西聯匯款 (WU) 2012 Q1 法說會逐字稿

Good morning and welcome to the Western Union First Quarter 2012 earnings call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mike Salop, Senior Vice President of Investor Relations. Please go ahead.

Thank you and good morning, everyone. On today's call, Hikmet Ersek, Western Union's President and Chief Executive Officer, and Scott Scheirman, EVP, Chief Financial Officer and Global Operations, will discuss 2012 first quarter results. Following their remarks, we will open the call for questions. The slides that accompany this call and webcast can be found at WesternUnion.com under the Investor Relations tab and will remain available after the call. Additional operational statistics have been provided in supplemental tables with our press release. As we noted in our February earnings call, beginning with this quarter, Western Union has implemented a new segment structure to reflect the acquisition of Travelex Global Business Payments, management changes, and strategic initiatives. We now classify segments as Consumer-to-Consumer, Consumer-to-Business, Business Solutions and Other.

The Consumer-to-Consumer segment has not changed from our previous reporting. Other primarily includes retail money order, prepaid, and mobile money transfer. Within Consumer-to-Consumer, we now provide metrics on six regions. These include Europe and the CIS, North America, Middle East and Africa, Asia-Pacific, Latin America and the Caribbean, and WesternUnion.com Online Money Transfer. Our India and South Asia business is now included in the Asia-Pacific region. As a result of reporting these additional regions, we will no longer be providing individual country metrics in our supplemental tables. However, we will give you color on country performance and will continue to provide domestic money transfer and Mexico results throughout 2012.

We issued an 8-K last week, which describes the new segments and regions as well as provides historical reclassifications. 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 2011 Form 10-K, for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements. During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures on our website WesternUnion.com, under the Investor Relations section. All statements made by Western Union officers on this call are the property of the Western Union Company and subject to copyright protection. Other than the replay noted in our press release, Western Union has not authorized and disclaims responsibility for any recording, replay, or distribution of any transcription of this call. I'd now like to turn the call over to Hikmet Ersek.

Thank you, Mike, and welcome, everyone. Overall, our performance in the quarter was generally in line with our expectations. And we made some good progress in our three strategic growth areas of Global Consumer Financial Services, Business Solutions, and Ventures. In Consumer-to-Consumer money transfer, our revenue growth accelerated compared to the fourth quarter, as constant currency revenue growth increased to 5%. Our North American business was generally strong and we also saw improved revenue trends in the Middle East, Africa, and Asia-Pacific regions. US domestic money transfer continued to delivered good growth and Mexico revenue increased in the quarter. We expected softness in Europe and Russia this year and we did see flat results for the region compared to a year ago, but revenue trends were slightly improved relative to the fourth quarter.

We made more progress in advancing our class of trade strategies in money transfer. We recently signed SunTrust Bank as an agent in the US, adding to a list that includes US Bank, KeyBanc, Regions, Fifth Third, and others. Globally, almost 60% of our Western Union agent locations are banks and post offices, but we are also widely present in retail, supermarkets, travel agents, other financial services, and many more classes of trade. I'm also very pleased to announce that in April, we reached 500,000 agent locations around the world. This is a huge milestone in Western Union's 160 years of history. We believe the expansion of our presence in 200 countries and territories will continue, and it will remain a competitive advantage to grow our core money transfer and other products. Beyond our core Global Consumer Financial Services, we are also making progress evolving our new businesses.

Although our Business Solutions pro forma revenue growth of 5% was below our target due to some softness in North America and the UK, our new customer acquisitions remained strong and our geographic expansion is progressing. Business Solutions is now able to offer services directly or through partners in 25 countries. Our integration efforts with Travelex are on track, our growth strategies are being implemented and we remain committed to low double-digit constant currency revenue growth for this business over the next several years. In Ventures, we continue to make excellent progress with digital money transfer. As WesternUnion.com revenues increased almost 40% in the quarter and (inaudible) again delivered double-digit revenue growth.

We have begun our additional investment in digital, our San Francisco business is up and running and we remain very excited about the opportunity and results we are seeing with this business. Innovation regarding additional channels and products at Western Union is happening. I'm also pleased to announce the appointment of David Thompson as Western Union's new Chief Information Officer. David will serve as the Company's head technology officer, responsible for building and supporting the next generation payments products and services. He was most recently Global CIO of Symantec and was previously at Oracle and PeopleSoft.

Turning to our results for the quarter, our operating margin was below last year's level, it was primarily the result of the impact of Business Solutions and the Travelex acquisition, investment, and some expense timing. However, we believe we will see the margin improve from the first quarter as we move through the year and are forecasting the full-year margin to be similar to last year. We resumed our share repurchase program in the quarter, buying back almost $150 million of stock and increased our dividend by 25% to $0.10 per share. In total, we returned over $200 million to shareholders in the quarter through buybacks and dividends.

I also want to mention a few events in the quarter that will not show up in the financial results, but are examples of the many ways we are evolving our business for the future as we continue to add new services and customers. We recently introduced WU Pay, a new and innovative electronic payment platform that allows online shoppers in the US to pay for purchases from their bank accounts or in cash at Western Union agent locations. This provides ease for consumers, many of them who are not comfortable providing credit card numbers or other personal payment information online. WU pay is also being added as a payment option for consumers to fund money transfers on WesternUnion.com. In mobile money transfer, we signed a strategic agreement with Ericsson to integrate Western Union's mobile money transfer services with Ericsson's platform. This will enable mobile networks operators who use Ericsson's solution to easily add Western Union money transfer to their suite of offerings and Ericsson has a relationship globally with over 450 mobile network operators.

In Canada, we are teaming with Acxsys, a leader in debit payment services. This agreement will allow customers of the banks that connect to Canada's Interac funds transfer system to access Western Union money transfer services. Previously, these customers had a domestic account to account money transfer system, but now they will also be able to send and receive international money transfers through their online and mobile bank accounts, with funds for payout at Western Union locations around the world. And in Business Solutions, we launched an exclusive agreement with Mercer Outsourcing in the UK largest pension administrator to handle payments to retirees living in 80 countries. These are just a few examples of actions we have taken to evolve Western Union.

We believe strongly in our core, but we also know we have a great opportunity to leverage our assets and extend more services to more customers as we execute our vision to be the premier financial service provider to the under served. We hope you will be able to join us for our Investors Day on May 9 in New York City, where you will hear much more about our strategies and plans to grow all of our businesses. However, right now, I would like to turn the call over to Scott to give you a more detailed review of the quarter. Scott?

Thank you, Hikmet. Overall for the quarter, we delivered consolidated revenue growth of 9% on a reported and constant currency basis. Consolidated pro forma revenue increased 4% or 5% constant currency, including Travelex Global Business Payments in the prior year period. Consolidated pro forma revenue growth was driven by improved trends in our Consumer-to-Consumer segment. The Consumer-to-Business segment again delivered a slight revenue increase in the quarter and Business Solutions revenue grew 5% on a pro forma basis, adjusting to include Travelex in the prior year period. In the Consumer-to-Consumer segment, constant currency revenue growth accelerated to 5%, up from 3% in the fourth quarter. Transaction growth also improved to 7%, up from 5% last quarter.

C2C cross-border principal increased 2% or 3% on a constant currency basis, which was steady with last quarter. C2C principal per transaction declined 4% year over year or 3% on a constant currency basis. Turning to the regions, C2C revenue in the Europe and CIS region, which represented 22% of consolidated revenues, was flat year over year due to the expected softness in southern Europe and Russia. This was a slight improvement from the 1% decline last quarter, as the rate of decline in Russia moderated. Our turnaround strategies in Russia are being phased in including adding a retail network for the developing or existing bank network with new locations, planning ATM and kiosk providers, adjusting prices for various corridors, and renewed marketing for the brand.

Turning to North America, the region's revenues increased 5% compared to 2% last quarter. US outbound in Canada strengthened while domestic money transfer continues to have solid momentum with revenue growth of 9% on transaction growth of 12% in the quarter. Mexico improved from last quarter with both revenue and transactions increasing 3% in the quarter. As we mentioned in February, we are still determining and implementing changes to our compliance-related practices in Mexico. Although we still expect to see some negative impact on the Vigo and Orlandi Valuta brands as we evolve our business model and compliance-related practices throughout the year, our Western Union brand is performing well.

In the Middle East and Africa region, revenue increased 6% in the quarter an improvement from 2% last quarter with good growth from both the Gulf states and Africa. The Asia-Pacific region grew revenue 7%, which is up slightly from last quarter's growth. This quarter's results were driven by growth across the region including India and the Philippines. China revenue declined, although this was primarily due to our decision to restrict transfers from Argentina to avoid currency risk on our cash balances in that country.

The Latin America and Caribbean region revenue grew 2%, which was down slightly from last quarter. Lack of revenue growth is being negatively impacted from currency translations compared to the prior-year period. WesternUnion.com, which we now report as our sixth region, again delivered strong results as revenue increased 39% in the quarter. WesternUnion.com results are not included in the growth rates for the other five regions. Total electronic channels revenue, which includes WesternUnion.com, as well as account -based money transfer and mobile, increased 38% in the quarter and represented 3% of total company revenue. In addition to WesternUnion.com, we also continue to make strong progress with adding our services to online banking platforms. Revenue from account-based money transfer transactions increased 43% in the quarter.

We now have nearly 90 banks signed for account-based money transfer with 44 active, including US Bank and Regions Bank in the US. Prepaid revenue increased 17% in the quarter, in total prepaid, including third party top-up, represented just under 1% of company revenue for the quarter. Our prepaid cards are now available at more than 20,000 retail locations globally, including over 19,000 locations in the US. We are now in 7-11 stores in the US and have launched cards in the UK, Germany, and Austria. In the quarter, we had over $260 million loaded onto our cards through over 600,000 loads. Turning back to the total C2C business, the spread between transaction and revenue growth in the quarter was 2 percentage points, excluding the impact of currency which negatively impacted the spread by approximately 1 point. The impact of net price decreases was less than 1% in the first quarter and mix was about 1%.

For the full-year, we continue to expect C2C price decreases to be in the range of 1% to 2%. Moving to the Consumer-to-Business segment, this business continued to have steady results with the revenue increasing 1% or 3% on a constant currency basis led by international growth in South America. Business Solutions reported revenue of $87 million in the quarter, which compared to $28 million a year ago. On a pro forma basis, adding last year's Travelex results back to the 2011 first quarter, Business Solutions revenue increased 5%, or 4% on a constant currency basis. Australia performed well, but we saw some slower than expected revenue growth in our North America and UK businesses in the quarter. This was primarily driven by slower global trade growth and lower currency volatility in some markets. Currency volatility benefited Business Solutions in the second half of last year.

Despite the slower growth in the quarter, our customer acquisition remained strong and we continue to expand to new markets and the integration of Travelex Global Business Payments is progressing well and we remain committed to delivering constant currency revenue growth in low double-digits this year. Turning to consolidated margins, the first quarter consolidated GAAP operating margin was 23.9% which compares to 24.4% in the prior year. Excluding $6 million of Travelex integration expenses, our consolidated margin was 24.3% compared to 26.3%, excluding $24 million of restructuring expenses in the prior-year period. EBITDA margin excluding integration expenses was 28.9% compared to 29.7% excluding restructuring expenses in the first quarter of last year. The primary driver of the reduction in operating margin was Business Solutions and the impact of Travelex Global Business Payments acquisition including an incremental $10 million of intangibles amortization. The first quarter consolidated margin was also negatively impacted by higher marketing expenses, additional costs related to investments in the new ventures and Southwest border compliance, acquisition-related expenses for Costa and Finint and the timing of certain expenses. In addition, marketing expenses were 3.8% of revenue in the quarter compared to 3.4% in the prior year.

For the full-year, we expect marketing expenses as a percent of revenue to be similar to last year at around 4%. These impacts were partially offset by benefits from revenue leverage, currency, restructuring savings, and reduced bank fees related to Durban. We believe our consolidated margins will improve as we move through the year and we are still targeting GAAP margins of around 25%, our margins excluding Travelex integration of expenses of around 26% for the full-year. Business Solutions margins should improve throughout the year as we benefit from revenue leverage and the beginning of some operating synergies in the second half. Consumer money transfer margins have also improved due to revenue leverage and timing of expenses. There were no restructuring expenses in the first quarter of 2012, as we completed all of our activities in the third quarter of last year. We realized approximately $18 million in restructuring savings in this year's first quarter.

We continue to expect approximately $70 million of savings in 2012 or an incremental $15 million compared to 2011. The tax rate in the quarter was 14.8%, which compares to 23.5% in the first quarter of last year. The decrease in our tax rate is primarily due to the resolution of the treatment of our international operations, as we noted in the announcement of our agreement with the US Internal Revenue Service on December 15, 2011 and the benefit of some small nonrecurring adjustments in the quarter. For the full-year, we still expect the tax rate of between 16% and 17%. Earnings per share in the quarter were $0.40, which compared to $0.32 in the prior year or $0.35 excluding restructuring charges. Excluding last year's restructuring expenses, EPS increased 14%. First quarter 2012 EPS also rounded to $0.40 excluding the $6 million of pretax Travelex integration expenses.

The C2C operating segment margin was 27.7%, compared to 28.6% in the same period last year. The margin benefited from revenue leverage, currency, and restructuring savings and was offset by increased marketing, Costa and Finint acquisition-related expenses, investments in WesternUnion.com, compliance costs, and timing of some expenses. Within C2C, marketing as a percentage of revenue increased 60 basis points compared to last year's first quarter. Costa and Finint are currently negatively impacting margins, but once we complete the integration and begin to realize cost savings, we should see positive contributions to margins later in the year. The Consumer-to-Business operating margin increased to 26.5% compared to 22.6% in the prior year period. The margin increased primarily due to the impact of lower debit processing expenses related to Durban. As a reminder, the reduction of debit fees due to Durban is having a positive impact on our C2B margins, although it will negatively impact revenue in some cases as we pass through the savings.

Business Solutions reported an operating loss of $15 million for the quarter compared to an operating loss of $4 million in the prior year period. Last year's loss does not include Travelex Global Business Payments. This quarter's $15 million loss included $14 million of intangibles amortization and $6 million of Travelex integration expense. Intangibles amortizations in last year's first quarter was $4 million. As mentioned, the Business Solutions profitability should improve throughout the year as we benefit from revenue leverage and cost savings.

Turning to our cash flow and balance sheet, we remain in a strong position. Cash flow from operations for the quarter was $215 million, which includes the impact of approximately $65 million of tax payments relating to the agreement with the IRS. Capital expenditures in the quarter were $76 million or 5% of revenue. As we noted in February, capital expenditures as a percent of revenue will be higher this year due to increased signing bonuses on agent contracts for several major renewals and we are aggressively pursuing new agent signings. We are also adding to investments in WesternUnion.com and other new technology. We expect capital expenditures to come back to 3% of revenue on average after 2012, although any given year could be impacted by additional new agent signings or other initiatives.

Depreciation and amortization expense was approximately $64 million in the quarter. At quarter end, the Company had debt of $3.6 billion and cash of $1.4 billion, approximately half of the cash was in the United States. We continue our strong capital deployment policies. We resumed our share repurchase activities in the quarter, repurchasing 8 million shares totaling $147 million at an average price of $17.69. This represents 1% of the total shares outstanding.

As of March 31, our shares outstanding were 614 million shares. We have approximately $470 million remaining under our existing authorization, which expires at the end of 2012. We also increased our quarterly dividend by 25% to $0.10 per share and paid out $62 million in dividends. We remain committed to continuing with strong return of funds to shareholders throughout the year. Finally, we are affirming our full-year 2012 financial outlook, including all the metrics provided in our February earnings release.

In summary, our Consumer-to-Consumer business has started the year well and we believe we will see better results from Business Solutions and stronger margins as we advance through the year. We're making good progress with the Travelex integration and in establishing other new growth areas and ventures. We will continue to deploy our strong cash flows to reinvest in the business and return funds to shareholders. Operator, we are now ready for the first question.

(Operator Instructions) Darrin Peller, Barclays Capital.

It looks like the trends on the transactions were a little bit stronger than at least we expected and I'm curious, a lot of the corridors that you had some questions about last quarter, including Russia and Mexico seem like they've hung in there, especially Mexico. Your revenue is also a little bit better than your guidance range. Your constant currency revenue at least at about 5%. What's inhibiting you from bringing the guidance up or we just too early at the point right now, given last quarter was around 3%?

Hi, Darren. This is Hikmet. Yes, I think generally I would say that we are staying so cautious because given the uncertainty in Europe. We do have some improvement in North America and in the Middle East, Africa, Asia-Pacific regions, but I would say that it's too early to give different guidance than it is. We are reaffirm our guidance, we are very pleased with the quarter, especially in the C2C revenue. I think the transactions are coming. There is some positive improvement here, but given, also, yesterday announcement already what happened to the stock market, about European news, I would say that I'm staying still cautious here for generally, but I'm affirming the revenue guidance.

Okay. Hikmet, just to clarify, we're now at, again, a little bit of a higher growth rate. Can you just give us a little more color, specific color, on what actually might've surprised you this quarter versus what you had expected when you give that guidance. Because it looks like some of the corridors certainly were a little better.

Nothing specific surprising. I would say that the people our are on the field and they are really giving us good indications about that. I think we have the same challenges like in Russia, like in Mexico, corridor there and continued softness in some parts of Europe this year. But also that gives also how good our business, how good it is to be in 200 countries. The portfolio, managing the portfolio, being in 200 countries has up and downs, but also evident in Europe even, countries like Germany are growing good and give us a comfort zone to affirming our guidance.

Okay. On the margin side, Scott, you said earlier the margin should show improvement through the year. Is it just growth on the top line and scale? Is it the timing of costs and marketing? Can you give us a little more color on specifically why through the year we'd expect it to ramp up?

Sure, Darrin. If you will, on a full-year basis, we're still targeting operating margins of 26% excluding the integration costs and EBITDA margins of 30% excluding the integration cost, if you will. We see a path there. A couple things that will be helpful as we move forward the next two to three quarters -- first, it's the fixed cost leverage from higher absolute revenue as we move through the quarters. Then also, improvement in Business Solutions. We currently have some heavy upfront spending there. We'll see some cost savings as we combine Travelex and Western Union Business Solutions later on in the year and then just better revenue growth from Business Solutions as we move through the year.

Also, there's other things, Darrin, to a lesser extent, but Costa and Finint will have lower integration spending and begin to see some of the synergy savings in the latter half of the year. We just did have timing of operating expenses, some with IT and Operations, so some of the timing was heavier in the first quarter compared to other quarters. The other thing I would add is, as we run the business, you'll see some variation in margins from quarter-to-quarter, but really making the right investment decisions, the right business decisions to drive growth and market share.

Just to add on that, Scott and Darrin, incremental investment like in WesternUnion.com, it pays back. You could see there's almost 40% growth. We opened our office in San Francisco, we are hiring people, I think we are growing and we want to grow that business faster. We have a target in 2015, $500 million. And I'm going to give you more color on that at our May 9 Investors Day in New York, but I'm very pleased with the investments and they are long-term investments and they are going to pay back.

Good. All right, guys. Thank you very much.

Bryan Keane, Deutsche Bank.

I just want to ask about any correlation to the improvement in the C2C transactions, but the margins were a little but lower than we expected. Is any of that pick up in transaction growth due to the marketing or anything we can point to exactly that actually hurt the margins, but helped transactions?

Bryan, not specifically, if you will. If you look at each of the regions, four of the five regions did see improved revenue growth Q1 over Q4. It was very much on a global basis. Markets such as the Germany were strong, Philippines, India, US domestic. It was really around the globe that we did see strength for the most part. Again there are some challenges in certain geographies, but as we look at the C2C margins, they were down about 90 basis points. Year over year marketing was up about 60 basis points.

But on a full-year basis, we'll run marketing right around 4% of revenue, so you will get some variation quarter-to-quarter. We also had some costs for the Costa and Finint integration. Again, as we move through the year, we think that will be helpful margins and then, just some timing of expenses; nothing particular line of sight. I think it's a good execution around the globe and the benefit of having the portfolio being in 200 countries. No country outside of the US is greater than 6% of the top line, so the portfolio is definitely helping us.

Okay. Then just looking at the metrics, last year, C2C transactions started out the first quarter at 7%, then went 6%, 5.5%, to fill out the rest of year, so it decelerated slightly. Any thoughts on what the outlook might be for transaction growth? Will it remain at this 7% level? Will it increase? Will it decrease a little bit like it did last year?

Bryan, in our business, it depends, really, changing corridor by corridor and by quarter by quarter. But generally, once again I'm affirming my revenue guidance I gave at the beginning of the year. I feel quite comfortable with that. We had a good quarter and a better quarter than last Q4, and I think I am pleased with the business results.

Okay. On the Latin America region, revenue grew 2% and then transactions grew at 8%; that's a 6 point delta, a little larger than typically we've seen. Can you just help us understand the delta there?

Yes, Bryan, there definitely was some currency impact there. If you were to currency adjust the [lacka] number, the 2%, I'm not saying it would be 8%, but it would be 2% revenue growth would be closer to 8% than the 2% that you're seeing.

Okay, great.

The delta would be much smaller.

Okay, great. Solid quarter, thanks.

Tien-Tsin Huang, JPMorgan.

I just want to ask about the B2B, the Business Solution segment, I didn't quite hear, how did that perform versus planned in the first quarter? I think I heard that it was cyclically a little bit challenged. But I also wanted to confirm if we're still looking $400 million for the year in terms of revenue?

I think, first, Tien-Tsin, as I mentioned before, we are committed to our low double-digit growth for the coming years. I think we did see some softness in our US and UK business, due to global trade and due to currency volatility. But we did, also, very strong growth in our Australia business. I would say that the quarter came a little bit softer than I expected, but we are committed for our low double-digit growth.

The only thing I would add, Tien-Tsin, from quarter-to-quarter in this business, you do see some variation in revenue growth rates. If you look at the second half of 2011, because there was a lot of currency volatility in the marketplace, you did see some higher growth rates and some variations among the quarter. We think in the first quarter, we had very good growth in Australia, Asia-Pacific, some softness in US and UK. Some of that is really due to trade being a little bit soft and then just, I'd say lack of currency volatility. But we are committed, we see line of sight to growing that business low double-digit pro forma revenue growth for 2012 and right around that $400 million of revenue that you asked about.

Great. So some of it is going to be easier comps around FX volatility, but did you also sign some new distribution points as well?

Yes. Absolutely Tien-Tsin, as you recall, we were in 16 countries as we acquired Travelex and now we are in 25 countries. We just announced one of the biggest pension payment organizations in UK, Mercer, and they are paying out to UK pensions and retirement people in 80 countries. I think we are getting new accounts here. We have salespeople that are quite active. Our agents, I have just come back from Asia, from Indonesia, and I met some agents there. They're very excited about opportunity to launch new services with B2B.

Great. Last one, just sort of a bigger picture question, I'm sure you'll talk about this at the analyst day, but WuPay, I've just been doing some work around that area. Is it fair, Hikmet, to call this your -- a digital cash wallet maybe? I'm curious, is it live now? What's the activity like? How many billers do you have? Should we think about this potentially being added to other marketplaces in the future? I'm just curious what the quick plan is on that?

Absolutely. I think it's too early -- we're going to give you more color, as you say it, in May 9. You may call it wallet, but I call it WuPay. It really gives the capability to our customers to use also, not only their account from a credit card, funds their account from a credit card, but also cash funding. Many customers don't want to give, purchase online goods, don't want to give their credit card numbers or online account numbers, they can go through one of the 500,000 locations in the future.

Now, it's only in the US, but also in the future, and pay their bills. That gives the capability. The good thing here, also, we want to add that on our WesternUnion.com, which is growing, by the way, by 40%, as you know and having direct access to the customers, to their accounts, I think the e-Bill which we acquired about six months ago and now we changed it to WuPay. We are using our existing brand, Western Union brand, and promoting that to our new potential customers.

Yes, Tien-Tsin, it's live for online payments to merchants. We've got several hundred merchants there where they're connected to and then it will be live for payment on WesternUnion.com in the next couple of months.

Very good, thank you.

Ashwin Shirvaikar, Citigroup.

Good job on the C2C revenue growth. My first question is, you do have this year several major renewals in C2C. What should we expect from that? Lower commission rates, is that on the table? Exclusivity, any comments, yet, on those things?

We, as you know, Ashwin, we have some principles. I think we like our brand, we like our exclusivity because I believe that our brand attracts customers to the point of sale and we would like to protect our brand and protect our premium pricing. Depending also about the market, of course, but generally, we are in line with our principles here. Of course we want to expand our, we have our, today's a big day for Western Union. We opened 500,000th location; actually, we are going to open a lunchtime. Our 500,000th location with a press conference and everything. I would like to expand our touch points.

As I mentioned the last conference call, we are having a target of about 1 million touch points globally to reaching out and we're going to aggressively going to sign new agents. But also, improving our margins. Over the years our coastal sales have been decreasing and we would like to go that path. And we hired new salespeople, one of the biggest investments we did the last two quarters are hiring new salespeople on the field and expanding our sales approach, is that going to continue.

Okay. Moving to the B2B, can you comment on the relative importance to revenue growth of things like currency volatility versus new client signings? Trade trends, if you can just comment on the relative importance of that.

Obviously, the existing customers revenue has to grow because of the core of the B2B. That some impact here with the existing corridor in North American UK, part of the world which the currency exchange rate was favorable to us, where our existing customer wanted to trade, they use us like in Australia and Asia. New client signings are very aggressive. As I mentioned before, we are in 25 countries.

We are signing new ones and it takes some time as they come up with revenues. But one of the new Western Union you will see is that be more aggressive at the market in signing new clients and we are doing that and it has been only a few months. We acquired Travelex and we put under Western Unions Business Solutions. We started with 16 countries, we are already in 25 countries. That impact will take some time, but you will see it.

I'd just add, Ashwin, that our global market share is right around 2%. We really have an opportunity to globalize this market. It is very under served and we believe our brand, our global footprint, our compliance capabilities, all those things play very well to globalizing this space over the coming years.

One housekeeping question -- share count did not go down in spite of the buyback. Was that timing in the quarter or issuance? Can you comment on that?

It would probably just be timing, because what you're probably referring to is that both in the fourth quarter and the first quarter, we had roughly 622 million diluted shares outstanding. Is that what you're focused on?

Yes.

It would be timing, if you will. What I will say with stock buybacks, since we're on that topic, is that we bought back about 150 million shares -- $150 million worth of our stock. We plan to be active, our buyback level is probably somewhere in the range of we saw in 2009, 2010, so 400 million to 600 million somewhere in that range, from that standpoint.

Okay, thank you.

Yes, Ashwin, we called out at the end of the quarter, there were 614 million basic shares outstanding.

Julio Quinteros, Goldman Sachs.

Just one quick housekeeping question -- can you go back through the domestic international and Mexico transaction and revenue growth numbers for the old disclosures? I just want to make sure we have those mapping correctly.

Sure. The domestic business had a 12% transaction growth in the quarter and 9% revenue growth, very solid in the first-quarter. Then the Mexico business, Julio, had transactions and revenue both growing at 3% in the first quarter.

Okay. Got it. And then the international piece?

The international piece, you would see 6% transactional growth and 4% constant currency revenue growth on the international piece.

Got it, okay. Obviously, we've talked a lot about the Business Solutions piece, in terms of revenue improvement, it sounds like you guys reaffirmed the $400 million. I'm just trying to get more specifics on what is it that gives you guys the confidence and the line of sight, if you will, on the improved revenue performance with the Business Solutions segment?

I think first of all, we believe that the existing customers are going to use, as the currency exchange rate and changes, and it's nothing, Julio, it happens in this business, depending on the quarters, depending on the months when the trade's happening. That's one. Secondly, also the new signings are coming very strong and we are assigning new clients here, that makes me comfortable with $400 million.

Yes, for us, obviously, this is an area that's a little bit newer in terms of trending out and trying to understand what the drivers are. At this point, if you had to make a suggestion on what we should be focusing on, it sounds like FX volatility might be something to be tracking. Are there any other sort of macro metrics or external data points that you would suggest that would also be important indicators for the business itself?

That's the first one and the second one, I would definitely -- the global trade. Especially for the SMEs, the global trade within the SME sector is something that you may have a look.

Okay. On the bill payment business, obviously, the disclosure in terms of the margins, does give us pretty nice look in terms of the margin profile of that business now we can see that separate from the Business Solutions segment. I'm trying to understand what you guys think is the margin profile of that business longer-term? Obviously, some benefits post the debit interchange rule changes et cetera and much, much stronger performance than I think what we were even thinking about here in terms of the model, but where do you think that margin goes from here? What are the most important drivers over the longer-term for the bill payment segment?

The drivers, like it would be for most businesses, is top line revenue growth. On a constant currency basis, revenues were up 3% in the first quarter. Now, as we move through the year, we may see some, because of Durban and some pass-through, may see some impact on the top line. But we see the C2B business as being steady for sure, Julio, from that standpoint. A key driver of the margins will be the revenue growth.

Without getting real specific, I do feel comfortable that the type of business, that its going to have a margin that at least has a 2 in front of it as we move forward. It's a good business. It's in the US, it's in Argentina, we're doing some things internationally and it complements our money transfer business very well. I think it'll be a very profitable business with at least a two in front of the margins as we move forward, for sure.

Great, thanks guys, good luck.

Glenn Fodor, Morgan Stanley

This is (inaudible) for Glenn. Can you just quickly update us on the compliance situation in Mexico? How that is progressing and by when do you expect to be in some compliance?

Yes, I think as we mentioned in our February earnings call, we have been working with the appointed external monitor very close to determine and appreciate changes, which we have outlined in our agreement and improvements about anti-money laundering oversight along all the border. I think we did do some changes last year on the Vigo and on Orlandi Valuta brands and also on our brands ID threshold changes, which have impacted our high principal transfers, which we still see it. Currently, we are also investing on the new technology changes and we have other many projects on the way. We believe that these changes have affected our principal and market share in 2012, but we also believe that these changes are needed. These changes are happening and we are going to be, as an industry leader, we're implementing the changes and that will also impact all the industry long-term.

Thanks. Also, recently, research by (inaudible) Hispanic center seemed to suggest that migration from Mexico to US has deeply declined and that there's actually a reversal of trend where Mexicans are leaving the US and that trend has picked up. Can you comment on that and how you see that impacting long-term growth in that corridor?

I think we believe that Mexico corridor for us is a very important corridor. I think we believe there is still room to grow. I believe that we're going to continue to invest on that. I didn't see any big changes on our currencies impacted by migration changes. But as I said, the biggest impact has been around our compliance programs.

As a reminder, I think everyone probably knows this, but it's probably worth saying is that Mexico is only about 6% of our top line, so it's one of many marketing. When you think about a portfolio of business, Mexico is an important market, but just one of 200 countries.

And these changes have been in through other countries, many, many years, many migration regulations, all this has been here.

Great, thank you.

Jim Kissane, Credit Suisse.

Have you seen any improvement in Italy since the tax was rescinded, I guess about a month ago?

I would say that generally we don't give special country numbers, but I would say, generally this implementation has been for all countries. It doesn't impact Western Union or the others and the southern European area stays as a challenging area, still. We do see in total in Europe business, a little bit improvement, but in southern Europe, I would say that we are, I'm still cautious there.

Scott, just to clarify, higher FX volatility is actually positive for B2B, right? Because you can generate a bigger spread? Is that the case? So you have, actually, more difficult comps in the back half of the year?

Where volatility really helps us, it just creates, if you will, Jim, uncertainty in the marketplace and so customers are more likely to be active trading forwards or options, if you will, if the currency's moving all over the board. It generally incites people to come into the market and transact.

Okay. So, you don't get a higher spread is what you're saying?

It can very a tad bit, but it's not a big factor. It's really just the volatility drives customers into the market because of some uncertainty of where rates might end up, high or low, good or bad, depending on where you're standing.

Got you. Longer-term, where do you see B2B margins, say three or four years out?

Jim, I think that is a very leveragable business model. As we look three to four years out, I do see that the EBITDA margins can be somewhere around where we're seeing the Company margins today of 30%. It's a very leveragable business model. We're spending $50 million to very well integrate the businesses in 2012 and I think that's going to give us really good technology, really good product offerings, and that fixed cost structure we can leverage. I see down the road, we could have EBITDA margins around that 30% spot.

Great, thank you.

David Togut, Evercore Partners.

Hikmet, at your analyst day in September of 2010, you highlighted reduction in agent commissions as these contracts come up for renewal as a major driver of long-term margin expansion. How far are you through that cycle of reducing agent commissions and can you quantify expected savings for this year?

Generally, as you know, over the years, our agent agreements are long-term agreements, in five to seven years agreements. We have about, many, many thousands of agents, which gives us 500,000 locations. Depending on the country, depending on the cycle of the agent, but generally, we are driving our cost down. What was the cost?

David, cost of services in 2010, ex-one-timers, was about 57% of our revenues. Then if you fast forward that to full-year 2011, it's 56%, down about 100 basis points, our cost of services as a percentage of revenue.

As we move forward with the agent negotiations, we are really targeting a lower commission rate. But it's also win/win situation, agents also have to win and we have to win. I think, generally, the directions we are having lower cost of services.

You have a target for cost of services for this year and next?

We didn't disclose that, but generally, it's in line with our -- we are keeping it lower.

I'd say, David, we have a spot that we want to get to. We've got a, like every business, a three-year business plan, so we have a road map of where we want to head. But without getting into a lot of specifics for a lot of reasons, one of our objectives in 2012 near-term is to have 26% operating margins, 30% EBITDA margins, and the combination of revenue growth productivity initiatives such as agent commissions offset by some investment spending will allow us to get to those 26% margins.

Finally, on capital deployment, you indicated a target repurchase this year of 400 million to 600 million. What should we expect for dividend policy this year and are you done with big deals for now?

Let me start on the acquisition front, we'll continue to look at things, David, but near-term, I don't see us doing any sizable acquisitions from that standpoint. From a return of capital, clearly, investing in the business is important. As I mentioned, I don't see any large acquisitions in the near-term. Getting our capital back to our shareholders is very important. About 60 days ago, early February, we increased our dividend by 25%.

It has roughly a 2% yield right now. We also believe, given where the stock price is at, that it's undervalued. We think it is important to buying back the stock. As we look forward, the management team will work with our Board. We continue to have a balanced payout, all things being equal and if the business performs, we'd like to move the dividend along, too, as the business performs.

Does that mean the payout ratio will increase this year?

I'm not giving you specific targets for 2012. We just did raise the dividend by 25% in February and I think, historically, we've got a very good track record of raising the dividend at least annually.

Thank you very much.

Jason Kupferberg, Jefferies.

Just wanted to start with a question on the principal per transaction growth. I think that metric, even in constant currency, slipped a little bit this quarter, which you highlighted on one of your slides. I wanted to just get a sense of whether that was due to Europe or any specific corridors? Do you expect it to say in slightly negative territory for the next couple of quarters?

Yes, Jason. Really, I would point you to just a couple markets. Again, it's a portfolio approach of being in 200 countries. But Russia, where we have some challenges, that carries a higher average principal per transaction. When that business is soft, it has a bigger impact on the consolidated number and then also China.

For example, out of Argentina to China, we're seeing some very high dollar sends and for a number of reasons, we pulled back on that business. The Russia and the China corridors are impacting that principal per transaction. I think what's key with our business, the biggest driver behind our revenue is the customer and the transaction, getting the customer in the front door, whether it's retail or electronic and that's what drives the revenue growth.

Also, DMT has an impact.

Yes, and DMT had somewhat of an impact because of the $5 for $50. DMT continues to be successful with 12% transaction growth and 9% revenue growth.

Right, right. Okay, that's helpful. Just to pick up on a couple of your earlier comments, Scott, I think you had referenced your three-year business plans and you did talk a little bit about, over the next three to four years where you see B2B margins, specifically, could go. Just given the fact that you guys, obviously, are in investment mode as it relates to electronic channels and talking about some of the longer-term payoffs there, what will be the right time for you guys to talk about some longer-term financial targets, in terms of ranges at least for overall revenue and EPS growth and potential margin trends? Is that something that we can conceivably start hearing about at your analyst meeting next month or are we going to have to wait a bit longer than that?

Jason, I think you're going to, at the Analyst Day, we've got Hikmet, myself, our business leaders, we're going to talk a lot about our strategy of where we're heading, not only near-term, but long-term from that standpoint. The objective at the analyst day is to give you all the building blocks, so on a long-term basis, you can take your view of what is the revenue growth, the margin profile, EPS. But we'll really give you those building blocks and strategies that I think will be helpful as you look out the next three or four years.

We are still very optimistic and I'm looking forward to the next years, coming years. We did give some indications like the WesternUnion.com like having $0.5 billion business year 2015. We gave indications on the Western Business Solutions. All these things and you'll get more color and I just want to extend my invitation to all on the call again for Investors Day in New York, May 9. That will really give you more color about the new Western Union, about how we change and take the company to the next stage, adding new products and new services. I think that will give for you an indication where the Western Union could be in three or four years.

Any update on PSD initiatives in Europe, perhaps in terms of incremental agent locations you've been able to secure or any other metrics you're in a position to share?

On the PSD, we added about, we're almost at 10,000 locations, we are around 9,000, more than 9,000 locations. I think we are expanding very good there. The 10,000 locations are, of course, only the retail locations, which we were not, in the past, not allowed to open, now we can open them. I think it brings us additional revenue. I am pleased with the progress we're doing with the PSD.

Good news. Okay. Thanks for the color, guys.

Andrew Jeffrey, SunTrust.

As a follow-up to Bryan's earlier question, with regard to the branch build-outs, Hikmet, I think you've been pretty clear, that's one of your initiatives in terms of accelerating the growth and increasing the Western Union footprint. Do have some thoughts as to when we may see the benefits of that initiative, in terms of faster C2C revenue growth? Are we seeing that today? What kind of payback, from a timing perspective, do you expect on those investments?

First of all, our business is growing with the expansion of our network, that's clear. I been now in the Company 13 years and I remember as we celebrate our 100,000th location, now we are celebrating today our 500,000th location. Without that expansion, we wouldn't be so successful. I just want to remind you that a few years ago, we had a 7% market share and we are now around 17%-plus market share under (inaudible) market. That's due to expansion of our network. We have this vision of having 1 million locations, because that gives us, not only on the core business, which we believe it will grow, transfer location to location money transfer, but it also has this big impact on our WesternUnion.com, WU Pay, really connecting electronic with locations. Nobody in minutes can pay from so many countries to 500,000 locations from WesternUnion.com.

I could, say, now, as I'm sitting in New York, send money to anywhere to 200 countries to 500,000 locations, in minutes, money. That's going to expand, we have this 1 million touch point. One other thing is also, as you know, recently we launched ATM money transfer in Italy, we launched ATM money transfer in Japan, we launched ATM money transfer in Turkey, so it's not only working in locations, it's also using electronics in a different way. We're going to continue that, it's already paying back WesternUnion.com wouldn't grow almost 40% if you wouldn't have the location globally. The team is very focused and I'm very pleased with the progress.

Maybe think about the branch build-out strategy as part and parcel of the kind of growth we've seen in the last couple of years and maybe cyclical factors are going to be more of an impact on the C2C transaction revenue growth prospectively?

Yes, I can give you more color in May 9 meeting, and so your going to hear it more. The other thing, also, what brings us the location expansion is adding new products like our store value products prepaid cards. And you're going to see that we have this vision as we are the biggest money transfer network of the world. We would like to have been, also, the biggest pre-load and cash-out network of the world and to do that, I think we have to expand on our brand [helps], our agent network helps, our presence in 200 countries and the regulatory environment health.

Okay, thank you.

I'd like to thank everybody for joining us. As Hikmet mentioned, we do have our Investor Day on May 9 in New York. We hope you're able to join us there as well and wish you all a good day.

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