The Western Union Company

Good day and welcome to the Western Union Third Quarter 2022 Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Brad Winbigler, Head of Treasury and Venture Relations. Brad, please go ahead.

Thank you. On today's call, we will discuss the company's third quarter 2022 results, our financial outlook for 2022, 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 the supplemental tables with our press release. On our call today is our CEO, Devin McGranahan, and our interim CFO, Matt Gagwin. 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 2021 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 these items to the most comparable gap measures in our earnings release attached to our Form 8-K as well as on our website, westernunion.com, under the investor relations section. I will now turn the call over to our CEO, Devin McGranahan.

Good afternoon, and welcome to Western Union's third quarter 2022 financial results call. Given our investor day was just two weeks ago, today we will recap some of the highlights of that discussion and then elaborate a bit on the third quarter. Thank you to all who attended on October 20th. Building on the discussions we've been having on these calls, we shared our approach to becoming the global leader in providing branded payments and accessible financial services to the aspiring populations of the world. Our strategy, Evolve 2025, is positioned as an evolution rather than a wholesale transformation. It builds on the strong and hard to replicate foundational elements of our existing business, including our large retail distribution network, our strong risk and compliance capabilities, and our existing customer base of over 120 million customers worldwide. At its core, we are shifting our model from one focused on transactions to one focused on customer relationships. Our customer relationship, in most instances, We'll still begin with the first cross-border money transfer, but we'll expand across products and ultimately should increase longevity. Our expanded offering supports our customers' ability to save, spend, and transfer. We also highlighted a focus on stabilizing the retail business and returning our digital international money transfer business to growth. We discussed how building an omnichannel customer experience can both increase retail retention and enable retail to become the gateway to Western Union more broadly. These strategies are underpinned by investments we have made this year in our retail point of sale system, our next generation digital platform, and our digital wallet and bank offering. Each of these platforms is in the process of being fully commercialized with expected rollout to continue over the course of 2023. At Investor Day, we had demonstration platforms onsite for people to see how these new experiences are. One highlight of the event was our announcement of having onboarded over 100,000 customers in the digital bank in Germany, Romania, and Poland. Recall, our current offering is an integrated money transfer experience, a multi-currency bank account, and a Visa debit card. We discussed our goals for expanding the geographical reach to 10 countries and over time also expanding the products we offer. Now, I would like to spend a couple of minutes talking about our results in the third quarter. The results were in line with our expectations and we continued to manage expenses well in the quarter. As you can see in our outlook, we expect to be able to accelerate investment in the fourth quarter as we continue to roll out our platform investments that are intended to put the company on a path towards a more sustainable growth profile. As in past quarters, we continue to experience year-over-year declines in transactions across our business broadly, although the pace of the decline slowed relative to the second quarter, with the third quarter benefiting from the implementation of our new marketing program in the United States. In the short term, as we highlighted at Investor Day, this new marketing program will have a negative effect on revenue due to introductory and new customer segment pricing, but should enhance our ability to accelerate our digital new customer acquisition engine in North America. Our reported revenues in the third quarter were $1.1 billion. and excluding contributions from business solutions decreased 6% on a constant currency basis. This growth rate was negatively impacted by three percentage points from the suspension of operations in Russia and Belarus and reflects the continuing softness in our retail business as well as the slowing of our digital business. Despite these challenges, our business continued to show its resilience by generating nearly $216 million of operating profit, excluding the impact from business solutions. Adjusted earnings per share was 42 cents in the quarter, compared with 63 cents in the prior year period, which included a contribution of 9 cents from business solutions and 6 cents from the operations in Russia and Belarus. The decrease in adjusted EPS was driven by lower operating profits and a higher effective tax rate partially offset by lower share count. I would like to pivot to provide an update on the status of some of the key initiatives that we have been working on that we believe, with time, will help change the trajectory of our business. As we shared last quarter, we have been working on a new digital customer acquisition model. In the second quarter of this year, we launched this project in the US for customers sending money to Jamaica and Mexico. Given the early success we saw in those two initial corridors, we made the decision to further expand the project in August to the top 50 U.S. outbound corridors, which account for the majority of both digital transactions and revenue in the United States. This new model is a combination of promotional offers, including new customer segment pricing, targeted lower funnel marketing, and a focus on rapid issue resolution and was successful in driving a 26% year-over-year increase in U.S. outbound new digital customers in the month of September. It also provided a 40% lift in new customers returning for their second transaction in weeks two and three, and provided a 24% increase in transactions from previously lapsed customers. To put into context, prior to implementing this new model, we hadn't seen positive new digital customer growth in North America in over a year. I am pleased to report that the new customer acquisition momentum that we saw in September has continued. As highlighted earlier, we continue to advance the rollout of our digital bank and ecosystem in Europe. We launched Poland in the third quarter and expect to go live with Italy in the fourth quarter. Early evidence shows that active customers that we are acquiring in our digital bank are doing 2.5 times more transactions than our traditional branded digital customers. We believe that increasing the frequency of customer interactions is likely to lead to an increased affinity towards the brand and improve customer retention. The progress we have seen to date further strengthens our belief that a wallet-based experience in our major markets, both send and receive, will improve the long-term potential of our business. Expanding our digital wallet ecosystem drove our recent decision to acquire the Brazilian digital wallet company TNVA. We believe this acquisition, while not material in price, likely accelerated our timeline to bring our digital wallet to Brazil by roughly 12 months. The last topic I would like to discuss today is our retail distribution network. We were happy to announce at Investor Day that our next generation POS system will now be in testing in the market in the United States this month. We plan to test the system in select locations with the goal of accelerating the rollout across our footprint starting in early 2023. We believe this new point of sale system will provide both agents and customers with a better user experience, and our objective is to cut both transaction times and clicks by over half. Before I turn it over to Matt to discuss our financial results and outlook in more detail, I would like to highlight a few key partnerships. First, we are pleased to announce a new digital white label partnership. Western Union has partnered with Move Money FX in Brazil to offer our global remittance services to their customers via their recently launched app. We also recently expanded our retail presence in France through a new partnership with Bee Media, one of the leaders in point-of-sale collection systems. Next, we renewed our contract with Walmart Canada to offer cross-border remittance services at all Walmart locations across that country. In addition, we will be integrating our cross-border money transfer platform into Walmart.ca to offer online services to their Canadian digital customers. And the last partnership we are pleased to announce is the extension of our longstanding and exclusive partnership with Walgreens for an additional five years. As a result, customers will continue to have access to Western Union money transfer and bill payment at more than 9,000 Walgreens locations across the United States. Finally, I would like to announce a couple of additions to the Western Union executive team. Cheryl McKenzie joined in mid-October as chief product officer, and Jeff Johnson joined in early October as the global leader of prepaid. Cheryl brings more than 20-plus years of experience in the financial services industry. She joins us from MasterCard, where she was responsible for global consumer products and digital innovation. Prior to MasterCard, Cheryl was the head of products at Bread Financial and spent 15 years at American Express. Her strong expertise in product, loyalty programs, marketing, and sales strategy will be an asset in her new role at Western Union. Jeff joins us from Quintus, a FinTech e-banking and e-commerce provider of digital financial services where he served as the CEO. Jeff has over 20 years in the payment industry with a concentration in the prepaid vertical. Prior to Quintus, Jeff was the SVP and GM of Commercial Prepaid for NetSpend. Thank you for your time today, and I will now turn the call over to Matt.