The Western Union Company

Good day and welcome to the Western Union Fourth Quarter 2025 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 Tom Hadley, Vice President of Investor Relations. Tom, please go ahead.

Thank you. On today's call, we will discuss the company's fourth quarter and full year 2025 results, 2026 outlook, 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 CEO, Devin McGranahan, and our CFO, Matt Cagwin. 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 2025 Form 10-K, which will be filed later today, 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 these 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 morning, and welcome to Western Union's fourth quarter 2025 financial results conference call. It was great to see many of you at our Investor Day last fall for the launch of our Beyond Strategy. We are excited about building a digital-first, retail-enabled, consumer services company that is powered by payments and innovation. We remain optimistic about the longer-term outlook for our business as we believe our core retail remittance business will improve as migration patterns normalize and we work to increase both our revenue and share gains in this important market. We believe that our focus on becoming market competitive, driving productivity, expanding our payments capabilities, and growing share within higher growth corridors and geographies is the key to delivering on this vision. A key element of our strategy has been to build everyday financial services that can leverage our global brand and our extensive payment capabilities. As these products and services gain critical mass, they will moderate some of the swings we have seen in the core remittance business as they tend to be less correlated with immigration trends. as witnessed in this quarter where our consumer services business continued to perform, which allowed us to report a reasonable quarter against a difficult macro backdrop, demonstrating the benefits of our global and now multi-product business model. For the fourth quarter, we reported revenue of $1 billion. On an adjusted basis, this was a decline of 5% year over year. Consumer money transfer transactions were down 2.5% in the quarter, and cross-border principal growth was up on a constant currency basis, speaking to the resilience of our customer base and their perseverance in the current macro environment. In this quarter, we again saw incremental improvement in transactions as Q4 was better than Q3 coming off of the lows that we saw in the second quarter of 2025. We continue to focus on operational efficiencies as we seek to benefit from our scale. This strong operational focus allowed us to deliver at the top end of our earnings guidance this year, even in the face of these macro-driven revenue headwinds. Adjusted earnings per share came in at 45 cents compared to 40 cents this quarter a year ago. Our retail business in the Americas continued to face headwinds associated with the current geopolitical environment. And while it may be too early to say that we have reached bottom, we are potentially seeing some stabilization. We did see strong performance in many corridors and geographies offset by continued weakness in the Americas across several large corridors, most notably U.S. to Mexico. Although, from a transaction growth rate perspective, the U.S. to Mexico quarter improved hundreds of basis points relative to the third quarter. Our branded digital business increased transactions 13% and adjusted revenue by 6% in the quarter, with gains driven by some of the new relationships that we have recently signed in the Middle East earlier in the year. Consumer services adjusted revenue was up 26% in the quarter and roughly 30% for the full year, driven by growth in travel money led by euro change, as well as growth in our bill payments business. We expect consumer services to have another strong year in 2026, as our travel money business is expected to approach $150 million in revenue, up from nearly nothing a few years ago. We see a market opportunity for a globally branded travel money franchise as the market remains very fragmented and some of the prior large global players have retreated since COVID. Given the strength of our brand, our global footprint, and strong retail distribution, we believe there will be many more opportunities for geographic expansion. A hallmark of the company for many years has been a strong commitment to returning excess capital to shareholders. Over the past year, we delivered again with above average industry margins and a return of over $500 million via dividend and share buybacks. I am also excited about the capabilities we've been building on the M&A front, the deals we were able to do in 2025, and I now look forward to welcoming Intermex into our family, hopefully in the second quarter of this year. Matt will discuss our fourth quarter results in 2026 Outlook in more detail later in the call. Switching briefly to the macro environment, while economic conditions globally remain reasonable, with inflation rates declining in key markets around the world and GDP outlooks remaining relatively strong, the landscape for human capital mobility continues to shift each and every day. For example, in the last quarter, we saw an election in Chile that will have implications across the region for immigration and mobility. Also, a change in leadership in Venezuela for which the implications are still being assessed. These kinds of macro conditions provide a dynamic and constantly changing environment for our business. While we expect them to stabilize over time, in the near term, we believe that companies with larger and more global operating models are better positioned to withstand disruption in any individual country or region. On the policy side, the US remittance tax went into effect on January 1st for all cash-based international money transfer transactions originated in the United States. I would like to take a brief moment to call out the strong work our team did and the flexibility of our new retail platform that enabled us to implement the tax across all our channels and all our partners flawlessly. We have received positive feedback from both send and receive side partners on our relative execution. With that said, through the first six weeks of this year, we have not seen a material impact on our business, but we continue to monitor the situation closely. Since the beginning of the year, however, we have seen an uptick in our prepaid cards and our Vigo Money Wallet. We launched the Vigo Money Wallet in the US in March of 2025. Since then, we have onboarded over 30,000 customers and have a couple of thousand weekly active user base now. An important note here is the vast majority of these customers are the result of a money transfer redirect. We have spent very few marketing dollars on customer acquisition. This is a powerful and effective approach to building our digital wallet customer base. These payout customers who traditionally have taken their money and left Western Union are now becoming weekly active users who are frequently using their debit card at points of sale, and about a third of them are initiating new international money transfer transactions. While these numbers remain small compared to the scope of our overall U.S. business, they do highlight the power of the model we are building. As you know, the U.S. wallet is an extension of our broader wallet strategy. Our goal is to create a two-sided network that makes it easy for our customers to move funds cross-border while staying within the Western Union ecosystem. In addition to our US wallet, we are continuing to see strong results out of our wallets in both Argentina and Brazil. In Brazil now, we have onboarded roughly 20,000 customers since our launch in May of last year. And in the most recent month, we have redirected roughly 5% of all inbound transfers to the country into our wallet. This saves commission expense as well as gives us an opportunity to increase retention and potentially monetize our receiver base like we are seeing in the U.S. as referenced above. For context, in Argentina, which we launched earlier than Brazil, we are now up to 17% of all inbound remittances ending up in our wallet in that country. We have anticipated launching a wallet in Australia later this year, and we continue down the path of developing a wallet for Mexico as we await regulatory approval for our pending acquisition. In addition, we believe that we will see an expansion of our wallet capabilities in Singapore, the Philippines and potentially Israel as well, all in 2026. Since the beginning of 2026, our sale of prepaid cards has also gone up. With now over 1,000 agent locations enabled to sell prepaid cards, we are seeing a market-driven increase which we believe may be because of the remittance tax. Linkages between this consumer services product and our core business are high, with over 30% of all transactions being Western Union money transfers and 60% of newly loaded cards being used to send a cross-border remittance with Western Union. Two years ago, we began a program to enable digital payment acceptance in our point of sale for retail agents. We firmly believe that the retail experience and value proposition is more than just being about cash. It is about the trust needed for an important transaction that comes from personal assistance, in language, culturally appropriate communications, and high quality service in the event of an issue. As more and more of our customers have access to payment and banking products, we need our retail systems to support card-based payments. The passage of the remittance tax has accelerated this transition in the U.S., with debit cards now accounting for 15% of all retail funding in the U.S. in the month of January on our Western Union point-of-sale system. This is up materially over the last several months. Another focus in the US market in the quarter was US to Mexico. The team has been working hard to identify market and agent segment opportunities to focus on, driving promotions and pricing strategies, and increasing our digitally directed payout services. That said, while it is still negative on a year-over-year basis, we are beginning to see improvements on a quarter-over-quarter basis, with last summer being the low point. And while corridors like Mexico, Venezuela, Ecuador, Nicaragua, and Colombia continue to decline, we begin to see transaction growth in the corridor to a number of other important corridors, including Brazil, Guatemala, Jamaica, and the Philippines. The Bank of Mexico data would seem to indicate that the worst may be behind us, with principal growth in the most recent reported month going slightly positive on a year-over-year basis, improving materially from the summer lows. Although there may have been, some pull forward in that number as customers look to move money ahead of the implementation of the U.S. retail remittance tax. Despite these short-term headwinds, we believe the long-term trajectory remains clear. Global migration is not disappearing. It is adapting. People will continue to move in search of opportunity, education, and family, and Western Union will continue to provide trusted, compliant, and accessible financial services. As the market continues to evolve, we continue to see a shift towards the digital channel, particularly among younger and more technologically savvy customer cohorts. This varies by region and country, but the trend is generally consistent globally. It does not mean, however, that a growing digital business necessarily means a shrinking retail business. In Scandinavia, for example, a region that is highly digital and has nearly eliminated the use of cash, our retail business grew transactions and revenue double digits last year. What does it mean? What it does mean is that the most attractive and growing part of the market, we will have to be able to compete with digital natives that do not have the complexity or the history of a large retail business. To do this, we believe we have two real sources of competitive advantage. First, we see our strong brand recognition and the large base of existing customers as the key building blocks to cost-effectively build our digital business without having to overinvest in non-scalable marketing expense. Second, our unit economics for key functions like compliance, tech, network management, payout costs, and customer service benefit from our overall scale as the largest remittance player in the market. Now that we have largely achieved price competitiveness, we believe these benefits can be more easily transferred into competitive advantage. In the end, there will only be a few players that will have the scale to effectively compete on a global basis digitally. We believe we are well positioned to be one of them. To capture this opportunity, we have to deliver a digital-first customer experience throughout the entire journey across the majority of our markets. With the launch of our Beyond platform in 2025, we believe we now have the infrastructure to achieve this goal. We are planning to have all of our markets on the BEYOND platform by the end of 2027. This will be a meaningful acceleration to the work that we have been doing to modernize our technology and experience over the past two to three years. Second, we need to translate our brand strength and market presence into scalable gains in new customer acquisition. Over the past 12 to 18 months, we have seen a flattening of our customer acquisition trends outside of the Middle East, and we need to improve upon that. These opportunities will be accelerants to our digital business, which has now grown in transaction double digits and revenue mid-single digits for two straight years. Our digital business now accounts for over 40% of the principal we send around the world, and as the world continues to move more digital, we will continue to move right along with it. You see this with our payments network, where we have made meaningful progress in creating one of the largest at scale funds in and funds out platforms anywhere in the world. Today, we have over 300 funds in types that we support and billions of accounts and wallet endpoints in our digital funds out network. We are using this network not only to drive both our retail business and our digital business, but to launch new businesses like our recently announced digital asset network. As a matter of fact, I just returned from a trip to Dubai to visit some of our large partners in that region. There may not be a region in the world that is moving to digital at a more rapid pace than the Middle East. Last year, we announced two partnerships in the Middle East to complement our existing business there. As you know, these markets are difficult for traditional MTOs, given the restrictive ownership and licensing requirements in most of these Middle Eastern countries. These partnerships are with well-known digital native brands who have accumulated large customer bases and essentially function as super apps or financial ecosystems for their customers to provide a wide range of telecommunications and financial services. We are pleased to be partners with these institutions and offer them the benefits of our payout network and our scale that few others can match, which enables us to win their business. Next, I would like to provide a quick update on our digital asset strategy. At our investor day a few months ago, we laid out an ambitious plan to use our assets in new and unique ways and to become a more meaningful player in the digital asset economy. Over the last few months, we have successfully minted our first U.S. dollar payment token, USDPT, and have moved it between our Treasury Department and our agents' wallets. These pilots are focused on leveraging on-channel settlement to reduce dependency on legacy correspondent banking systems, shorten settlement windows, and improve our capital efficiency. We see significant opportunities for us to move money faster and at lower cost without compromising compliance or customer trust. These milestones put us on a path to meet our expectation of offering our payment token to the market by the middle of this year. I'm happy to report that remain on schedule, and we were looking forward to our market launch. Finally, we are expanding our partnerships and capabilities to allow our customers to move and hold stablecoin digital assets and to allow them to have more control in how they manage and move their money. In many parts of the world, being able to hold a U.S. dollar-denominated asset has real value as inflation and currency devaluation rapidly erodes an individual's purchasing power. We are working with RAINN and Visa to bring the first USDPT stable card to market and are targeting an initial launch of more than a dozen countries later this year. I look forward to continuing to update you on these initiatives as the year progresses, and we are excited about the opportunities in front of us. Finally, I would like to take a moment to highlight several new agent wins. Over the last two years, we have invested heavily in modernizing our retail technology platform, making both integration and ongoing experience management significantly easier. We believe our partner OS platform is now the gold standard in the industry for large retail networks. Combining these improvements with our move to a more competitive consumer value proposition and the extensive work we have done on our agent support model, we are seeing renewed momentum and interest from large distribution networks. A little over a month ago, we put an announcement out that we have resigned the Deutsche Post. This was one of the two significant European agents we lost a couple of years ago as they made the decision to exit the remittance business. With our improved market position and capabilities, Deutsche Post has decided to return to the remittance business with a multi-year exclusive relationship with Western Union and a planned relaunch sometime in the middle of this year. This will be a great addition to our German business, and we look forward to offering our services across the Deutsche Post network. Second, we recently signed an exclusive five-year contract with Canada Post. This is a new win for us and a competitive takeaway. Canada Post is expected to begin offering Western Union service in the majority of its 5,600 locations in the coming months, and we look forward to servicing our Canadian customers throughout the Post's extensive network. This win should help bolster our North American business and provide a substantial retail network across Canada. Third, we have recently signed a long-term exclusive contract with the Californian grocery store chain, Vallarta Markets, which caters to the Latino community across the state. This is a new relationship for Western Union, and we look forward to offering our services to customers in Vallarta locations. Lastly, we announced at investor day, we have gone back to being exclusive with Kroger for money transfer. This builds on the 40 plus year relationship we have had with the company. We look forward to continued collaboration and are excited to see now what we can accomplish together in this exclusive partnership. With these partnerships that I have discussed today, we expect at least an incremental $100 million of retail revenue per year when fully ramped. I am excited not only about these four opportunities, but about the future prospects as our pipeline continues to remain robust. The changes we have made to our retail technology platforms, our agent support, our improved pricing, and our leading payout network has put us in a position to grow our agent base for the first time in several years. In closing, I want to reiterate our confidence in the path we're on. Western Union is transforming, becoming more digital, more agile and more aligned with the evolving needs of our global customer base. We are expanding our product suite, modernizing our platforms and unlocking new opportunities for growth across all of our channels. We are positioning Western Union to lead in the future of cross-border and accessible financial services across the globe. It is a privilege to be the CEO of this wonderful and now 175 year old company. I am proud of what we have been able to accomplish so far. I would like to thank our board of directors for their continuing support and our combined commitment to drive shareholder value. I would also like to thank my leadership team and our nearly 10,000 employees for their laser focus on delivering for our customers, even in these tough times. Thank you all. I will now turn the call over to Matt Cagwin, our Chief Financial Officer.