The Western Union Company

Good day and welcome to the Western Union first quarter 2023 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 that this event is being recorded. I would now like to turn the conference over to Tom Hadley, head of investor relations. Tom, please go ahead. Thank you.

On today's call, we will discuss the company's first quarter 2023 results, 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. Joining me on the call today is our Chief Executive Officer, Devin McGranahan, and our Chief Financial Officer, Matt Kegwin. 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 Security and Exchange Commission, including the 2022 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 gap measures in our earnings release. attached to our Form 8K, as well as on our website, westernunion.com, under the Investor Relations section. I will now turn the call over to our Chief Executive Officer, Devin McGranahan.

Good afternoon, and welcome to Western Union's first quarter 2023 financial results conference call. We are pleased with the progress we are making on our evolved 2025 strategy and are generally positive about our first quarter results. As we have discussed previously, we see our evolution as a two to three year journey to return the company to sustainable, positive revenue growth. In the near term, changing the trajectory for new customer acquisition and transaction growth has been our priority. Our reported revenue in the first quarter was $1,037,000,000, excluding contributions and excluding contributions from business solutions This decreased 1% on a constant currency basis. This reflects several underlying dynamics, including a negative impact of three percentage points from the suspension of operations in Russia and Belarus, and a positive impact of two percentage points each from the business performance in the Middle East and Argentinian inflation. Adjusted earnings per share came in strong and was $0.43 in the quarter compared to $0.51 in the prior year, which included a contribution of $0.05 from Business Solutions and $0.04 from operations in Russia and Belarus. Matt will further discuss our financial results in more detail and provide an update on our 2023 financial outlook. As you can see from these results, we are progressing against our evolved 2025 strategy. We are making headway on stabilizing our retail business and accelerating growth in our digital business. Recall, some of our evolved 2025 goals include getting the retail business to stable and returning our digital business to low double-digit growth rates. As we reported today, we saw sequential improvements in transactions across all regions compared to where we exited last year. More importantly, for the first time in almost two years, we saw positive transaction growth in North America in the first quarter. We also saw a 200 basis point sequential improvement in transaction growth in our European operations when adjusted for the suspension of services in Russia and Belarus. Transactions in our Middle East region also improved by 200 basis points sequentially, and transactions in APAC improved significantly as well. Latin America continued to be the top performing region in the company, with transactions up 9% year over year, an acceleration of 100 basis points over the growth rate we experienced in the fourth quarter. Our results demonstrate that our focus on improving the core operational performance of our business, focusing on winning new customers and improving retention can be achieved. Stepping back for a moment, on the macro front, the first quarter of 2023 continued to be challenging with persistent high inflation despite interest rates being elevated around the world. Even with that backdrop, 2023 central bank remittance data indicates the resilience of the cross-border remittance market with an average principal volume up mid single digits in the countries which have reported. We are also seeing resilience in our own customer base with constant currency principal per transaction up 5% in the quarter. Our PPT is benefiting from our decision to suspend operations in Russia and Belarus, but even excluding Russia and Belarus, constant currency, PPT, remains positive. Last October, we launched our evolved 25 strategy to return Western Union to positive revenue growth by becoming the market leader in providing accessible financial services to the aspiring populations of the world. In addition to accelerating our core retail and digital remittance businesses, We have been working to launch new products and services to expand our value proposition to our existing 120 million customers. We have successfully launched our digital bank in Germany, Italy, Romania, and Poland. We are now in friends and family testing in Brazil and the U.S. with our digital wallet product. We have expanded our bill pay business in Lhaka. relaunched our U.S. corrections pay platform, have entered into partnerships in Argentina and Australia to help connect customers to lending products, and are nearing the relaunch of our prepaid product in the U.S. as well. While in the short term, these products and services will not be material contributors to our overall revenue growth. They are the foundation of expanding our value proposition, increasing our relevance, improving our customer retention, and providing platforms for future revenue growth. As we gain more traction, I look forward to sharing more with you. Returning our branded digital business to positive customer and transaction growth has been a top near-term priority over the last three quarters. We launched a new go-to-market approach in August of 2022 and shifted from maximizing revenue per transaction to maximizing LTV to CAC. We launched new customer segment offers and, more importantly, revamped our approach to marketing funnel management. We are now far enough into this journey to be able to tell you we believe it's working and durable. We reported to you last quarter that new U.S. outbound branded digital customers were up 30% year over year, which contributed to 5% transaction growth in the fourth quarter. I am happy to report that in Q1, we saw a continuation of these trends with U.S. outbound branded digital customers growing at 21% and transactions now growing at 11%. the fastest transaction growth we have seen in the U.S. since 2021. Our expectation has always been that we would see new customer growth first, followed by transaction growth and ultimately revenue growth, which we expect to begin in North America in the third quarter of 2023. In the near term, growing new customers and transactions is an important part of the equation to jumpstart revenue growth. But sustaining that growth at scale longer term will require us to increase the customer's lifetime value and improve our cost of customer acquisition. Our work in these areas is also starting to bear fruit. In the first quarter, while increasing our new U.S. branded digital customers by 21%, we were also able to lower our average customer acquisition cost by roughly 20% in North America. Additionally, retention rates of our U.S. Outbound September cohort, the first of our new approach, continue to perform at or above the levels of our existing customer base. In conclusion, we are acquiring more new U.S. Outbound branded digital customers than in the recent past, we are acquiring them at a lower cost of acquisition, and early signs would indicate we are also retaining them at similar if not higher levels than in the past. As we mentioned in the last quarter, we have expanded our digital go-to-market program to several of our large European markets. As a result, we have begun to see a similar trajectory across key countries in Europe. New branded digital customers in France, Spain, the UK, and Germany were all up double digits in Q1, which is a meaningful improvement from recent trends in those countries. Additionally, we've also seen improvements in transaction growth across these same countries and look forward to sharing more with you on future calls. Our retail growth strategy centers around having the right value proposition for customers delivered with the right partners in the right locations and on driving location-level productivity, as opposed to just increasing the number of active locations. Frequently, these partners include some of our largest networks, many of which have been partners for decades. Strategic network partners, as we refer to them, are an important element of our overall retail network strategy, as in most cases, they are exclusive to Western Union and provide the customer with a unique value proposition around convenience. Over the past six months, we have been working to better understand how we can improve the in-store experience as well as individual location productivity of the stores in these large networks. The initiatives being developed include creating a more omni-channel offering, introducing new products and services, integrating loyalty programs, improving stage and pay options, simplifying refunds, and focusing on reducing friction in the transaction flow. Beginning in the second quarter of 2022, I began discussing the opportunities to reduce friction for both our retail customers and our agents to better improve the overall Western Union retail experience. Over the past year, we have launched many such initiatives including streamlining our refunds processes, reducing friction in our compliance processes, increasing transparency of the flow of funds through our track of transfer services. I am pleased to let you know that this focus on agent and customer experience has led to a 30% year-over-year drop in per-transaction agent support calls to our call centers. While this is obviously beneficial from a cost perspective, ultimately, we believe it will help us increase retention. We realize we still have a lot of work to do, but are pleased with the progress we are making and will continue to work to improve the overall experience for our agents and our customers alike. As part of our retail network strategy, we continue to pilot our new point of sale system in the U.S., We have developed this new system using a modular architecture and have built a services layer that we can access across multiple front end technologies, including our legacy point of sale systems around the world. This type of modular development allows us to bring to market product enhancements that will improve the customer experience in advance of the full scale rollout of our new point of sale system. Two functions we have developed in recent months are Quick Resend and an improved customer lookup tool, which we call Remember Me. The goal of Quick Resend is to allow customers to complete repeat transactions to known receivers more quickly and can reduce transaction times by up to 75%. We have tested this product enhancement on our legacy technology in select agent locations in the United States in the first quarter and have now begun to roll it out across our entire US footprint. Finally, I would like to give you an update on the progress of our ecosystem strategy. In recent months, we have focused heavily on improving the onboarding and transacting experiences for new customers. In particular, we have been focusing on making it more seamless for existing and former Western Union customers to migrate to the digital bank. As we continue to evolve, we believe that these migrated customers and returning customers will continue to be the most valuable and the easiest to retain. To date, our digital bank has enabled us to reengage with more than 20,000 lapsed Western Union customers. Our offer has not only brought them back to Western Union, it has given them access to an improved money transfer experience, our multi-currency digital wallet, and a Visa debit card. Secondly, converted Western Union customers and prior lapse customers are doing more than twice the number of transactions they were doing prior to the conversion to the digital bank. These transactions include P2P, top-up, funds in and out, and debit card payments in addition to traditional money transfer. Finally, and potentially most surprisingly, we have seen that the cohort that converted from our retail network to our digital bank is among our very best performing with more money transfer transactions and more revenue than they were providing prior to the conversion. This will be a clear opportunity for us going forward. Now, we realize it is still a small sample relative to our existing customer base, and we will need to continue to scale our efforts more broadly. But early results leave us optimistic about the possibility to provide broader financial services and increase retention with our 120 million customers around the world. Before I turn the call over to Matt to discuss our financial results and outlook in more detail, I would like to highlight a key partnership renewal. We are pleased to announce the extension of our exclusive longstanding relationship with Swiss Railways. They have been a valued partner of ours for nearly 30 years, and we look forward to continuing to serve our Swiss customer base at 135 plus Swiss Railway locations for many years to come. Thank you for your time. And I will now turn the call over to Matt.