more than double the potential customer base to over half a billion people. Second, migrants are a growing, hardworking, and upwardly mobile group. They are expected to drive a significant share of future population growth in higher-income countries and have above-average labor participation rates, higher rates of entrepreneurship, and contribute significantly to innovation. The third and final point, migrants have significant spending power. According to a 2019 new American economy study, migrants represented $1.3 trillion of spending power in the U.S. alone. And obviously, globally, this amount is even higher. To summarize, we believe migrants and their families and loved ones are a special group of people that have an important role in societies and economies around the world. Serving our customers' needs is a good business that offers Western Union organic growth and opportunity to expand into new services. On top of this, the cross-border expertise and capabilities we gain through serving our core customer segments enables us to offer our cross-border platform for financial institutions and other third parties, extending our market opportunity beyond our own Western Union consumer services. In closing, I'm pleased with the direction of our business. Based on what we see internally and in the market, we are confident in the strategy and plan for the year, and we are off to a good start. With that, I'll turn the call over to Raj.