西聯匯款 (WU) 2014 Q4 法說會逐字稿

Good afternoon, and welcome to the Western Union fourth-quarter 2014 Earnings Conference Call.

(Operator Instructions)

Please note this event is being recorded. I would now like to turn the conference over to Mike Salop, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, and good afternoon, everyone. On today's call, Hikmet Ersek, Western Union's President and Chief Executive Officer; and Raj Agrawal, Executive Vice President and Chief Financial Officer, will discuss the Company's 2014 fourth-quarter and full-year results and Outlook for 2015 and then we'll take your questions.

The slides that accompany this call and webcast can be found at westernunion.com under the Investor Relations tab and will remain available after the call. Additional operational statistics have been provided in supplemental tables with our press release.

Today's call is being recorded and our comments include forward-looking statements. Please refer to the cautionary language in the Earnings Release and in Western Union's filings with the Securities and Exchange Commission, including the 2013 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 on the call are the property of the Western Union Company and subject to copyright protection. Others other than the replay noted in our press release, Western Union has not authorized and disclaims responsibility for any recording replay or distribution of any transcription of this call.

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

Thank you, Mike, and good afternoon, everyone. Overall, I am pleased with our 2014 results, especially with profitability and earnings-per-share which exceeded our expectations. In consumer money transfer, revenues increased 3% in constant currency terms as the actions we implemented in late 2012 and early 2013, helped return this business to positive revenue growth.

Online again led to rates, with westernunion.com consumer money transfer revenues increasing 28% for the year. We've seen in business solutions revenue increased 4% in constant currency in 2014. The business experienced good improvement in the fourth quarter, after being negatively impacted in the middle of the year by a lack of foreign exchange volatility. And the consumer bill payments' business produced strong constant currency growth, with US electronic bill pay again posting solid results.

While we continue to make investments in our compliance capabilities across the businesses, we were able to deliver operating margin improvement in 2014. Efficiency initiatives helped us increase the profit margins and earnings-per-share for the year increased 11% to $1.59.

Our business also continued to generate great cash flow, with approximately $1 billion from operating activities in 2014, and we remain committed to returning significant free cash flow to shareholders. Over the course of the year, we returned over $750 million through the combination of dividends and share repurchases.

We are very pleased to announce enhancements to our capital return program. These includes a 24% increase in our quarterly dividend, which raises it from $0.50 to $0.62 on an annualized basis, and a three-year $1.2 billion share repurchase authorization. Our intent is to periodically raise the dividend, while continuing to have a balanced return comprised of both meaningful dividends and buyback.

As we begin 2015, we are continuing to execute to strengthen consumer money transfer, with an emphasis on online and mobile, and expand to reach on penetration in businesses solutions, while retaining our focus on generating and deploying strong cash flow. We believe our cross-border money transfer business is well-positioned, and we do not anticipate a need for a significant cross-border pricing actions in 2015.

However, we are facing some global economic headwinds, including the impact of a stronger US dollar and slowing economics in key send markets, such as Europe and Russia, and some competitive pressure in our US retail domestic money transfer business.

Overall, we expect to grow revenues on a constant currency basis in 2015, but reported growth is anticipated to be negatively impacted by currency translations, which we estimate will affect revenues by approximately $300 million compared to 2014 rates. Despite this, we anticipate our cost-saving initiatives and foreign- exchange hedges will help mitigate the effect on profitability.

We expect 2015 operating margins to increase approximately 21%, and earnings-per-share to be in the range of approximately $1.58 to $1.65. Strategically, we remain focused on being a leader in cross-border, cross-currency money transfer for consumers and businesses.

We want to build on our cross-border money transfer [engine], which includes our pay-in and payout network, our foreign exchange and settlement systems, and our data management and compliance capabilities, to serve new use cases and bring in more customers with expanded connection points. We want to allow customers to transact almost anywhere, anytime through the channels they prefer.

For Racine that means more mobile and account connections, more online options, and more ATMs, and self-service kiosks, in addition to further enhancements to our retail network. Racine Business Solutions remains a very important part of our strategy, providing account-based services through diverse set of customers. We continue to believe we can drive strong growth in B2B, as we shift our portfolio to more integrated customer solutions, and we expect profitability in this business to accelerate as revenues increases.

We are proud that Western Union plays an important role in providing financial services to underserved customers and businesses, aiding economic growth in many parts of the world and allowing families to improve their lives and small businesses to grow.

In 2014 we delivered on our earnings calls. And I would like to thank my Management team, and all of our employees, and agents around the world through their dedication and hard work. In 2015, we continue to focus on execution and although we are facing some revenue challenges from currency, we expect to generate good profitability and cash flow.

Now to give you a more detailed review of the financial results for the fourth quarter and our 2015 outlook, I will turn the call over to Raj.

Thank you, Hikmet. As I review 2014 financial results, I will focus primarily on the fourth quarter. The similar information for the full year can found in our press release and the attached financial schedules.

Fourth-quarter consolidated revenue of $1.4 billion was down 1% compared to the prior year period, while on a constant currency basis, revenue increased 4%. Depreciation in the Argentine peso, the euro, and other currencies around the world drove the differential between reported and constant currency revenue.

In the consumer-to-consumer segment, revenue decreased 2% on a reported basis or increased 2% on a constant currency basis. Transactions also increased 2% in the quarter. Western Union's C2C cross-border principal declined 1%, but increased 2% constant currency.

Principal per transaction was down 4% compared to the prior year period and was flat in constant currency terms. The spread between the C2C transaction growth and the revenue decline in the quarter was 4 percentage points, including a negative 4% impact from currency.

There was minimal impact from pricing and mix in the fourth quarter. For the full-year the spread between C2C transaction and revenue growth was also 4 percentage points comprised of a negative 2% impact from currency and 1% each from pricing and mix.

Turning to the regions, in the Europe and CIS region, revenue declined 5% compared to the fourth quarter a year ago, including a negative 6% impact from currency. Germany continued to deliver good growth, but this was partially offset by weakness in other parts of Europe. Compared to the third quarter, growth in Russia also slowed as the economy began to soften.

Transactions in the Europe and CIX region increased 6%. North America revenue was flat in the quarter, including a negative 1% impact from currency. Transactions increased 2%.

US southbound delivered good growth again in the quarter, and Mexico revenue increased 11% on transaction growth of 9%. Our growth in Mexico was higher than the reported market growth from Banco de Mexico for both the fourth quarter and the full year. Domestic money transfer revenue declined 4%, while transactions grew 1%, with the revenue decline being driven by reductions in the higher principal bans.

In the fourth quarter we began to see an impact on US retail domestic money transfer from recent competitive price changes. And we have factored these trends into our 2015 Outlook. We are implementing some price reductions in the higher principal bans in parts of the country, where we are seeing the most competitive impact, and we will monitor these results.

Strategically we are also very focused on further marketing and expanding our online domestic business, which is still growing nicely. Our network and brand give us a strong position with online and mobile sends for cash pickup, which is generally a different use case than the many account-to-account offerings in the domestic market. As a reminder, domestic money transfer represents about 8% of our total revenues and this includes the westernunion.com domestic business.

In the Middle East and Africa region, revenue declined 3% with a negative 3% impact in currency, while transactions decreased 3%. Good revenue growth from Saudi Arabia and the United Arab Emirates, was offset by softness in Africa, especially Libya, where business remains limited due to the unstable geopolitical conditions.

In Asia-Pacific revenue was down 3%, including a negative 4% impact from currency, while transactions declined 4%. Revenue continued to benefit from strong growth in Japan, which was partially offset by slowing in the Philippines.

Revenue in the Latin America and Caribbean region was down 3% from the prior year period, including a negative 7% impact from currency, while transactions increased 2%. Revenue was impacted by continued government-imposed restrictions on the market in Venezuela, and by the decline in the value of the Argentine peso, compared to the prior-year quarter.

Westernunion.com C2C revenue grew 19% in the quarter, including a negative 4% impact from currency, while transactions increased 27%. US-originated online transactions grew 29%. Electronic channels revenue increased 17% in the quarter, and represented 6% of total Company revenue.

In the consumer-to-business segment, revenue grew 4% in the quarter, or increased 15% on a constant currency basis. The differential between the reported and constant currency rates continue to be primarily driven by the devaluation of the Argentine peso, compared to the prior-year period. Consistent with prior quarters, in the US strong growth from electronic bill payments was partially offset by declines from cash walk-in, while the South America business increased on a constant currency basis.

Business solutions reported a revenue increase of 1% or 5% constant currency with good growth in hedging products, and from our education and financial institution services.

Turning to consolidated margins, the operating profit margin was 19.6% in the fourth quarter compared to 16.8% in the prior-year period. Operating margin improvement was primarily driven by cost savings initiatives, and lower integration expenses. Overall in 2014, we achieved $47 million in incremental savings from our cost initiatives, including $15 million of savings in the fourth quarter.

We incurred approximately $30 million in expenses in the quarter to drive future efficiencies. These expenses relate primarily to severance costs, and compared to approximately $33 million of similar costs incurred in the fourth quarter of 2013. We expect the new initiatives to generate approximately $15 million to $20 million of savings in 2015.

Compliance expense was approximately 3.6% of revenue in the fourth quarter and approximately 3.3% of revenue for the full year. EBITDA margin was 24.5% in the quarter, compared to 21.3% in the prior-year period.

Our fourth-quarter tax rate of 6.1% benefited from some nonrecurring items, and our full-year effective tax rate was 12%. Reported earnings per share of $0.42 increased 35% from $0.31 in the prior year period, driven by cost savings initiatives, a lower effective tax rate, and fewer shares outstanding. The C2C segment operating margin was 23.1%, compared to 20.5% in the prior-year period, with the improvement primarily driven by cost savings initiatives.

The consumer to business operating margin was 14.2% in the fourth quarter, compared to 15.6% in the prior-year period. The C2B margin declined primarily due to higher interchange expense, driven by increased credit card usage, and higher principal per transaction in the US electronic bill payments. Business Solutions reported an operating loss of $5 million for the quarter, which compared with a loss of $11 million for the same period last year.

Depreciation and amortization was approximately $13 million in both the 2014 fourth quarter and the prior-year period. The reduction in operating loss for Business Solutions in the quarter was primarily due to lower integration costs.

Turning to our cash flow and balance sheet, cash flow from operating activities was approximately $1 billion for the full year. Capital expenditures were $50 million in the fourth quarter. For the full-year, capital spending was approximately 3% of revenue, as agent signing bonuses declined from prior-year levels.

At the end of the year, the Company had debt of $3.7 billion and cash of $1.8 billion. Approximately half of the cash was held by United States entities. During the fourth quarter, we repurchased approximately 3 million shares for a total of $43 million. We also paid $65 million in dividends in the quarter.

At year-end we had 521 million shares outstanding and $12 million remained under our previous $500 million authorization. For the full year, we returned $753 million to shareholders through repurchases and dividends. As Hikmet mentioned, we also announced today a 24% increase to our quarterly dividend, and a new repurchase authorization of $1.2 billion, which expires in December of 2017.

Turning to our Outlook for 2015, our expectations reflect continued progress on key strategies, as well as anticipated impacts from the stronger US dollar, and the softening of European and certain other economies. We expect good growth from US outbound, but we have also factored in declines in our US retail domestic money transfer business, as we deal with the competitive pricing pressures in the market.

While we plan to implement some price reductions in US domestic money transfer, we do not expect significant price changes in our cross-border business, which represents approximately 90% of the total C2C revenues. As a result of these factors, we expect full-year revenue growth to be in the low single digits on a constant currency basis. GAAP revenue is expected to decrease in the low- to mid-single digits, reflecting the expected negative currency impact from depreciation of the euro and other major currencies.

Our outlook assumes the euro and other major developed market currencies remain around current rates throughout 2015. As Hikmet Ersek mentioned, we are estimating changes in exchange rates relative to 2014 will negatively impact 2015 revenues by approximately $300 million. This amount is net of the expected benefit from foreign exchange hedges, implemented to partially offset major currency movements.

Based on current rates, we anticipate the hedge benefit to be approximately $70 million. Operating margins are expected to benefit from cost savings initiatives and the foreign exchange hedges. The hedge impact on our margin percentages moves inversely with foreign currency movements.

When the euro weakens, it negatively impacts our revenue translation but the impact on profitability is less due to the hedges. Consequently, as we go through 2015, our margin percentage could be influenced by further significant exchange rate movements, but the likely impact on profitability is minimal.

Since compliance expense came in lower than expected at 3.3% of revenues in 2014, there is a year-on-year increase planned for 2015, but this year's spending projection is still within our 3.5% to 4% expectations laid out last year. The increase in 2015 is primarily due to additional hiring and the full-year expense related to headcount added throughout 2014.

We expect our operating profit margins in 2015 to be approximately 21%, which compares to 20.3% in 2014. And we expect a tax rate of approximately 13%, which is an increase from last year's 12% rate. As a result, we currently expect earnings per share to be in the range of $1.58 to $1.65.

The outlook for cash from operating activities is approximately $1 billion for the year. This outlook excludes $100 million of anticipated final tax payments, relating to the agreement announced with the IRS in December of 2011. Some or all of this tax payment may be paid in 2015, but timing is difficult to predict as it is affected by completion of other ongoing US federal tax matters.

So, overall we are pleased with the 2014 results, especially in regards to profitability and we remain focused on strong capital allocation for our shareholders. Although we face some revenue headwinds as we enter 2015, we have taken steps to benefit profitability, and we will continue to execute our strategies and invest for the future.

Operator, we are now ready to open the line for questions.

(Operator Instructions)

Bryan Keane, Deutsche Bank.

Just a couple of questions. If I heard you correctly, I think you said cash of $1.8 billion, approximately maybe half of that was held in the United States. If I remember correctly, I thought it was only about one-third or so held in the United States? So did you guys figure out a way to bring back some cash to the US?

Bryan, this is Raj. No. It's just really timing more than anything else. Typically we have a large portion of cash that's not in bank accounts, it's in transit. So it's really money that's not accessible to us. We have another portion that's held for regulatory purposes. And then we have some cash that may be excess in nature.

Some of it is going to be held by our international operations and some of it will be domestic, but the fact that there's more domestically is really just timing in nature and it's not necessarily related to anything else.

Okay. And then just to understand the hedging techniques, the $70 million that will show up, that's in the operating line? And just to clarify that?

And then, secondly, what would the operating margins be doing if you didn't have the hedges? Would they be flat or just give us some color there. Thanks.

Sure, Bryan. The $70 million benefit that we have will be helping both the revenue line, so the revenues will be better by $70 million, versus what they would have been. And then that also helps our profit line by the same amount. So that gives us a point of benefits on the operating profit margin line.

And had the hedges not been in place, the margin would have been about the same level as last year, so it's about 20%. We have cost savings initiatives that are helping us this year and that would help to offset any translation impact, as well as some of the other increases, investments that we're making. So margins would have been about the same as last year, ex the hedges.

Okay. Great. That's what I thought. Last question for me. Any color on the three segments on what to think about for constant currency as we look to set our models for next year or for this year actually?

Let me just start with, we don't give out specific outlooks for each segment, but Business Solutions, we're still very optimistic about the business. We believe that business can grow in the low double-digit range the next few years. Last year in the second half of the year, we saw the business accelerate from the low level of growth in the second quarter.

And it's on the right track, as we continue to expand into more of the integrated payments area, because our payments part of that business beyond the basic FX services has been growing really well in the university segment and the FI segment as well as NGO's.

And in terms of the payments business, we are continuing to get good growth there. The trends really haven't changed in that business, so good electronic growth, that's been offset by declines in our cash lock-in business here in the US.

And then in South America, on a constant currency basis it's doing just fine, but we have the Argentine peso issue here. And I think I gave a fair amount of color on the C2C business. I'll just leave it as --

Maybe you mention digital is going good.

Yes, of course, the digital business, we're very excited about. That's got some great growth opportunities to it. We're expanding our channel capability there on an ongoing basis. We already deliver money and cash anywhere in the world, but we're also expanding our bank funding and bank payout capabilities, which will be the growth drivers for this area of the business on a long-term basis.

Okay. Great. Thanks for the help.

Tien-tsin Huang, JPMorgan.

Good work here on the margins. Just wanted to ask on the compliance spend, a touch better than we thought. You're exiting I think, at 3.6%, Raj? So is there a clear line of sight for more spending going into 2015? I guess there's a question on visibility there. Thanks.

We expect the spending and compliance to be about 3.5% to 4% in 2015, and that's largely related to costs of all the people that we hired in 2014. So we're going to just see the full impact of that this year.

Also international expansion of compliance program, know your customer and know your agent expansion. But these are all factored in 3.5% to 4%, Tien-tsin.

Okay. Understood. Good. My second question, my follow-up, is just on the domestic money transfer. So sounds like it's just selective price actions in certain markets in response to MoneyGram and Walmart. What would it take to revise your pricing more broadly? What are you looking for to go to more of a uniform price change versus selective price changes? Thanks.

It's basically our business got impacted on the higher principal amounts. Right? We're seeing good growth in the lower principal amounts continue, especially the online and mobile part is growing very good on the domestic money transfer business.

On the higher principal amount, we did see some impact on our business, so we do look at where are the impacts happening in which areas with the higher principal amount, and we will adopt our prices there. The beauty of our business, although we have 500,000 locations, we exactly know where the consumer's behavior is in which location, how to behave, and we do implement specific pricing actions.

Now, we will look at it, how the market reacts. But overall I don't anticipate in 2015 big price changes. I think the investment we will do on domestic money transfer, but overall I would say I don't anticipate big pricing investments.

All right. That's great. Great results. Thank you.

Darrin Peller, Barclays.

I just want to follow up quickly on the margin side. Just to be clear, you're saying the $70 million from hedging is actually what gave you a benefit of about 1% on the margin; so they would have been about 20%, I think you said before.

I guess when we look into that a little bit, that compares to about a 20.2% or just over 20% in 2014, like you said. With revenue on a constant currency basis growing, you're saying you're backing out the currency hedging. What exactly is the pressure from? Is it just the increase in regulatory costs on a year-over-year basis by a small amount or is it something on the mix front that's preventing you from having a little more margin expansion?

Yes. Darrin, it's Raj. Margins we see being at approximately the same level. So 20% last year and 20% this year. We have cost savings initiatives that are helping us going into this year. But when you take the hedges out, you do have the negative impact on the overall profit line from removal of the hedges. So that's hurting us. And so the cost savings initiatives are helping to offset some of the translation impact.

And then we also are investing slightly more in compliance, as you heard. And then we just have higher inflationary costs in the business, in our fixed-cost structure that are just a part of doing business. So those are some of the components that get us to about the same margins this year.

Okay. That helps.

Just to expand on that a little bit, Darrin, the outside of the hedges, currency is negatively impacting our margins because we do have fixed costs in the US.

Makes sense. Just a quick follow-up on the forward-looking, when you think about the mix in terms of transaction growth versus revenue growth, again this quarter there was, I think you said -- or the outlook had a couple of points of spread differential. Can you, again, just explain the moving parts? You said you had about 1 point, I think, from pricing, a couple of points from mix? Or can you describe in a little more detail what the mix was and how we should think about that going forward?

Sure. In the fourth quarter we had 2% transaction growth. There was no impact from pricing and no impact from mix. And there was a 4 percentage point impact from currency, which got us to the negative 2% reported growth in C2C. And those are the three components as you go forward. Again, the pricing environment is a little bit more stable.

And DMT we may do some more, but otherwise it's going to be historically in our historical norms of low single-digits. From a mix impact, we haven't seen a mix impact in the last couple of quarters as we've anniversaried some of the bigger mix changes. And then currency is the wild card. It's hard to predict where currency will be. And that's really the last component.

Okay. Putting currency aside, is it fair to assume 1 or 2 points of spread between transaction growth and actual revenue growth for this year and maybe even longer term?

I'm not going to give a prediction on exactly where that's going to be. But, again, the pricing is relatively stable. I see us doing some pricing around the world and a little bit in DMT. So you'll have to make your assumptions around that, Darrin.

I appreciate it, guys. Thanks.

Smitty Srethapramote, Morgan Stanley.

The effective tax rate of 13% in 2015 is a bit lower than what your original guidance of 15% for 2014 was before the one-time items that you guys experienced in Q4. Can you talk about the drivers that allow you guys to lower the rate in 2015 below the 2014 numbers?

We've always thought, Smitty, that we can be in the mid-teens area for our tax rate and that's really within our overall range that we look at. It's really just a function of all the different entities that we operate in around the world. We have a global business. We operate in very low tax jurisdictions, so that allows us to keep our tax rate relatively low. So it's nothing more than that. It's just ongoing tax planning that we have.

Got it. And you mentioned that you guys have a couple new cost saving initiatives that's going to help support margins in 2015. Can you talk about some of the new areas of cost saves that you guys are targeting for 2015 that wasn't implemented in 2014?

Yes. We took $30 million of additional costs in the fourth quarter of last year. And that's going to translate into about $15 million to $20 million of incremental savings. In addition, we achieved a $47 million of savings last year, but on a run rate basis that's going to be about $60 million this year, so it's an incremental $10 million to $15 million. And that's really related to just eliminating roles throughout the organization and pushing roles into lower-cost jurisdictions around the world. So just shifting our organization to be aligned with our overall business.

Got it. And just, lastly, the mid-teens tax rate, do you think that is sustainable for the next couple years?

Yes. Approximately mid-teens. That's about where we target and we think that's achievable for the next few years.

Okay. Thank you.

Sara Gubins, Bank of America Merrill Lynch.

Could you talk about any impact you might be seeing around the world from lower oil prices? Are you starting to see that impact remittance flows?

Let me take that one, Sara. Hi. We do see a different dynamic in different parts of the world. That's the beauty of our business being in 200 countries. Our US outbound -- as you heard from Raj, our US outbound business is doing pretty well, the strong dollar helps out, also the US economy helps out.

On the other side, Russia did get some impact on our business. We saw some slowness in Russia to Central Asia, especially these countries in Ukraine and so, but that's also dependent on the foreign exchange and oil prices, the economic environment.

We don't see in the Middle East that big impact. I think the projects they put in place, they are still continuing happening to people. Our customers, they are still sending money to their loved ones, especially to South Asia. And we don't see the big impact. But long-term, I don't know what the oil price will happen, but it's too short. It's only three months, that volatility in the oil price happened.

The other side of the coin is that being in 200 countries helps. We do see some slowness in some parts of the Europe, put on the other side, Germany is doing pretty well. The outbound is doing well. So I would say, overall, I am cautious about 2015 and uncertain on 2015 about the global economy. But being in 200 countries helps our customers to continue to do transactions..

Great. Would it be possible to try to help size what percent of your transactions are coming from countries where oil production is a really critical component?

I think, as you know, the big part of our business is the Middle East Gulf states, out-front business. But we don't disclose that information, actually. And I don't think that all these oil price changes, all the (inaudible), oil price environment has been projected in our 2015 outlook.

Okay. Great. Switching gears briefly. Wu.com volumes continue to be really strong but they are decelerating. Could you talk to us about your revenue expectations for digital in 2015?

I think we still believe that our 2015 revenues will be strong. We still believe that digital, especially also on mobile, we believe it's going to grow very fast. We are now more than in 20 countries, I believe almost in 24 countries, with our online digital, sending money to 200 countries. And our goal is expanding to geographical expansion, but also we have very strong growth in the US. Our last quarter US growth was 29%.

So I think that there's still huge opportunities in Europe in outbound. We are just on the beginning of expanding our online businesses in Europe. And we do have some business in Australia and New Zealand, but I would like to have that -- we are today in our retail business in 200 countries. Why not being also with our online business in 200 countries? And that's our expansion policy. We are going to put a lot of emphasis behind that.

Thank you.

James Schneider, Goldman Sachs.

I was wondering if you could talk a little bit more about the types of cost control actions you put in place you referred to earlier? The incremental $15 million to $20 million in savings. Specifically where some of those actions, where some of those areas were? And maybe if you look into 2015, can you maybe talk about any incremental opportunities you have to reduce costs as you had throughout the year that may not be included in that guidance?

Sure, James. This is Raj. As I mentioned earlier, we've taken out some positions in some of the higher cost jurisdictions and put them into lower-cost centers we have around the world. And some of them are executive-type positions; some of them are shared-services-type positions, but these are really optimization actions that we have been taking on an annual basis.

And I would expect that we'll continue to look at optimization efforts for both our fixed and variable cost structure. It's not a one-time exercise for us. It something we look at on an ongoing basis and we'll continue to prune away at some of the costs that we have. So I do believe there are additional opportunities and we'll keep looking for those.

Also one thing I would like to mention here is that we build the transformation office. We have a special leader looking at our processes. By optimizing our processes, we do find some cost savings activated. We do really do the business in a different way which we did many years ago. That brings also our concept cost-saving dollars, actually.

That's helpful color. Thanks. Just picking on what geography, the APAC region for a second, I may have missed it, but can you maybe go through some of the factors that drove the year-over-year decline in transactions as well as revenue in APAC?

Yes. In APAC, the business declined by 3% or grew 1% on a constant currency basis. And transactions were down 4%. What we saw in that region is that Japan continued to post good growth for us, but we saw a slowdown in Philippines

We're also seeing an increased impact from compliance in the APAC region. And some of it is also grow-over. We had higher growth in the fourth quarter of 2013 on transactions. Some of it's grow-over. So those are some of the pieces that we're seeing in the APAC region.

One of the things I would like to also mention, we do expand our compliance activities globally, and that has sometimes impacted our revenues. As an industry leader, we want that compliance activities are implemented globally. But in short-term, it has an impact on our revenue when we expand that geographically, but, long-term, I believe it's a competitive advantage because I believe the industry will follow that.

Thank you.

Jason Kupferberg, Jefferies.

Question on the 2015 EPS guidance. Does that assume more or less ratable execution of the new share buyback plan? So call it $400 million or so for this year?

I think that's a safe starting point, Jason. Obviously the amount of repurchase that we'll do in any year is going to be dependent on market conditions and overall objectives, but I think that's a safe assumption to begin with.

Okay. That's helpful. Any update on the same-day ACH initiatives? I think some of those were supposed to start to be rolled out in Q4. Maybe tell us a little bit about the corridors, the solutions available for and how does the cost actually compare for consumers to do the same day versus previous solution? I think it was more in the neighborhood of four-day settlement?

Yes. We have launched same-day ACH in the fourth quarter. You're right. We were testing it on a limited basis. And we are now evaluating all customers who choose the bank- funded option in our wu.com business for potentially funding instantly.

It depends on whether you're approved, based on your risk parameters. So we are doing it. We're not advertising it or marketing it heavily, because we do want to make sure that we get the management of the risk around that business done right. But we'll be doing that more over the next couple of years.

I would like to mention that we are doing that ACH, same-day ACH. It's selected and approved customers. There was always a question about that.

Yes. And the other thing I would add is that that's really just a US-based concept. Instant ACH, we really are focused on expanding our business globally. We have over 10 markets now that have a bank funding capability. We also deliver money into bank accounts into 50 markets around the world and we're continuing to expand those channels available to consumers.

And the cost of a transaction like that, if it's bank funded, it can be relatively small, but you need to make sure that you manage the risk around the funding of that transaction and the delivery time is going to be dependent -- you really need to have both sides of the equation. So you need to be able to fund instantly and you need to be able to deliver instantly for an instant transaction and that's not necessarily available in every single market.

Okay. Understood. And then just last question, I know you mentioned that specifically with the same-day ACH, you're not doing much advertising and marketing around it, but can we talk more broadly about advertising and marketing spend in 2015 versus 2014? Any general trends or call-outs or growth expectations there?

Well, we're going to continue to invest in our brands. Obviously, our brands have a value. And if you look at also prices globally, we are 15% to 20% premium. So there's a trust factor on our brand and we don't want to disappoint our customers.

We want to invest the customers' experience. We are going to do that, we are upgrading our point-of-sale systems. One of them is that the fast -- simple and fast point-of-sale, which you could see also at the Walgreens locations. And we are expanding that in different parts of the world so the marketing is a big part of our business.

And also promoting the business on -- without -- our mywu program, building the loyalty and we know that existing customers do more transactions, if you have them loyal, so we are continuing to invest in these kinds of programs.

We've been spending about 4% of revenue the last few years on marketing and advertising. We'd expect something similar in 2015.

Perfect. Great color. Thank you.

[Tom McCrowan], Sterne Agee.

About a year ago, Hikmet, you talked about getting into Walgreens and I think you just mentioned them two seconds ago. So are there other retailers that you're looking to get into over the next year that you can talk about?

Yes. I think we are constantly looking at retail expansion. We have about somewhere to 500,000 locations. But as the customer use cases are changing, we are doing also different [part] of retail upgrades. Walgreens is definitely the one example of that. But we recently also announced our Apple Pay usage at the retail locations. With Apple Pay you can use at some locations already, do transactions with our.

As you can see that I am really diversifying the use cases with different channels options. Is it retail or is it online or is it mobile? And on the retail part, we are definitely looking at expansion. I believe still Asia is a big opportunity to expand.

We recently signed Bank of China, which is a big signage. It gives us 30,000 locations in China. So the expansion of point-of-sale, is it digital? Is it online? Is it retail? We'll continue.

Thank you. And one last question on the pricing actions or potential future pricing actions. In Q3 of 2012, we announced pricing actions. Your transaction growth was zero, it was flat. So now total transaction growth slowed to 2%. So I just want to get some comfort that if transaction growth slows further to zero that there's not additional cross-border pricing actions or how should we be thinking about that?

As you know, as I said earlier, we believe that we have a competitive pricing and we believe that for the cross-border money transfer we are very well-positioned. But, as you know, we are in 16,000 corridors. I don't know if many other companies are like that. So what we do is that within the 16,000 corridors, that's where the different bands, that's our prices.

And but all these pricing actions, we're going to continue to do, we're going to do promotions. We do adaptive foreign exchange. We do adapt bans. We're going to continue to do these things, but all are within our guidance for 2015. I don't see big pricing investments, especially in cross-border, for 2015.

Thank you.

Bob Napoli, William Blair.

Just looking at the big picture maybe, transaction trends, your transaction trends are still -- they clearly slowed, and it seems like you're losing broadly, losing some market share and continue to. There's a number of fast-growing companies in different markets around the world and they may not be generating the best margins but have lower pricing.

How much market share loss will you accept and do you think there's going to be consolidation? Are some of these other players that are charging lower prices around the world, do you think that they have sustainability such, or do you think that there will be significant industry consolidation globally?

First of all, it's not about pricing, obviously. That's why we have a 15% to 20% premium. It's many factors. As you really state that this business is complex, being in 200 countries, having regulatory -- licensed in 200 countries. Having different part of (inaudible) [multi-current] settlement, paying out in 121 currencies, somebody has to build that. It's not easy to build that and I think we have an extremely good cross-border engine. So we are proud of that.

I believe also that the business will be growing more on the digital environment, but you have to build the engine first. And we have the engine, and what we are doing is building on the engine, expanding on the digital parts of the world, through finding new customer use cases.

On the market share, I would like to mention also, I think it's a principal amount, that you are mentioning, I believe our target is maintaining market share. I wouldn't say that we are losing market share.

One example is exactly, Mexico corridor, which Raj mentioned in his starting comments, we are growing faster than the Banquet of Mexico. The pricing actions we put in place in 2012 and 2013 definitely helped us. And we are growing faster than the market. And the slowdown on the transaction was also -- remember, we had actions on the 2012, 2013. It's kind of a grow-over. We are not doing pricing actions anymore, so we believe that we're going -- to summarize the comments, I think we're going to maintain market share and I believe that we're going to grow very fast on digital.

Bob, the other thing I would add is that last year, if you look at our principal growth, we grew principal at 5% and 6% on a constant currency basis and that's very much in line with the market growth from last year. So just to reiterate that point.

A good point. Thank you. And on the wu.com, the pricing and transaction growth has narrowed. That gap has narrowed or are you done with the aggressive pricing actions on wu.com? And what are your thoughts on profitability? When does wu.com become profitable or start to generate reasonable profit margins?

Bob, this is Raj. On wu.com, we do all kinds of testing on pricing and we're having a lot of good success there. So we'll keep testing. We'll keep doing pricing at different band levels, different markets, really to drive the customer adoption, because our goal is to continue to acquire more and more customers or, as you know, 80% or more of the customers that are visiting us on wu.com are new to the franchise. So we want to continue that customer acquisition machine, if you will.

And in terms of profitability, we know that we've been spending a disproportionate amount on both technology and marketing in that business, but we also know that the contribution of an incremental transaction on a margin basis is in the same range as in our retail business. So we know the business can grow profitability much more than where it is today.

And also as we expand channels. As we have more bank touch points, both on the funding and receiving side. That's going to allow us to drive better profitability as well.

And last question. Your B2C business, 15% constant currency growth, that's a really good acceleration. Is that sustainable? And what is driving that type of growth? And are the margins -- are you going to be able to maintain margins with that kind of growth or expand them?

Let me start, Raj, and then maybe you can add something. But our B2C business, mainly from our Argentina business, our US business and electronic business. And the electronic part has been showing, again, a very good growth. And that's basically the success story. Our cash business, walk-in bill payment business are, as expected, declining but electronic is making up that one. That's the biggest success story there.

And the peso is a part of that equation because we have the Argentine business, which you have inflation there but then you also have the devaluation of the peso. So you do need to take that into account. But we did get good acceleration on the reported growth as well of 4%.

And on the margins that you asked about -- on the margins, the margins have been impacted last year from the higher interchange costs, so that's something we're trying to address. But putting that aside, we do think that we can continue to have good margins there and our goal is to improve the margins from where they have been in the fourth quarter.

Okay. Thank you very much. Appreciate it.

Thank you.

Ashwin Shirvaikar, Citi.

Good afternoon. I guess my first question is with trying to understand the hedge benefit that you have this year, which I'm counting as roughly $0.10 to $0.12, it looks like. What happens when the hedges roll off in 2016? Does that $70 million in profit go away? I guess, broadly, I'm trying to understand your hedging strategy.

The hedges that we have in place for this year are giving us that benefit. It's too early to talk about the impact to next year because it really is heavily dependent on where the currency markets will be. And as you know, based on what we've seen in the last three months, that's not really predictable in nature, so we'll see where that actually ends up. We do have some hedges in place in 2016, but the overall impact is going to be hard to predict at this early stage.

Okay. That's fair enough. Question on tax rate. And the 6% tax rate this quarter, you did mention some nonrecurring items. And then in response to a question you had also said something about tax planning. So could you maybe provide some details on the nonrecurring items?

And then the 13%, I know the tax rate goes up from 12% this year, but I think everybody on the street pretty much expected it to be 15%. So it is maybe $0.04 or $0.05 of benefit relative to street models. So I'm trying to figure out, is 13% now the new 15%? Is that the go-forward tax rate? And is that because of tax planning?

Ashwin, I won't get into the details of what specific items drove our tax rate down in the fourth quarter. Again on a go-forward basis, obviously we can't predict any new laws or regulations or other things that may come into play. But putting that aside, we think mid-teens is still the number that we would be targeting over the next few years.

Okay. So it can step back up and there's some temporary help you're getting this year?

Yes.

Okay. The transaction-growth question, I think part of the reason why, Hikmet, you're getting that question so much is because it seemed to decelerate 3Q to 4Q in pretty much every geo. And so I'm curious how things react to a previous question, again just trying to understand the rationale.

What does it take to -- especially as your competition evolves, should you continue to carry that premium pricing that you have? And that you have earned, but with maybe different competition, should that premium still exist down the road?

Ashwin, you've been following so long, you know the business very well. You know it's corridor by corridor, right? It depends really on the countries and corridors. As you know, none of our countries have been outside US more than 6% of our revenue, so we can very much diversify our pricing actions.

The 15% to 20% is an average. In some corridors we are lower than the competition. In some channels we are lower than the competition. Some channels we are higher than the competition. So we really adapt our pricing to the use cases. I believe that the 15% to 20% price actions and the overall that's an average. I think we have a good policy.

You can't take one corridor saying that we are higher than the others. So you have to bring your prices down overall. Right? That's what we are doing and that's what we have done for many years and very successfully.

Even the 2012 pricing actions which we have done implemented, we said it will come back and it did come back and bring us to the transaction growth. So I don't anticipate from today's point of view, big pricing investments.

And also on the digital wires, I believe you're going with the different channels of the digital, so I believe we are very competitive. Being in 24 countries, sending money to 200 countries, already opens many, many corridors to you and customers value that you can drop money off anywhere worldwide in minutes in their currency. So there is -- I believe that we have the right strategy here, Ashwin.

Yes. No problems with the service. I'm a user. So that -- there's definitely no -- I'm asking financial questions more than anything else. But all the best, guys. Thanks.

Thank you, Ashwin.

We've got time for one more question.

Tim Willi, Wells Fargo.

I apologize for sticking with the prior two questions, but, again, along this theme of market share and brand, if I could ask one question, it would be, if you look at the brand of Western Union, which as I think Ashwin talked about is well known, there's a premium. Should that premium exist, what have you?

Is there any thought process that maybe the brand needs to be repositioned or reinvigorated or a different message into the marketplace, given the competitive dynamic that maybe needs to be driven home a bit more than you feel like it is when you look at the transaction numbers in the growth numbers relative to how we think about the market growing and the share that you have given up and it appears is maybe slipping away again?

I'm glad you asked the question, Tim. I wish we could have more time to answer that question as a brand thing. If you look at our brand, we do have some different approach. We do position our products to the customer needs. We do the [invest in the] product; we have the next-day product. We have the account-based money transfer product. We communicate that to the customer differently.

And some corridors even have -- we have Vigo, we have Orlando Valuta. We do serve the customers in a different brand, different communication, different needs. So that's going to continue to happen in the investing, in investing in Business Solutions, we do serve the customer on a white label.

We do use the third party and we use our cross-border engine and we serve the customer in a need that it's not too important, the brand. So that brand differencification will continue. Today's brand, nonbrand, to all of us is 90% of our business. But fastest-growing parts are the differentiation of the brand and repositioning the brand in a way that the new customer use cases needs it.

Tim, this is Mike. I would add on the slowdown from Q4 or Q3 to Q4, while certainly we have a competitive situation on domestic money transfer and there's some other corridors around the world where you could point to competition, the bigger picture is we think we're seeing some slowing economies in Europe and some of the other -- Russia and some other parts of the world. And we know we have some compliance impacts, particularly in Asia and Africa that we're dealing with. So those are contributing to a good part of the change from Q3 to Q4.

I think to make the point also, Mike, on that, as I said earlier, I'd stay cautious with geopolitical and economical environments for 2015.

Okay. Great. Thanks very much for the time.

Thank you.

Thanks, Tim. Thanks, everyone, for joining us. Appreciate it and have a good afternoon.

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