西聯匯款 (WU) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2011 Western Union earnings conference call. My name is Jeremy, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session.

(Operator Instructions).

I would now like to turn the conference over to your host for today, Mr. Mike Salop, Senior Vice President of Investor Relations. Please proceed, sir.

Thank you, and good afternoon, everyone. On today's call, Hikmet Ersek, our President and Chief Executive Officer, and Scott Scheirman, our Chief Financial Officer will discuss 2011 fourth quarter and full-year performance, and our 2011 outlook. Following their remarks, we will open the call for questions. The slides that accompany this call and webcast can be found at www.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, www.WesternUnion.com , under the Investor Relations section. All statements made by Western Union officers on this call are the property of the Western Union Company, and subject to copyright protection. Other than the replay noted in our press release, Western Union has not authorized, and disclaims responsibility for any recording, replay, or distribution of any transcription of this call. I would now like to turn the call over to

Thank you, Mike, and welcome everyone. Overall, 2011 was a good year, and we realized many accomplishments. We exceeded our earnings per share outlook from the beginning of the year, and delivered our highest full-year revenue rate since 2008. This was accomplished in a challenging environment that included the Arab Spring, economic troubles in Europe, and high global unemployment. We believe that we gained cross-border market share. Each of our consumer-to-consumer regions grew, and the repositioning of our US domestic money transfer business, which began in late 2009 continued to pay off. We advanced our European strategy of being closer to the consumers, and optimizing our operating model by completing the Angelo Costa and Finint super agent acquisitions. In Asia, we further expanded our network and (inaudible) and now have approximately 200,000 locations across China, India, and the rest of APAC. With our bank license, we also laid the groundwork for expansion in Brazil, and continued the turnaround in consumer Bill Payments. In business-to-business payments, we completed the Travelex Global Business Payment acquisition in November, which gives us a strong foundation for a second leg of growth well into the future.

Within our C2C, our electronic channel business continued to advance in 2011 with 35% revenue growth, indicating that our combination of physical network with digital send-and-receive options is matching consumer needs in the marketplace. We also signed a global prepaid and money transfer agreement with MasterCard, which will help us globalize prepaid services, and allow us to leverage MasterCard's world-class global electronic network. Late in the year, we began our launch of prepaid cards in Europe. Other accomplishments in 2011 include completion of the restructuring activities we announced in mid 2010, which delivered approximately $55 million in cost savings. And also we resolved our international tax position with the IRS. We also maintained strong cash deployment in 2011. In addition to the acquisitions, we repurchased $800 million of shares, and paid almost $200 million in dividends. So, 2011 was a great year. As we entered 2012, we are expecting near-term challenges, driven largely by economic conditions. I just returned from the World Economic Forum in Davos, where I had the chance to talk to many business leaders, and the general expectation is Europe will be challenging in 2012. Our business has held up well in countries such as the UK, France, and Germany, however Italy and other parts of southern Europe have softened. We also still face some challenges in Mexico and Russia in 2012, as we adjust our strategies in these countries.

But our focus is on execution and positioning the Company for future growth. We have defined our long-term opportunities and growth strategies, and now we must execute successfully against them. Our long-term vision is to become the premier financial service provider for the under-served. This includes our current customer base, but also new consumer and business customers segment that are under-served. There are 2 billion people worldwide, who are considered under-banked or completely un-banked. Western Union's core [immigrant] business charges to the 200 million who migrate to other countries, as well as their families back home. However, all consumers have financial needs. And we plan to utilize our brand, global network and infrastructure to provide more financial services to the under-served overtime. This could be in the form of prepaid or (inaudible), or distributing third-party financial and related services throughout our global network.

I met with many potential global business partners in Davos, and there are great opportunities to leverage our global network and (inaudible). There are many other types of under-served customers that could benefit from the services we offer, examples include students, who need to make some tuition payment in foreign currency, travelers who need cash, and small businesses that make cross-border payments. Last year, we organized our business around three key growth areas. First, global consumer financial services, which include core money transfer, second, new ventures and services, which include expansion of our electronic channels, and third, business-to-business payments. We now have a strategy growth maps in place, that will allow us to accelerate our businesses over the next several years. In 2012, we will focus on executing against those plans. There are three main areas of focus this year, expanding our network and focusing on adding and retaining consumer and consumer money transfer, creating a digital infrastructure to drive our electronic channels business, and growing the B2B business, and successfully integrating the Travelex acquisition.

I would like to spend a few minutes talking about each of these areas. In core money transfer, over the next few years we want to transition from being a transaction-based, to becoming a truly customer-centric organization, with added convenience and more choice. We have a long-term vision for the core business of 1 million agent locations, further market share increases, and margin improvement from growth and efficiencies. Over time we want to further increase loyalty, by continuing to improve the retail experience with simple high-quality transactions at the right volume. We want to increase share of wallet, by leveraging our consumer database, and providing access to new services. And we want to add new consumers, through expanding our network with strategic agents and offering adjacent services such as account-based money transfer, direct-to-bank or card, ATM money transfer, and intra-services in key markets. To reach these goals, we will need to invest over time in sales people, focused marketing, and technology.

In 2012 our focus is on accelerating network expansion to reach more consumers, through increased global sales resources, and more aggressive pursuit of new agents. We are adding to our sales forces around the world, and anticipate that we will increase agent locations at the faster rate this year. We plan to further build our network in Asia, add to our retail agents in Europe, and banks in the US, and fill in white space around the globe with strategic locations and accounts. We also plan to increase our account-based money transfer relationships with banks, and further expand ATM capabilities. Our market research has shown us that providing more locations and options brings us new customers, not only due to added geographic convenience, but also because we can connect with account-driven consumers and customers of an agent's main business. By strategically expanding our network, improving the consumer experience over time and building deliberate -- and building and leveraging our customer database, we will -- we can increase retention, add new consumers and provide new services in global consumer financial services over the next several years.

Another area where we can provide more choice to existing customers, and attract new consumers is through electronic channels. Last year, we created an internal team that took a deep-dive study of our digital efforts and the market opportunity. In 2011 our digital-based revenues from westernunion.com and mobile were over $100 million. I asked the team to build a long-term road map on how to achieve through leadership and scale in electronic channels. At the core of this road map, is creating a separate digital business that will give us the [dedicate] focus and expertise. We have placed this business in San Francisco, and are building a team, combining strong internal expertise and external digital talent. We are also investing in technology to redesign the consumer experience, offer multiple funding and receive options, and optimize risk mitigation. Importantly, having a strong digital offering will allow us to add new customers, consumers who want to make account-to-account payments or transfers will be able to use our services. There is also significant portion of the [immigrants] market that is [drawn] to account-based solutions, and historically, this type of consumers have utilized bank transfer options.

We are seeing, in a strong position to assert a strong leadership in digital, as we have the advantage of global retail networks in over 200 countries and territories, as well as strong global compliance capabilities. The digital portion of the [immigrants] market is projected to grow faster than the cash portion of the next few years. We already have a WesternUnion.com business that is over $100 million in revenues and growing, with even today's limited capabilities. We plan to become a leading-edge digital money transfer provider. Building the infrastructure now, will allow us to turn into a much larger profitable business over the next several years, with the goal of exceeding $500 million in revenue by 2015. Our third area of focus for 2012, is to grow to the B2B business and to integrate Travelex Global Business Payments. As you are aware, we completed this acquisition in November of last year. We believe there is a tremendous market opportunity to serve small businesses' cross-border payment needs. And the combination of Travelex and Western Union business solution gives us a strong foundation for growth.

The semi cross-border payments revenue market is estimated to be approximately $24 billion, and it is fueled by growth in international trade. With Western Union Business Solutions and Travelex, we expect to have an approximate $400 million revenue business in B2B in 2012. We are now the largest non-bank provider in this space, but our market share are still estimated to be under 2% only. Small business customers are often underserved by their current cross-border providers. They want speed, accuracy, and transparency in their payment, and we believe we provide a superior value proposition, with differentiated service, feature-rich platforms and competitive pricing. Our customers include small and medium-sized businesses, but also specialized verticals such as universities, law firms and smaller financial institutions.

We have approximately 100,000 customers in 23 countries, including more than 500 financial institutions. To grow this business, we are adding sales resources in new geographies, and deepening our reach in existing markets. We are expanding the vertical and online partners, and utilizing our money transfer agents in certain countries to sell the services. We already have 16 Western Union Money transfer agents signed in different countries, with 6 active. With talented employees and strong platforms, our services and back-end payment connections, we believe we have tremendous opportunity to achieve low double digit revenue growth, in this large and fragmented market for the next several years.

So, we are focused on execution of strategic road maps this year. We want to expand our networks at new -- to consumers and increase loyalty in core money transfer, build a world-class digital business, and integrate and expand business-to-business payments in 2012. We have a strong foundation with our brand, our global network, our consumer relationships, our regulatory and compliance capabilities, and our range of send-and-deliver options. We are building a strong foundation in business-to-business payments, and can leverage our strengths to establish leadership in electronic channels. We expect overall growth to be some how challenging in 2012, due to economic conditions and the impact of currency translation. However, we believe in the future opportunities of our businesses, and are investing in the key areas now, to position us for accelerated growth as conditions improve. Now to give you a more detailed review of the quarter, and our 2012 outlook, I will like to turn the call over to Scott.

Thank you, Hikmet. As I review the 2011 financial results, I will primarily focus on the fourth quarter. The similar information for the full-year can be found in our press release, in the attached financial schedules. Overall for the quarter, we delivered consolidated revenue growth of 5% on a reported basis, and 6% on a constant currency basis. Excluding $35 million of revenue from the Travelex Global Business Payments acquisition which closed on November 7, reported revenue increased 3%, or 4% on a constant currency basis for the quarter. Consolidated organic revenue growth was driven by increases in all regions of our consumer-to-consumer segment, growth in consumer Bill Payments, and double digit growth in Western Union Business Solutions. Transaction fee revenue increased 2%, while foreign exchange revenue grew 20%, primarily due to the acquisition of Travelex. In the consumer-to-consumer segment, reported revenue increased 3%, with transaction fee revenue up 2%, and foreign exchange revenue up 6%. C2C constant currency revenue growth was 3%, as compared to 4% in the third quarter, while transaction growth was 5%, the same as the third quarter.

While we had revenue growth in each region, revenue trends were effected by slow downs in southern Europe, as well as business challenges in Mexico, Russia, and China. C2C cross-border principal grew 2% in the quarter, or 3% on a constant currency basis. C2C principal per transaction declined 2% year-over-year, or 1% on a constant currency basis. In the international C2C business, revenue grew 2% on a reported basis, and 3% on a constant currency basis. International transaction growth was 5%. International principal per transaction declined 1%, compared to the prior year on both a reported and constant currency basis. We ended the year with approximately 485,000 agent locations. This was the same number at the end of the third quarter, because we closed approximately 15,000 inactive or low activity VIGO agent locations in Russia and CIS countries.

Turning to the regions, our C2C business in the Europe, Middle East, Africa, and South Asia region increased revenue at 2%, and transactions at 3%. The revenue growth rate was down slightly from the third quarter, due to currency, and further challenges in Russia and southern Europe, primarily Italy. As we mentioned in the third quarter, in Russia we are losing business to retail-based competitors. We have action plans in place to counter this, but they will take time to implement, and we expect Russia to be a challenge throughout 2012. In addition to the economic situation in southern Europe, new regulations in Italy are also impacting the business. Despite the headlines, other large markets in the Europe such as the UK, France and Germany held up well, and the Gulf states delivered good growth. In India, revenue growth remained strong at 12%, and transaction growth increased to15%. For the full-year, the EMEASA operating margin was 28.7%, a 30 basis point increase from 2010.

Turning to the Americas region, revenue increased 3% on steady transaction growth of 6%. Although not as strong as third quarter, domestic money transfers continues to have solid momentum, with revenue growth of 7%, on transaction growth of 11% in the quarter. Mexico revenue declined 1%, while transactions increased 1% in the quarter. Our Mexico business continues to be affected by ongoing compliance procedures, related to our Southwest border agreements. In 2012, we will be evolving our business model and practices related to Mexico. We're in the process of renewing agent agreements, and changing how we operate in Mexico, including further compliance-related changes. As a result of these factors, we expect our Mexico business to decline in 2012, as we modify the business. US outbound continued to grow, with growth rates, increasing slightly, relative to the third quarter. For the year, the Americas operating margin was 28.5%, an increase of 30 basis points from the prior year.

Asia-Pacific revenue increased 6% in the quarter, a decline from the third quarter rate, while transactions improved to an increase of 8%. Australia delivered good growth, but not as strong as the third quarter, while the Philippines delivered similar growth to the third quarter. In China, revenue declined 5% in the quarter, while transactions increased 1%. China was affected by currency controls or other restrictions implemented in certain countries like Africa and Latin America, which impacted high principal outbound activity from these countries to China. The Asia-Pacific operating margin for 2011 was 28%, compared to 28.7% in 2010. For the C2C business overall, the spread between transaction and revenue growth in the quarter was 2 percentage points. The impact of net price decreases was 1% again in the fourth quarter, and mix was 1%. For the 2011 full-year, the impact of net price decreases was 1%, and we expect 2012 to be in the 1% to 2% range. Within C2C, electronic channels revenue increased 36% in the quarter, and represented 3% of total Company revenue.

Account-based money transfer transactions through banks increased over 40% for the quarter, and increased 40% for the year. We now have over 80 banks signed for account-based money transfer, with 44 active. One of our most recent ABMT signings is a major European bank, UniCredit in Italy, which will also offer ATM and kiosk services. WesternUnion.com had transaction growth of over 30% for the quarter, and just below 30% for the year, with transaction growth in international markets over 40%, for both the quarter and the year. Although mobile is still a small business, we're seeing strong adoption in some corridors, such as the UK to Kenya, and US to Kenya. In fact, over 30% of our UK to Kenya transactions are now sent to a mobile phone. Also our mobile apps for the iPhone and Android are gaining traction, as access points to WesternUnion.com.

In prepaid, we ended the year with nearly 1.5 million cards in force, and retail distribution at over 15,000 US locations. In the quarter, approximately $115 million of principal was loaded onto Western Union prepaid cards through 500,000 loads. Starting in the first quarter of 2012, our GPA -- starting in the first quarter of 2012, our [GPR] cards are now available in more than [3,000 7-11] locations, with more being added. We also launched our first prepaid expansion in Europe in the UK, and began testing in Austria and Germany in the fourth quarter. In total, prepaid including third party pop-up, represented just under 1% of Company revenue for the year. Moving to Global Business Payments, overall segment revenue increased 24% in the quarter, including $35 million in revenue from Travelex. Western Union Business Solutions reported revenue growth of 13%, excluding the acquisition. The consumer bill payment business continued it's steady improvement, with revenue increasing 2%, led by strong international growth. US revenue trends were similar to the third quarter.

Turning to margins, the fourth quarter consolidated GAAP operating margin was 25.0%, which compares to 23.7%, or 24.5% excluding restructuring expenses in the prior year. The improvement is primarily due to revenue leverage, restructuring savings, Durbin, and lower marketing expense, partially offset by Travelex deal costs and intangibles amortization. Travelex results negatively impacted operating margins by approximately 100 basis points. This includes about $5 million of integration expense, as we began integration in the quarter. In addition, there were $9 million in costs, related to completion of the acquisition. Marketing expenses were 4.4% of revenue in the quarter, compared to 5% in the prior year. Marketing for the year was consistent with 2010, at approximately 4% of revenue. There were no restructuring expenses in the quarter, as we completed all activities in the third quarter, and we realized approximately $19 million in restructuring savings in the quarter. As a reminder, restructuring charges are not included in our segment operating results.

For the full-year of 2011, GAAP operating margin of 25.2%, is consistent with 2010 GAAP operating margin of 25.0%. Excluding restructuring charges, 2011 operating margin of 26.1%, is also consistent with 2010 operating margin, at 26.2% on the same basis. Excluding restructuring charges, the relatively consistent year-over-year margins of approximately 26%, were a result of benefits from restructuring savings and revenue leverage, offset by foreign exchange, spending on initiatives, and acquisition-related costs. The Company recorded a total of $47 million of restructuring charges in 2011. We realized approximately $55 million of related savings, and continue to expect approximately $70 million of savings in 2012. In 2010, we reported $[60] million of restructuring expense, with $8 million of savings. Our 2011 earnings per share includes some non-recurring gains in other income.

In the fourth quarter, we recorded a gain of $20 million related to the reevaluation of the Company's previous ownership position in Finint, as we indicated earlier in the year. We also recorded a gain of $21 million on foreign currency former contracts, related primarily to the acquisition of Travelex Global Business Payments. We entered into forward contracts to lock in the dollar value of a portion of the anticipated purchase price, which generated a gain when the British Pound appreciated. As a result of the forward contract gain, the overall impact of the Travelex acquisition on EPS was neutral in 2011, including the deal costs. For the full-year, we recorded $50 million of gains relating to the reevaluation of ownership positions in Angelo Costa and Finint, which were included in our last outlook. And we recorded a $21 million gain on foreign currency forward contracts, related to the acquisition. The tax provision in the quarter reflects a benefit of approximately $205 million, related to the agreement with the IRS which was announced mid December. We had previously established tax contingencies reserves over the last eight years, related to the restructuring of our international tax operations in 2003.

As we resolved the appropriate tax treatment by the IRS, we agreed to make tax payments of approximately $200 million, which we anticipate will be made in 2012, in addition to the $250 million deposit we made in 2010. Since we had reserved at a higher level, we recorded a one-time non-cash benefit of $205 million to our tax provision in the fourth quarter. Excluding the benefit, our effective tax rate in the quarter was 29.8%. This compares to an effective tax rate of approximately 23% on a year-to-date basis through September 30, as we had some international reserve increases and other items in the fourth quarter. For the full-year, the Company's effective tax rate would have been approximately 25%, excluding the tax benefit related to the IRS agreement and the impact of restructuring expenses.

Earnings per share in the quarter were $0.73, or $0.40 excluding the tax benefit. GAAP EPS was $0.37 in the fourth quarter of last year, or $0.38 excluding restructuring charges. Earnings per share in the full year were $1.84, or $1.57 excluding the tax benefit and restructuring expenses. This compares to GAAP EPS of $1.36, or $1.42, excluding restructuring charges in 2010. Common shares outstanding as of 2011 year-end were 619 million. Our C2C segment operating margin in the quarter was 28.0% ,compared to 27.0% in the same period last year. The improvement was due to restructuring savings, revenue leverage, and lower marketing spending.

For the full-year, C2C operating margin increased to 28.6% in 2011 from 28.4% in 2010, driven by the restructuring savings and revenue leverage, partially offset by the impact of foreign exchange and spending on initiatives. Global Business Payments operating margin was 17.5%, compared to 13.3% in the fourth quarter of 2010. The margin improved compared to last year, primarily due to revenue increases, restructuring savings, the impact of lower debit processing expenses related to Durbin, and lower integration investment spending in Western Union Business Solutions. The reduction of debit fees due to Durbin is having a positive impact on our consumer bill payment margins, although it will negatively impact revenue in some cases, as we pass through the savings. Full-year Global Business Payments operating margin increased from 17.0% in 2010 to 17.9% in 2011, driven by many of the same factors as the fourth quarter. Consumer bill payment margins improved slightly in 2011, compared to 2010.

Moving to our cash flow and balance sheet, our financial position remains strong. Cash flow from operations for the year was $1.2 billion, and capital expenditures were $163 million. Capital expenditures were 3% of revenue for the year. Depreciation and amortization expense was approximately $193 million. At year-end, the Company had debt of $3.6 billion, and cash of $1.4 billion, of which approximately $500 million was outside the United States. As a result of the IRS agreement, we have been able to move additional cash back to the US. During the fourth quarter, we retired $700 million in maturing notes, which had already been replaced by issuances earlier in the year. In the fourth quarter, we declared $50 million in quarterly dividends, which were paid on December 30. Consistent with our comments on our third quarter call, we did not repurchase any shares in the fourth quarter, but plan to resume buyback activity in the first quarter. We had approximately $(inaudible) million remaining under existing share repurchase authorization as of year-end.

Now I'd like to review our outlook for 2012. In general, we are anticipating a more challenging economic situation this year. We saw some slow downs in our C2C business in the fourth quarter of 2011, and expect similar growth rates in 2012. Our outlook assumes softness in Europe. In the Americas, we expect our US outbound and domestic money transfer businesses to remain solid, but we are anticipating declines in Mexico, as we evolve our business model and compliance practices.

The C2C revenue outlook includes solid double digit growth in electronic channels. In Business Solutions, we anticipate constant currency -- we anticipate constant currency revenue to grow in the low double digits, on a pro forma basis. Revenue from current business-to-business customers are impacted by movements in global trade, but we still anticipate strong new customer acquisition. Our Bill Payments business is expected to be steady, although reported revenues will be somewhat negatively impacted Durbin pass-throughs. Overall, we expect constant currency revenue growth in the range of 6% to 8% in 2012. This includes a 4 percentage point benefit from having a full-year of Travelex Global Business Payments revenues, compared to approximately 2 months in 2011.

We expect GAAP revenues to be approximately 2 percentage points lower than constant currency. As you are aware, the US dollar has strengthened significantly compared to the 2011 average Euro rate of approximately 1.40. As a reminder, we hedge the majority of our European profits, so currency movements have a larger impact on revenue, than operating profit. Moving forward, we would expect any additional 5% move in the European currencies to have a full-year impact to our 2012 outlook of approximately $55 million on revenue, and approximately $6 million on operating profit. Our operating margins are expected to be similar to 2011 levels, including the negative impact of intangibles amortization from the Travelex acquisition.

However, we do expect EBITDA margins to increase in 2012. We anticipate GAAP margins of approximately 25%, which compares to 25.2% in 2011. Current year GAAP margins include approximately $50 million of integration expense for Travelex Global Business Payments, while prior year included $52 million of restructuring expenses, and Travelex integration costs. Excluding Travelex integration costs, we expect 2012 operating margins of approximately 26%, which compares to 26.2% excluding restructuring expenses in Travelex integration costs in 2011. Items that are favorably impacting margins include revenue growth, currency hedges on European profits, Durbin, lower deal costs, and approximately $15 million of additional restructuring savings. These benefits to margin are being offset primarily by increased amortization and incremental investments in the business.

The acquisition-related intangibles amortization for Business Solutions will increase from approximately $20 million in 2011, to around $60 million in 2012 due to the Travelex acquisition. We also plan to build out our digital business, which has already well underway. From a P&L standpoint, we are investing about $35 million of incremental expense into this initiative in 2012, hiring talented digital employees, enhancing technology solutions, and increasing consumer marketing. This will become new infrastructure, and our goal is to create a $0.5 billion-plus digital revenue business by 2015. We're also investing in network expansion, allocating additional funds to increase sales forces, and to drive new account acquisition. As a result of all these factors, we expect essentially flat operating margins compared to 2011.

Due to the increasing magnitude of acquisition-related intangibles amortization, we will also provide EBITDA metrics going forward. The EBITDA metrics will reflect operating income, with depreciation and amortization added back. All other income and expense is excluded from the metric. We expect 2012 EBITDA margins of approximately 30%, excluding the Travelex integration expenses. This compares to 29.6% in 2011, excluding Travelex integration costs and restructuring expenses. Our 2012 net other expense is expected to increase from 2011, due to the $71 million in non-recurring acquisition-related gains reported last year. We expect an effective tax rate in the range of 16% to 17% in 2012, following our agreement with the IRS late last year on treatment of our international operations. This compares to an effective tax rate of 25% in 2011, excluding the tax benefit related to the IRS agreement, and the impact of restructuring expenses.

Bringing this all together, we expect GAAP earnings per share in a range of $1.65 to $1.70 in 2012. GAAP EPS was $1.84 in 2011, aided by the one-time $205 million tax benefit. Our outlook calls for EPS, excluding Travelex integration costs, to be in a range of $1.70 to $1.75, compared to a $1.57 in 2011, excluding restructuring expenses and the non-recurring tax benefit. The increase in 2012 is driven by a revenue growth, and a lower effective tax rate, partially offset by the acquisition-related non-recurring gains in 2011 in other income and expense. As mentioned, operating margins in 2012 are expected to be similar to 2011, as benefits are offsetting increased amortization and investments. We expect cash flow from operations in a range of $1 billion to $1.1 billion, or $1.2 billion to $1.3 billion, excluding the anticipated tax payments of approximately $200 million to the IRS and state tax authorities related to the agreement announced in December. Our future cash flow is now expected to be split roughly 65% international and 35% domestic, which reflects some standard repatriation each year. However, based on the IR agreement and other factors, we also anticipate being able to bring back additional international cash to the US.

Capital expenditures are anticipated to be 4% to 5% of revenue in 2012. This year, we anticipate a significant increase in signing bonuses on Asia contracts, as we have several major renewals, and we are aggressively pursuing new agents. We are also adding to investment in WesternUnion.com and new technology. Longer-term, we expect capital spending to come back down to approximately 3% of revenue. We plan to continue to manage our capital structure to balance returns, with strong credit ratings, while maintaining appropriate debt and cash levels. At this time, we do not anticipate pursuing any sizable acquisitions, however, we may continue to evaluate smaller acquisitions that support our growth strategies.

Before opening the call to questions, I would also like to mention that in 2012, we will be evolving our segment reporting. We will maintain our consumer-to-consumer segment, but we'll now have separate segments for business-to-business, and consumer Bill Payments, rather than the Global Business Payment segment. Within the C2C segment, we will provide metrics on 5 regions that align with our regional leadership team. The 5 regions are Europe and CIS, Middle East and Africa, Asia-Pacific, North America, and Latin America. India and South Asia will be included in the Asia-Pacific region. Our prepaid and retail money order businesses will continue to be reported in the other category. We will provide restated comparisons for these changes, prior to our first quarter earnings release.

To summarize, we believe 2011 was a good year, given the environment. We've exceeded our initial EPS outlook for the year, and recorded our highest annual revenue growth since 2008. We advanced our strategies, and we added a strong foundation for growth, in business-to-business payments with the Travelex acquisition. We also successfully executed our restructuring, and reached a resolution with the IRS on our international tax position. Finally, we returned $1 billion to shareholders, and today, announced a 25% increase in our dividend. We expect some challenges in 2012, but are focused on execution, and investing in the areas we believe will position us well, for long-term growth, including core consumer money transfer, business-to-business, and digital channels. Operator, we are now ready for the first question.

And our first questions comes from Tien-Tsin Huang with JPMorgan. Please proceed

Hi, thanks, It's Tien-Tsing here. I just wanted clarify on the margins. I heard the flat comment. But I just wanted to confirm, excluding the Travelex intangibles amortizations, margins will be up 40 bps? Including the investments? Did I hear that correct? And secondly, the digital investments you are making, what kind of growth do you expect that to drive in fiscal 2012? I heard it is 20% of revenue now, but what could that look like this year?

Yes, Tien-Tsin, this is Scott. But let me address the EBITDA margins. And then I will turn it over to Hikmet for the dot.com for 2012 and forward, which we think can really grow very well. But on the EBITDA margins, 2011 we had an EBITDA margin of 29.6%, excluding restructuring charges and Travelex integration expenses, which were only about $5 million in 2011. In 2012, we expect EBITDA margins of 30%, which excludes the Travelex integration costs. So, the EBITDA margins, we anticipate to increase in 2012.

Yes, on the WesternUnion.com investment, Tien-Tsin, I believe that's the [big bat] which the Company does, and I think that is great, because we are already growing with our limited capabilities, about 35% internationally even 40%. What we do, what the other companies cannot do, is that we are connecting the electronic channels with our retail, 485,000 locations, 200 countries. But many companies have the capabilities to use iPhone or use a computer to send in minutes, and pay out in foreign at 85,000 locations. We believe that the special focus, within the ventures. The team is working very hard in San Francisco, and we hire also digital talent there. We believe that we can grow this business to $500 million. Now it is about $100 million, right, Scott?

Right.

We can grow to $500 million by 2015, and the road map there is very clear, capturing the customers, building on that, and growing this business very strong.

Okay, okay. And I guess, just thinking about the core including the digital piece, I guess you are targeting 2% to 4% growth excluding the Travelex piece. And you did I think 4% growth in the fourth quarter and most of '11, so is the deceleration all just the Mexico and Russia adjustments that you're making? What is your underlying assumption I suppose here on the macro, to get to the 2% to 4%?

Well, from the macro environment, I would say (inaudible) in Europe. Parts of Europe is doing pretty well, I mean, the north part of Europe like Germany UK and France, we are growing there very well. And but in the parts of Europe, like south -- southern Europe we do have some challenges here, we see some slowdown. Partly also, we -- in Russia we do have a lower price competition there, in the retail markets. And Mexico, we do have some Southwest border compliance issue. We are upgrading there, our compliance environment, and also changing our business model. But from general environment, economic environment, I would say that I am a little bit cautious on Europe generally, but that is showed also in Q4, the numbers has been a little bit slower than Q3.

Last one, I promise. Could the digital component add 100 bps to growth again, in 2012 versus '11?

Well, we think -- it's got a lot of opportunity in digital. I won't get specific about '12, but we do expect strong double-digit -- for revenue growth in digital. And we do think that could be $0.5 billion business by 2015. So it's going to for sure, add to the growth rates in 2012.

It will be Tien-Tsin, and we have a road map to get $0.5 billion, and we are -- feel confident about that.

Okay, great. Understood. Thanks so much.

Thanks, Tien-Tsin. Have a good day.

And our next questions comes from Glenn Fodor with Morgan Stanley. Please proceed.

Sorry if I missed it, but the -- what is the goal for fiscal '12s marketing spend, as a percent of revs? And you talked about these expansion efforts, having more customer-centric view. That's a fine strategy, but just want to know what type of impact could this have on marketing spend over the long-term? I mean, I imagine, it should increase, but offsets possible from the electronic and mobile channels? How you look at the moving parts there?

I'll take the second part of the question, of the (inaudible) if you like then, Scott, then you jump in, okay? Hi, Glenn. The -- I think from the digital strategy from the being close customer focus is really putting the customer in the middle, and see digital as the sixth region, besides our five region, and sending in-home digital to new -- to our -- sending money globally. I think what we are doing here, is really connecting the digital with our network 500,000 network, one-time, one site you have good funds from cards, or from a (inaudible) sending cash globally. But also account-to-account is growing very fast in certain markets. We believe that is a huge opportunity also. Putting the customer in the middle, we don't believe that we need additional huge marketing investment. We already captured the customer. We communicate with the customer in a different way, but still in ethnic marketing, we'll continue to do. We still believe that we will have strong brand, sending and receiving connection, will drive the digital, as we do it in the retail money transfer. One thing I just want to make sure also, is that our retail money transfers, our core business is the core. And we still believe that there is a huge opportunity to grow that. Otherwise, I wouldn't have this strong ambitions with the team to grow our retail network to 1 million locations.

And then, Glenn, on the marketing for 2012. We will be right around the same levels we were in 2011, at about 4% of the top line, we will spend on marketing.

Okay. And then second to last question, just a little more granular color on expectations for C2C versus the B2B, well, Business Solutions margins -- I know one is going to be under pressure, because of the amortization, but just the magnitude of the trajectories? I mean, are you expecting 25 bps expansion in C2C or 50?

Yes, I would say, if we look at the overall company-wide to give you a sense, Glenn, of operating margins company-wide we expect them to be flat if you will, 26% '12 and '11. The EBITDA margins, we do expect those to be up 29.6% in '11, versus 30% in 2012. Again, as we look at the C2C business, I continue to expect to have strong margins there. Clearly, in the C2B business, because we are through some investment cycle with Custom House and integration there, the C2B margins, I do expect the strengthen there. But we are going to invest $50 million to integrate Travelex Global Business Payments. And we think that is really important to help move that top line to the low double digit revenue growth. We have a 2% share. We think we have an opportunity to have much greater than 2% share, so we will invest behind that. But overall, we expect EBITDA margins to be slightly up next year, and operating profit margins to be flattish with 2011.

Okay. Thanks, everybody.

Thanks.

Our next questions comes from Ashwin Shirvaikar with Citi. Please proceed.

Hi, it's Ashwin from Citi. So I guess my question is, you run a, basically a portfolio of [quarters]. When I look at the year-over-year comparison of what was not working last year, but versus is sort of not working this year, can you provide where we stand -- and Europe was weak both years, last year and this year. So where do we stand with Ivory Coast, with the way it is continuing in the Middle East. And is there a time-frame for Russia or China or Mexico to get better here, in terms of your own actions?

Ashwin, hi, basically we have 16,000 [corridors], right, into our business, and it is hard to come up. But generally, I would say that I wouldn't see Europe -- as weak. In certain [corridors], in Europe especially from southern Europe to certain quarters, that had some impact. Our business from the Gulf is doing good, is growth business is back again. I think especially to South Asia, and Philippines and Asia, parts of Asia is doing very well. Our US outbound business is doing well. We did to -- saw some challenges of this to Mexico though, as I mentioned before in the call. But I think that's going to -- the Russia business is mainly driven to central Asia business, and that has been impacted by strong pricing competitors, which we think we can -- we have a plan to compete against in the long-term, but it will take some time. I would say overall, from a quarter point of view, I -- except southern Europe, I would say, that the business is holding pretty well, and the Gulf is back.

Okay. I guess my next question then beyond growth then, is looking at margins. And the digital business as you grow that, what should we expect for the margin profile in that business? I mean, given the potential to eliminate the agent on one or both ends, do you expect margins to be correspondingly higher?

First of all, I don't believe that eliminating the agents, Ashwin, as what I said before is that my goal is having 1 million agent locations. And I challenged question of a few years ago, will you ever have 500,000 agent locations, and we are almost there, now. First of all, I would say that unique to agent location, to connect the digital with the agent. Otherwise, this business has -- many people try to build this business, and the issue is that building the retail with the digital, and we haven't. I would say on the send side, we do believe that, that is a high margin business, and we are going to increase the margins definitely. Because we are the agent of the send side, and we do have operating models to drive this business. But we have to invest in the beginning, and to grow to come to a revenue expansion, and a margin expansion business.

Okay. Real quick, a bookkeeping question, how much of a buyback is included in your guidance?

Ashwin, this is Scott, for a variety of reasons, I don't give you a specific number. But maybe let me give you some color of our thinking -- and clearly we want to be returning capital to our shareholders, both in a balanced way through dividend the buyback. And in fact, we increased the dividend by 25% today. But what we are trying to do with buyback, is get cash to our shareholders, but also balance that with keeping a strong balance sheet, if you will. So, as we think about 2012, you probably won't see buyback to the level we did in 2011 at the $800 million. But I'd probably have you think about the years of 2009, 2010 -- as we see things today, probably at that type of level, as we move forward through 2012.

Okay, great. That's useful. Thank you very much.

Yes, hanks

Thanks, Ashwin.

And our next question comes from Kartik Mehta with Northcoast Research. Please proceed.

Well, thank you. I wanted to get your thoughts on the new regulatory environment, because of the CFPB, and if you think that will have any impact on business conditions, or your ability to grow market share?

Well, on the consumer protection side, I believe that we are, first of all we are looking at -- from the US side very carefully on that, how the new regulations they are. But our (inaudible) business as you know is quite simple and quite transparent. The sender, recall (inaudible) exactly knows what the receiver will get, and what -- how much we is going to pay out. That puts our business model in a very advantage part, that we are quite transparent. Saying that though, we look at that -- the new rules, we believe that we can adapt our business model also where it's needed to the requirements. And but we don't see a huge change in our business model. We believe we can apply the regulation very easy.

And then what are your expectations for the C2C market growth in 2012, considering some of these headwinds that are being posed by the economies of the world?

Well I would generally say, that our C2C business is very well-positioned, right? If you exclude the electronic channels, the digital part, I think they are very well-positioned. The -- I'm still saying cautiously, as I mentioned before on Europe. Part of Europe, especially the south parts of Europe, today I think Spain announced again, the unemployment rate is about 22%. And Italy has some issues also. But Germany, UK, France, our business is doing well. I think the unemployment rates are there stable, so it impacts of that. But Europe I would like to stay on 2012 cautious on Europe. Do you want to add something on that?

No, I think that frames it well, Hikmet.

And just one last question, the margin decline in Asia Pacific, was that just pricing pressure? Or was that Western Union investing more money to grow market share or something else?

Yes, it is still very strong at that 28% type level, and it is really the latter, as you described. We invested more in marketing. We had a little bit more in compliance, which I think the investment of the brand too. But really things to help drive the top line on a long-term basis. But overall, strong margins in APAC, and almost not quite 30%, but nearly 30%.

Yes, I think, Kartik, I would really like to rest on that Scott. I mean, we have now in Asia Pacific, including India and China and APAC about 200,000 locations, Kartik. I mean that is a huge coverage there, and I think there is still room to grow, though.

Thank you very much. I appreciate it.

Thanks, Kartik.

Our next questions comes from Darrin Peller with Barclays Capital. Please proceed.

Thanks. How are you doing tonight?

Good.

Good. How are you doing, Darrin?

How are you?

Good, thanks. Just a quick question. Could you just provide some color on thoughts, around the new restrictions we are seeing in Italy? Maybe how impactful that is to you, and is that in your guidance assumptions? And then maybe on the other side of that, are there any at macro assumptions built in for potential pick-up in housing starts? Maybe -- if you can give us a little color on what you might think might come out of any type of housing recovery, and how that could be impacted on your fundamentals?

Yes, I'll -- jump in Scott, I'll try to answer the first part and second part of the question. The first part is on Italy, I think that has been some impacted on the higher bands of the revenue on our PPT, principal per transaction, has been impacted -- for putting some regulations from non-European Union citizens showing ID. But I believe long-term, look at Italy, we had the retails, and we have the banks there, right? And bank customers don't -- who have the know your customer registered already, don't have to go through the process, only the retail customers have to go through the process -- so our portfolio is pretty well settled. And we -- this is not the first time that we have in some countries. In the beginning, we will see some changes on the processes, impacts on the transaction numbers. But long-term, we always come back to customers, and they say, we will use our service. On the housing, then, I would say that it will help, right? Everything, the building new houses, building in the construction helps. They are our first sign in the US that employment rates are picking up, that will definitely help that -- our customers, many of our customers do work in the construction area. They do make money, and send back to their loved ones. In Gulf states, you saw some investments as you recall in the three quarters ago -- something I told --

Yes.

-- about the investment in Saudi Arabia. And that started to pay back, and the customers are sending, and working there, and sending back through the South Asian [corridors].

Yes. And Darrin in regard to the outlook, in the fourth quarter, we did see some impact from Italy regulations, so we built that into our 2012 outlook. And likewise, for the US, we haven't built in an assumption that things are going to improve, due to housing.

Okay. That is great and helpful, thank you. And then one quick question on the margin again, I know there has been a couple of points discussing it. But correct me if I'm wrong, I was under the impression that depreciation and amortization are incremental D&A from Travelex, was around -- was I think it was over $50 million for the year. I -- that is somewhere around 90 basis points of pressure on a year-over-year basis, but your guidance on EBITDA margins is really only for mildly higher, about 30 or 40 basis points. So is there just maybe some conservativism built into that, or is it just another approximation?

Yes. We just called out the intangibles amortization, which is going combined, for Business Solutions and Travelex, going from about $20 million to $60 million. So there is $40 million impact there, which is roughly 70 basis points or so. There is additional depreciation as well. There's additional, I think, about $15 million or so, depreciation coming from Travelex.

Yes.

Thanks. And just last question on Mexico. Can you give a lot more color on what exactly you are doing there? I just maybe, and I know you mentioned before, how you expect a little bit of slower trend, but maybe give us a little more explanation? And I'll just go back to the queue after that?

Darrin, if you look at our Mexico business, it's a little bit affected by ongoing compliance procedure, which we are changing, especially from southwest the border. As you recall we had an agree to 2009, to work with an independent monitor on our compliance activities. And that we see that some of the activity has been impacted our business. And we also are looking at 2012, of our model, our practices in Mexico. We are in the process of reviewing some agent agreement, and changing our operating model, Darrin. In Mexico, we are going to upgrade our compliance-related changes. We are going to be more -- we really want to be the industry standard, and the highest standard of industry, I think we really want to be the highest there. So I believe that we have the right approach there. And just to put the things in perspective, as you know, none of our business, Mexico is not larger than 6% in 2011 of our business, right, so --

Yes. Okay, all right, thanks.

Thanks, Darrin.

Our next question comes from Jason Kupferberg with Jefferies. Please proceed.

Thanks. Just had another question on the margin, just trying to conceptualize longer-term. I know you have already talked as a management team, as being committed to long-term margin expansion in the business. And obviously in '12, you've got kind of this one-off situation with the intangibles due to the Travelex deal. But at the same time, you're telling us that you don't see any other large acquisitions on your near-term horizon. So, if you kind of take that factor out longer term, can you just talk us through, where you guys stand from a strategic perspective, in terms of the priority of margins to expand longer-term? Both on an EBIT and a EBITDA basis?

Well, I think -- first of all, management is committed for the margin expansion. To do that, we need to grow. I think we are investing the right way get the growth, right? It has been, as you saw, in 2012 a little bit impacted -- I do believe we are going to be impacted from the economic slowdown, especially in Europe, and that will impact our growth rates, which were -- being similar to 2011 Q4. That's the projection we have it, from 2012. So, on the growth rate, I have to say that, besides the core business we will grow, on the C2C. But we believe also that the B2B, growing low double digit, and also electronic channels growing on the 40% approximately. I think we are really set for the growth. And with that investment, they will be definitely a help on the margin expansion. So my team and I'm very committed for the margin expansion, but for that we need definitely growth. You want to jump in on that?

And another thing I would add, Jason, is these business models are set up to drive margin expansion, with roughly 65% of our costs variable, 35% of our costs are fixed. As a management team, on a long-term basis, we're committed to drive margin expansion, whether that is operating margin or EBITDA margin. And just review the two things that are impacting the operating margins in '12, is the additional amortization. And then if you will, the investments we are making in the business, the $35 million for digital. But we believe that will be $0.5 billion business in 2015. So we think it is very much well worth the investment today, for the future.

That all makes sense. Just to shift gears for a second over to Travelex, because I think the execution that the people are really focused on. And if I recall, when you announced the acquisition, you suggested it would be accretive to cash EPS in 2012. So I wanted to confirm if that is still the case, and any sense you can give us on order of magnitude there?

Yes, it is for sure, still cash accretive to EPS in 2012. Looking forward to 2013, we expected to be both GAAP accretive, and cash accretive in 2013. As far as magnitude, I'd probably have you think about roughly the, intangibles going from $20 million to $60 million as a non-cash charge, if you will, Jason. And then we do have $50 million of integration charges, although those are cash, we expect those to go away in the future, as we get it integrated.

Okay. And then just one follow-up on Travelex, and I guess broadly, more broadly, on Business Solutions. Can you give us an update on the size of the sales force there, and growth plans for the sales force in 2012, as you continue to pursue the double-digit top line opportunities on that side of the business?

Yes, I mean, if you think about our business, we are very active on the [set]. Now we are into 23 countries. We have about 500 people selling our products there, getting to [SMEs]. We have about 100,000 SME customers in our portfolio. Our approach is really using existing agent network, which still is consumer-to-consumer money transfer, will also selling B2B. And it works, already we have about 16 agents signed on that, 6 of them are already active, selling this our business. So, we are very much active on selling that, and our sales force is about 500 people selling our product there.

Okay. Thanks for the color there.

Thanks, Jason.

Thanks, Jason.

Our next question comes from Julio Quinteros with Goldman Sachs. Please proceed.

Great. Just to back up real quickly, and to make sure I have the growth rates for 2012 correct, can you just give us the target growth rates from C2C? And then maybe if you could decouple electronic channels n '12. And then lastly, the business solutions piece, please?

Yes. Let -- I'll work backwards with Business Solutions. What we expect there is low double digit constant currency -- revenue growth, not only for 2012, but really over the next several years. For electronics, we expect double digits -- strong double-digit revenue growth in the electronic business. And then, Julio, the color on the C2C business, the trends that we saw in the fourth quarter, those type of growth rates, we're cautious about Europe, but we expect C2C to see those type of growth rates throughout 2012.

Okay, great. And maybe Hikmet, this one is more directly for you. If we go back and compare the strategy that you laid out back in 2010 at the end of the year, you had identified a lot of the -- quite frankly, a lot of the same things that you're talking about today, in terms of areas of investment. And yet as we go into 2012, it feels like you have to do more in the way of incremental investments to sort of keep pace. Is that the economy that's driving some of the requirements for incrementally investments? Is there more competition? So if you could just help us bridge the gap between what you sort of laid out as your investment strategy in 2010, versus where you are now in 2012, where is the change on the margin, in the sense that you actually have to go out and invest more, to stay more competitive?

Well, I mean, as we talked in 2010, and as you recall, at our investors meeting there, we outlined our strategy. I think, we are really executing against our strategy, now. What we did is also we -- don't forget that we expect the margins in 2011, and I think we are doing the right thing. We have grown the revenues since 2008, the highest growth was in 2011. That is the best year and top line. So I think we have the right strategy, plus last year we built second leg on the B2B. We have our customers and Travelex put together, to (inaudible) Business Solutions, and that we want to grow that by double digit -- low single --double-digit growth. So on the electronic channels, Julio, really, we are once -- that was growing 35% to 40% on limited capabilities. So what we are doing here is taking this business channel, a new region, call it whatever you call it, a new channel to $500 million, a $0.5 billion business. And that needs some capability investments. That needs some investments to -- around the consumers, and that is what we are really doing on that part. I wouldn't say that's a big pricing invest -- a big pricing challenge in globally, as you recall our pricing investment was around 1% 2011. And we assume that it will be 1% to 2% in 2012.

Okay. And just lastly on the competitive front, with all of the different P2P options that have popped up over the last couple of months now, with obviously PayPal and FiServe and NCR yesterday, all kind of jumping into P2P, how do you think about that, from a competitive dynamic going forward?

Well from the competition side, I think they are very well-positioned. What are -- differentiates us from the competition, as I've said is our global brand, our regulatory relationship presence in 200 countries, and our connecting to electronic with the -- retail. Plus, I just wanted to say also, on the prepaid side, and also on the Top-Up side, we have a partnership with MasterCard. And I'm very excited actually with that partnerships with -- Ajay. Banga and I sit together, we talked about how that could be just two companies, Western Union serving the underserved customers, having the brand recognition in emerging markets, combining with MasterCard's capability, with electronic capability, makes big sense to take that -- our (inaudible) value to the next stage.

All right. Thanks, good luck.

Thanks, Julio.

Our next question comes from James Kissane with Credit Suisse. Please proceed.

Hi, thanks. Just following up on Darrin's question. The compliance issues in Mexico, are those industry-wide or company specific? And maybe, if you could maybe a little more specific, in terms of how you're going to change the model? And maybe some of the agents -- and how you deal with the agents, and will there be any impact on pricing in Mexico? Thanks.

Thanks, Jim. On Mexico I would say that it is more Company-specific, because we came under 2009 in an agreement as you recall, and we are implementing really, with independent monitor, the agreement requirements. And it does impact our business. I would say that it also it sets industry standard, and which we are very proud. And I think we're building on that, but it does impact our business, especially in some southwest border. I think that is where we are really focused on that, and that is really a high priority within the Company. And we believe that long-term, we -- in a very well-positioned environment with that.

Yes, and Jim, on the agent model, we are currently in negotiations for agent renewals in Mexico. So it is premature for us to talk about what is going to happen there. But once things are finalized, we will be able to discuss that.

Okay. But that is on the receive side, not so much on the send side?

Yes, you're right.

Yes, on the Southwest border is on the send side, the compliance issues, Jim.

Okay. And then in Russia you talked about the retail competition being more intense? Looking out, how are you planning on countering the retail competition in Russia?

Well, we're going to do the same thing in the European Union with the PSP. I think we'll have the right sales force there also. The big thing is also, it is a pricing issue there. I think we have to balance between pricing and gaining market share and gaining transactions. I think that is all in the business plan, and we have the right plan to expand that.

Okay. And just last question on China, can you give us an outlook on the revenue growth there? And did the timing of the New Year have any impact on the fourth quarter growth?

As you know, we don't give - didn't -- never give a specific numbers on China. But generally I would think we are very well-positioned in China. It had some currency impact, Scott, believe me, that currency had impacts on some of the higher [RPT]. And also some corridors had some regulations from Africa to China and to --

South America.

South America was -- to China had some impact on our business on the regulation side. But generally I would say that with our locations there, we have the top banks, and we also regional bank there. I would say that we are in good position. I don't forget China is currently an in-bound country only.

Yes.

Okay, thank you.

Thanks, Jim.

Our next question comes from Bob Napoli with William Blair. Please proceed.

Thank you. Just -- good afternoon -- follow-up on the Travelex or the B2B business. I think when you bought Travelex, you were looking for about $400 million in revenue in 2012? And I know currencies moved, and the dollar strengthened a little bit since then, but what is your outlook for revenue for that B2B piece in 2012?

Yes, it is very similar. To use around number as we combine Travelex and Western Union Business Solutions, we expect about that $400 million number.

Okay. And then, now just on your digital business, $100 million to $500 million. I mean that's a 50% annualized growth rate. Are you on track for that in 2012, that kind of growth organically? And this is all without acquisitions?

I think, yes, without acquisitions, and I believe that we are on track on to reach our $500 million business. We are very confident about that. Yes.

And Bob, you can imagine we are investing in a lot of these things to help this business, so until the investments are in place, the growth will come a little bit later. But we had strong growth last year in the existing business. We expect strong growth, but the growth will probably ramp up as we go out towards 2015.

Okay. And then just on your growth rate, I mean do you think your losing some market share now? I mean, the World Bank is looking for -- I think upper mid-single digit transaction growth. I mean we saw MoneyGram report mid double-digit, like near, I think 13% transaction growth. I mean are some of these issues in Mexico and Italy and Russia, are you currently losing market share, do you think?

We believe, in the cross-border money transfer, we gained market share. We compare, as you know Bob, usually with [IETA] numbers, we believed we gain market share. We do have as I mentioned before, in some countries like Russia, or southern Europe, some challenges. But I would say that our belief is gaining market share, and we believe we have gained market share in 2011.

And as you look -- last question -- your bill pay business, if you go back several years, I mean that bill pay business, the US piece I think was -- a lot of that was rapid pay. Your margins, you were generating operating margins in the 30% range. And granted the mortgage piece isn't coming back with Rapid Pay. But the auto finance is screaming back in the US, as far as the growth. And I mean is that business changed, such that you don't have the operating leverage, you're not going to get -- I mean I would have expected to see a little bit more acceleration in growth in the US business, given the growth of -- I think auto is a big piece of that business. You have added a lot of billers, but what is going on with that business? Can -- I mean are the margins that we saw in the past, not achievable in the future? Is there more competition?

Yes, definitely that business has evolved over time, especially as we moved through the financial crisis of 2009 and 2010, with subprime and so forth. We do now have 10,000 billers, so we're further diversifying our biller base. The one thing I would probably point out, Bob, that might be helpful, in the fourth quarter, out of the Global Business Payment segment, if you take out Travelex is now in that.

Yes.

If you take Travelex out of that, that segment would've had margins over 20%.

Yes, I think -- (Multiple Speakers).

So the margins are getting better there, when you kind of look more at apples to apples basis. And we do believe that business in 2012, the B2B. business will be steady, although the revenue could be somewhat impacted by some of the Durbin pass-through. But we do see a steady C2B. business in 2012. And the last three quarters, we have grown that business 2%, where it was declining before that. So we feel like we are on the right path to improving that business.

Didn't Travelex have margins in the 30% range, excluding amortization expense?

Yes, Travelex that EBITDA margins right in that 30% range, Travelex Global Business Payments. But you have to remember, in the fourth quarter, we had $5 million of integration expense, we had depreciation and amortization, so all those things impacted that segment.

Thank you.

Okay. Thanks, Bob.

Our next question comes from David Togut with Evercore Partners Please proceed.

Thank you. Good afternoon, gentlemen.

Hi, David. How are you?

Hi, David.

Very good, thanks. Just a few very quick questions. First, Hikmet, at the time of the September 2010 Analyst Day, you highlighted Asian commission, as a significant source of possible cost savings as you go through the five-year contract renewal cycle. Where you stand with respect to that renewal cycle, and do you still believe that you can bring commission rates down over time?

Yes, I think, yes. The answer is yes, we are bringing down. And especially in the Asian contract negotiations, it is always seasonality. In some years, it is higher, because of the agents contracts are coming to renewal with CapEx investment, everything, the effective rates impacts there. But in generally, our current cost of services going south, which is going down, which is great, and helps us. And it is also win-win situation, long-term agreements, I think we have the right formula here, bringing the Asian commission's long-term down, and keeping the agents for a longer time in our -- with our network.

And second, Scott, do you still expect to have ballpark $70 million of restructuring cost savings in 2012?

We do. It was $55 million in '11. We think there will be an incremental $15 million, so $70 million in 2012.

Great. And just a quick final question, nice to see the 25% dividend increase. Can you be a little bit more granular on your acquisition appetite? Are you done with a big deals for now, and it is basically share repurchase and dividends? Or are you still on the lookout for large transactions?

Well I think, obviously, we're constant, as a the business leader, you are constantly look on acquisition opportunity, right? That's my -- is that an opportunity? We have a healthy capital structure, so we do look at it. But I think our focus for 2012 is mainly on the integration of Travelex. We did a big move in 2011. We build a second leg of our business, and we are focused on that on our (inaudible) I don't see from today's point of view, a bigger acquisition like a Travelex one. But we do see opportunities on the smaller one, which will expand our capabilities in electronic channels, or in other parts of the business. So I would say that we are constantly looking at acquisition, but not on a larger scale. I don't see another opportunity.

A quick final question, where are the TGBP integration costs located in the P&L? Are they cost of services or SG&A?

Yes, the $5 million is split a little bit in cost of services and SG&A. And what we may do David on a go forward basis in 2012, is give you color on how those break between the two lines.

Okay. Thank you very much.

Thanks, David.

Our next question comes from Tim Willi with Wells Fargo. Please proceed.

Thank you, and good afternoon. I just had two questions. First one, just going back to the capital a bit. Can you at all talk about ultimately, what you think the capital return, sort of what the profile might look like between buyback and dividend? You currently sit I guess, roughly around 20%, 25% payout ratio, which is obviously much better than it was. And you have done a good job there. Do you see that as a ratio, if we look out three, four, five years that could be notably higher, than the current payout ratio, with more emphasis on the dividend versus the buyback?

Hi, Tim, it is Scott. As we think about our business, we clearly, want to invest in our business, but also get cash back to our shareholders. And we want to do that in a balanced way. Probably one way to look at that historically, is the last four years we have raised the dividend at least once per year, if you will from that standpoint. So we will continue to work closely with our Board and our management team, to have dialogue around that. But as the business performs, as things work, we would like to do things to move the dividend up. But also be balanced with the stock buyback. The good news with regard to our business, we generate so much cash flow, it allows us to do a number of things, whether it is investing in the business, moving the dividend up like we did today by 25%, and returning cash to our shareholders through stock buyback.

Also, keeping in the right balance -- to start our cash availability, because it is important also for us, parts of the world to have the ratings in place. And if you go to several parts of the world, you want to keep a good rating company, which other big companies want to work with you. And that's the financial strength is also important to keep the business, and have a good relationship with many partners.

Okay. And then the follow-up I had, was just going back to the electronic channels. I apologize if you had on this in prior answers in your comments. But do you at all have any kind of feel for, if there is any even if it is minor cannibalization of sort of the legacy customer base, or legacy transactions that is occurring with your growth of account to cash, or through mobile? And then as you think about this $500 million target, do you all expect people that are typically going in and sending money at an agent, and are going to be part of that equation, and now they're going to do it from their mobile phone or off the computer, instead of going into an agent and sending money to a relative or somebody overseas?

Well, most of the customers are new customers, we are getting to new customer segment. There maybe some of the cannibalization, but depending also on the geography where you are, in some countries it's really new, and in some countries the existing ones they are using. That I would say that generally, I would say that it is, a new customers we believe that we are really coming to a new customer segment. And on the receive side, we are (inaudible) and I mean I give also me, as an example, right? I used to go to location, Safeway location, since we have machine [dot.com] in the US and me, I'm a new migrant, I send money to my father in Istanbul, with electronic, because I don't have time to go through that. But I still on Saturdays and Sundays, I go to Safeway, and still use it, so it is a balance between that. Absolutely.

Okay. Thank you very much for your time.

Thank you.

Our next question comes from Daniel Perlin with RBC Capital Markets. Please proceed.

Thanks. I just wanted to go back to segments in these investments for the year. You called out that $35 million incremental for the digital channel, but could you just put around number around the consolidated investment that you are looking at this year? Or at least can you help us with cost of the build-out of the sales force, and then these other incremental expenses, as it relates to Mexico, Mexico Italy and Russia?

To kind of give you sense -- and hit on the $35 billion digital investment, I would say that's, of all the investments, that is the larger piece of it for sure. We are investing in the sales force. We think -- we believe we have opportunities to increase even more market shares, and march toward that 1 million locations down the road, if you will. Also makes some investments behind the technology and customer acquisition, but I don't want to parse it too fine, Dan, but think about digital, $35 million is the biggest part of that investment. Yes, as you think about these investments in WU, and in sales force, I mean, these are infrastructure investments. So we are hiring people and creating technology that will be there as ongoing as well.

Okay. And as you think about doubling your agent network from here, how do we think about the incremental margin associated with those? I'd suspect they are smaller in size. Will there be as many super agents that you have to rely on? Is there new infrastructure that you think have to have, in order to get you to doubling of that size? It is a pre-significant call out for you.

Well, it is a substantial extension of our retail team. Don't forget that we really started to get -- first of all, we do have direct agent relationship. I think the super agent model that we had in the past, opening a country with them entrepreneurial, and expanding. It's really we are really having the direct agent model, which is also more cost efficient with us. So we believe that certain geographies, certain class of trade is still untapped. Certain banks in the US are still untapped, and some retailers in Europe among, but most important, the emerging markets, they are still huge numbers. As we -- as I was over the seas a few years ago, we wouldn't come up, coming up with 200,000 locations in Asia Pacific. I think we significantly changed environment. And knowing the market a little bit, there is still opportunities to grow that, and I believe we can do that.

And on the types of transactions that you would expect from this kind of next bucket of agents, are you expecting as much cross-border transaction, or more kind of inter-country transactions, where might not get the spread?

Several of the financial services which I outlined for my strategy could be a cross-border intra transactions also, but also cross-border also. And some of the countries which are in-bound only, will be turned to out-bound also, because the migration patterns are changing. And in the rural areas, still we have a need to expand that. Also could be with our MasterCard agreement, some of the using as a Top-Up, the location as we expand our prepaid and [stored value] activities globally with partners, that will be also part of it.

Okay. And then lastly, can you just from the appetite that the super agents are having to sell this business-to-business or Business Solutions. I know you have said there are 16 that signed up, and 6 are active. Are you expecting that to be at all significant, as you look at maybe Business Solutions as a standalone segment in 2012 and '13? Or is that it is still kind of early days of the selling cross-selling opportunity?

Well, first of all, we just started with that, right? So I think it's early days, to tell how that will be. But I believe really on that model, because the reason for that, it reminds me of how we expanded our consumer-to-consumer money transfer business. It is a similar part, and the more -- most -- and more and more requests is coming actually from the agents, saying that eventually you have a new business segment, we can also send-- the sales before -- besides the C2C also, C2B with our existing -- is it in Latin America, or is it in Philippines, they say that, you have already existing Western Union brands there, we have the regulatory environment there, why shouldn't we sell also to money transfer part also, to the small business entities.

Excellent. Thank you.

Thank you.

Jeremy, we are going to take one more call.

And our last question comes from Bryan Keane with Deutsche Bank. Please proceed.

Hi, thanks for taking my call. I will be quick. Just two questions. I guess, it sounds like compliance and regulatory challenges are hampering the growth rate in several countries, Italy, Mexico, China. I guess, Hikmet, do you worry that could spread to other nations, and just becomes a global phenomena?

Well, I think first of all, with our compliance ones, we are really on it. I think Western Union is, I believe has the focus, and is a high priority in our environment. I think we are really setting the industry standard, and my aim is with our General Counsel, and with our anti-money laundering activities to setup, are a very high priority, that is the first thing. I would say that the regulatory environment in this business has been always challenging, in 200 countries. I wouldn't say that as a (inaudible) out, because we have the right environment in many countries. Don't forget that we have already zero thresholds, which we did implemented. We work very closely with regulators. And some of the (inaudible) of that, has been always a challenge to enter some markets, because of the regulatory environment. I feel quite confident that we have the right structure to meet the regulatory environment needs.

Okay. And just one for Scott, I think operating margins ended up at 26.1% for the year, and that's excluding restructuring. I think the guidance was 26% 26.5%, so that was a little bit on the low end. Just was wondering, Scott, if there are any takes, that put us there on that side of the fence, toward the low end?

Not particularly. We had a wide range, or since had a wide range, but 26% to 26.5. FX did have some impact on that. And then we did pick up $9 million of deal costs in the fourth quarter. So there is a variety of things, but they came in basically exactly where we expected. And then 2012, we are expecting to improve the EBITDA margins. So, we're on a path to do that.

Yes, for the full-year, we had $20 million of deal costs related to the Travelex acquisitions, which hit the (inaudible) and then FX was a big impact on margin last year as well.

Okay. All right, thanks for the color.

Thanks, Bryan.

Well, thanks everyone for the call. We hope you have a good evening. And we will talk to you soon.

Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.