The Western Union Company

Good day and welcome to the Western Union Second Quarter 2026 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 second quarter Results in our 2026 full year 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 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. Where possible, we have reconciled those items to the most comparable gap measures in our earnings release attached to our form AK 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 second quarter 2026 financial results conference call. In the second quarter, we continued to face significant margin pressures due to the ongoing slowdown in the retail business in the Americas, higher agent commissions, and the continued acceleration of our digital payout-to-account business. The quarter came in six cents better than Q1, having eliminated many of the one-time effects we saw in the first quarter. However, the accelerated shift from cash payout transactions with higher revenue per transaction, RPT, and higher contribution profit per transaction, CPPT, to pure digital transactions continues to weigh on profitability. On a more positive note, despite the strong macro headwinds, our strategy and our significant geographic diversification enabled us to report revenue of $1 billion. On an adjusted basis, this was a decline of only 1% year over year. Consumer money transfer transactions grew at 3% in the quarter, which was a 300 basis point improvement from Q1, a 600 basis point improvement year over year, and the highest transaction growth rate since the second quarter of 2024. We continue to see quarter over quarter improvements as we lapped the worst of last year. For example, U.S. to Mexico declined a little over 3% on a transaction basis in the quarter, a nearly 1,000-point improvement year over year. Yet overall U.S. retail continued to be mid-teens negative on a transaction basis in the second quarter, well below our expectations. While overall global transaction growth has improved significantly, it is important to know that it comes from lower contribution profit per transaction which is putting pressure on our margins. Adjusted earnings per share came in at 31 cents in the quarter, compared to 42 cents this quarter a year ago. This is below our expectations and is driven by lower profitability in our America's retail business and lower profitability in our Middle East business as volumes there continue to shift rapidly from our legacy partners in the region to newer digital-only partners at lower RPTs and profitability. Our branded digital business continued to perform well, with transactions increasing by 25% this quarter and adjusted revenue by 6%. While transaction growth continues to accelerate, the revenue growth is being muted by strong growth in lower RPT corridors and a significant increase in digital payout to account, which saw 55% growth in the quarter. As I mentioned in previous calls, our new customer acquisition economics remain challenged in the quarter, which impacted the overall revenue growth and profitability of our digital business. We continue to roll out our Beyond Digital platform, which I believe will enable better customer experience, improve our ability to market at a corridor level, and potentially reduce the magnitude of needed new offer incentives. In consumer services, adjusted revenue was up 12% in the quarter, driven by growth in our bill pay business, as well as continued growth in travel money. Our financial results in this quarter came in below our expectations for the second quarter in a row. This is not acceptable, and we are not satisfied with the current operating performance, and will be implementing significant changes as a result. While the external macro factors over the past 12 months have undoubtedly accelerated the underlying trends in the business, we recognize that in the near term, these trends are likely to continue at elevated levels. We have been navigating this mixed shift away from payout to cash over the past several years, as well as the move from retail to digital through cost savings initiatives and the reallocation of investments. The impact of ongoing changes in immigration in the Americas has accelerated those dynamics, and we must now more aggressively change our cost base to reflect the reality of a future with continued pressure on CPPT. Over the past 12 months, we have seen the percentage of payout to account and payout to wallet transactions grow by 25%. Thank you very much. We have spent much of the last eight weeks evaluating what is working across these three dimensions and what is not. That process has reinforced our belief that the long-term fundamentals of our business remain intact. Our brand, customer relationships, market position, scale, and digital capabilities continue to provide a strong foundation upon which to build. However, a strong foundation alone is no longer enough. We must accelerate the transformation of our operating model to enable us to maintain our ability to invest in our next generation digital initiatives while simultaneously significantly lowering our ongoing operating costs. The program we have launched is called Beyond Efficiency. It has five key program elements, and we will be targeting a run rate operating cost reduction of $50 million by the end of the year. The five key program pillars include the first pillar, accelerate the dual track strategy by reducing redundancy and streamlining processes that do not align with the Beyond strategy. As a 175-year-old company, we have a lot in the garage. Organizations build up over time, and what were once new ideas or areas of investment are now ongoing operating costs with limited or no contribution to the Beyond Strategy. For example, as we move to the Beyond Digital framework, we have made the decision to close down our existing digital wallets in Europe, saving the company a run rate of $6 to $8 million. We anticipate launching our Beyond Digital platform to replace those in Europe by the end of the year. The second pillar is to reduce discretionary operations and technology work by 20% that is not directly tied to growing digital. We are targeting a 20% reduction in discretionary operations and technology capacity by the end of the year, forcing a prioritization that will cause only the most impactful initiatives to get work done. The third pillar is to rapidly adopt AI to drive automation and reduce manual work given our legacy system limitations. We have ramped up our adoption of AI and other automation platforms significantly over the past six months, and we see meaningful opportunity to eliminate manual work and reduce the friction that results from our large, geographically dispersed, and highly regulated business. The fourth pillar is to move to a more aligned operating model. As part of our Beyond Efficiency program, we are looking to align people in work closer to the region they support. This will require us to localize what today are distributed global functions. For example, we have been moving agent onboarding for the Asia-Pacific region from Lithuania and Costa Rica to our operating center in Manila. This will improve time zone and geographical alignment and reduce unit labor costs. We anticipate this will improve on all three dimensions of cost, quality, and speed. The fifth pillar is to reduce the operating costs of moving money. In a world that is rapidly going to digital payouts, we must reduce the cost of capital that we have floating around the system, lower payout costs, improve FX rate competitiveness, and accelerate real-time settlement through our own digital currency, USDPT. These initiatives are focused on creating a leaner organization while maintaining our ability to invest in the areas that matter most strategically. Importantly, this is not a short-term exercise designed solely to reduce near-term costs. Rather, it is a structural effort to improve how we operate and to position the company for stronger, more sustainable profitability in the years ahead. Thank you. Our objective remains straightforward. Generate consistent growth, improve operating profitability, strengthen free cash flow generation, and create long-term shareholder value. I look forward to updating you on the progress of this program in the coming quarters. Now, switching briefly to the macro. As you know, remittances in the Americas have faced meaningful pressure that began in late 2024, driven by the changes in immigration policy. Thank you very much. As we have discussed, the growth in retail business is almost always dependent on new migration. When immigrants come to a new country, most frequently they transact in retail out of necessity given cultural and language issues, lack of access to digital funding, and often heavy cash remuneration. Thank you very much. Thank you very much. We also recently launched an industry-first partnership with Total Wireless, a Verizon value brand that combines wireless connectivity and cross-border money movement. The partnership expands our reach into the telecom channel, providing access to millions of subscribers through thousands of retail locations and extending our distribution footprint across both digital and retail channels. Recognizing that consumer behavior continues to evolve and digital engagement is becoming increasingly important across every aspect of the customer journey, we believe our digital first strategy and our digital platforms represent the most attractive growth opportunities over the long term Over the last couple of quarters, we have seen substantial gains in the Middle East, while our digital business in other parts of the world has plateaued. We spoke on the last couple of calls about needing to better manage promotional offers in places like the United States and Europe, and as such we have begun to pull back. While the benefits of this more disciplined approach are not immediately obvious in this quarter's results, in the last few months new customer growth rates have improved and have done so at higher RPTs, which should bode well for better revenue and profitability in future quarters. That said, pulling back on new customer incentives is just one element of our revised approach. Since our investor day, we have been executing our digital acceleration program along three axes. The first is the restructuring of our digital go-to-market model and team. We have now completed the restructuring of our go-to-market team. Thank you very much. In particular, I would like to welcome Shashir Singhania, who joined us last quarter as our new chief digital officer, leading the global digital product team and the North American go-to-market team. Shashir brings deep knowledge and experience to us and has already begun to make material impacts. Second, we are accelerating our Beyond Digital platform. Having now seen early returns, we are accelerating the rollout across our major markets with planned launches in Australia, Europe and the U.S. before the end of this year. We are expecting the Beyond Digital platform to enable us to improve new customer onboarding success rates and thus improve the return on new customer acquisition in these important markets. to all of our major markets by the end of 2027. Third, we are focusing on investments by corridor. Our analytics and insights have improved, and we've begun to differentiate our level of new customer investment in both marketing and new customer incentives at the corridor level. This higher level of fidelity and targeting, we believe, will enable us to earn better returns on the same overall investment pool. and some larger corridors where competitive dynamics inhibit strong returns. Before I turn the call over to Matt, I would like to discuss further a few minutes to provide an update on our digital asset strategy and the progress we are making. At the center of this strategy is USDPT, our U.S. dollar stablecoin. USDPT is designed to maintain a one-to-one value with the U.S. dollar and is backed by reserves including cash and U.S. treasury instruments. First, we successfully launched USDPT in May of this year, which established the foundation for a regulated digital dollar that can support payments, treasury operations, and customer use cases across our global network. USDPT is now live and available through an expanding ecosystem of exchanges, financial institutions, and partners. With the first four exchanges now live and actively trading, USDPT. Second, we have introduced our Treasury Bridge solution, which utilizes USDPT to support more efficient movement of liquidity and capital across our global network. This initiative has the potential to enhance funding flexibility, improve settlement speed, and reduce reliance on the traditional correspondent banking infrastructure. We are testing with multiple counterparties to use USDPT as a form of settling our cross-border money transfer transactions. Third, we launched the Digital Asset Network, or DAN, which extends Western Union's unique global distribution capabilities to the digital asset ecosystem. Through DAN, digital assets, exchanges, and other partners can connect to Western Union's payout infrastructure, enabling customers to convert digital assets into local currency and access funds throughout our global network. This creates a bridge between the rapidly growing digital asset economy and the real-world economy that customers can use every day. We have successfully launched our first partner and we expect the launch of several more in the coming weeks with the goal of having tens of millions of consumer digital wallets connected to our digital asset network by the end of the year. and lastly, we continue to advance our consumer proposition with the development of our USDP-T powered wallet and card capabilities. Our vision is to provide customers with the ability to redirect remittances, hold the USDP-T digital dollars and spend them through a payment card, seamlessly transitioning between digital assets and traditional financial services. We are launching the USDPT stable card today. We view the digital assets as an opportunity to expand our TAM and to free up capital. Our objective is to leverage Western Union's trusted brand, regulatory expertise, global reach, and distribution network to become a critical infrastructure provider within that ecosystem. What differentiates Western Union is that we are focused on real-world utility. We are not building speculative products. We are building solutions that address practical agent and customer needs, faster settlement, lower friction, improved accessibility, and broader financial inclusion. While we remain in the early stages of this journey, we are encouraged by the momentum we are seeing. We have moved beyond strategy and are now into execution. Thank you very much. to people everywhere. Before I conclude, I would like to give a quick update on Intermex. We remain actively engaged in discussions with regulators on the final approval. I remain optimistic that we will be able to obtain the outstanding approval needed. This would enable us to close the transaction upon receipt of this approval as well as satisfaction of other outstanding and customary closing conditions. In closing, while we are disappointed with our current results, we remain confident in our ability to improve performance and unlock the value that exists within this business. The path forward is clear. We are focused on driving growth through our digital initiatives, improving efficiency throughout the organization, allocating capital with discipline, and executing against a well-defined strategic plan. We recognize that rebuilding momentum requires patience and execution. However, we believe the actions that we are taking today will position the company for a stronger future. We appreciate the continued support of our shareholders and the dedication of our employees who remain committed to serving our agents and customers every day. While there is significant work ahead, we are focused on delivering the results that our stakeholders expect and deserve. Thank you, and I now turn it over to Matt to review our financial results in more detail.