On Tuesday, 11 March 2025, Western Union (NYSE: WU) participated in the Wolfe Fintech Forum, outlining its strategic initiatives aimed at accelerating digital business growth and expanding financial services. The company highlighted positive strides in transaction flow and digital transaction growth, while also acknowledging challenges such as a lighter first quarter and the need to stabilize its retail business.
Key Takeaways
- Western Union achieved a 500 basis point improvement in transaction flow from 2022 to the previous year.
- The company has experienced seven consecutive quarters of double-digit growth in digital transactions.
- Consumer services revenue grew by 15% last year.
- The new WUPOS 2.1 system is operational in 35% of locations globally.
- Western Union aims for consumer services to exceed 50% of overall revenue in the coming years.
Financial Results
- The company reported a 500 basis point improvement in transaction flow from 2022 to last year.
- Digital business has seen seven consecutive quarters of double-digit transaction growth.
- Consumer services revenue increased by 15% last year.
- Western Union has redeployed $110 million of its $150 million strategy over five years.
- The company is trading at a 9% dividend yield.
Operational Updates
- WUPOS 2.1 is now implemented in approximately 35% of Western Union’s locations worldwide.
- Call center costs have been reduced from $30 million to less than $15 million.
- The company operates about 400,000 active agent locations and 1,000 owned stores.
- Debit acceptance is available in 30% to 40% of European locations.
- New users make up less than 5% of U.S. transactions.
Future Outlook
- Western Union aims to move digital business transaction growth from low teens to high teens.
- The company plans to stabilize its retail business while diversifying into digital and consumer services.
- Consumer services are expected to constitute more than 50% of the overall revenue stream.
- The company is exploring real-time cross-border money transfers and AI for call centers.
Q&A Highlights
- The company deferred $800 million in taxes, with a $220 million tax payment expected this year.
- Consumer services are the most likely target for mergers and acquisitions.
- Challenges with cryptocurrency include on and off ramps and cash handling for agents.
- Competitor pricing has remained stable over the past two years.
For a more detailed understanding, readers are encouraged to refer to the full conference call transcript.
Full transcript - Wolfe Fintech Forum:
Matt: had to accelerate our digital business back to market level growth rates. We had to expand our financial services to the aspiring population of the world. And then finally, we want to have improve on our overall quality. When you think about those different topics, the first one, on the retail side, we’ve been able to improve our transaction flow by about 500 basis points between 2022 and where we were last year. So very good improvement, still more room to go.
During the last couple of years, we’ve done a couple of different things. We’ve launched Quick Resend, Remember Me, One Step Refund. And we’re in the process right now rolling out our new WUPOS 2.1. You may say, why does that matter? Who cares?
The old solutions we had, you had to go do point of sale system by point of sale system by each location. We’ve now moved into the cloud. And once it’s fully rolled out, we’ll be able to push out future advancements much quicker than we were able to do before, which you’ve heard us for years talk about 400,000 to 600,000 locations. We got to go roll this out. It’s going to take time.
That conversation will not take as long going forward now once we have that rolled out. On the digital side, we’ve now had seven quarters of double digit transaction growth. We were able to grow high single digit all four quarters last year. How we got there, you probably remember this, but we launched a new go to market strategy in late twenty twenty two. That go to market strategy had a couple of different pillars.
One is we revamped our marketing campaign. We implemented first time transaction fee free. We improved the subsequent transaction pricing to market level growth rates. And all that has allowed the results I just thought about before, which is a tremendous improvement from where we were in ’twenty two where we grew revenue 1% where we’re actually shrinking transactions. So we’ve come a long way in that.
On the Accessible Financial Services, we have been able to grow for the third consecutive year our consumer services revenue double digit. We actually grew last year 15%. Over the last three years, we’ve launched a couple of different products. We’ve launched prepaids now been in The U. S.
Market for about twelve to eighteen months. We’ve launched a new media network business. We’ve continued to accelerate our retail money order business. So we’re making and our last one being our ForEx business within Europe, we’ve expanded. So making great progress there and feel very bullish about the future for our consumer service business.
And then the final aspect of our strategy was to redeploy $150,000,000 over five years. We talked about this in our call most recently that we’ve been able to redeploy about $110,000,000 and we announced that we’re going to be on track to actually complete that program this year. So if you feel very good, all the pillars are moving, how you got there is slightly different, but super excited about the path we’re on.
Darren: So if we go into the transaction trends for a moment, I mean, first of all, you know, you’ve like you just said, you’ve had some very good trends, digital up low, you know, 13%, fourteen %, for several quarters in a row now actually. And you’ve as you rightly pointed out the retail side, the non digital side has actually improved, quite a bit to like maybe just barely low single digit decline now versus what it was high single digits. And so maybe start us off as a reminder, where are we what are you seeing right now in the just in the backdrop of the macro? We’re in we’re getting a lot of questions of, you know, obviously, implications of policy. So maybe a quick update on anything you can, just high level, and then we’ll go into a little bit more on what you see as a driving force for transactions.
Matt: Great. That’s great. I’ll give two parts to that for just Q1, we’re teaming for trends. Just a reminder, we talked about this on our last earnings call. Q1 will be a little bit lighter of a quarter.
We have a couple of things going on for folks that we knew about when we modeled our assumptions, so it doesn’t change our full year outlook. But we had a leap year benefit last year, which we won’t have again. We actually have relaunched our loyalty program here in The U. S, which will widen the spread between transactions and revenue in the first part of this year as we lap our way through that and start getting acceleration in our growth. And then consumer service, I talked about in our year end call.
We had very strong Q4 consumer services revenue. Won’t be as strong in Q1. There’s a seasonality in marketing at the end of the year. The political campaigns and all that also help us a fair bit. Back to your core question though, what are we seeing in the trends?
It’s actually pretty consistent from what we saw in Q4. We’re We’re still seeing great strength within our European business. They grew high single digit in Q4. We’re continuing to see good strength there in our retail business. Overall, digital, we’re still seeing strong double digit growth in transactions and comparable revenue.
It’s It’s really the comparability issues that I just talked about a minute ago that will make Q1 slightly different and the first half slightly different. But full year, we feel very good about our guidance we gave.
Darren: That’s great. When we talk about the trajectory for your transaction growth rates, again, I mean, you’ve talked about wanting your digital business to move from even low teens to high teens over time, right? And obviously, your retail side to stay relatively steady and more or less flat. What’s in your control around that from here? I mean, you’ve done so you’ve made some changes really ever since you and Devin have taken over.
But help us understand what’s worked and then more importantly, what you can do going forward to that’s in your control beyond macro to improve that even further.
Matt: Yes. So I think we feel like we can control our value proposition, the way we serve our customers, the way we serve our agents. And we’re doing a lot of technology improvements that go drive all that. We can control our overall value prop to our customers, what is the right price, what’s your customer level support. Those things we can control every day.
As you’ve heard Devin talk about many times in calls, we’ve been able to reduce our calls into our call centers from about $30,000,000 when he arrived to last year, we were less than $15,000,000 And that’s just by taking out the friction. We’ve done a lot of things around. We used to make it very challenging to get a refund. We’ve now gone to one step refund to make it easier. So all those things are in our control.
Darren: Right.
Matt: What we can control is really the macros. What’s happening in politics today, we saw a little bit of anxiety in the marketplace post election. We’ve had a number of our agents see lighter business in the later part of January, early February. I was actually with an agent last week, and they’re starting to see that loosen up, one agent, one week. But we can’t control those macros.
Darren: When we think about the spread now between what we see on the revenue side and the transaction side, you stated, I believe, that digital marketing is growing, again, revenues mid teens percent, yet the company is still trending in the high single digit range in terms of the revenue growth rate on the digital side despite what you wanna see is that gap really narrow. Right? And I think that’s a kind of a crux to the heart of the issue and the questions we get on the story. I mean, it’s you’ve shown a lot of improvements. The multiple is still pretty low relative to what the growth could be or what it looks like it even is now.
And I think it’s it’s questions of competition and whether you can really show pricing is stable. Right? So help us understand your view. Why would you see that gap narrow now from what’s been about, what, seven or so points? Where do you see that going between digital growth rates that are in the low teens, could go to high teens and revenue growth that are in the high single digits, but could potentially move into the double digits?
Yes. So we do believe it
Matt: will narrow over time. We don’t manage it that way. It’s more of an outcome. We want to get as many transactions as possible at the market level pricing. And if it widens because of that, so be it.
We’ve talked about that for a number of quarters now. But what will bring it back together is when we launched our go to new go to market program at late ’twenty two, that came in with first time free. Well, that had a one year effect
Darren: Right.
Matt: And we’re past that. What it also brought in is subsequent pricing. And we have our legacy customers that were are trading off a slowing rate because the book is smaller now that have a higher market price than the ones we’re bringing in new today. That is causing a divergence in the transactions and the revenue per transaction. The other item that’s gonna naturally continue to have a spread for us is our APN or account to account transactions is growing as a percentage of our book.
We’ve been talking about this now for probably three to four quarters that whether it be the retail to account or whether it be digital to account, we’re seeing that growing in the 30 plus percent range. Those generally come at a lower RPT than you see in a traditional cash payout transaction because we have higher costs to pay off the commission expense. So that’s going to widen it, but doesn’t have a massive impact on your profits. So we still love those transactions.
Darren: Sure.
Matt: And that’s going to keep a wider range than parity until you get to some of our competitors who are more 70% or 80% accounts.
Darren: So what’s the cadence? I mean, what’s the timing on some of those anniversary, some of those lapping effects of what you’ve already added, whether it’s at lower take rates or lower yields or price? But because again, that’s probably a big driver of the at least the narrative of the story, if you can see that revenue accelerate on the overall CMT business.
Matt: Yes. So you’re going to continue to see it narrow over time. You’re going to see it widen this quarter, to be honest, with the we launched our loyalty program, which you have to accrue for the cost of that loyalty program when you do it. Right.
Darren: But
Matt: you’ll still get the transactions that are generating it. But that will be a couple quarter, two quarter impact and then now we’ll start getting the flywheel going on that. But it will continue to narrow as we get through in the latter part of this year going to next year. We’re not and again, I mentioned a bit more. We’re not trying to get it down to three to four basis points.
We think it’s where it’s going to land on a long term basis. Right. But it’s gonna organically get there as you shut off.
Darren: And the number of digital users now you guys have updated it was, what, around 10,000,000 if I remember correctly.
Matt: A
Darren: little bit over that. And so your market position and how you feel about yourselves competitively in digital versus some other competitors out there. I mean, anything in terms of innovation you feel like you need to do that moves it to the next level from here, or are we in a good place?
Matt: We’re always innovating. We we talked about our last call that we now have launched our new, digital app in 10 countries. We also announced that we’re going to put it out into 10 additional ones this year. We’re always constantly looking to plug into more accounts, bank partners throughout the world. A lot of companies, including ourselves, have used aggregators to do that.
We think there’s a benefit of being directly plugged into as many bank partners you can because it will get you real time feeds both ways. So always going to be innovation.
Darren: Okay.
Matt: But we feel good about where we are. We feel like it’s going to continue to drive the growth we had last year. We think there’s plenty of room to keep accelerating.
Darren: So if we continue to see this mid to low, let’s call it low teens, but accelerating to mid to high teens transaction growth on digital, help us understand the implications on the margin of the business. I mean, I think historically you’ve talked about somewhere around, I think, RPT being 20% to 30% below retail, but the margins, if I remember correctly, are similar. So just remind us what the math is.
Matt: You’re you’re spot on. And there’s a lot of variability depending which quarter you’re talking about. But when you just blow it up to the highest level, retail is generally about 20%, thirty % higher than a digital transaction from an RPT standpoint. When you go through working your way down to contribution margin, so taking out all your variable costs, the digital business is a little bit higher profitability, but it’s slightly. And then when you work your way all the way down to operating income, they’re close to each other.
You do have some higher marketing costs when you get to the digital side versus what you would have on the retail side. So it makes it pulls down the contribution margin, again, pretty close to the same point on a margin basis. There is also variability depending on your pay and payout method. The lowest yields we have will be an account to account transaction, but we love those transactions because they’re usually the stickiest and have the longest retention timeframe.
Darren: Okay. And so when it comes down to it, I mean, this mix obviously is a little bit on the RPT side. But from a margin standpoint, you feel pretty good about the stability in it.
Matt: On the margin side, we feel very good about it. But the other part to keep in mind for digital as a whole, the retention rate for digital customers is much stronger than a retail customer. And then when you get a account payout or account pay end customer, it’s even more stronger.
Darren: Okay. That’s really helpful. Shifting to the retail side now, if you could just give us an update on the physical footprint, the agent locations. Just I think it’s still important for the brand more globally at least. But where are you in terms of location optimization also and just where do you want to be?
Matt: Yeah. So we’ve got about 400,000 active agent locations. It’s been to that number for a number of years.
Darren: Yeah. It was I remember 500,000 years ago.
Matt: It was six when I first joined the company, it was 600,000, but that wasn’t active. Right. So we pulled out all the inactives. There’s some of them are still there today. Right.
We just don’t count them because we wanna focus on productive locations. We don’t wanna reward ourselves or our employees just for signing up locations that do nothing. So it’s been a stable base for a number of years. But you got to think about it from a pyramid standpoint. The way we manage it is you’ve got your company owned stores as your small number, we have about 1,000 of them, but we want to have controlled distribution where we can test and learn and do different things, high density cities where you have good good throughput.
Then we have our something called a concept store. Concept stores are where it’s Western Union branded. They’re exclusive. They operate very similar to a company store. Then you work your way down to exclusive Western Union branded, you have non inclusive, you have your strategic.
So our pyramid, we’re working off all parts of it. We think there’s ways to improve each part of that with our technology plus our relationships.
Darren: So just as a take a step back and remind us the mix. Your retail is just for the audience is the percentage of retail versus digital now.
Matt: Yes. So for CMT, it’s about 70 fivetwenty five. For the whole company, it’s closer to seventy-twenty five-five.
Darren: Right. So your goal is to take that 75%, probably reduces as a percentage of the mix. But at the end of the day, you still want it to be relatively flat.
Matt: Yes. Our goal our belief is we can stabilize our retail business and then we’re going to over time diversify the company away from retail by continuing to grow our digital business and our consumer services high single digit, double digit.
Darren: So we have overall digital that again can grow in the teens and retail relatively stable. You should lead to a CMT business, an overall money transfer business that should be up somewhere in the low single digits, I think. Right?
Matt: Correct.
Darren: So the big question is now just getting retail from that slight decline, negative low single digits, to something in neutral territory. I mean, what just help us understand again the blocking and tackling and the dynamic of getting there.
Matt: Yes. So it’s a combination of I’ll give you an example. So for us, our European business, when we over the last two years, we’ve lost two agents. That caused us to reinvest in our sales force. We put a lot of our pilots in there related to our concept stores.
We with some of the extra money we had from Iraq, we were able to improve our pricing, get back to market level pricing. And you saw high single digit transaction growth and revenue growth in the fourth quarter. So that’s what we think is possible when you have the right proposition of mix of agents, right systems, right distribution and the right price.
Darren: So where are we on that? I mean, what percentage of your agent locations actually have an updated POS infrastructure, quick resend, remember, debit paying capabilities and other features?
Matt: Yeah. So it varies based on solution. I’m gonna give you the blanket that does it all, and then I’ll I’ll take a step back for you. So our new WUPAWS 2.1 is now in about 35% of our locations around the world. It varies by region, but that’s about the average for the world.
But the actual components, we started rolling out many of those things before twoone. So something like one step refunds largely around the world now. Quick resend is in the vast majority of our locations. So really, the last push here we’re pushing out is the twoone that we can roll out future improvements. Another thing we’ve been working on is debit acceptance.
In Europe, that’s probably in about 30%, forty % of the locations we want to have it in. So we still have much more room there. U. S. Is much more nascent.
So we’re working our way through that here too. So tons of improvement, tons of opportunity to go forward.
Darren: Okay. Okay. And so again, when we think about the competitive landscape, obviously, we’ve seen a lot more competition on the digital side. What about the retail side? I mean, have you seen much change in terms of the incumbents that you were competing with going back a couple of years till today?
Matt: It’s many of the same competitors we’ve had for a number of years and the way of competing is similar. Agents are looking for how you can speed them up. Labor cost is very high. That’s why we put a lot of time into our point of sale solution. They’re wanting us to treat our customers right, and we’re improving with our call centers and ability for people to do things digitally with us.
So the landscape is very similar to what it’s been over the last couple of years.
Darren: Okay. And I guess I know Devin would talk a lot about when he first came in the convergence between the digital and the retail user. It was really looking at it as one customer. I mean, have you seen that actually play out where as you grow, you see more loyalty on both sides?
Matt: So we continue to see people who we would call the omni customers are working on both sides. We continue to see the retention rate to be meaningfully higher for an omni customer. We see them transacting five to seven transactions more per year. So we continue to see that population having a much better demographic or benefit to us, the company. But as far as the overall size of it, it’s not meaningfully different.
We disclosed it, I think, maybe two years ago where it was up to 5%, ten %.
Darren: Okay.
Matt: What we’ve learned is a lot of customers go from retail to digital, so more the retail digital escalator, and they’re only in there for a year and they become a digital customer. There’s not not millions and millions of customers that bounce back
Darren: and forth every year. Right. That makes sense. Let’s shift to the political environment a bit. Obviously, there’s been a lot of rhetoric and discussion over immigration and obviously a lot of questions on the whole remittance industry as to whether or not migration limitations will impact your business.
Right? Just help us frame number one. I mean, what what do you see as the percentage of users in your model that actually are new migrants? Because there’s obviously some question of risk around that. And then we can go a little bit more into the implications on even The US and Latin America.
There’s been some more protectionist regime. So can you give us a sense of what you’re seeing out there and what the potential implications from a political standpoint can be?
Matt: Yeah. It’s still early days. It’s six weeks in. You can look back to the last Trump administration and deportations was not that dissimilar to a lot of other administrations. As far as limiting inbound immigrants, and we talked about this in our last call.
When you look at our transactions that are related to customers that have been new to us in the last year, we don’t necessarily know when they cross the border to come in, but we can tell whether they’re new to us. They might have been somewhere else, but it gives you kind of a max exposure. Someone new to us about 5% of our transactions in The U. S, a little under that. So that would be if something happened where you were to slow that inbound.
Is it going to happen? Time will tell. If you can predict that, that’d be awesome to know. We’re monitoring it very closely. But as I mentioned before, we’re starting to see the retail environment starting to loosen up six weeks into it is some of the information we’re starting to get back.
So we’re optimistic about about tomorrow.
Darren: And then in terms of the different geographic dynamics going on, I know Latin America came up. Just remind us and explain to us, if you don’t mind, what what that what that was what was really going on there and the implication of it?
Matt: Yes. So we saw in the latter part of the third quarter going into the fourth quarter, slowdown in our Latin America business. There was dozens of elections in Latin America. There were some controls down the Darien Gap. There’s some controls around the Mexican border.
We make a fair bit of money as people migrate up through Central America. And we saw two things. One is limitations on people being able to migrate, but also people wanting to stay home to help to vote and spend time in the political system.
Darren: Okay. So net net, put it all together, I mean, from a political standpoint, it sounds like right now you’re not seeing that much of an implication yet on from the migration policies or it’s still so early, I guess. But I think you’ve called out low single to maybe mid single digit percentage of your total transactions that are new potentially new users that could be new migrants.
Matt: Yes. So sub 5%. We’re not seeing a massive or any meaningfully different impact today than we would have over the last couple of quarters and still feel very good about our guidance for the year.
Darren: Okay. Let’s shift to the Consumer Services segment. I mean, it’s a low double digit percentage of your business, right? But it’s been extremely strong from a growth rate standpoint. Maybe if you could just take it a step back and remind us what’s in that segment, what is it what are you guys investing in around it now?
And just break it down for us first and then we’ll go into what the opportunities are.
Matt: Certainly, Darren. So our consumer service business is a little over $400,000,000 to your point about 10%. The largest two components of it is our bill pay business, which is in The U. S. And Latin America, principally Argentina, our money order business in The U.
S. And then we’ve added a bunch of new things to it over the last couple of years. We’ve added to it a prepaid business. We had a very small nascent Forex business, which we’ve been expanding in Europe. We’ve launched a new media network.
And then we’ve got our wallet solutions in seven countries around the world now.
Darren: And in terms of what you think because it’s been growing double digits, right? I mean, what that can be as a percentage of the overall business going forward, what are your aspirations on it?
Matt: Yeah. So our aspirations are for our branded digital business plus our consumer services business be greater than 50% of our overall revenue stream in the near future. Both those should be able to grow high single digit, double digit range. And today, they’re 35% of the company. So you can just imagine how that goes if you stabilize the retail business.
It takes you a couple of years to get there. So that’s our aspirations and beliefs we can get to.
Darren: What is the TAM now? I mean, if you think about retail, money order, bill payment, FX exchange, are those markets actually growing well? I mean, just help us understand the backdrop of these segments.
Matt: Yeah. So we haven’t really disclosed those yet. We you’re trying to steal my investor day coming up for any couple of months. But I’ll walk through high level each one of them. So as you think about retail money order, that’s a business that doesn’t have a high growth business but is a consolidation.
And we think that we can be a winner as the business consolidates. It’s been growing for us for the last two, three years. When you think about the ForEx business, we can see a high variability in the ForEx business around the world. It ranges anywhere from low single digit to high single digit which region you’re talking about in the world. We had a very small business, got an opportunity to expand that through some of our company owned stores.
And we think there’s a way that we can make that to be a strong grower going forward. It is a multibillion dollar business around the world. And the last one I’ll touch on is bill pay because it’s a big one for us. Our bill pay business, similar to the retail money order, not a high growth business, but it’s one where it’s consolidation. We think our retail footprint can allow for us to continue to have a big growth business.
Darren: And these businesses, I mean, is there a natural synergy between these and CMT? I mean, is it just help us understand the cross sell.
Matt: Yes, there is. So they all leverage both a digital and a retail platform. So we’re able to both we’re able to leverage the eyeballs on our customers, 100 plus million customers we have today to sell these transactions into. The one place where it might be slightly different, but we’re able to leverage our retail locations is on the ForEx side, it’s less of the migrant customers and a little more affluent folks, but you still can leverage the same retail footprint.
Darren: Okay. There was also a couple of deals I know you guys did, two small tuck in deals, both a Mexican wallet for a license, I think, and Dash, a wallet in Singapore. What’s the latest on the integrations there? And just maybe if there’s more to come on this front, help us understand what the strategies were there as well. Yeah.
Certainly. So, both deals
Matt: are still in regulatory review. Buying license is not an easy thing as you probably know. But let me take a step back about why we bought them both. So Mexico is the number one remittance corridor in the world, U. S.
To Mexico. We think a two sided network will be very beneficial for us to be able to send from our U. S. Wallet to a Mexican wallet. To do that, you need to have a license.
So we bought a business that has a wallet solution plus a license. And once we get through regulatory reviews in the next three to nine months, we’re looking forward to building that out and make that work. Dash is already an existing wallet solution. We’ve got a very strong retail footprint within Singapore. And we feel like the combination of that digital solution plus our retail footprint could provide a great synergy we can then take to other parts of Asia.
Darren: Just shifting to capital and allocation and given just following up from those two deals. In terms of internal investments, Matt, I mean, you had discussed reallocating and shifting existing expense to get about 150,000,000 plus in OpEx in order to modernize the business. Again, we’ve talked about POS hardware being a little bit more modern, different offerings at the point of sale, especially on the CMT side. You’ve signaled trending ahead of this. You’re doing better, a little ahead of schedule here.
Is there more wood to chop in terms of reallocating expenses first before we go into where you want to allocate capital?
Matt: Yes. So on the cost side, I grew up at First Data. There’s always room for chopping more wood. We feel like we’re still early in our journey there. Most of the last two years have been chopping wood to reinvest back in these product solutions.
Most of them are now built and we’re getting beyond that now it’s rolling them out. We think there’s still further room to much of that will fall to the bottom line.
Darren: Okay.
Matt: On your second part of your question there on capital allocation, we continue to be committed to our dividend. For everybody who wants to invest. You can get a nice beautiful 9% dividend yield while you watch us continue to turn this company around. But we’re also looking at other M and A opportunities. We did the two we talked about there.
Last year, we probably looked at 35 to 40 things. We’re very judicious about where we do that. We’ll make sure it’s a good return, and we balance the two. Is it better to buy something and invest? What’s gonna help us accelerate relative to returning capital to our owners?
And if we don’t find something that makes sense, we’re going to buy back some shares.
Darren: So again, from an M and A standpoint, it sounds like you’re always looking. But is there anything specific that you’re looking at right now? Is there anything live? Is there without mentioning names, obviously.
Matt: There’s always things in the pipeline with 35 to 40, you got several every month. The vast majority of things we’re likely to do will fall in the consumer services space. We’re always looking at the retail players. Some have been on the market recently. We always look at the digital players.
But they don’t add a ton to us. You look to see is there some synergy you can get. But you should expect most of the stuff falls into consumer services.
Darren: Okay. Matt, before we take questions from the audience, I just I want to take a step back and look at the stock again because, I mean, obviously, the market for some time now, has been putting a multiple that’s, you know, call it a mid to high single digit multiple on a stock that you guys have been showing progress. So first of all, what are your thoughts? I mean, in terms of what the investor sentiment is, what do you think is being missed by investors versus your strategy? Start with that, if you don’t mind, and then we’ll go into a couple more specifics.
Matt: Well, we’ve had a history of being a shared owner. We’ve had a history of shrinking. We then laid out a not immediately lovable three year plan at our Investor Day last October February ago. We’ve been delivering that. We’ve delivered now three quarters of positive revenue growth.
We have maintained EPS while we’ve been investing in the business, and we’re now getting on the back end of this. Our free cash flow has been challenged the last three years. You know this, Darren, that we had some deferred tax payments under the Tax Act that will make our last payment coming up in a few months. And then as we get into next year, we’re going to have meaningfully more accessible capital to do things with. I think people are missing the journey we’ve been on and hit those milestones in a landscape of fintech not being loved as much.
But I feel like we’re in a much better place today than we were three years ago, and we’ll have a very good story in November when we talk.
Darren: Right. And then competitively, again, I mean, that’s a topic that we always hear about from our investors and clients about money transfer in general and pricing and the spread between revenue and transactions. So from your perspective, I mean, again, do do you see anything different whatsoever in terms of what you’re doing on pricing now in order to maintain or grow market share or the market more broadly?
Matt: Yes, I’d go a different angle. I would go if you look at most of our competitors, they’ve been stable in pricing the last two years. We have brought pricing down clear above market and had convinced the world and ourselves probably that you could be meaningfully premium priced. I do believe our brand has recognition. We do have a very loyal customer base, a lot of trust, but there’s a difference between when you have customer our customers don’t make a lot of money.
There’s a big difference between charging 5% more, 10% more, or 50% more. And we’ve largely fixed most of this pricing challenge over the last two years.
Darren: Okay. And then just last one for me before I take the audience questions. I mean, is there anything more from a technology big picture disruptive standpoint that’s maybe outside of the traditional money transfer companies that you guys think about and keep you up at night? Or you know, are you investing in some areas as well like that, whether it’s, you know, RTP or Yeah.
Matt: So we’re well, we’re always looking at we’re always working on, AI, generative AI. We’re doing things in our call centers. We’re doing things in tech to speed it up. So there’s all those blocking, tackling things we’re doing. Right.
But but beyond that, not not nothing else major.
Darren: Okay. Alright, guys. Well, we have a few minutes left. If anyone has any questions in the audience and when we think about the investor day coming up, what are your goals? What are your goals to wanna make sure that the investor base walks away from, hopefully?
Matt: So we are in the process of designing that right now and looking forward to sharing that in November.
Darren: Alright, guys. Any questions?
Mark: Thanks, Matt. You talked a little bit about the final tax payment. I believe that’s coming up in 2Q. Could you size that and maybe how much that frees you up as a CFO to maybe reinvest or redeploy that in different ways that you couldn’t do over the last three years?
Matt: Yeah. So it’s the way the tax act worked, we were able to defer $800,000,000 of taxes. The first four, five years of that is a very low number. I believe it was $45,000,000, but then it ratchets up at the end of it. This year’s payment will be $220,000,000 Last year’s was about $200,000,000 So you can imagine that for us, that’s about 25% to 30% of our free cash flow.
Darren: So again, with that incremental step up in free cash, I mean, your view is more buybacks, more just continue the dividend and look for opportunistic deals? Correct. Okay. Go ahead, Mark.
Matt: Do you see any opportunity in crypto at all? Obviously, it’s hot and then it’s not. But is there an opportunity there? So we spend a fair bit of time monitoring whether there’s ways to send money real time cross borders rather than using the traditional banking system. One of the challenges we always run into when we talk to different providers is the on and off ramps.
Ultimately, we need to have cash in Nigeria, and you need to be able to give out money at your agent location. So somehow, you have to get the money to your agents in Nigeria. We’ve yet to solve that riddle, but it’s one that we hope we’re hopeful there’s an opportunity there at some point, but we’ve yet to find that.
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