U.S. Markets closed

Edited Transcript of WU earnings conference call or presentation 7-May-19 8:30pm GMT

Q1 2019 Western Union Co Earnings Call

ENGLEWOOD May 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Western Union Co earnings conference call or presentation Tuesday, May 7, 2019 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Hikmet Ersek

The Western Union Company - President, CEO & Director

* Michael A. Salop

The Western Union Company - SVP of IR

* Rajesh K. Agrawal

The Western Union Company - Executive VP & CFO

================================================================================

Conference Call Participants

================================================================================

* Ashwin Vassant Shirvaikar

Citigroup Inc, Research Division - Director and U.S. Computer and Business Services Analyst

* Benjamin Elliot Budish

Barclays Bank PLC, Research Division - Research Analyst

* Bryan Connell Keane

Deutsche Bank AG, Research Division - Research Analyst

* Darrin David Peller

Wolfe Research, LLC - MD & Senior Analyst

* David Michael Scharf

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* James Edward Schneider

Goldman Sachs Group Inc., Research Division - VP

* James Eugene Faucette

Morgan Stanley, Research Division - Executive Director

* Jason Alan Kupferberg

BofA Merrill Lynch, Research Division - MD in US Equity Research & Senior Analyst

* Jeffrey Brian Cantwell

Guggenheim Securities, LLC, Research Division - VP and Analyst

* Tien-Tsin Huang

JP Morgan Chase & Co, Research Division - Senior Analyst

* Vasundhara Govil

Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Western Union First Quarter 2019 Results Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Mike Salop, Senior Vice President of Investor Relations. Please go ahead.

--------------------------------------------------------------------------------

Michael A. Salop, The Western Union Company - SVP of IR [2]

--------------------------------------------------------------------------------

Thank you, Andrew. On today's call, we will discuss the company's first quarter results and our full year financial 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.

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 2018 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.

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 would now like to turn the call over to Hikmet Ersek.

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thank you, Mike, and good afternoon, everyone. Revenue trends were softer in the first quarter and industry growth appeared to slow, but we remain on track with our full year expectations. We expect growth and margins to improve throughout the year as we gain traction with new opportunities such as Albertsons and Dollar General and face less challenging comparisons from currency and pricing actions than in the prior year.

The digital business continues to drive our results with 19% transaction and constant currency revenue growth in the quarter for westernunion.com money transfer. Cross-border digital growth was much higher, but declines in the U.S. domestic money transfer business continue to affect both westernunion.com and overall C2C growth rates.

Geographically, our U.S. outbound and U.S. to Mexico money transfer businesses delivered good results, and Latin America outbound remains strong. Trends in Europe in certain countries were mixed and Middle East revenues continued to be affected by the price reductions implemented in the first half of last year.

In Business Solutions, we achieved constant currency revenue growth for the third straight quarter driven by strong growth in Asia Pacific and Europe. Overall, our core business expectations for the year have not changed from our original projections. And we are not standing still. We are taking additional actions to improve our results going forwards.

In the next few days, we expect to complete the sale of our Speedpay U.S. domestic bill payment business for approximately $750 million. This represents the first step in our effort to streamline our model and focus on our core cross-border business. Our overarching strategies remain focused on driving digital expansion and growth, offering our cross-border platform to new business areas and generating operating efficiencies.

With digital, in addition to westernunion.com and mobile geographic expansion, we continue to build our account payout network, including recent collaboration with mobile wallets in emerging markets around the world. Although this business is still relatively small, it is generating strong growth. We also continue to expand our payments platform and agent location network to allow customers to make payments for use cases such as e-commerce purchases. We are expanding into new pilot countries with Amazon and are also looking at other additional payment opportunities.

Finally, we remain focused on generating operating efficiencies, including the implementation of lean management and other WU Way-driven processes, which we are continuing to roll out across the company.

With the streamlining of our business, we have identified additional opportunities to optimize our operating model and cost structure, which we are currently evaluating. Our business has proven resilient regardless of the economic conditions, but this initiative can give us more ways to drive stronger profitability in the future. We are working on specific plans and expect to have an Investors Day later this year, where we will share our strategies, growth plans and efficiency opportunities in more detail.

Now turning back to this year. We remain committed to generating and returning cash flow to shareholders. In the first quarter, we returned over $260 million through dividends and share repurchases. For the full year, we currently expect to spend $500 million to $600 million to buy back shares, which would put total return to shareholders including dividends at $850 million to $950 million for the year.

To summarize, we continue to generate strong cash flow. The Speedpay divestiture is near completion. We expected revenue growth to start out slowly in the first quarter and improve throughout the year, and we remain on track with our full year business performance expectations. And we are in the process of evaluating long-term efficiency initiatives that will enhance profitability in the coming years.

Now to give you more detail on the first quarter as well as the outlook and capital allocation plans, I would like to turn the call over to Raj.

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [4]

--------------------------------------------------------------------------------

Thank you, Hikmet. First quarter revenues of $1.3 billion declined 4% compared to the prior year period, while adjusted constant currency revenues, which excludes Speedpay revenues for -- from both the current and prior year, increased 2%.

Currency translation net of the impacted hedges reduced first quarter revenues by approximately $77 million compared to the prior year, primarily due to continued declines in the Argentine peso. The decline in peso negatively impacted total revenue by 4 percentage points, while the effect of inflation on our Argentina businesses is estimated to have positively impacted both reported and constant currency revenue by approximately 2 percentage points.

In the consumer-to-consumer segment, which represented 79% of company revenues in the quarter, revenues declined 3% or were flat on a constant currency basis, while transactions grew 2%.

Total cross -- C2C cross-border principal increased 1% or 5% on a constant currency basis, while principal per transaction was down 2% or increased 2% constant currency. The spread between C2C transaction and revenue growth in the quarter was 5% with a negative 3% impact from currency. Mix had a negative impact of approximately 2% in the quarter, while pricing was flat compared to the prior year period.

Turning to the regional results. North America revenue grew 1% on a reported and constant currency basis, while transactions were flat. The U.S. to Mexico corridor delivered strong revenue growth in the quarter driven by westernunion.com, and we made significant share gains based on the latest Banco de Mexico data through March. Our other U.S. outbound business also generated good revenue growth driven by sends to Latin America and Asia. However, continued declines in the U.S. domestic money transfer business largely offset the U.S. outbound strength.

In the Europe and CIS region, revenue declined 3% or increased 1% on a constant currency basis, with growth led by France and Spain, while transactions in the region increased 5%.

Revenue in the Middle East, Africa and South Asia region declined 7% on a reported basis or 6% constant currency on transaction growth of 1% as last year's price reductions in the Middle East are still impacting revenue.

The Latin America and Caribbean region continued to deliver strong constant currency revenue growth with very good growth from Ecuador, Mexico outbound and Peru. Revenue in the region declined 2% or increased 12% constant currency, while transactions grew 9%.

In the APAC region, revenue declined 13% or 11% constant currency and transactions were down 6% with Australia, Korea and New Zealand contributing to the revenue decline.

Westernunion.com again delivered strong growth in the quarter driven by cross-border sends, which were partially offset by declines in the U.S. domestic business. Overall, westernunion.com revenue grew 17% or 19% constant currency on transaction growth of 19% and represented 13% of total C2C revenue in the quarter.

Business Solutions revenues decreased 1% on a reported basis or increased 4% constant currency and represented 7% of company revenues in the quarter. Constant currency revenue growth was led by strength from hedging products and the education and financial institution verticals. Regionally, Business Solutions growth was driven by Asia Pacific and Europe.

Other revenues, which consist primarily of our bill payments businesses, decreased 9% in the quarter. Other revenues represented 14% of total company revenues in the quarter with approximately half of the revenues related to the Speedpay business. The Pago Facil walk-in business in Argentina continued to grow transactions and local currency revenue but declined in U.S. dollar terms, and Speedpay revenue also decreased in the quarter.

The depreciation of the Argentine peso negatively impacted other revenue -- reported revenue by 20 percentage points in the quarter, while Argentina inflation is estimated to have positively impacted other revenues by approximately 11 percentage points.

Turning to margins and profitability. We will focus on consolidated margins as segment margins have not been adjusted for the expected reallocation of corporate overhead expenses anticipated after the divestiture of the Speedpay business in the second quarter.

The consolidated operating margin was 18.8% in the quarter compared to 19.1% in the prior year period with the decline due to higher acquisition and divestiture-related expenses. Foreign exchange hedges provided a benefit of $5 million in the current quarter compared to a negative impact of $9 million in the prior year period. EBITDA margin was 23.6% in the first quarter, which compared to 23.9% in the prior year. The GAAP effective tax rate was 19.9% in the quarter compared to 8.9% in the prior year period or 11.4% in the prior year period adjusted for changes in Tax Act provisional accounting.

Last year's first quarter rates benefited from certain discrete items, while this quarter's rate reflects the impact of new full year expectations related to the Speedpay transaction, which I will detail when I discuss the 2019 outlook.

GAAP earnings per share in the quarter was $0.39 compared to $0.46 in the prior year period. The decrease was primarily due to lower revenues, an increase in acquisition and divestiture-related expenses and a higher effective tax rate, partially offset by fewer shares outstanding.

Turning to our cash flow and balance sheet. Cash flow from operating activities was $240 million for the quarter. Capital expenditures in the quarter were approximately $38 million. At the end of the quarter, we had cash of $833 million and debt of $3.4 billion. We returned $262 million to shareholders in the first quarter, including $87 million in dividends and $175 million of share repurchases, which represented approximately 10 million shares. The outstanding share count at quarter end was 433 million shares, and we had $1.369 billion remaining under our existing and new share repurchase authorizations, the majority of which expires in December 2021.

Before I turn to the updated financial outlook, I want to provide some details on the Speedpay transaction. We expect to complete this transaction in the coming days for approximately $750 million in cash. As a reminder, Speedpay generated $350 million in revenue in 2018 and approximately $100 million of carve-out operating income, which excludes corporate allocations to the business.

Separately, we have completed the sale of our Paymap mortgage payment services business, which was also in other in the second quarter. This business had approximately $15 million in revenue last year.

From an income statement standpoint, the sale of Speedpay business is expected to generate a pretax gain of approximately $530 million in the second quarter. We expect taxes on the transactions of approximately $150 million reflecting the fact that the Speedpay tax gain is considerably higher than the book gain and also reflecting a $15 million tax benefit from the Paymap sale.

In addition, the Speedpay gain produces a favorable effect on our overall U.S. tax position with respect to the BEAT provision in 2019, resulting in a separate tax benefit of approximately $40 million compared to our previous outlook.

We currently expect to use the approximately $600 million in after-tax cash proceeds available from the Speedpay and Paymap transactions for a combination of share repurchase and net debt reduction over the next 12 months with slightly more than half currently planned for share repurchase.

From an earnings per share perspective, we expect the dilution from the lost income related to Speedpay net of additional share repurchases and lower net interest expense to be approximately $0.10 per share for both 2019 and 2020. This reflects about 4.5 months of Speedpay and Paymap income in 2019 and no income from these businesses in 2020, which is being offset compared to 2019 by the impact of additional share repurchases and lower interest expense.

The after-tax gain on the sales and the BEAT tax benefit generate an approximately $0.94 benefit to the 2019 earnings per share, which is net of approximately $0.02 for acquisition and divestiture-related costs. So the total impact of all divestiture-related items is approximately $0.84 accretion this year.

Turning to our full financial outlook. We now expect GAAP revenues for the full year to decrease mid-single digits due to the removal of a partial year of the Speedpay business. On an adjusted constant currency basis, excluding Speedpay from both years, our outlook is unchanged as we continue to expect a low single-digit constant currency revenue increase.

Operating margins are expected to be approximately 20%, in line with our original outlook. Although the removal of Speedpay carve-out profits does have a negative impact on margins, our outlook still projects to approximately 20%. We expect an expected tax rate of approximately 18% to 19% in 2019, which increased from the previous range of 17% to 18%.

The increase in the GAAP outlook reflects the impact of tax on the gain on Speedpay sale, partially offset by favorable changes in the company's U.S. tax position with regards to the BEAT provision. We currently expect the effective tax rate in 2020 to be in the mid-teens range.

GAAP EPS in 2019 is now expected to be in a range of $2.66 to $2.76, which includes the approximately $0.94 of nonrecurring net benefits and approximately $0.10 of ongoing dilution from the divestitures. GAAP cash flow from operating activities for 2019 is expected to be approximately $850 million, which is net of the taxes paid on the Speedpay and Paymap sales.

From an accounting perspective, the proceeds from sales are classified as investing activities on our cash flow statement, while the taxes on the net gains are classified as operating activities. Excluding these taxes and the BEAT benefit, operating cash flow is expected to be approximately $950 million, which is adjusted from our previous outlook of approximately $1 billion to reflect the removal of a partial year of Speedpay cash flow.

As mentioned earlier, we currently expect to spend between $500 million and $600 million on share repurchases in 2019 and a similar amount in 2020.

So to summarize the quarter, all business results were stable, although we faced currency headwinds and difficult year-over-year growth comparisons. We continue to generate strong solid cash flow and returned significant capital to shareholders through dividends and repurchases. Our full year outlooks have been updated primarily to reflect the Speedpay divesture, but basic business trends are still expected to be in line with our original outlook.

Operator, we are now ready to take questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question comes from Bryan Keane of Deutsche Bank.

--------------------------------------------------------------------------------

Bryan Connell Keane, Deutsche Bank AG, Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

Why don't I just ask about pricing? I know you guys did some pricing actions in North America and the Middle East. It looks like transaction growth dropped a little bit. Usually, you see the opposite effect you see with pricing, you see an increase in transactions. Overall, transactions was, I think, 2% for the quarter down from 4% last quarter. So just trying to figure out what was the impact from pricing. Did you guys get the impact you expected? And how much of this is just a little bit of the difficulty going on in the economies worldwide?

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [3]

--------------------------------------------------------------------------------

Yes. Bryan, this is Raj. Let me start off. In the Middle East, most of what you're seeing in the revenue side is related to price reductions we made in the second quarter of last year. Transactions did fall off a little bit, but there are a number of different things happening in that region, Middle East and Africa. The revenue was a little bit better in some of the key markets like Saudi Arabia and the UAE, but we also had a little bit of softness both in transactions and revenue trends in our Africa outbound business. Just some of the markets there are being impacted by hard currency shortages, and so we're just trying to manage through that. So there are some opposite impacts that are impacting the business, but we do believe that the trends will improve as we go past the second quarter just as we anniversary some of the price reductions there.

And then in North America, there was a little bit of price optimization or increases that I would say in the quarter but nothing material there to really talk about. The domestic money transfer trends, the transactions there are a little bit worse even though revenue trends were probably similar to the fourth quarter. So that could be some of it, where the DMT business is really dragging down the results in North America.

--------------------------------------------------------------------------------

Bryan Connell Keane, Deutsche Bank AG, Research Division - Research Analyst [4]

--------------------------------------------------------------------------------

Okay. I got it. And then I think Hikmet, you talked an Analyst Day towards the end of this year and talking about some long-term initiatives maybe. Could you just give us maybe a preview of some of the things that you're thinking about for that Analyst Day and how you guys might talk about some of these long-term initiatives for the business model?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [5]

--------------------------------------------------------------------------------

Sure. Yes. We are excited about coming up to Investors Day because we believe that we have an exciting story to tell. We are currently working on it. We are really looking at our business model which we can use more technology and more artificial intelligence, which we have already. It's not additional investment. We can optimize our current organization and running this business more efficiently. Starting from variable cost to fixed cost, we are looking at that. But at the same time, for the revenue expansion possibilities like digital expansion and really offering our platform, which is unique, offering cross-border solutions to new payment providers. That's the story basically. We are currently reevaluating what the outcome will be. We have the first internal plans, but we are really going on the detail. And we would like to share that with our investors on the Investors Day coming up probably September -- end of September or October term, end of Q3 or beginning of October.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

The next question comes from Jason Kupferberg of Bank of America Merrill Lynch.

--------------------------------------------------------------------------------

Jason Alan Kupferberg, BofA Merrill Lynch, Research Division - MD in US Equity Research & Senior Analyst [7]

--------------------------------------------------------------------------------

I just wanted to ask, actually, a follow-up there. Just in terms of some of these newer initiatives that you're going to talk more about later in the year, I just wanted to get your viewpoint on why now. Why is this the right time? It doesn't seem like WU Way was that long ago. It seemed like that was a successful effort. So is this about kind of taking WU Way to the next level or just wanted to get a sense of why this is the right point in time to take another cut at efficiency initiatives?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [8]

--------------------------------------------------------------------------------

I think Jason that's an excellent question, why now. As you look at our business, till 2016, we really were investing a lot on the compliance programs, on the anti-money laundering efficiencies, on the technology. Since end of 2016, 2017, we have much more stable results. We are really -- the resilience of our business gives us confidence that we can run this business in a much more efficient way. We do have license in 200 countries. We have invested in the technology paths. Now it's really the reorganization.

And in the past, we were all about expanding globally. We are in 200 countries. While the other competitors are still struggling expanding globally, we have been already there for many years now. We are really looking at how we can offer our global platform to new partners. And we can do that in a much more efficient way with artificial intelligence. We've been working with our teams the last few weeks -- actually not few weeks, I will say, the last 6 weeks on a very detailed strategy plan with -- and then we would like to take that to a more detailed plan and present that to the shareholders.

We believe that this could go to a margin expansion that could be in a much more better margins here because it's changing the business model from a distribution model to more of a customer-oriented business model, gaining more consumers and having consumers more in our digital way will give us efficiencies. For instance, dropping money on an account is much more efficient than dropping money on a location because of the commissions. And we could gain there also more traction and there's a plan behind that. We would like to share that. Does it make sense?

--------------------------------------------------------------------------------

Jason Alan Kupferberg, BofA Merrill Lynch, Research Division - MD in US Equity Research & Senior Analyst [9]

--------------------------------------------------------------------------------

Yes. Yes, that does make sense. Maybe just shifting gears, maybe one for Raj, just on the guidance side. So I think, on an adjusted constant currency basis excluding the Argentinian inflation benefits, we need to get from 0% in Q1 to the unchanged full year guide of 2%. Can you kind of give us that walk of the pieces? How we get there? I know the comps do get easier. You talked about Albertsons and Dollar General. Can you maybe quantify how much they may benefit the top line during the rest of the year?

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [10]

--------------------------------------------------------------------------------

Yes. It's all the pieces that you mentioned, Jason. We had a tougher comparison to Q1 of last year. We also had a slightly negative calendar impact in Q1, which will alleviate itself as we move through the course of the year. And then Albertsons is now fully ramped up. That gives us an incremental 1,000 locations. Dollar General is now also fully ramped up and will contribute more. We are adding about 14,000 locations with them. We don't quantify the exact impact of each one, but they're certainly going to be contributors.

And then we are also going to be expanding some digital partnerships later this year that will also add to the overall picture. So we feel confident about the full year outlook even though Q1 was a little bit softer.

--------------------------------------------------------------------------------

Jason Alan Kupferberg, BofA Merrill Lynch, Research Division - MD in US Equity Research & Senior Analyst [11]

--------------------------------------------------------------------------------

Okay. And sorry just one last quick one. On wu.com, I know you slowed to 19%, but you did call out DMT as a headwind. How could we think about maybe the wu.com number ex DMT? I'm just trying to see if there's any underlying change in the trend.

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [12]

--------------------------------------------------------------------------------

Yes. We grew 19% all-in, but we haven't given that number specifically, but we would be in the mid-20% range if we took DMT out of the dot-com number and...

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [13]

--------------------------------------------------------------------------------

And overall, I think, Raj, overall, in 2018, our DMT business, about 8% of our revenue...

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [14]

--------------------------------------------------------------------------------

Because of our consumer revenue, yes, exactly.

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [15]

--------------------------------------------------------------------------------

Consumer revenue, Jason. As you recall, we don't give it out. We said that we are not disclosing in the future, but it's declining and has an impact to our total number. But cross-border has still healthy -- very healthy growth rates.

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [16]

--------------------------------------------------------------------------------

Yes. The international cross-border is really growing at the strongest level in dot-com. And then we're getting pretty good growth in our U.S. outbound business, and then the DMT part of digital is declining.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

The next question comes from Tien-Tsin Huang of JP Morgan.

--------------------------------------------------------------------------------

Tien-Tsin Huang, JP Morgan Chase & Co, Research Division - Senior Analyst [18]

--------------------------------------------------------------------------------

I'll ask similar to Jason on margins for the year, though. Starting at 18.8%, you mentioned Speedpay removal I think is dilutive, still guiding 20%. So what's -- I guess with revenue improving, you'll see some margin lift. But what other levers do you have to get the margins higher in the balance of the year?

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [19]

--------------------------------------------------------------------------------

Tien-Tsin, this is Raj. We also had some acquisition and divestiture-related expenses in Q1 that we called out and that's not necessarily representative of every quarter, so that will help a bit. The revenue lift that we get the rest of the year will absolutely help on the margin expansion. And we've -- with the Speedpay divestiture, we still -- going into the year, we -- coming into the year, we had about 20% margin outlook. And we're still at 20% because, even though Speedpay is a bit negative, it could be a little bit above or a little bit below the 20% number. So still confident that we're going to make the full year. And the revenue growth will help a lot and our expense base should be relatively stable as we move through the course of the year. So that's why we have confidence around that 20% number.

--------------------------------------------------------------------------------

Tien-Tsin Huang, JP Morgan Chase & Co, Research Division - Senior Analyst [20]

--------------------------------------------------------------------------------

Okay. Just a quick follow-up, advertising. I've been -- I've noticed a lot of the pay-to-account advertising even on TV. So is that -- was that reflected mostly in Q1? Could we see more of an advertising impact for the balance of the year? I'm curious what kind of payback you might expect from something like this, if it's a change from before.

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [21]

--------------------------------------------------------------------------------

Yes. On the marketing, advertising front, we're likely to have a little bit higher spending in the first half of the year than the second half. Second quarter is typically a higher spending quarter just given Mother's Day and other things. So that's roughly what we see.

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [22]

--------------------------------------------------------------------------------

Tien-Tsin, on the account payouts, it's -- I think it's one of our strongest growing -- it's still small, of course, but strongest growing channel. People are using more and more for account payout. If you use your mobile app, you can choose between cash payout or mobile payout. There are also price differences to animate the customers. It's going very well. Transactions and revenues are going very well. So we are advertising. Especially some certain quarters like India, it's definitely something that is growing fast. But also, from Europe, people are using more and more account payout. And that, long term, also helps on our agent commission structure because of the mix. So I think I'm excited about that, the current level, but for being accounts worldwide which can drop money directly. And we are very much pushing that also to optimize our revenue growth and our commission structure.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

The next question comes from Darrin Peller of Wolfe Research.

--------------------------------------------------------------------------------

Darrin David Peller, Wolfe Research, LLC - MD & Senior Analyst [24]

--------------------------------------------------------------------------------

Let me just start off, when I think about, strategically, the DMT, the domestic business, I mean again, just revisiting, is there anything you guys can do to -- first of all, how profitable is that for you right now, if you disclosed how much that contributed to the earnings? And then, is there anything you can do similar to what you've done to Speedpay? Would it make sense in someone else's hands? I know it's declining but still potentially cash-generative for someone. And then I guess taking it a step further, is there any other ways to enhance the business model in terms of specifically C2C digital beyond the organic trends you're seeing? With capital brought into Speedpay and others, should you buy someone else? Does that become a greater priority?

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [25]

--------------------------------------------------------------------------------

Yes. The -- on the profitability of DMT, we haven't really disclosed that, but it's a very profitable business for us. I said, it probably generates more profitability than its size, but we haven't really gone into the actual specifics of that. Selling DMT would be challenging because it's so integral to everything that we have. I think that's what your question was, Darrin. Really, we have DMT customers that are also international money transfer customers and vice versa. So...

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [26]

--------------------------------------------------------------------------------

And also, it's -- DMT is -- one of the biggest advantages of DMT is the cash payout. You have certain customers, they use DMT, our U.S. DMT, send money on mobile but pay out in cash in minutes, and that's unique. That customer is existing. However, the competitors like Zelle and Venmo, having 0 fees on a direct-to-direct account, that's where we build -- feel the competition, and it's hard to compete against 0 fee. And so I think that we are really looking to those customers we currently have. It's a high profitable business and we are serving this customer in the best way like we do serve U.S. outbound customers.

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [27]

--------------------------------------------------------------------------------

And Darrin, can you just repeat your last question? There was a third question around C2C digital and...

--------------------------------------------------------------------------------

Darrin David Peller, Wolfe Research, LLC - MD & Senior Analyst [28]

--------------------------------------------------------------------------------

I guess, I was just wondering if there's any other use of capital around some of the proceeds from Speedpay. I know you talked about debt paydown and buybacks, but have you raised in priority any type of tuck-ins that could help expedite some of the growth profiles in your businesses?

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [29]

--------------------------------------------------------------------------------

Yes. I mean, our going-in plan is to buy back stock, as we articulated, but we also are always looking for acquisition opportunities whether it's digital or something else and...

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [30]

--------------------------------------------------------------------------------

Let me just give a shot on that. We do look at M&A opportunities. Given the business, we are not standing still given the operating performance a little bit flat. And we are really looking for M&A opportunities also which will continue to get additional revenue to our cross-border engine. Of course, it has to be the right price, right strategic fit, and that's what we are doing, and we are really evaluating. Now we can do these things since we feel much better with our platform. And we -- and as I mentioned earlier in the call, as we have now the operating efficiencies and we are looking for operating efficiencies. I think we can -- also when we go to the market, we can include new revenue streams to our engine much better than we did it in the past. And I think, adding an efficient cross-border engine will allow us to be more active on the M&A front.

--------------------------------------------------------------------------------

Darrin David Peller, Wolfe Research, LLC - MD & Senior Analyst [31]

--------------------------------------------------------------------------------

Okay. Just one last follow up, it's just around -- I mean the Amazon news that we had seen from you guys a couple of quarters ago, we thought was pretty promising. Have there been any other marketplaces like that where you could use your network for bigger and better things than even what you're doing today?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [32]

--------------------------------------------------------------------------------

On Amazon, first of all, we are expanding with Amazon together the countries we are in, right? So I think there will be some -- hopefully some recent announcements. Our shareholders will like. I will like it, and our shareholders and Amazon, our business partner, like to serve new customers. Collecting funds in the local currency, turning that to a dollar immediately, which is that so you can buy locally -- or you can buy globally, pay locally, it's enormous. And we are looking also for other partners and more announcements come on that. We have our own division called cross-border solutions division which is a sales organization which offers our platform to big partners. And it's all about closing that and expanding Amazon and -- but also signing new partners.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

The next question comes from Jim Schneider of Goldman Sachs.

--------------------------------------------------------------------------------

James Edward Schneider, Goldman Sachs Group Inc., Research Division - VP [34]

--------------------------------------------------------------------------------

I guess just maybe at a 50,000-foot level, can you maybe kind of give us a sense, regarding the divestitures and the M&A you're contemplating, where do you want to take the company in, say, 2 years from a business mix perspective? Is the thought that you want to be just a much more larger-scale C2C business with a lot more digital exposure and maybe less B2B exposure? Or how are you thinking about kind of the direction the company is going to go in given what you've done with Speedpay and what you might be contemplating elsewhere?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [35]

--------------------------------------------------------------------------------

Excellent question, Jim. That's why we want to have the Investors Day to go more deep on that, but let me try to give you a high-level thinking behind that. Over the years, we created that cross-border engine. We call it cross-border platform, which allows us to settle 137 currencies in minutes and turn that really -- offer that really now not only to Western Union customer, which are the C2C customers, really offering also that to C2B and B2C customers, and that platform is unique. Not everybody has that. We have in 200 countries license. We have a compliance program which is driven by artificial intelligence. We have a technology which is really unique, and putting that all in one platform, putting that in a cloud, that's something we are doing currently. With that, Amazon is only one example to go out of our C2C customers, really using a third brand. It is the Amazon [by code], and offering our platform to Amazon so the customers thereby are able to shop Amazon online. And these are kind of things which I am trying to take the company to the next level. C2B, B2C and C2C is definitely something in our heart. And another example is, Jim, you know it, we talked a little bit, is the university pay. The student pay product is basically acquiring universities. And so people can globally pay their fees locally and study in another country. An example, there are about 200,000 Chinese students only in Spain, and so we can offer that. People pay in local currency and can study in Madrid or Barcelona immediately and get their visas to go abroad. So these kind of things are definitely something we are looking at that. It's not only Western Union branded products, C2C products, but also other verticals to offer our platform.

--------------------------------------------------------------------------------

James Edward Schneider, Goldman Sachs Group Inc., Research Division - VP [36]

--------------------------------------------------------------------------------

That's helpful. And then maybe just kind of as a follow-up. Aside from the macro pressures you're seeing in any of the corridors, can you maybe talk about whether it's -- whether you think the bigger impact on some of the transaction deceleration you've seen is more due to things like the hard currency shortages, et cetera? Or is there any kind of change in migratory trends that are really driving that weakness as well?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [37]

--------------------------------------------------------------------------------

Well, generally, Jim, our cross-border business is healthy. As I mentioned it, as Raj mentioned earlier, right, which we really believe on our country-to-country curve, we are healthy. We do have some softness in the Middle East. We have some softness in some part of Europe, but generally, I would say that our U.S. outbound business, which is the major business, and European Union outbound like France and Germany has been doing very good, good results. Even in Saudi Arabia and UAE, you will see some -- if you put the pricing to [set] some improvements in that in the recent quarters. I would say that the impact is really the U.S. domestic money transfer business has impact to our business of -- on transaction-wise. And we always say that our competency is in cross-border, cross-currency, and that's where we are focused and I feel resilient, also. Even that we don't see big pricing pressures, the prices are stable in cross-border, cross-currency. I think that operating in 200 countries, serving more than 20,000 corridors is really a competitive advantage.

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [38]

--------------------------------------------------------------------------------

I mean the remittance principal growth, based on the World Bank data, Jim, is a little bit slower this year than it was the last couple of years. So that may be some of it overall in terms of overall market, but it is expected to keep growing in that low to mid-single-digit range in terms of principal growth, cross-border principal. So the market dynamics should continue to be okay, a little bit softer this year, but...

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [39]

--------------------------------------------------------------------------------

I think it's softer. I think also competitors gave some numbers. Their numbers were also softer. But generally, I would say still a healthy business.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

The next question comes from Ashwin Shirvaikar of Citi.

--------------------------------------------------------------------------------

Ashwin Vassant Shirvaikar, Citigroup Inc, Research Division - Director and U.S. Computer and Business Services Analyst [41]

--------------------------------------------------------------------------------

So my first question is with regards to the U.S. domestic money transfer trends kind of worse. The reason I'm asking is, given the backdrop of a higher number of agent locations because you have been adding agent locations, what's going on at that level? Is it just it takes time for agent locations to get more productive? And then that's a broader question, too, because, over the last couple of years, you guys have added a number of locations. wu.com is in more countries but your growth rate has not necessarily accelerated. So how should we think of that?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [42]

--------------------------------------------------------------------------------

Well, first of all, let me start with the agent locations. The recent agent locations, the Albertsons and Dollar General just has been added, Ashwin, a few months ago, and activation of them takes time. We know that, especially on the [strategic] areas, like you add location, it does bring more transactions. That's from the send side. On the receive side, having 550,000 locations globally is a big advantage, Ashwin. So you can use your phone and send money directly to 550,000 locations in dollar and return that in Vietnam or in Chile or in Finland immediately to their local currency, but not many companies can do that. That being present on that country in the last mile is the biggest advantage. That's why we are paying out in 137 currencies. Not many companies can do that, that will be. On the new expansion of westernunion.com, yes, it takes time. Our growth basically comes from U.S. and from European Union outbound. As you recall, we were first in the U.S. a few years ago, then expanded to European Union. Now we're all over the European Union. We recently -- I was just last week in the Gulf states, in Middle East. We opened 7 new countries there to outbound business. Especially, I am excited about spending money to South Asia. Since the promotion, we know that we signed many, many new customers on our mobile apps, on the westernunion.com mobile apps. So it will take some time, but the 20% growth on -- or 19% growth, sorry, on dot-com, it's a very healthy growth. If you compare it a few years ago and where we are, we end this year more than $500 million of revenue in dot-com business, and it's still growing by 20%. The base is much larger, and we are still growing with 20%. It's a quite good success story, I guess.

--------------------------------------------------------------------------------

Ashwin Vassant Shirvaikar, Citigroup Inc, Research Division - Director and U.S. Computer and Business Services Analyst [43]

--------------------------------------------------------------------------------

Right. No, I was thinking of it within the context of your overall business. But the second question, quite different from the first, is in terms of how much was the acquisition and divestiture expense in 1Q? In other words, what's a normalized EPS for 1Q? And if you could also provide what compliance expense came in at for the quarter and for the expectation for the year.

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [44]

--------------------------------------------------------------------------------

Yes. Ashwin, we didn't break out, but I think -- just think about the annual outlook, we said that we expected about $0.02 worth of impact from acquisition and divestiture-related expenses. Obviously, that could change depending on the level of activity, but that's what we've currently assumed. So that should give you a sense of how much that could be for the year. And then from a compliance standpoint, I would say the costs were relatively consistent. We didn't -- we haven't broken that out, but we haven't -- we've been able to stabilize our compliance costs over the last couple of years. So nothing specific to call out there.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

The next question comes from Ramsey El-Assal of Barclays.

--------------------------------------------------------------------------------

Benjamin Elliot Budish, Barclays Bank PLC, Research Division - Research Analyst [46]

--------------------------------------------------------------------------------

This is Ben Budish on for Ramsey. I wanted to ask about another question on your operating margin. And maybe this is something best left for the Investor Day, but talking about some of your longer-term efficiency initiatives and kind of what the growth in the wu.com business, is there sort of a path there to getting the operating margin back into like the mid-20s? Or is that more dependent on reacceleration in your revenue growth?

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [47]

--------------------------------------------------------------------------------

Yes. I mean I think it's something that we should probably save for the -- for later -- the next few months, and certainly Investor Day, we'll give you more color on some of our initiatives. We want to -- we're going through the process right now, I would say, in identifying how much opportunity there is and what we can take to the bottom line, right? And in past exercises, we've sort of reinvested the money to try to drive growth but we also are looking for ways to drive more efficiencies, ultimately, better margins, but we still are going through that process to evaluate how much that could be.

--------------------------------------------------------------------------------

Benjamin Elliot Budish, Barclays Bank PLC, Research Division - Research Analyst [48]

--------------------------------------------------------------------------------

Fair enough. If I could ask one more. Just on your APAC business, could you maybe give a little more color on kind of what you're doing tactically to kind of turn that business around?

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [49]

--------------------------------------------------------------------------------

Yes. Asia Pacific is a certainly a focus area for us. The good thing is that it's only 6% of our consumer revenues, and so it is relatively well contained. But the negative trends in the quarter were driven by Australia, Korea and New Zealand, and each market has different issues associated with it. Some are more competitive in nature. Some are more just economy-related, and then digital continues to be a heavy push in the Asia Pacific market. Right now, digital, for us, is only about 11% of the total Asia Pacific market, and we want to drive that to be a much bigger number over the next few years because that is the way the market is heading. And so in having more mobile capabilities, more account funding, more account payout and having more of those kinds of capabilities. So these are some longer-term things that we're trying to do, and we're also trying to tactically fix things on a short-term basis as well.

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [50]

--------------------------------------------------------------------------------

And on Asia Pacific, most of the market is the receiving market. A few markets like Australia, New Zealand, Hong Kong, Singapore, Malaysia are outbound markets. But if you look at total Asia, most of the Southeast Asia, China and India are receiving markets. So it's much -- we are much dependent on how we send money to this country. And the other thing is also we do have some challenges, I just said, in Australia and in New Zealand with our retail. But the dot-com business and the digital business is doing pretty well there.

--------------------------------------------------------------------------------

Operator [51]

--------------------------------------------------------------------------------

The next question comes from James Faucette of Morgan Stanley.

--------------------------------------------------------------------------------

James Eugene Faucette, Morgan Stanley, Research Division - Executive Director [52]

--------------------------------------------------------------------------------

Most of my near-term questions have been answered, but I did want to ask a modeling question and a more strategic operational question. The first is, with the sale of the Speedpay business, is there any seasonality that we should be aware of that was no longer have to -- or being -- that we should incorporate into our forecast and models?

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [53]

--------------------------------------------------------------------------------

I wouldn't expect seasonality. Do we have anything, Mike, that you're aware of...?

--------------------------------------------------------------------------------

Michael A. Salop, The Western Union Company - SVP of IR [54]

--------------------------------------------------------------------------------

No, actually in the tables -- the table for the company, our press release, we actually have the Speedpay by quarter pro forma for last year, so you can go through that.

--------------------------------------------------------------------------------

James Eugene Faucette, Morgan Stanley, Research Division - Executive Director [55]

--------------------------------------------------------------------------------

Okay. Great. Yes, I missed that. And then my second question is your comments on using -- implementing artificial intelligence and machine learning, et cetera, to improve, among other things, AML and KYC requirements, how do you think about like that ability to not only help you maintain compliance but then ultimately bring down costs potentially as far as maintaining AML and KYC compliance? Is that a possibility? Or do you feel like you're probably going to just -- it's just a new avenue of investment to be able to maintain your capabilities there?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [56]

--------------------------------------------------------------------------------

No, it's the first part, actually. It's definite we have it and we use it and we want to expand it. Currently, we use a lot of artificial intelligence, especially in our compliance programs, know-your-customer environment, the transactions monitoring, and that helps us a lot in our compliance programs and which we advanced since we start to invest heavily here. And we have also a good team who really knows that very well. So it is the existing artificial intelligence, but we could use this also in other parts of the company. Is it a dynamic pricing points? It's like an airliner, all these things what we really think that we could do. Some -- we do have -- we think that we could have some revenue opportunities there. And also, using the technology, artificial intelligence will give us even better access to (inaudible) associates, communicate them in a better way. As you recall that we have about 550,000 locations. Let's say 2x of them is -- 2 (inaudible) associates for a location or about 1 million people promoting Western Union daily, right? And how do we communicate with them in a very efficient way? All these things are something that we would like to share during our Investors Day, and that's exactly what Raj mentioned earlier. That's exactly what we are planning and putting together all these things to give you more a better outline for our future growth and future efficiencies.

--------------------------------------------------------------------------------

Operator [57]

--------------------------------------------------------------------------------

The next question comes from David Scharf of JMP Securities.

--------------------------------------------------------------------------------

David Michael Scharf, JMP Securities LLC, Research Division - MD and Senior Research Analyst [58]

--------------------------------------------------------------------------------

Two of them. First off, Hikmet, I believe, in your prepared remarks, you specifically called out your belief that you experienced market share gains in U.S. to Mexico that may have been triangulated from Banco de Mexico [to U.S.]. Can you expand on that a bit?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [59]

--------------------------------------------------------------------------------

That was Raj, but I'll take it. It was Raj, but I'll take it. It's a good news, yes. Banco de Mexico data shows that we are gaining market share.

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [60]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

David Michael Scharf, JMP Securities LLC, Research Division - MD and Senior Research Analyst [61]

--------------------------------------------------------------------------------

Got it. And is there any magnitude you're able to articulate or any internal sense of where that share may have come from or if it was broad-based in terms of competitors?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [62]

--------------------------------------------------------------------------------

As you recall that we invested on our network there. The last 2 years, we did a lot. We had OXO. We had other kind of locations. But one of the big changes also, we started to do our APN network, which means account payout network. That shows really good growth rates in account payout. And also, dot-com business to Mexico has good results, the digital growth. So these are the things that helps us to gain market share. By the way, as you recall also, we have 3 brands there. We have Orlandi Valuta and Vigo in addition to our Western Union brand. We adapt our products to the customer needs. That helps definitely also to gain market share on this specific corridor.

--------------------------------------------------------------------------------

David Michael Scharf, JMP Securities LLC, Research Division - MD and Senior Research Analyst [63]

--------------------------------------------------------------------------------

Got it. Understood. And then as a follow-up, I believe, in response to one of the questions about the expected ramp-up of revenue throughout the year, more back-end weighted. Among other things, you highlighted some of the additions like Albertsons and Dollar General. I'm wondering, when we think about a big grocery chain like Albertsons, kind of a regional/national chain, when you -- when we look at things like a Safeway or a Kroger, other examples, what is typically the transaction profile out of big grocers? Is the bulk of it domestic money transfer? Is most of it outbound? Just trying to get a sense for -- in addition to how that helps the top line, sort of what it means in terms of profitability per transaction?

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [64]

--------------------------------------------------------------------------------

So if you look at our business, I mean U.S. outbound business is huge, right? I mean we like U.S. outbound business sending money from U.S. to 200 countries in minutes. I think nobody can beat that our way, and we have a lot of competitors that we are competing daily on the markets, right? But I think, during that environment, we are doing pretty well, a good job. So agents like our product. Most of our agents have been -- on send side, have been with us more than 17 years, Mike?

--------------------------------------------------------------------------------

Michael A. Salop, The Western Union Company - SVP of IR [65]

--------------------------------------------------------------------------------

20 years.

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [66]

--------------------------------------------------------------------------------

20 years already. So 20 years, and they like our product because they bring customers in their locations. And the customers are from migrant population -- from different countries, but at the same time, also, people who want to send money, support their loved ones globally. So...

--------------------------------------------------------------------------------

David Michael Scharf, JMP Securities LLC, Research Division - MD and Senior Research Analyst [67]

--------------------------------------------------------------------------------

Right. Yes, I might have misspoken. I guess what I was trying to understand is the grocery vertical in particular in Albertsons as we compare it to like a Kroger or -- is the...

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [68]

--------------------------------------------------------------------------------

You have customers that are -- it's probably a representative customer set from the rest of our business. So it's not unique in nature from a grocery store chain standpoint. So because U.S. outbound is such a large business, you're going to have more customers doing that than the domestic part of the business, but it's going to be a mix and it's going to probably depend on where some stores are located and which neighborhoods, and those kinds of things will have an impact on the kind of customer base we have within a chain -- within a store.

--------------------------------------------------------------------------------

Operator [69]

--------------------------------------------------------------------------------

The next question comes from Jeff Cantwell of Guggenheim Securities.

--------------------------------------------------------------------------------

Jeffrey Brian Cantwell, Guggenheim Securities, LLC, Research Division - VP and Analyst [70]

--------------------------------------------------------------------------------

Your launch of digital in the Middle East, I believe you launched digital in 7 countries last week. Can you just tell us a little more about that and maybe just give us a general feel? Not that we're asking you to preempt your Investor Day, but it just seems like your Asia digital strategy, certainly over the past 12 months, now your Middle East digital launch, it just sounds like a possible shift towards more top line growth given how large those TAMs are. So is there anything you can tell us about the magnitude of the opportunity you see there? And any color around timing and size of that impact, to the extent you're able to today, would be great.

--------------------------------------------------------------------------------

Hikmet Ersek, The Western Union Company - President, CEO & Director [71]

--------------------------------------------------------------------------------

So generally, as you recall, Jeff, from a strategic point of view, the digital customers are new to our network. 80 -- still 80% of our dot-com users are new to our network. They didn't use the last 12 months Western Union. So we are really getting additional customer segmentation, not the retail customer. They want to use the digital one. That's -- putting that to side for a minute, we've been now in 70 countries. Our Middle East strategy -- Asia produce the same like we did it in Europe for years -- to opening countries. We've been now in 70 countries, sending capabilities to 200 countries. You can drop money in 200 countries on a location -- in a location or you can send money to one of the 4 billion accounts we serve globally. So this is a huge advantage. In the Middle East, that I was recently there, the 7 countries, they are Gulf countries. They are outbound countries where they have a big migrant population. And these people are also starting to have credit cards and accounts which you can allow them to send money from their account, from their credit card directly to 200 countries, not carrying cash to a location. We believe it's a huge opportunity going forward. It will take some time. We know that the dot-com customers take some time until you acquire them. But once they start to use them, they use it more often than retail. So it's still basically -- and if you look at our growth rates, as I mentioned to Ashwin earlier, we've been growing around 20% over the years right now and our base was much smaller from dot-com. Now our base is over $0.5 billion revenue and we are still growing by 20%. That's a part of the global expansion and part of it is that return customers on the existing countries.

--------------------------------------------------------------------------------

Michael A. Salop, The Western Union Company - SVP of IR [72]

--------------------------------------------------------------------------------

Andrew, we'll take the final question.

--------------------------------------------------------------------------------

Operator [73]

--------------------------------------------------------------------------------

Okay. And that question will come from Vasu Govil of KBW.

--------------------------------------------------------------------------------

Vasundhara Govil, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [74]

--------------------------------------------------------------------------------

I guess the first one I had was for Raj. Just wanted a clarification on the EPS guide for the year. I think if you exclude the $0.84 impact that you called out from the divestitures, it seems like the underlying guide is going down a couple of pennies. Just wanted to understand what was driving that and if that's the right way to look at it.

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [75]

--------------------------------------------------------------------------------

Yes. I wouldn't give that too much weight. The only real change is the divestiture impact. That's what we tried to isolate. Otherwise, the outlook for the year really has not changed. When you look at the top line, outlook is low single-digit constant currency, the same as it was before, and margins are still approximately 20%. So the range itself is a little bit tighter. And it all depends on the level of revenue, the level of expenses, the tax rates that we actually will have, your timing of repurchases, all those things can have an impact. And so we have just tightened the range a little bit. But we still feel good about the overall outlook and no material changes other than the divestiture-related impact that we tried to call out.

--------------------------------------------------------------------------------

Vasundhara Govil, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [76]

--------------------------------------------------------------------------------

Got it. That's very helpful. And then I guess the second question, not to beat a dead horse, but just on this slowdown in the westernunion.com channel. I know you guys called out the slowdown in the domestic money transfer business. But could you sort of help us with how much it got worse during this quarter? Because just -- the magnitude of, I guess, decline in transactions would imply that the domestic quarter got materially worse this quarter versus last?

--------------------------------------------------------------------------------

Rajesh K. Agrawal, The Western Union Company - Executive VP & CFO [77]

--------------------------------------------------------------------------------

No. I wouldn't look at it that way. The DMT business, transactions did get a little bit worse. However, the other parts of the business, the international parts continue to go very strongly, and that's where a lot of our expansion focus is. Our U.S. outbound business slowed a little bit, but it still had very strong growth. And on the domestic side, I would say the revenues were still relatively stable to the last quarter. But transactions were a little bit worse, so we still really feel good about the dot-com business and the growth opportunities, and we ultimately want to be in 200 countries and territories over the next few years and with multiple different channels. So nothing has really changed from our strategic outlook on the dot-com business.

--------------------------------------------------------------------------------

Michael A. Salop, The Western Union Company - SVP of IR [78]

--------------------------------------------------------------------------------

Yes, that's it. I'd just add, as Hikmet mentioned, DMT is 8% of our C2C revenues, but within wu.com, DMT is actually a higher percentage of those revenues.

Thanks, everyone, for joining our call today. You have a good afternoon.

--------------------------------------------------------------------------------

Operator [79]

--------------------------------------------------------------------------------

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect...