西聯匯款 (WU) 2020 Q2 法說會逐字稿

Good day, and welcome to The Western Union Company Second Quarter 2020 Earnings Release Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Brendan Metrano, Vice President, Investor Relations, Western Union. Please go ahead.

Thank you. On today's call, we will discuss the company's results for the second quarter of 2020, and then we will 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.

Western Union is still following or from home policies. So on our remote call today is our CEO, Hikmet Ersek; our CFO, Raj Agrawal; and Head of Treasury and Investor Relations, Brad Windbigler.

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 2019 Form 10-K for additional information concerning factors that could cause actual results to differ materially from 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. We will also discuss certain adjusted metrics. Although the expenses that have been excluded from adjusted metrics are specific to these initiatives, the types of expenses may be similar to types of expenses that the company has previously incurred and can reasonably be expected to incur in the future.

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 will now turn the call over to our CEO, Hikmet Ersek.

Thank you, Brendan, and thank you all for joining our earnings call this afternoon. We hope you and your families are safe and well during these unprecedented times. On today's call, Raj and I will discuss the company's performance during the second quarter, underlying business conditions and plans to drive our growth strategy forward.

As you all are aware, the second quarter continued to be a tiring time for people around the world, facing the COVID-19 pandemic. At the onset of the pandemic, Western Union took swift action to support the safety and well-being of all our stakeholders with a focus on Western Union employees and customers, but also our agent partners and the communities we are operating. And we continue to operate with the same diligence.

In addition, during the quarter, concerns over social justice came to the forefront globally, Western Union has long stood for values of equity and inclusion, which are core to our mission as a global, socially conscious company with a diverse customer base and workforce. For details about our holistic COVID-19 response and Western Union social values, please refer to our annual ESG report published in June and available on Western Union Investor Relations website. Let me tell you that I am personally proud and humble to lead a company with these values.

Now let me give you some color on business performance. On our first quarter earnings call in May, we noted that COVID-19 had caused a sudden and steep decline in our business in the later part of March and early April, and led us to withdraw our 2020 financial outlook. I'm pleased to say that since then, our business began to bounce back. Our C2C segment finished the quarter with solid transaction growth of 6% in June, which increased to 10% in July. In fact, our C2C cross-border principal increased 3% on a constant currency basis in the second quarter. For June, our C2C cross-border principal grew over 20%, which also carried into July. So for the first half of the year, our cross-border principal grew 2% constant currency. This sharply contrast with the World Bank's forecast for a 20% decline in remittances for 2020, which we believe indicates that we are winning in the marketplace for both retail and digital money transfers.

This isn't surprising to us. We have invested substantially over the past decade to build a leading omnichannel platform for cross-border cross-currency money transfers and payments. Western Union can deliver money and payments effectively through multiple channels to more places than anyone else in our space. So the disruptive impact of the current environment has actually enhanced the competitive advantage of our combined physical and digital capabilities.

When COVID-19 hit we were ready with a proven digital platform when consumers and clients sold fast, convenient and reliable methods to transfer money on their smartphone or computer. This enables strong digital customer acquisition with westernunion.com monthly average active customer up 45% year-over-year. And according to the mobile marketing firm, SensorTower, we are leading significantly in downloads of westernunion.com mobile app compared with the peer money transfer companies. The strong momentum of westernunion.com, combined with acceleration in digital partnership transactions, drove 50% constant currency digital revenue growth for the second quarter to approximately $220 million.

Digitally initiated transactions accounted for 31% of C2C segment transactions, up from 15% in the second quarter of 2019. Importantly, this digital growth is largely incremental to our business and has strong profit and customer lifetime value. Customers also knew they could turn to Western Union to send money virtually anywhere with confidence given the quality of our network. Most of our agents are well-established essentials businesses like financial institutions, postal institutions or large retailers. So the large majority of our agent locations have been open and able to serve customers during the crisis, unlike some other providers. Our research shows the availability of our platform was one of the reasons money transfer consumers switched to West Union during the quarter.

Our resilience over the second quarter shows the strong fundamentals of our business, which, combined with the new growth strategy we laid out at the Investor Day last September, positions Western Union for profitable long-term growth. For the second quarter, revenues declined 11% on an adjusted constant currency basis, but grew in June. While the digital business demonstrate impressive results, retail trends got better over the quarter and drove monthly improvement in overall C2C trends.

We continue to deliver solid profitability with adjusted operating margins of 20.4% due to targeted productivity savings and expense management enabled by the WU Way lean program and organizational efficiencies. We generated healthy cash flow, returned capital to shareholders through our quarterly dividend and continue to maintain a strong financial position.

So our business moving in the right direction, consumer behavior appears to be relatively stable and the macro environment has improved from the significant drop-off in March and April. However, there is still uncertainty from COVID-19, evidenced by concerns of second and even third waves in some markets. We think these conditions warrant continued caution, and therefore, we are not issuing 2020 financial targets at this time. Raj will provide a detailed review of our financial results and offer some additional insights into our expectations in a few minutes.

Looking forward, we have a robust agenda for the second half of the year that should help position the company to emerge from this disruptive time in a very strong competitive position. We will continue to focus on 3 key objectives of our new strategy: driving digital growth, enhancing our global network and optimizing our organization.

The current environment has benefited the boarder digital money transfer market and not just from retail customer switching, it is also bringing in new consumers to the market, some from informal channels or banking system and others with recently developed needs. To keep the westernunion.com momentum going, we will continue to invest in acquiring new customers and enhancing services like real-time payments.

Third-party partnerships have been a big contributor to our digital money transfer business this year. Offering our unique cross-border cross-currency platform to third parties gives us an access to a previously untapped segment of the remittance market that currently relies on correspondent banks. While the sales cycle is somehow longer than agent signings, we have a strong pipeline of potential business focused on financial institutions and the team dedicated to capturing this exciting long-term growth opportunity.

Moving on to network. We continue to enhance our industry-leading diverse global distribution network. So far this year, we have renegotiated agreements with nearly 150 existing agents with more than 125,000 locations, added over 60 new agents with 16,000 locations and increased our real-time account payout capabilities to over 60 countries at the end of June. We also added additional wallet and card capabilities. So I am pleased with the progress here, and we will continue to focus on improving the coverage, cost and quality of our network.

In Business Solutions, we continue to evaluate new ways to help businesses address their need for cross-border services. We also continue to develop our payment network and make progress on our edge platform that will enable customers to digitally self-serve.

On the organization efficiency front, our Wu Way lean and effective management mindset has enabled good progress in creating a more effective organization. We are on pace to deliver at least $50 million in annual productivity savings we target for this year as well as the 3-year target of $150 million.

In closing, I am very pleased with our performance under challenging circumstances in the second quarter. While macro uncertainty remains, we are focused on serving our customers globally and executing against our growth agenda for this year. Looking at longer term, we are well positioned in a resilient market with a strong financial position, and we are pursuing a growth strategy that will enable us to drive meaningful, profitable growth for the years to come.

With that, I will turn the call over to Raj.

Thank you, Hikmet, and good afternoon, everyone. My comments today will start with the second quarter performance of our business, and then I'll offer some thoughts on our expectations for the remainder of the year. As Hikmet discussed earlier, we faced a challenging business environment in the second quarter. So we are encouraged to see faster improvement in our business than we expected just a few months ago, accentuated by positive consumer transaction growth and very strong cross-border principal growth in June and July.

Second quarter revenue of $1.1 billion declined 17% compared to the prior year period, while adjusted constant currency revenue, which excludes the 2019 divestitures, declined 11%. Currency translation, net of the impact from hedges reduced second quarter revenue by approximately $46 million compared to the prior year, primarily due to the depreciation of the Argentine peso.

In the consumer-to-consumer segment, revenue declined 12% or 11% on a constant currency basis due to the transaction declines and other mix impacts. Transaction declined 8% for the quarter driven by decreases in the retail business, which were primarily attributable to reduced consumer mobility resulting from COVID-19. Retail transaction declines were partially offset by the exceptional growth in digital money transfer, which I'll elaborate on shortly.

Drilling down into the business, as conditions stabilize and economies began to reopen over the quarter, we saw substantial and broad improvement in trends across our geographies and channels. We ended with 6% transaction growth in June and carried on with 10% in July, which was somewhat bolstered by a holiday benefit. Total C2C cross-border principal increased 1% on a reported basis or 3% constant currency, with principal per transaction or PPT, are up 7% or 9% constant currency. The increase in PPT was primarily due to higher PPT in our retail business which we believe was largely due to a shift in customer mix and changes in customer behavior. Changes in the mix of our digital money transfer business also contributed to the higher PPT, notably more account-to-account transactions and digital partnership transactions.

The spread between C2C transaction and revenue growth in the quarter was 4% or 3% constant currency, which is largely attributable to mix shifts in our business from faster growth of certain digital transactions with lower yields. Digital money transfer revenues, including westernunion.com and digital partnerships increased 48% or 50% constant currency and accounted for 22% of total C2C revenue and 31% of C2C transactions in the quarter. The spread between digital revenue and transaction growth was attributable to a greater mix of digital partnerships and strategic pricing actions for westernunion.com. We continue to drive forward with our dynamic pricing strategy, which focuses on agile pricing capabilities to drive more customers, transactions and revenue over the long term.

westernunion.com revenue grew 33% or 34% constant currency with cross-border revenue up approximately 48%, partially offset by continued domestic declines. westernunion.com transactions increased 50%. Our digital partnership business continued to gain momentum in the quarter as transactions ramped up in our digital white label business.

Turning to the regional results. In most geographies and channels, trends improved sequentially from lows in April to June and into July. North America revenue declined 6% on a reported basis and 5% on a constant currency basis, and transactions declined 7%. Both revenue and transaction trends improved steadily each month throughout the quarter. U.S. outbound growth was largely offset by declines in domestic money transfer with digital continuing to drive the results.

U.S. domestic money transfer continued to weigh on revenue results, but it's only 5% of total company revenues now and will likely be less meaningful over time. Revenue in the Europe and CIS region decreased 10% on a reported basis or 9% constant currency. Transactions grew 4% due to strength in Russia, benefiting from the Sberbank partnership. Strong digital growth was more than offset by retail clients. However, we are encouraged to see retail transaction trends improved throughout the quarter. Indeed, some countries, including Germany and Switzerland, even had transaction turns that were better than pre-COVID. It seems that Europe is benefiting from a strong social safety net in many countries, which should help to maintain stability along with strong customer acquisition.

Revenue in the Middle East, Africa and South Asia region decreased 13% or 12% constant currency and transactions declined 1%. The spread between revenue and transaction growth was attributable to strong growth in Saudi Arabia, driven by our partnership with Saudi telecom. UAE experienced softening trend as service-related industry slowed in the quarter.

Revenue in Latin America and Caribbean region decreased 45% on a reported basis or 35% constant currency on transaction declines of 41%. Declines in the region were due to restrictive government policy responses in many countries. We anticipate that recovery in this region may lag due to a later onset of COVID-19, more restricted government policy responses and a smaller social safety net in manufactures.

Revenue in the APAC region declined 14% on a reported basis or 13% constant currency on transaction declines of 18%. On a positive note, Australia, which is an important market, grew both revenue and transactions in the quarter, including for retail.

Business Solutions revenue decreased 17% on a reported basis or 15% constant currency and represented 7% of company revenues in the quarter. Revenue declines were the result of softening trends in verticals and with more exposure to COVID-19, including education, travel and tourism and small and medium-sized enterprises. Other revenues represented 5% of total company revenues and declined 56% in the quarter. The decline was largely due to the 2019 divestitures, the impact of COVID-19 and depreciation of the Argentine peso. Other revenues primarily consist of retail bill payments in both Argentina and the U.S. as well as money orders.

Turning to margins and profitability. I will focus on consolidated margins as segment margins are not comparable with the prior year period due to the divestitures and expense allocation changes implemented in the first quarter of 2020. Consolidated GAAP operating margin was 19.9% in the quarter compared to 19.3% in the prior year period. The increase was primarily due to productivity savings and additional cost management measures, partially offset by revenue declines associated with COVID-19 and the 2019 divestitures. Additional cost savings realized in the quarter reflect both the timing of certain expenses and specific actions, such as delaying hiring, limiting travel and reprioritizing investments.

We incurred $5 million of restructuring-related expenses in the second quarter related to our productivity program. We continue to expect total restructuring-related expenses of approximately $150 million and to date, we have incurred $131 million. Our adjusted operating margin in the second quarter was 20.4% compared to 20.3% in the prior year period with expansion driven by the same factors stated previously and adjusted for restructuring and M&A costs.

Foreign exchange hedges provided a benefit of $7 million in the current quarter and a benefit of $6 million in the prior year period. The GAAP effective tax rate was 16.2% in the quarter compared to 17.5% in the prior year period, while the adjusted tax rate was 15.7% compared to 16.8% in the prior year period. The decrease in GAAP and adjusted effective tax rate was primarily due to the effect of the 2019 divestitures.

GAAP earnings per share in the quarter was $0.39 compared to $1.42 in the prior year period. The decrease is primarily attributable to the gain on sale from the divestitures in 2019 and to a lesser extent, current year revenue declines associated with COVID-19 year and the divestitures. Partial offsets include productivity savings, additional cost management measures and lower share count in the current year period.

Adjusted earnings per share in the quarter was $0.41 compared to $0.45 in the prior year period, with the decrease due to the factors stated previously and adjusted for the gain on sale and restructuring M&A costs.

Turning to our cash flow and balance sheet. Year-to-date cash flow from operating activities was $348 million. Capital expenditures in the quarter were approximately $49 million. At the end of the quarter, we had cash of $1.2 billion and debt of $3.1 billion. Our financial position is among the strongest in the industry. We have an undrawn $1.5 billion revolving credit facility and no significant debt maturities until 2022. We returned nearly $93 million in dividends to shareholders in the second quarter. And the share repurchase program was on pause. The outstanding share count at quarter end was 411 million shares, and we had $783 million remaining under our share repurchase authorization, which expires in December 2021.

Now moving to our 2020 business update. As Hikmet mentioned, we will not be providing an outlook at this time, but instead, we'll provide some perspective on the second half of the year. We consider a variety of forecasts to inform our understanding of the economic environment and how it will impact revenue generation. We think the prevailing macro outlook for gradual improvement over the second half of 2020 is a reasonable baseline for the business. However, we anticipate some quarterly variation related to grow over in the digital white label business and strategic pricing actions taken in the second half of 2019. Additionally, we recognize that recovery may not be linear in certain geographies.

For our C2C segment, we expect the overall remittance market will be down for the year. However, the World Bank's current 2020 forecast, which calls for a 20% decline in total cross-border principal appears too pessimism. Our total cross-border principal grew 2% on a constant current basis in the first half of the year and grew over 20% in June and July. Based on these trends, we think we're gaining share in the market.

Lastly, for our Business Solutions segment, we consider global trade forecast in our projections and the prevailing view calls for gradual improvement in the second half of the year. Moving to margins, we believe that we can deliver solid margins in the second half of the year despite softer revenue trends. As we mentioned last quarter, we have a flexible cost structure. 55% to 60% of our costs are variable and 40% to 45% are fixed.

Additionally, we are still on track to reach at least $50 million in cost savings in 2020 and may realize more based on recent shifts in timing of initiatives and investments. We continue to target $150 million of annual cost savings through 2022. Furthermore, we will manage costs appropriately with the revenue environment. For example, we increased marketing investment in West union.com from the first quarter to the second quarter to address the growing digital opportunity. If business trends continue to improve, investments could potentially increase in the back half of the year. Finally, we expect both the GAAP and adjusted effective tax rate to be in the mid-teens range for 2020.

To recap, we are pleased with our results in this quarter in a very challenging environment, delivering solid margins and positive transaction growth for June, which continued in July. We see these as major wins, given the current backdrop and belief that indicates we are broadly outperforming the competition. Moreover, we think the exceptional performance of the digital business this quarter confirms the digitally focused strategy we laid out last year and has us on the right path to drive durable long-term value for all our stakeholders. Thank you for joining our call today.

And operator, we are now ready to take questions.

(Operator Instructions) The first question comes from Tien-Tsin Huang of JPMorgan.

Hope you can hear me? I've no WiFi here. I was thinking about how to ask this quickly. So transaction growth, 6% and 10% in June and July. It sounds like principal growth is up 2% in the first half of the year, but you're expecting it to be down for the full year. So I'm just trying to think about that dynamic and ask maybe, is there a danger to assume the 6-ish percent continues the year into the third quarter? I'm just trying to think about why that might not be a good proxy for the near term?

Yes. Tien-Tsin, it's Raj. Let me just try to address a couple of points there. On the cross-border principal growth, the World Bank is at minus 20%. We're -- and we think that's quite pessimistic. We're not going to be at minus 20%. We think that the market will decline this year, but there are a wide range of estimates on where that will be. Contrast that with what we're experiencing in the first half of the year, we grew low single digits in our cross-border principal, and that was up over 20% growth in June and in July on the cross-border principal. So that's what leads us to believe that we're heading in a very different direction from a principal growth standpoint.

And then on transaction growth, June was 6%, July was 10%. July did benefit from some holiday impact, but it was pretty consistent if you adjust for that to what we saw in June. Now what we did say, and I said in my comments that in the second half of the year, we'll get some natural grow over from the digital white label business, which began largely in the third quarter and then more so in the fourth quarter. And we're also continuing to do our dynamic pricing behind the wu.com business, which obviously is translating into a lot of customer acquisition, a lot of revenue but that -- we had higher pricing in Q4 of last year, particularly in dot-com. So that's also going to grow over in the second half of this year. But we're still going to get very strong transaction growth, and we feel very good about where the year is going thus far.

Okay. Got you. Got you. And then as my follow-up, just the white label business, which you just alluded to, Raj, that look -- that was pretty big. It doubled sequentially, I think. So big performance there. I know the comps are going to get a little tougher, but I think you talked about the pipeline. I'm just curious if you can maybe quantify that or give us a little bit more detail. Is it more bank-oriented partnerships or text partners or telecom partners? Just anything else you can share there would be great.

Sure. I think we are very happy with the performance of our white label. It's a new business for us. It's an incremental business for us, and it adds incremental transactions. And we are really happy with the performance, and we did add some white label partners. And the performance, it takes time did the new partners also contribute to that success. The main success comes from the existing partners, but the new partners like South Korea and Japan, we added. And we have also a pipeline of adding new. And these are mostly, as you said, Tien-Tsin, these are mostly financial institutions, where we believe that we have a better service than the correspondent banking opportunity. And the team is dedicated on that. Also kind of financial institutions with telecom background like wallets are also interested in our white labeling and our platform to serve their customer in a better way. So I'm excited. Jean Farah and his team are doing a good job to get new partners here. And -- but the sales cycle is a little bit longer here than signing an agent because you have to -- as a financial institution, you have to have adapt your systems to our systems, and it takes a little bit longer, but exciting opportunity.

The next question comes from Darrin Peller of Wolfe Research.

Nice to see these trends. I want to hone in on the mix, on the digital versus the cash or the retail side. It looks like these customers are new customers coming to your business. And so if we think about that, what is it, 30% of transactions on digital, driving your overall transaction growth to the high single digits. It looks like there's about a 4-point spread between transactions and revenue. Should we be counting on like just a more sustainable, higher growth profile for transactions now into the second half and longer term?

In other words, are these customers that have come on, are they actually new from -- to your business from other single corridor players or banks? And is there any reason why they're not going to keep -- you're not going to keep having, call it, 30% mix on digital?

Yes. Darrin, this is Raj. Yes, we're very excited about the digital growth. It really is going even beyond what we had initially expected coming into this year. So we're very pleased there. A couple key data points, and then I'll get back to your mix question. 80% of the new customers that are visiting us on wu.com, which is the lion's share of digital, continue to be new to Western Union. They have not used us in the past couple of years. So it's largely a new customer. They seem to be either new customers to category. So they haven't used money transfer before. They haven't identified themselves that way or they're coming from other parts of the remittance market, maybe from the banks or other digital players.

So -- and it seems to be a very high quality customer. They're sending high principal amounts per transaction. They also seem to be transacting at a high level or at least at the same level that we have our current customers. And as we surveyed them, most of them have said that they're going to continue to utilize Western Union in the future as their needs are there. Sorry, we have some jets flying over here.

But on the mix question, yes, think you're going to continue to see transactions grow faster than revenue just because of the digital white label mix and the overall wu.com mix on the overall business. But we're pleased with the overall trends. And some of it's going to depend also, Darrin, on how fast the retail business comes back, right, because that has a different mix impact. So that's the part that's also interesting. And although digital is driving a lot of the growth here and recovery, it is also coming from recovery in retail because digital has stayed in the 100% range for the last few months, but retail has been steadily gaining back where it was before.

Okay. So I mean, it does seem like the mix -- assuming retail is coming back, the mix could stay a little more positioned towards digital than really ever that -- you've ever had before by a pretty decent amount. I guess I just -- I'd be curious to know, number one, how much stimulus is you think stimulus has helped that trend? And maybe just the overall transaction trend from into maybe May and June and even into July perhaps? And then maybe just remind us lastly of the yield differential that you guys calculate between wu.com and your traditional retail business? I know the bank side, the white label is lower, but really wu.com is the lion's share.

Hikmet, do you want to start first, and then I can take that.

Yes. I'll take the macro part. You may get yield part, Raj, is that okay? So from the -- I mean, we like the government actions, obviously, which helps the economy and helps people who have -- who need money, obviously. But we don't see the big difference. When we ask the customers, they are here to support them. It doesn't have direct impact -- as the customers. It doesn't have direct impact. The stimulus package is to their sending principal. I think we asked them their support, their loved ones and that's great.

The new customer business earlier I mentioned, they do have an impact to our higher principal amount. And they are new customers, and they have a different behavior. They are newer segments, which is great. It's incremental. They do send higher principal. Stimulus packages generally are good. It may have a little impact, but I wouldn't say that the performance-based on stimulus package. I believe that in this time like this customers are looking for a trusted brand. They are looking for a network, which is globally everywhere. And so that's why we are gaining here, I believe, market share. And Raj, do you want to...

Yes. Let me just... Yes. A couple of additional key data points, Darrin, the digital business in total, in this quarter was about 22% of consumer revenues. And that's up 900 basis points from where it was a year ago in the same quarter. And while that growth has taken place, the overall margins for the company have obviously expanded slightly. So just keep that in your mind as I describe some of the economics here, can be quite attractive to Western Union.

The unit economics on the westernunion.com side, which is the lion's share of digital, are actually quite similar to what we have in retail. Now you have averages of how you send the money, how you're funding it and then where you're paying out in the corridor is involved, the dollar contribution on a gross margin basis and the percentage contribution are very similar between retail and digital and our wu.com business because we really look at the marketing spend that we're having here as part is really an enterprise-wide spend, right? Because that marketing spend overall has been shifted more towards digital, but it hasn't really increased the overall company. So the profitability of wu.com is very strong.

And on digital white label, we have -- we really are playing a different role, right? We're a processor in the transaction. We're not paying for the acquisition of customers. We're not paying for the fraud losses. So we're really getting a customer delivery that has good funds that want to move money. So it's a lower starting point from a revenue per transaction standpoint for us, but we also have much less in terms of cost. So it ends up being a very high margin, at least with the examples we have thus far on the digital white label side. So very high profitability on both those businesses, largely incremental, and that's why you're seeing the overall results that we have for the company.

Next question comes from Jason Kupferberg of Bank of America.

This is [Katy] on for Jason. First, I just wanted to ask a little bit more -- just get a little more color about the growth within the specific corridors or geographies? I know you guys said a sort of broad-based strength, but just wanted to know trend specifically in Europe and North America. And on that same side, I kind of wanted to ask if you potentially see any threat of trends reversing, especially for some areas where economies are potentially reclosing or policies are being more restrictive?

Sure. Yes. Just in terms of trends, we really -- because we have a global business, we see different trends in different parts of the world. But generally, I would say we saw a broad-based improvement through the course of the quarter. Each month, we saw successive improvement across most of our key geographies as well as most of our key channels. So that's the backdrop of what we're talking about. Some regions like Latin America did not perform as well as others because they were later to see the COVID issue and their economic situation that was not as strong, if you will, going in, but they also improved during the course of the quarter. In Europe, as I've mentioned, Germany and Switzerland actually did better than we were seeing before COVID even hit.

And so I think in terms of how tens will continue, we'll see. June and July were certainly similar in nature and quite stable. Digital has trended in the 100% range from a transaction standpoint for quite some time now for the last few months, and retail has been improving since then. So we're not giving an outlook because there are still some uncertainty in terms of COVID and the second or third wave and how that might hit. And we just need to see how the economic situation around the world plays out. But we're very pleased. And I think the cross-border principal growth was really strong in June and July, it was well over 20%. So I think that's a very big positive here, and it really speaks to our gaining share in this space.

Yes. And just following up on that. I know you're not giving an outlook, but just wanted to know sort of some of the puts and takes that we should think about for 3Q and 4Q. Some of the restructuring should get some benefit in the back half of the year. Can we expect like sequential revenue growth and margin growth going forward? Or still expecting revenue growth to lag transaction growth? Just a little more detail.

Sure. Yes. I think as I mentioned in my comments, we will see some grow over impact on the digital business because of the growth that we had in the second half of last year, that's where they began for the most part. So that's going to certainly have a grow over impact. The margins, I think it's hard to say. It just depends on the revenue picture. We can certainly control the cost side, and we're doing very well on the cost side, but the revenue will be a key determinant on where margins go. Regardless, we -- based on the year-to-date experience in margins, we think we're going to deliver solid margins for the full year. The exact level is going to be obviously dependent on revenue and where that comes out.

The next question comes from Rayna Kumar of Evercore ISI.

It's really good to see that 50% digital money transfer revenue growth. I was just wondering, a lot of your competition is also called out strength in Digital, PayPal calling out. Solid results from Zoom, Euronet and MoneyGram speaking about strength in digital. Now that you're also seeing sustained digital growth. Could you talk a little bit about what distinguishes your digital platform versus your competitors?

Sure. Let me take that one, Raj. Feel free to add something on that. Great question, actually. If you look at our business, we are obviously moving money cross-border cross currency. And we have probably the unique, the unique platform to move that being present in 200 countries. And our digital send function is in 75 countries. Nobody has that to my understanding worldwide. And that gives us the very strong diversification of our portfolio and growth.

We are definitely growing with 50%. It's a great growth, but please do understand also if you compare it with other competitors, alone in 2019, we already had $600 million revenue. So we are going from a huge pace, and we are going very strong and believe that we are leading here in the industry. So we are specialist on cross-border cross currency. As you know, also, our domestic, we are not that specialist on that. Our U.S. domestic money transfer business is only 6% of our total revenue and it's declining. But the cross-border is growing very fast, and this is where our strength is. Besides that, also our white labeling is growing very fast, adding huge transaction growth to our digital growth. So we are very satisfied with that.

Why are we different than the competition? Look, we have a payout network that is unique. We have 550,000 locations. So you can send money from New York immediately from your mobile phone and somebody in Bangladesh and Dhaka can pick up in that moment money in their local currency in cash. You can send money from Australia, somebody in Argentina can get them in on an account. You can send money from Finland, somebody in New Zealand in an account.

So I think the diversification of our portfolio, 550,000 locations, billions of accounts and in real time, makes it a bit different. And that takes time to build that, and competition has huge way to get there. It will take them time, and that makes us unique.

That's very helpful. And just as a follow-up. At your Investor Day, you spoke heavily about your dynamic pricing initiatives. Can you talk a little bit about what changes you've seen in your transaction growth directly tied to this initiative? And also, are there any other corridors or channels where you plan on implementing dynamic pricing in the near term?

Yes. I think we have good results on dynamic pricing. We could see that the customers are really shopping, looking at around and the dynamic pricing really helps us. As you know, the prices has been very stable over the few quarters. And I think, obviously, our business has been from pricing side very stable. The people really like it, you could see that also from app downloads, right, mobile app downloads, we are leading the industry by far as you could see from those from the market research there as we present on the slides. So I think dynamic pricing brand trust helps us to position us in a different way than the competition. We do corridor pricing. We do channel pricing. We do street-corner pricing. We do ethnic pricing. We will do promotion pricing. We holiday pricing. That's in 200 countries, 40,000 corridors, and this is driven really by very good intelligence, and we are advancing that by month by month, year-by-year and really diversifying our portfolio with dynamic pricing.

And one other place you can see, Rayna, directly is the customer growth we had in wu.com. We had average monthly active customers go up by 45% from last year. So that really is a great result of our dynamic price where we want to make sure we get that last customer transacting with us, but really is showing up in the customer growth as well.

The next question comes from James Faucette of Morgan Stanley.

Great. I appreciate all the color and detail on kind of the ebbs and flows and the dynamic nature of traffic, particularly over the last few months. I'm wondering as you look at those traffic and traffic patterns, where you're seeing kind of a resumption of previous patterns that you can identify? And really as well, how are you thinking about the things you would like to see or need to see in order to identify new ones, especially given how dynamic all the current environment is?

Yes. James, let me start and maybe Hikmet can add in there. I think we're -- we're in a period of a few months here where we really have not seen things be the way they used to because we've seen a significant acceleration of digital. Most customers coming to digital still new to Western Union. And they're actually transacting high principal amounts, they're transacting at least at the level that's not higher in terms of number of transactions per customer. And so I think that's very interesting for us. We've grown customers, active average customers, more than we've seen in the past. We have mobile app downloads that are way above what we've seen from some of our peers. So all those things are new to us. So we love it, but it's really going in the right direction.

And with the PPT level in the retail side, the principal per transaction is -- it grew more than we've seen in quite some time. So that certainly speaks to the higher income centers, sending more money than they historically -- continuing to spend money because they have the ability to. We have new customers coming into the category that are also of that kind of sort of changes the mix. And we're getting a lot more account payout, too, which is higher principal amount. So those are some of the things that have changed, and it hasn't really dropped that to normal, if you will. And that's something that we're very excited about what we've seen in the last couple of months.

Yes. One thing also, James, just to add on that. Look, this COVID-19 environment is definitely a different environment, but this didn't happen to us [suddenly], right? We were ready with our acquiring new customers. As you know, pre-COVID-19, we had very strong growth on our digital business already. And the COVID-19, obviously, environment brought us new customers, which they looked for trust, coverage and new type of customers, which they said that, okay, how can I send money now to my loved ones, right? The first thing, as you could see that for mobile app downloads, from Google Search, the first thing they saw was immediately Western Union, and that roll out up new customers and this is the right direction because we were ready with our digital money transfer.

Got it. Got it. And then I'm wondering if you can beat to it. You highlighted a little bit what's going on in Europe and other places. But I'm wondering if there's anything that you can draw in terms of correlation, at least or maybe causation in terms of different openings or closings of regions in core? And what the impact is on corridor behavior? And anything that could be drawn from that perhaps?

Let me start, Raj, you may add one thing. First of all, most of our locations seen as an essential business. If you compare us with the competition, most of our locations have been opened because our retail locations are banks, post offices and big retailers seen as an essential services. There were some lockdowns, country lockdowns, curfews, you couldn't get out of that. That impacted our business. But generally, after April, you could see that these customers came back regionally. I will say that Europe is in a -- as Raj mentioned earlier, like Germany or Austria, Switzerland, they had a better growth rate before COVID-19. Parts of them, they are new customers, even in the retail. Parts of them are coming to us because they don't see it at the level they can send money with their existing methods, some of the competition had some issues here.

And on the regional area, I would say that Saudi Arabia and the Middle East area helped us a lot with our white labeling. Europe is really recovering everywhere in digital going very strong also in retail coming strong. U.S. outbound has been very strong and all has been a positive one. Latin America has been a small 6%, about 6% of our total send revenue, it's a small part of that. And also Asia is a small part of that. But main regions, like the Gulf outbound, Europe outbound and North America outbound has been really good and recovering in a very fast pace. Raj, do you want to add something?

No. I think you covered most of it.

Next question comes from Ashwin Shirvaikar of Citi.

Hope you can hear me?

Yes.

Good. I'm good without Power and Internet. I guess the question is, as I kind of look at your best-performing geos from a transaction growth perspective, in pretty good turnaround in those, like Europe and CIS, Middle East, South Asia. What I heard was there the large difference between transaction growth and revenue growth is something that you would have expected because of the sort of the progress of white label partners. Are there any kind of volume thresholds or anything on those -- on those sorts of partners where you can maybe close the gap. Or can you tell us about the progression of how some of these work as they get bigger?

Yes. I think -- don't think about it in terms of flows in the gap actually because as I described earlier, the westernunion.com and digital white label are very profitable to Western Union. And it's largely incremental business. So we can compare it to other components. But as we add incremental business, it's incremental revenues in process to Western Union. And we play a very different role. So if you look at the top line, or revenue per transaction in digital white label, it's going to naturally be lower than the rest of our business because of the processor role that we're playing. Because we don't have the custom acquisition costs. We don't have the fraud losses, other expenses and doing that kind of business. It really is a big customer that's being delivered to us that we are moving money for. And the rest of that process is relatively low cost, seeing a very high margin.

The dollar contribution is going to be different than the rest of our business from the white label, but some of them actually are quite profitable and not too far away for the rest of our business. So I think it just depends. And we look at it really as being good incremental business for Western Union, not really about closing the gap because I'm not sure what you mean by there's not a gap to close. It's a different business model completely than what we have.

Understood. Purely processing. Got that. And then on the Business Solutions segment with over the last couple of years, you've done a pretty good job lowering the cost base and cost structure there. To what extent is the current impact sort of business shutdowns in terms of what's the outlook there? Because I feel like the incremental margins there, if the volume comes back, can be pretty good. You pretty much operating at where your fixed cost basis right now. Can you talk a little bit about the outlook there?

I can talk generally about the environment, how the environment is. Raj, you can add on the cost side, maybe. So in general, I would say that business solution had, as you said earlier, a good run, right? But they did get impacted by the COVID-19 impact, especially in some parts of the verticals like the student pay, had some impact because of the lower applications for students -- international students studying because of COVID-19, and some import export had impact. But I have to say that also in the business solution, we started to see improvement coming to the last. But it's still in the challenging environment on the Business Solution. I would say that the import export environment has been challenging within the COVID-19 as any industry has it.

Yes. On the margin side, Ashwin, you're absolutely right. As the business performs and as we get revenue growth there, given the structure of the costs that are more heavily fixed in that business than other parts of our business, we should start to see that improvement again. I would say the margin performance overall when you look at it on a year-to-date basis, is actually around the 19% range in terms of EBITDA margins. So it's not where it was for the full year last year, but it's also not that down given everything that we've experienced. So yes, as we get better revenue growth, we should have better profit performance there as well.

Next question comes from Jeff Cantwell of Guggenheim Securities.

I appreciate all the new data you're giving us. I appreciate you sharing some of your July numbers as well. I just had a follow-up question on your wu.com app downloads, which is something that we watch pretty closely. How should we be thinking about the number of monthly downloads that you think you can generate sort of post lockdown? Are you optimistic that you produce a high number of downloads of wu.com? And if that's the case, can you maybe elaborate on where those downloads will most likely be coming from? Any data points you can share with us that would be very helpful.

Yes. Clearly, you watch it very closely, Jeff, I think the -- those are quite specific questions. I think we will certainly think about those questions. I would say, in general, our app downloads have been way above market, no matter how you measure the level of app downloads vis-à-vis the rest of the market. We just decided to present that because it was so telling to us in terms of what the market shift that was taking place. So that's why we're really showing it. But I don't know, Hikmet, do you want to add anything to that?

No. I think the new customers, the apps are coming from the new customers. Definitely, people are loading their apps because they are searching for the money transfer. You could see that activation from new customers and download from apps especially the mobile app usage is really increasing. The people are switching more to mobile apps. And our app has been improving, and the 101 benefit we have, we really adapt our app country by country, region by region. And not many companies can do that. We are in 75 countries. We do ethnic marketing. There's country-specific regulations there. They know your customer environment and ethnic marketing has been really adapted in country by country, that makes a huge competitive advantage. If you are in parts of Europe, you have it in Italian or you go to Russia, you have it in Russian or you go to U.S. you have it in English part. So I believe that makes us different. That's why we have quite good downloads on apps and puts us in a leading position.

Great. And then I just wanted to circle back to an earlier question on what you're seeing in your digital transaction growth, which you're saying is 115% of C2C, and that's clearly. Can you talk a little more about that? I just want to understand the mix of those transactions coming from Europe, coming from Latin America, Asia, domestically here in U.S., et cetera. How is that digital mix breaking out right now? How is it maybe a little different now versus what was like a year ago? And why? Just any color you can give us on digital transaction mix that you can call out would be great.

Yes. Yes, let me give it a shot here. One interesting data point that is important, I think, for everyone to understand is on our wu.com business. First of all, we continue to see declines in the domestic part of westernunion.com and the broader company. So it's become a much smaller piece. So if you really look at the cross-border aspect of westernunion.com, it's almost 90% of the revenues, so in terms of cross border. So that's quite strong. And the digital white label growth, wu.com first all is coming from U.S. outbound and Europe outbound. So that's where we're getting a lot of the growth dot-com. And then for digital white label, we're seeing it, obviously, from the Sberbank partnership, which is also in the European numbers and then also Saudi telecom, which is in the Middle East, Africa and South Asia. So that's why you're seeing big mix shifts that are happening within those 2 regions and then how it all adds up to the total company. And that's why I think that the transaction growth is likely to be staying at a higher level than where we see revenue growth given all this digital mix that's been happening in the business. So I'm not sure if that answers your question, Jeff, but is that helpful?

The next question comes from Bryan Keane of Deutsche Bank.

Congratulations on some of these numbers. They look quite impressive, especially in June and July, with 20% plus cross-border principal growth. So I guess I'm just trying to understand, maybe that the World Bank have it wrong that COVID was going to be hurt and maybe COVID has a onetime positive impact? Or do you guys think it's more sustainable than that?

You want to start it or me?

Yes. Okay. I'll start that. COVID environment is definitely new, Bryan. It's hard to read in because, obviously, the world is in a different place since COVID-19 started. But one thing we know that these customers are coming mostly to digital and they are new to us. And we know that the digital customers stay with us. And so that's great. And part of that, as you know, the digital customers have a different -- they are different customer segment. They have to have a bank account. Otherwise, they can't send money. They have a credit cards or debit card or account to debit their accounts. So this is a new tour, and they are staying with us and they are staying for a longer hours. And within that environment, also what helps us in the geographical presence, our payout network and APN network, our account payout network, helps us to acquire them. I believe the growth of digital is going to continue to be a good healthy growth. Now is it during COVID onetime? I don't believe so. I think we have a good base. Now the growth rates, that's why we did not also give year-end guidance, right? We don't know what the impact COVID to our business that -- the macro impact looks like. But I feel confident, generally with the acquisition of the new customers.

Got it. And then just as a follow-up, thinking about the 20% growth you guys are seeing versus the market being down likely low single digit. Is that all explainable through the share you're taking in digital? Or is there things that are happening on the retail end as well that you're gaining share that's creating that massive delta in difference?

Yes. Retail is also -- obviously, customers are coming back in retail also, we can see that. And some of the competitors, smaller competitors location were closed. And some of the competition has [been up] the financial positioning that we have it. I believe that [we’re] gaining also market share in retail. Now it's in a different base. Obviously, the strong growth comes from digital, right? But we are also seeing principal and market share growth in retail.

Yes. Bryan, in June and July, I can tell you specifically that not only did we get more than 20% cross-border principal growth, but we also saw cross-border principal growth, slight growth, I would say, in retail itself. So I think that just supports what Hikmet was saying. And it's not going to initially be true for the full year. But certainly, for the month of June and July, we've seen pretty good trends.

This concludes both the question-and-answer session and the Western Union Second Quarter 2020 Earnings Release Conference Call. Thank you for attending today's presentation. You may now disconnect.