西聯匯款 (WU) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter 2011 Western Union earnings conference call. My name is Melanie, and I will be your coordinator today. (Operator Instructions). As a reminder, today's call is being recorded.

I would now like to turn the call over to Mr. Mike Salop, Senior Vice President of Investor Relations. Please proceed.

Thank you and good afternoon, everyone. On today's call, we will have comments from Hikmet Ersek, our President and Chief Executive Officer, and Scott Scheirman, Executive Vice President and Chief Financial Officer.

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 a supplemental table with our press release.

As a reminder, 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 2010 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, 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.

Thank you, Mike, and welcome to everyone on the call. We believe our business is off to a good start in 2011 as we successfully executed against our strategies. We delivered 4% revenue growth, continued to make progress on margins, and actively deployed our strong cash flow. Our Consumer-to-Consumer segment continued to produce strong trends as constant currency revenue increased 5% for the second quarter in a row. As always, this business, which has presented more than 200 countries and territories, represents a mix of performances in different markets.

Asia-Pacific was strong again with a 14% revenue increase driven by growth across the region. We are also increasing our presence in the region by signing an agent agreement with China Construction Bank, one of the leading banks in China. We now have over 100,000 agent locations active in India and China combined. I was in China meeting with agents recently, and I can tell you that there is a great excitement about the opportunities for our business.

The Americas sustained the improvement realized in the fourth quarter, delivering 6% revenue growth. Within the Americas, the US domestic repositioning continued to generate successful results with domestic money transfer revenue increasing 8%. Domestic transaction growth was strong again with 21%, which was impressive considering the 18% growth a shift in the 2010 first quarter immediately following our repositioning.

In the Europe, Middle East, Africa, South Asia region, we saw similar constant currency trends to the fourth quarter in many of the markets, although there was some impact from the political unrest in the Ivory Coast, Egypt and Libya.

I also want to take a minute to mention Japan. Although our business is very small there as we are in the early stages of building our brand and network, we, of course, want to help the people of Japan in dealing with this crisis. We have contributed to various efforts to assist in the disaster relief and also (inaudible) money transfers to the countries for a month following the earthquake and tsunami.

Now turning to Global Business Payments, revenue growth was flat as increases in Western Union business solutions were offset by declines in the Bill Payment business. There was good progress in Bill Payments, though. The Bill Payment revenue declined continued to moderate, only decreasing 2%, and we saw improvement in margins relative to the fourth quarter.

We have worked hard on the cost structure of this business, as well as on driving revenue opportunities. We have been adding new billers and now have access to over 10,000 billers in the US. We have been adding electronic billing partnerships with providers such as Online Resources and 3i Infotech and implementing improved technology that delivers a better consumer and agent experience.

We have also been repositioning all our consumer Bill Payment products under the Western Union brand, which is allowing us to better manage the consumer value proposition to dynamic pricing and marketing.

Western Union business solutions delivered 13% revenue growth in the quarter. We plan to continue to increase penetration and expand to new markets in B2B through direct, online, agent and partnership models over the next several years.

We will also use innovation to better serve customers such as our recent introduction of a new foreign exchange payment service that allows small and medium enterprise business clients to make payments from their smartphones. Business-to-business cross-border payments remains one of our priority growth areas as the market is large and fragmented, the SME customers are underserved, and we believe we can leverage our brand and cross-border expertise and global relationships to gain share.

We also made further progress on our other strategic initiatives. In electronic channels, which includes westernunion.com, account-based money transfer, and mobile money transfer, revenue increased over 20% in the quarter and presented 3% of the total Company revenue. Account-based money transfer transactions, which includes account to cash through banks, increased over 35% in the quarter. We now have over 45 banks signed to offer account-based money transfer services with 25 already activated.

One of our recent agreements with Emirates National Bank of Dubai where we will offer account-based money transfer through online banking, mobile phones and ATM account holders in the United Arab Emirates. Also, in EMEASA we have just launched another ATM-based money transfer service with Bank of Georgia. In Asia-Pacific we have activated online service with several banks in Japan, and this summer we will offer money transfer service through the bank's 15,000 ATMs.

In the Americas, we recently signed with US Bank, which is already a working agent to offer online banking money transfers to their customers. By the way, this is our first such agreement with a top 10 bank in the US.

For bank account holders, Western Union account-based money transfer is a great service to easily initiate transfers from home and connect to our global network of agent locations in more than 200 countries and territories. For Western Union, we believe these are great opportunities to gain new consumers, as well offer more choice and convenience.

Westernunion.com, which is available in 20 countries, had transaction growth in international markets over 40%, while global transactions increased by 15%.

In mobile money transfer, we continue to position ourselves to be at the center of the cross-border mobile money transfer infrastructure as it develops. We have 16 agreements in place with mobile network operators and banks, and over 85,000 of our agent locations in 49 countries are enabled to provide cash to mobile service. We recently expanded our service to Safaricom subscribers in Kenya, and we signed a Master agreement for mobile money transfer with Etisalat Group, a leading mobile operator in 18 countries across Asia, the Middle East and Africa.

In pre-paid we increased our cards in force in the US to over 1 million with retail distribution at over 10,000 locations. In the quarter approximately $180 million of principle was loaded onto Western Union prepaid cards through over 500,000 loads. We will also launch prepaid cards in some international markets in the second half of the year with the UK being the first priorities.

So overall I feel positive about the stock through the year. The Consumer-to-Consumer business continued to recent favorable trends, and we increased our agent locations to 445,000. Our efforts to improve Bill Payments and expand the margins are starting to pay off. We are seeing business solutions delivered solid growth, and we made further strides with the development of electronic channels and prepaid.

Excluding charges, we drove margin improvement thanks to the revenue growth, restructuring activities and other efficiencies. We continue to generate and deploy strong cash flow as we returned almost $570 million to the shareholders through repurchase and dividends in the quarter, and in April we completed the acquisition of a leading European super agent.

Now given the first-quarter results and our current expectations for the remainder of the year, we feel confident in affirming the full-year financial outlook provided in February.

Before I turn the call over to Scott, I want to review our recent organization announcement. As you know, I became President and CEO in September and have been working on developing the right organization to best drive our key strategies. We made some changes last year, adding an executive responsible for new products and services and streamlining some positions. We have now further redefined responsibilities and expanded the roles of several members of the executive team. I'm pleased that Stewart Stockdale has taken the position of Executive Vice President and President Global Consumer Financial Services.

Stewart is responsible for all of the Company's regions and agent network, leading the core consumer money transfer service and the Bill Payment business. We have a strong team of regional leaders with great track records that report to Stewart. This group includes Jan Hillered for Europe and CIS, Jean-Claude Farah for Middle East and Africa, Drina Yue for Asia-Pacific, Victoria Lopez-Negrete for North America, and Odilon Almeida for South America.

I think you all know the great accomplishments Stewart and his team have achieved in returning the Americas business to growth, taking on Bill Payments and jumpstarting our prepaid efforts, and I do look forward to Stewart now taking on a global leadership role.

David Yates, who is our Executive Vice President and President of Business Development and Innovation, has responsibility for the design, development and implementation of all our new products and services. This includes Western Union Business Solutions, electronic channels and stored value programs, including prepaid. David has extensive experience in the payments, banking and IT space, and David's team will be a great driver of our key strategic initiative of expanding electronic channels and developing new products and services.

And finally, Diane Scott, who had been responsible for marketing in the Americas, has been promoted to Executive Vice President and Chief Marketing Officer. Diane has been an integral part of our success in the Americas and is now responsible for strategic global marketing, as well as communications and social responsibility.

I'm confident these changes will help guide Western Union to the next level of success and drive our key strategic initiative of growing retail channels, expanding electronic channels, developing new products and services, and improving process and productivity.

Now to give you a more detailed review of the first-quarter results, I would like to turn the call over to Scott.

Thank you. Overall for the quarter we delivered consolidated revenue growth of 4% on both a reported and constant currency basis. Transaction fee revenue increased 3%, while foreign exchange revenue grew 8%. Within C2C, transaction fee revenue increased 4%, and foreign exchange revenue grew 7%. The consolidated revenue growth was driven by continued solid trends in our Consumer-to-Consumer segment and Western Union Business Solutions and further moderation of the revenue declines in our Bill Payment business.

Our Consumer-to-Consumer segment revenue increased 5%. Constant currency revenue growth was also 5%, which was consistent with the fourth quarter. Transaction growth in our C2C segment for the quarter was 7%, which compared to 9% in the fourth quarter. The transaction growth rate change was primarily due to the disruptions in the Ivory Coast, Egypt and Libya, and the more challenging comparisons from prior year on US domestic money transfer of transaction growth. The Company's C2C cross-border principle increased 7% in the quarter or 6% on a constant currency basis. C2C principle per transaction increased 1% year over year on both a reported and constant currency basis. This represented the first quarterly principle per transaction growth in over two years.

In the international C2C business, revenue also grew 5% on both a reported and constant currency basis with transaction growth at 5%.

Turning to the regions, our C2C business in Europe, Middle East, Africa and South Asia region grew revenue at 2% on transaction growth of 4%. Reported revenue growth improved from the fourth quarter, primarily due to the strengthening of the euro. The transaction growth rate declined 2 points compared to the fourth quarter due to the impact of the Ivory Coast, Egypt and Libya, which individually are 1% or less of total Company revenues, but added together they impacted growth. Currently most of our network in Egypt is back in operation, and there are indications our agents in the Ivory Coast may be reopening soon, although Libya largely remains closed.

Constant currency revenue trends in Europe were similar to the fourth quarter with growth in large markets such as Russia, Germany and the UK.

The Gulf states delivered overall transaction and revenue growth for the second consecutive quarter, while India revenue increased 8% on 6% transaction growth.

Last week we completed the acquisition of the remaining 70% interest in one of our leading super agents in Europe, Angelo Costa, for cash consideration of approximately $140 million.

As we stated in December, this acquisition will allow us to more directly access our network locations and be closer to our consumers, as well as more quickly introduce more products and services such as prepaid cards. We will also be able to optimize commission rates and achieve operating efficiencies by leveraging our European infrastructure, including the infrastructure obtained through the FEXCO acquisition in 2009.

We have begun the integration of Angelo Costa. As we mentioned on our February 1 earnings call, we expect about a net $0.01 benefit to 2011 EPS from the acquisition. The benefit results from the recording of a gain on our previous ownership interest, partially offset by slight dilution from integration costs. The gain will be recorded in the second quarter.

We also continued to make progress with our regional agent expansion in Europe. We now have over 2500 retail locations activated since the passage of the payment services directive and are seeing good productivity at these locations. We are on target for European retail revenue of approximately 1% of total Company revenue for 2011.

Turning to the Americas region, we continue to see success from the US domestic repositioning as the Americas region delivered a revenue increase of 6% on transaction growth of 8%. Domestic money transfer revenue increased 8% on transaction growth of 21% in the quarter. Domestic is delivering solid revenue growth, although we expect the transaction growth rates to moderate as we anniversary last year's large gains. We expect to see domestic revenue growth in 2011.

Elsewhere in the region, Mexico transactions and revenue each increased 1% in the quarter. Mexico trends have stabilized the last few quarters, but we have modest expectations for this business until we start to see more substantial job creation in the US.

The Asia-Pacific region delivered revenue growth of 14% on an 11% transaction increase. There were once again many markets across Asia Pacific contributing to the growth with China posting increases of 12% in revenue and 5% on transactions. For the overall C2C business, the spread between transaction and revenue growth in the quarter was 2 percentage points with no impact from currency. The spread was equally split between pricing and mix and narrowed from the fourth quarter as both impacts declined.

For the full year, we continue to expect price decreases in the 2% to 3% range.

Moving to the Global Business Payments segment, overall revenue was flat. The Bill Payment business decline moderated further with a revenue decrease of 2%, while Western Union Business Solutions revenues increased 13%. In Bill Payments, continued strong international growth and increases in electronic payments drove the improvement.

Western Union Business Solutions is on track for the expected midteens revenue growth for the year and benefited from increases in online revenue.

Turning to margins, the first-quarter consolidated GAAP operating margin was 24.4%. Excluding restructuring charges, the consolidated operating margin was 26.3%. The margin excluding restructuring charges improved approximately 70 basis points from the same period last year as revenue leverage and operating efficiencies, including restructuring savings, more than offset some negative foreign exchange impact and increased investment spending.

We recorded $24 million of restructuring charges in the quarter related to our previously announced programs. Approximately $7 million of the charge is included in cost of services and $17 million is in SG&A. These charges are not included in our segment operating results.

We realized approximately $8 million of savings from restructuring activities in the quarter. For the full year, we continue to expect approximately $50 million of pretax restructuring charges and approximately $50 million of related savings.

The tax rate in the quarter was 23.5% or 24.1%, excluding the impact to the restructuring charges. This is consistent with our full-year expectation of 24% to 25%. Earnings-per-share in the quarter were $0.32 or $0.35 excluding restructuring charges. GAAP EPS was $0.30 in the first quarter of last year. Our C2C segment operating margin in the quarter was 28.6%, an increase of 120 basis points over the same period last year. The increase was driven by the same factors that favorably affected the consolidated margins.

Global Business Payments operating margin was 16.5% in the quarter, which compared to 20.7% in the first quarter of 2010. The margin declined compared to last year primarily due to revenue decreases and mix shifts in US Bill Payment and additional investments in Western Union Business Solutions. The margin increased 320 basis points relative to the fourth quarter's 13.3% as a result of lower integration costs in Western Union Business Solutions and the restructuring savings and other cost structure changes in our Bill Payment business. As a reminder, we expect Western Union Business Solutions to be nondilutive to earnings for the full year.

Moving to our cash flow and balance sheet, first quarter cash flow from operations was $252 million, and capital expenditures were $22 million. At quarter end, the Company had total debt of $3.6 billion and cash of $2.2 billion, of which approximately $1 billion was outside the United States. In the quarter, we issued $300 million of two-year floating-rate debt. As a reminder, we have approximately $700 million of debt maturing in November 2011 that we planned to refinance.

We were active with capital deployment in the quarter. We spent $525 million to repurchase 25 million shares on 4% of the total shares outstanding at an average price of $20.95. We also paid $45 million in quarterly dividends. As of March 31, we had $890 million remaining under our stock repurchase authorization, which expires on December 31, 2012.

Given the solid start to the year, we are comfortable with the full-year 2011 financial outlook we provided on February 1. Our 2011 full-year outlook calls for constant currency revenue growth in a range of 3% to 4%; GAAP revenue growth similar to constant currency; GAAP operating margin expansion to approximately 26% in 2011 compared to 25% in 2010; operating margin expansion to approximately 27% in 2011, excluding restructuring charges compared to 26% in 2010; GAAP EPS of $1.41 to $1.46, including $0.06 of restructuring charges; EPS of $1.47 to $1.52, excluding restructuring charges; and GAAP cash flow from operating activities of $1.2 billion to $1.3 billion.

At this time we have not changed our foreign exchange rate assumptions compared to our February outlook. As a reminder, on a full-year basis, each 5% move in European currencies impacts revenue by approximately $55 million, but pretax operating profit by only $7 million due to our hedges.

In summary, the results for the first quarter were solid with sustained momentum in our Consumer-to-Consumer segment, moderating revenue declines in Bill Payments, and solid growth in Western Union Business Solutions. We made further progress on our strategic priorities, and we have strong deployment of capital, returning almost $570 million to shareholders through buyback and dividends in the quarter and completing our European super agent acquisition earlier this month.

Operator, we are now ready to take questions.

(Operator Instructions). Adam Frisch, Morgan Stanley.

Nice job on the quarter. I wanted to ask you how much of the next leg up whether it be revenue growth acceleration or margin expansion will be driven by company-specific initiatives and how much is relying on the macro settling down and becoming steadier? And the reason I'm asking the question is because the uptick in the principal per transaction that picked up a little bit in the quarter for the first time in [eight], so I'm just wondering what that was due to?

If you look at our business, the details of our business is being in the 200 countries, and obviously being on 16,000 corridors has different dynamics of the business. Some parts of the corridors have different pricing. Some parts of the corridors have different dynamics. But generally I feel comfortable with the outlook. I believe also that migration will continue. I believe also despite the crisis, which happened recently in the Middle East, we are well-positioned. The beat of our business being in 200 countries we can respond to different crisis, differently. So overall I will say that from business-wise I'm satisfied.

Besides that, having 445,000 locations being in 200 countries and having such a strong brand gives us also specific -- we can also do specific activities on electronic channels. I'm pleased with our current development on electronic channels. The account-based money transfer which initiates from account to cash gives us a very good position. And the other thing is also we have now 3% on electronic channels. Our westernunion.com is growing very good, and I believe also we are very well positioned.

Do you want to add something?

Nothing I would add. New term for 2011 we don't expect the economic environment to be substantially better, worse. It is about the same. But our objective no matter what the economy is to continue to gain market share as we move forward whether it is in the core money transfer business where we have the 17% share or in our newer opportunities that probably will play out over the next couple of years whether that is prepaid, B2B or electronic channels, but we think we really can control our destiny as we move forward.

Okay. And if I could just follow that up with one more. In terms of flexibility on the marketing spend, let's say things do take a turn down on the macro scene and the economy starts to sputter again around the globe whether it be for geopolitical reasons or what have you, if you want to preserve the bottom-line growth in terms of steady operating margins and EPS if revenue growth decelerates or accelerates at a slow rate, do you have the flexibility there? Are you managing? If push came to shove, are you managing for operating margin, or are you managing for revenue growth?

Well, I think obviously we are really much focused for the health for the business. I think we are a global brand (inaudible) our global expansions continue to growing. I mean we have around 445,000 locations now, and we are going to continue to add new locations in West-Air. We are going to invest in our brands. We are going to continue to invest in the new initiatives. I think we are affirming our outlook for the year. We are very well-positioned to affirm our outlook and confirm our outlook which we gave in February.

Bryan Keane, Credit Suisse.

I just wanted to talk a little bit about the Europe, Middle East, Africa and South Asia corridor. The transaction growth moderated there a little bit. It went from, I think, 6% in the fourth quarter and transactions to 4%. Was that entirely -- when you look at it, is that entirely due to some of the disruptions in the Middle East? I think you mentioned Ivory Coast, Egypt and Libya.

I would say on the EMEA division, if you will, what primarily impacted the transaction growth rate would be Libya, Ivory Coast as we move forward including Egypt. But what is probably important to remember, too, that as we think about the C2C business, although transactions move from 9% in the fourth quarter to 7% in the first quarter, the constant currency revenue growth in our C2C business, which is about 85% of our revenue, was 5% in both quarters, so very strong, very stable, and in the C2C business, we were able to drive 120 basis points of margin expansion.

With that said, Egypt, we are back up and running in that market there. Ivory Coast we expect to be soon; hard to say for certain, but we expect to be soon. And I would say Libya we are still down, but compared to the other two markets, an important market, but it is much, much smaller than the other two markets.

Any impact at all, any spillover into the UAE or Saudi Arabia that you've seen from this political unrest?

Not really. We did see in the Gulf states in the first quarter both positive transaction and revenue growth exactly what we saw in the fourth quarter. So those markets continue to perform nicely. We have had modest expectations for the Gulf states in 2011, but Q1 pulled through very consistent with the fourth quarter with positive transaction revenue growth.

I also recently visited the Middle East. I have to say that our position is there pretty well, Brian.

Okay. Terrific. Last question for me. It was great to see the margins bounce a little bit there in the Global Business Payments division. What do we expect, Scott, maybe going forward? Should it bounce around that 16.5% level, or will there be some shocks to the margin as we go forward?

You know, in that business, we are really focused on a number of things. Clearly we want to with the US Bill Payment business is to continue to get the revenue declines to moderate. The revenue was down 5% in the fourth quarter. It was down 2% in the first quarter, so we are making progress. We want to continue to make that progress there.

In addition, as part of that segment, is Western Union Business Solutions. That business grew 13%, and we expect to grow it midteens. So the combination of working to get the topline going north and not south is going to be helpful. We have also signed on more billers. We are now up to 10,000 billers in that business that I think will be helpful to us. And then we are very focused on the cost structure there.

Western Union Business Solutions will not be dilutive in 2011, so the profitability profile will get better. But the objective on a consolidated basis is really to grow our margins to 27%, which would be up about 80 basis points compared to 2010. So we think the combination of what we can do with Global Business Payments and then our C2C business, which is about 85% of our top line, the revenue growth, the restructuring, some pushback for investment in the future, we can drive margin expansion in the business.

Sounds good. Congratulations on the quarter.

James Kissane, Bank of America/Merrill Lynch.

Thanks and good job, guys. Scott, can you provide a little more color on the spread between domestic revenue and domestic transactions? I mean the spread definitely narrowed but seemed pretty wide, and you anniversaried the price cuts in the fourth quarter, so just a little more color on that.

Yes, Jim, we still do have some spreads there. We had 8% (inaudible) revenue growth on 21% transaction growth in the quarter, and that is a business that carries a 30% margin. So we like the revenue growth profile there. If you recall, we implemented the $5 for $50 program midway through the fourth quarter of 2010. So we still have some lapping of that as we move forward. I do expect that that spread will probably narrow as we move throughout the year, and we do expect that business domestic money transfer to have revenue growth in 2011.

Okay. Great. And just given the large buyback, is it safe to assume that you see better value in your stock than in potential M&A transactions?

You know, Jim, I would describe it as we think about our cash and cash flow priorities, clearly our first two priorities are to invest in the business and to acquire good companies. And as we acquire companies, they both have a strategic fit and the right cash-on-cash economic return, but a close third third priority is clearly returning cash back to our shareholders. So given the $1.2 billion to $1.3 billion of cash flow we anticipate, we have $2 billion, over $2 billion of cash on our balance sheet. That really gives us the flexibility to do a number of things. So, as we move throughout the year, we will prioritize our capital deployment in those terms, but we are pleased with the $525 million that we bought back, and we still have $890 million left under the authorization.

Okay. And if I can get one last question, just maybe the performance of FEXCO now that you control it versus the super agent relationship or arrangement in the past.

You know that we have -- I think we are pleased with our performance in our business in Europe. We do have direct access now to the super agents, and our brand delivery, our service quality is increasing. I think also it has -- the FEXCO acquisition is within our business plan, and also, I'm very excited about the recent announcement with Angelo Costa. If you combine FEXCO and Angelo Costa together and the (inaudible) incentive, I think we have the right strategy to expand our business in Europe.

Julio Quinteros, Goldman Sachs.

Just real quickly, Scott, on the comments that you made about margins expanding for the year, I apologize if I missed this, but did you give any clarity on where you thought that Consumer-to-Consumer segment margins would be relative to the Global Business Payments margins this quarter 28.6%, 16.5%?

Not specific. We are going -- our objective is to expand our margins to 27%. So clearly I see the C2C margins since they are 85% of our top line, those margins will grow in 2011. And compared to the fourth quarter, our Global Business Payments where we did have a 13% margin, which were 16.5% in the first quarter, we want to improve those margins as we move through the year. Clearly getting the topline stabilizing that, getting the revenue declines to moderate will be helpful. But when you think about the C2C business that is a majority of our topline and those margins are up 20 basis points, we feel like we got a business model that with revenue growth we can drive margin expansion.

Ashwin Shirvaikar, Citigroup.

My question is on pricing. And did I hear you right, pricing down about 1% in the quarter? And if that is the case, then if you are still holding to pricing being down, call it, something approaching 3%, is that potential for upside down the road, or is that an investment in growth that you are planning?

If you look at it from a strategic point of view, if you look at our history, it is that generally our pricing investment was around 2% to 3%, and I think we are staying within this guidance. And don't forget that our biggest price investment was about 15, 16 months ago, Scott, right? That's the DMT money transfer, which is our biggest corridor, so-called corridor are biggest business within the corridor, US domestic money transfer. Despite that, we are going to continue to invest in the pricing. Looking at the corridors within the 2% to 3% pricing investment is, I think, the right direction. It depends on from quarter to quarter from the promotions we do it and also watching where we can gain market share.

Okay. And in the Global Payments business, obviously very good improvement, much better than we expected there. But should we continue to look for slow, steady improvement, or is there something structural that you can do that is more in the nature of a more permanent fix?

If you look at the Global Business Payments sector, we are very focused on our US payment bill payment business. I think our revenue decline will moderate there to minus 2%, and the team is doing a great job there. We consolidated under (inaudible) team, and we are really very focused to getting new billers. We have now through our applicators about access to 10,000 billers, and this is definitely also diversifying our portfolio on the topline. But we are also focused on the bottom line to expanding your margins, and I am very optimistic on that. Also, the business solution part having 13% revenue growth it is quite within our guidance saying that always we want to actually meet a [10] revenue growth, so I'm pleased with the results there.

Kartik Mehta, Northcoast Research.

I understand about the domestic growth business. You said transactions should moderate, and that makes a lot of sense. But looting at the revenue growth you had in the first quarter, would it be accurate to assume that that business can at least grow mid single digits for 2011?

You know, we have not provided any specific color on that other than we believe in 2011 domestic money transfer revenue will grow. With 7% in the fourth quarter, 8% in the first quarter revenue growth, we are off to a good start. We like what we are seeing. And, as I mentioned earlier, the business has got 30% plus margins. So we are going to keep working hard at that business, but we like where it is heading and what it is doing.

When you talked about the Bill Payment business and the ability to sign billers and it seems as though that business has a potential to get better, as you look at that business, is it that you just need to sign more billers, or is this more of the economy just needs to keep continuing to get better for that business to really turn around?

I think it is a general answer, it is a general question. I would say generally both, right? I think the economy has to help here also, but also, our efforts, the team is really very focused to signing new billers. They are focused on the topline. But also, as I mentioned before, they are also focused on the bottom line, and I think the team is doing a good job here.

I guess my question was more, how much control does Western Union have? You seem to have executed better in that business, and the business is moving in the right direction. But what I'm trying to figure out is, how much more control does Western Union have and how much at some point you just have to rely on the economy getting better?

I think we are very focused. Just if you think about our business, the Bill Payment business, the Consumer business is a part of our Consumer business under Stewart's leadership with a global consumer leadership, I think we have some synergies here. We have found that our sales force are on the road approaching billers, approaching our agents, and we are increasing the service success, but also definitely the economy is helping us also.

And then last question, what impact, if any, would you anticipate on the business from an increase in gasoline prices, whether it is impact to the domestic business or more revenue going in the Middle East that could create more projects and more immigrant flow there. Just your thoughts on impact from what is happening to oil and gas prices.

I would say all those things, but it is hard to tell for certain. But if I look at our customer profile, their objective as that migrate from one country to another to support their families back home whether that is for rent, medicine, school or whatever it might be. So their goal is always to remit as much money back as they can to their home countries. And so, as we saw, the international principle per transaction was up 2% in the first quarter. That is the best it has been in a couple of years. Not necessarily declaring victory on that yet, but we like the trends and what we are seeing there. But my sense for our customers, their spend on gasoline is probably a very, very small part of their disposable income. So I think their goal is to get money back to their customers, to their loved ones.

Andrew Jeffrey, SunTrust.

As you look at the restructuring efforts you're making this year, Scott, as you look out, say, to the future years, 2012, 2013, do you think there are sustainable cost savings associated with that that are going to be an important part of the long-term margin drivers for the Company?

You know, Andrew, I would describe it as that we have taken actions that will save about $50 million in operating expenses in 2011 and then about $70 million in 2012. So we really like the progress that we have made.

One of our key initiatives is improving our processes and productivity to ensure that we have efficient operating structure, that we are providing outstanding service to our customers, our agents, and we are able to effectively launch our new channels and so forth. So all the things that go along with strong processes and productivity.

So, as we move forward, as we think about our business model and margin expansion that we believe the business model is set up to drive margin expansion in that, revenue growth will be helpful to that. Process productivity, the restructuring savings being operationally excellent, and then offsetting some of that would be investments back in the business to drive the topline. But, in summary, we think that just all of those initiatives will be helpful as we move forward.

Okay. And Hikmet, could you clarify or elaborate on the comment in the press release about US Bank? I know one of your efforts has been account to cash with big US banks, and maybe that has developed a little more slowly than you would have liked. Is the US Bank signing a step in that direction specifically, and then how would you characterize the pipeline of deals like that?

You know, the beauty of our business having 445,000 locations globally is a cash payout side, right? I think nobody can match that one. And connecting account holders with 445,000 locations globally, I mean it is a huge opportunity. We have signed 45 banks globally. Now I think 29 of them we activated, Scott, 29 --

25. (multiple speakers)

25 of them we activated. We connect to direct arrivals. The beauty of that is you go through your accounts and send electronically money to 445,000 locations.

Now the US Bank is one of the first top banks globally, and we are very pleased with that. Also, account holders can connect that to 455,000 locations globally. They can connect that. So I think that there are more on the pipeline, and I'm very optimistic on that side.

Okay. And then just one last quick one, Scott, housekeeping-wise. It looks like you bought back a lot of stock toward the end of the quarter. What should we think about as the fully diluted share count currently, I guess, or at the end of the first quarter?

The input I would give you, Andrew, is, as we think about deploying our cash flow, we will invest in the business, acquire companies that are strategically the right fit and have the right cash and cash economic returns, and then we want to deploy capital to our shoulders through stock buyback and dividend. And I have not provided any specific target externally, and the reason being is I just want to keep the flexibility as we deploy our cash flow of what is the best way to utilize our cash flow and our cash for our shareholders as we move forward. But we were active in 2010 in buying back stock, we have been active in 2011, and we still have $890 million available for stock buyback through December of 2012.

Right. No, I appreciate all that. I'm just wondering if you could tell us what the share count is currently?

When we file our 10-Q, you will be able to see at that point in time (multiple speakers) of what are the outstanding shares. I will probably just have you wait until then.

David Togut, Albacore Partners.

Hikmet, is agent productivity increasing or decreasing in the C2C business on a global basis, and can you discuss agent productivity by the three major geographic regions?

Sure. As you know, we have currently 455,000 locations, and we re going to continue to add and expand our agent locations globally. The teams on the field are working very hard on that. I'm very pleased in our recent activities in South Asia, Asia and also in Europe with our new retail locations.

But if you look at our business, you have to differentiate between send and receive side. Obviously our productivity is different on the send side with the ethnic locations, with the post office locations on the receive side, also on the different dynamics here. But generally adding locations means also adding transactions, getting more access to the consumers, gaining market share, and getting new consumers that are signed. Our target is gaining market share. As you know, we have 17.4% market share globally on the (inaudible) market, and I am going to continue to expand that.

So, is agent productivity increasing or decreasing?

I think we never talk about specific numbers here, but I'm very pleased with our current agent productivity.

The other thing I would add is, if you do the simple math, David, it has been about the same in the first quarter, if you will. But if you think about as we add locations, you know we added about 10,000 locations in the first quarter. Many of those were actually in Asia-Pacific, in particular in India.

But what is important about the business model is both the send side and the receive side. So you think about productivity, we also have to take into consideration if it is a send transaction or a receive, and having that right received network is very helpful to send transactions.

James Friedman, SIG.

I wanted to ask just for some clarification with regard to the principle per transaction increasing 1%. Does that -- two questions here -- does that include the electronic channels, which are now up to 3% of total revenue? And if you could share some color on the behavior of those electronic channels when you think about the principle per transaction that is actually moving?

Yes, it does include the electronic channels, and just to highlight, the C2C principle per transaction was up about 1%. If you segment that just to the International business, which was about 70% of our revenues, that was up about 2% for the quarter, if you will. Today the International -- excuse me, the Electronic business became 3% of our topline. It grew by about 20% in the first quarter. But, as you think about that, it is just very still a small piece of the total C2C business today.

Okay. And then if you would, looking forward which regions or corridors would you anticipate will drive C2C transaction growth this year? I know you don't always get that granular. But like for China, we had the 14%. Is that the market, or is that your presence -- India, China you are up to 100,000. Which of these corridors do you think are going to be the major drivers of growth this year?

I think Asia-Pacific is definitely an opportunity for us. The 14% you refer is basically the region for Asia-Pacific, I guess, and the 100,000 locations are combined India and China. Are we going -- we will continue to focus on Asia-Pacific under Stewart Stockdale's leadership, and under his leadership, that team is doing a pretty good job there in China. We signed another major bank. It is the China Construction Bank, which gives us even more locations there. And I recently was in China. I have to say that the team and the agents are very motivated about our business, not only on China. I would say Asia Pacific generally is a huge opportunity. And compared with the general market share, I think we are there still below the market. We can expand our market's penetration, and we are going to gain market share there.

David Parker, Lazard Capital Markets.

I was just hoping you could possibly expand on some of the announcements you had during the quarter, specifically expanding your distribution channel and prepaid with your partnership with [Incom] and also with your Bill Payment with your relationship with Kmart?

Sure. I think we are having now about through Incom we signed, we are very pleased with that relationship with Incom. That gives us an ability to sign more locations to distribute our prepaid cards. We are currently -- it is in the beginning stages through Incom, we will have direct access to the retailers which we are going to continue to sign them, and we are at 10,000 locations to distribute our prepaid cards.

On the Bill Payment business, we are assigning more and more billers. Also, through aggregators we have access to 10,000 billers. Now we were recently at 5,000 and now 10,000. Scott, is that right?

Yes, that is right. And what I would add on Kmart, Kmart is a very important retailer in the US as everybody knows, and now they are taking on our comprehensive suite of Bill Payment solutions. So whether you need to make an urgent Bill Payment in five minutes or a next day one, they have got a comprehensive suite of Bill Payment solutions that are branded Western Union, and Kmart has been a real nice partner of ours for many years.

And this kind of retailer is important. They have traffic, and I think our brand value who drives really traffic to that retailer, and they say besides making Bill Payment and money transfer, also selling the other products in the retail shops.

Okay. Thanks. And just on a different note, with the Obama administration looking at or potentially looking at immigration reform, are you guys doing anything proactively or any thoughts on that topic?

I think we are definitely as we do in every country also in the US, we definitely talk with the regulators and with the government. We are actively hand-in-hand talking about that, and we are constantly in contact with them.

Craig Mauer, CLSA.

I just wanted to follow up on the discussion of prepaid. I wanted to know how -- well, if it is -- if you have data yet on how the prepaid cards might be impacting customer loyalty, and what the spend rate is on those cards once they are loaded?

Sure. A number of the prepaid cards have been prior loyalty card holders. And what we do know about loyalty card holders is that the retention rates and frequency rates are higher from that standpoint.

As we look at the prepaid business, it is very early days now. We do have 1 million prepaid cards in force, but we are seeing some good consumer behavior around point of sale, utilizing for ATM withdrawals and so forth. And then as you saw in the quarter, we had 500,000 loads under those cards. So it is early to have comprehensive statistics on this, but the early readings are we are getting good usage out of the prepaid cards.

And what are the -- I don't remember if you mentioned it, but what the economics are on the loads?

You know, it depends on how the customer loads the card. Our value proposition is fee-friendly. So if you go to one of our 50,000 locations in the US to load the card, we would charge $4.95. Some of those economics pass back to the agent. We keep some of those economics. If they do a direct deposit, then there is no fee to the customer, and then really the deal we struck with the card issuing bank because a lot of the economics passed back to us, and the position is to really be fee friendly. And the goal with our customers is we want to retain them over a two or three or four-year period.

Okay. If I can just ask one more question. Has the CFPB engaged you yet on what will eventually be a study of the industry?

Yes. We are in contact with the staff there. We have had meetings, we will have meetings, and Hikmet can share more with you on some of his initiatives there.

I think we are very close in contact with them. I am meeting them also. The meetings are set up. I think we are openly discussing with them with all these initiatives, so I think we are in contact with them.

Chris Mammone, Deutsche Bank.

First, what was the growth rate on the investment spending year over year during the quarter?

You know, Chris, we did not break that out separately. The color we did provide is that our investment spending in the first quarter of 2011 was higher than the prior quarter. We definitely see good opportunities in electronic channels, prepaid, B2B and the core Consumer-to-Consumer money transfer business. But with that said, with that increased investment spending giving our operation efficiencies, restructuring and revenue growth, we still were able to expand margins by 70 basis points.

Okay. And I guess among those major categories of the e-channels, westernunion.com and account to cash mobile prepaid, I think was the investment spending sort of broadly spread out among those areas, or was there a disproportionate amount in any of the categories?

You know, from quarter to quarter, it varies as far as the initiatives, the promotions, the programs we have got going on. But I would say for sure in the core money transfer business, electronic channels, prepaid, B2B, all of those we think are good medium- to long-term growth strategies for us, and we have invested in those.

I think also under David Yates' leadership that team is doing a good job to focusing on the right approach. Given his background and the team's background, I think we -- plus building on our fundamentals. Being on 200 countries and this connection, the cash to electronic, I think that is the huge competitive advantage we have there. So we have the right investment here combined.

Okay. And I guess just a follow-up on account to cash. With US Bank, I mean is that -- again, it seems like a pretty big breakthrough to us given it is the first major US bank to sign on for that. Is that the right way to think about this, or is it more just like the 46th bank to sign up for the service? I mean I think that by order of magnitude, this is probably a lot bigger and more significant than like, say, Emirates Bank, but tell me if I am wrong. And then also, could you do share any early expectations like is US Bank going to -- have they committed to market behind that to make their customers aware of the service or how that is going to work?

First of all, I am very pleased with the US Bank. And yes, the answer is yes, they are dedicated to grow this business with us together. And I think I'm very pleased that even in the US also we are expanding now our account-based money transfer.

Now, if you recall, that our success as we mentioned several times in Canada with Scotia Bank or in Switzerland with Swiss Postbank. I think there are many examples. In Turkey with the currency bank. I think we mentioned that several times in several calls about our successes. We are building on that, and now we are in the US signing that -- one of the top 10 banks with US Bank giving access to the account holders, a huge step.

Other than that, also, it will take some time. You have to connect the host to host and get all the right IT structure here. But yes, the US Bank is very focused on that.

We will take one more question.

Tim Willi, Wells Fargo.

Just two questions. Number one, on the domestic money transfer and that revenue growth and transaction growth, directionally does that translate -- should we think about translating into margin expansion in the US division? Because I think you have talked about that generally the US is still one of your highest margin markets? And I had a follow-up.

I would say yes. That is helpful to profitability and margin expansion because the business has a 30% plus margin profile.

Okay. And then the second one was on prepaid, and you referenced international expansion plans I think in the back half of the year. Could you talk about your expectations for, I guess, the scale of your prepaid business with more of a international and global rollout? Do you still expect to see a pretty nice curve around margin expansion as revenue grows, or will an international footprint maybe limit margin expansion relative to the type of revenue growth when we think about that business?

I think given our global presence, the opportunity is huge. The opportunity to think being in 200 countries and don't forget also the card issuing side having our own bank license in Europe. Most of our agents international are banks and post offices, they have the license to issue cards with our brand, with our presence. I think the opportunity is huge to expand the prepaid model.

As I mentioned before, we are starting in the UK as a first market, but also other markets are online to expand our presence here. And the Western Union brand, the Western Union presence, the customer relationships, having 65 million centers and about 100 million receivers in our portfolio, expanding another product to these customers is a huge opportunity.

That is all I had. Thanks so much.

Okay. Thanks, Tim. I just wanted to say, well, thank you to everyone for joining the call, and thank you for your questions also. I just want to summarize again that, as I mentioned earlier, we are really off to a good start in 2011. There are still some challenges down the road, but our Consumer-to-Consumer business trends are good. Bill Payment is improving, Business Solutions is growing as expected, and electronic channels grew to 3% of our total revenue. We are executing against our strategies, making good progress on margins and continue to generate and deploy strong cash flow.

So thank you to all for joining us on the call, and we hope to have -- I hope that you all have a good evening. Thank you. Bye.

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.