The Western Union Company (WU) Earnings Call Transcript & Summary

All right. Well, good afternoon, and thanks for joining us today. My name is Ben Varga, and I'm a senior associate on the U.S. Payments and Fintech team here at Autonomous Research. Filling in today for Ken Suchoski, who is out on paternity leave, looking after his firstborn child. Today, we are excited to have Western Union here at our 39th Annual Strategic Decisions Conference. And we're thrilled to welcome Devin McGranahan for second year in a row. Devin joined Western Union as the company's CEO in late 2021 after spending 5 years of Fiserv, where he oversaw the company's global merchant acquiring and processing businesses. Prior to which he spent over 20 years at Mackenzie. So Devin, welcome. Thanks for joining us. And I'd like to thank you all for attending. Just a few housekeeping items before we get started. So we are going to do a fireside chat today. So I will start off with some questions. But attendees are able to submit and vote on questions through Pigeonhole, either by scanning the QR code shown on the screen and in the conference agenda book or by visiting Pigeonhole.at with Passcode SDC2023. We'll try to leave these questions in as we go through our discussion.

So with that, let's get started. Devin, you've been CEO for about 1.5 years now and part of your strategy has been to shift the business from a transactional-based model to a more customer-oriented one. Can you talk about how the digital strategy helps with that goal?

Sure, sure. So first, it's great to be here. Thanks for having me. Please do give our congratulations to Ken. That's great news. We're happy for him. Also happy to be here with you because we know you're the one who does all the work. So this way, maybe we can take the middleman out of the interpretation of what's going on. We spent a lot of time talking publicly about the shift. The company, it's a 172-year-old company, was built on our retail money transfer business, right? And so when that was all developed, it was a transaction processing platform, cash to cash, right? And so as we've evolved the company as this part of the strategy, we've come to recognize -- and this will come to the digital part here in a second, we've come to recognize the importance, and we talked about this at our Investor Day of really thinking about customers and not transactions, thinking about customer retention, thinking about customer lifetime value and building products and services that can expand both, our ability to generate revenue from the customer as well as increase the longevity of the relationship from the customer. And so that whole customer mentality translates particularly well in a digital context, right, where you can more easily measure your cost of acquisition where you could more easily measure your LTV, where you can more easily measure and manage lifetime interaction cycles, right? So one of the things we've started to work on is we've created these 9 profiles of customers, how frequently they transact with us. So we call that the heartbeat, some customers -- by the way, people fall into their profiles very quickly. So if you are a weekly sender, you are almost always a weekly sender. If you're a monthly sender, you're almost always a monthly sender. If you're a holiday sender, you send around the holidays, right? And so we develop these profiles. And then digitally, we can then manage them. So if you miss a week and you're a weekly sender, we can send you an SMS or we can send you an e-mail. We can -- if you miss 2 weeks, we can send you an offer "Hey, we miss you. Please come back," right? If you miss a month, then we can put the full-on cork, because you've now missed 4 regular transactions. But if you're a monthly sender, okay, we're not going to -- like if it's been a couple of weeks, we're going to wait for the month and see so we can -- digital allows you to do that, that's much harder to do retail.

Interesting. And maybe let's dig right into a digital business then. So it's obviously an important growth driver, and it's becoming a bigger part of the overall business. So can you talk about how the company is positioning the digital business, and where do you expect it to be in 3 to 5 years?

Yes. So one of the key pillars of our EVOLVE 2025 strategy is to return the digital business to double-digit revenue growth, right? And so when you talk about where do we see it being in the course of the EVOLVE 2025 strategy, we will bring it back to a double-digit revenue grower, which means you need to have new customer acquisition in the 20s and you're probably going to have transaction growth in the solid double -- in the solid teens. We are well on the journey. I'm quite proud of the work the team has done when we launched that strategy this year last time, our digital business was shrinking transactions globally 3%, right? We finished the first quarter globally with transaction growth at 7%. And so what I have said repeatedly is first, you get new customers. And for 3 quarters now, we've had new customer growth in the markets where we've launched our strategy in excess of 20%. You're then going to get transactions. We went from negative 3% to positive 1% to positive 2% to positive 7%, and then revenue will follow. And we've said publicly, we will have positive revenue growth in North America, digital in the third quarter, which will be about 12 months from when we launched the program, which when we launched the program, we said 12 to 18 months. So we're on the faster end of that trajectory. So we're really pleased with the progress we're making. We're well on our way to being back to a double-digit revenue growth digital business. And over the course of the next 18 months, I look forward to keep updating you on the progress we're making.

Well, looking forward to it. And in terms of these improvements that you're seeing, how much does that help the LTV of the new digital customers? And to kind of put a finer point on it, it would be interesting to hear what that improvement looks like in the newer cohorts versus your existing customers?

When you move to customer life-cycle management, customer value creation, you have to adopt a new set of ways of thinking about it, right? And so publicly, we've now really started about -- talking about LTV. But more importantly, we started talking about CAC to LTV, right? So longer term, we want to expand the lifetime value by increasing retention and by adding new products and services, right? Both of those are works in progress. In the short term, we want to grow new customers while maintaining our CAC-to-LTV ratios, right? So I have some competitors that have a different approach to marketing. They may not make money. We actually have a 20% margin. So we're very disciplined about the cost of acquisition and the value of the customers that we're acquiring. On the first quarter earnings call, we talked about having improved our CAC by 20%. That, in essence, enabled us to fund the first-time free offers. So we were able to maintain our CAC-to-LTV ratio by decreasing the cost of the CAC despite the fact that the LTV went down a little bit because of the first-time free offers, right? And so that ratio, CAC to LTV, is the thing we really manage to.

Got it. That makes sense. And these improvements that you're seeing, I mean, what gives you the confidence that these trends can persist over the coming years?

It's a great question. We get it all the time. Lots and lots of people when we first launched the program -- in fact, I used to joke with my CFO that even I can give away free transactions. I don't need a CMO to do that, right, like that's easy. But what we've been really disciplined about is ensuring that the customers that we're acquiring are as good in quality, if not better and the data would say that the statement is true, they're as good if not better, than the ones we were acquiring before we put these new customer acquisition offers into the market. And the way we measure that is we look at the pace of first transaction to second transaction to third transaction. So how long does it take you as a new customer to go from your first transaction to your third transaction, right? And third transaction is important, because once you cross your third transaction, our LTV and our likelihood of retaining you as a customer goes way up. So that's why we -- that first 3 is really important. So we really manage that and then, we manage how many people make it to the third transaction, so the retention at transaction 3. So the combination of those 2 across the cohorts that we've launched are all at or better than our traditional, non-acquisition offer cohorts. So that gives us great hope. We're only 9 months into it, so you can never say perfectly, but 9 months into it, we're doing great. We're really happy with it.

That's great to hear. And you're also expanding your offerings and one of them is the new digital banking initiative. So what does the product road map look like? And how should investors really think about this opportunity?

Yes, so the digital bank/digital wallet because in some markets, it's not a bank, it's just a wallet, is primarily focused on increasing engagement, so driving a customer. So cross-border remittance is an occasional used product, whether that occasional use is once a week, once a month, only at holidays, it's an occasional use product with only one objective function: send money home, right? So in order to increase retention, we need more engagement. We need to be more top of mind. We need to be more part of your daily lives. So the purpose of the wallet in the bank is to increase engagement, which causes us to be top of wallet, which causes us to be first choice when you go to send money abroad. So lots of people ask me questions about, "Hey, well, how are you going to make money in digital banking? Nobody makes money in digital banking." We're not trying to make money in digital banking. We're trying to increase the retention of our cross-border remittance space by driving products and services they can use every day. Now we talk publicly about the fact that in the markets that we're launched, Germany, Romania, Italy and Poland, we're seeing 4x transaction volumes. Now that's all transactions, right? So that includes top-ups to the wallet. That includes P2P, intra-company -- intra-country money transfers. That includes debit card transactions at the point of sale. That includes foreign currency transactions that don't result in money being sent, it's just me changing euros to RON or euros to dollars but keeping those in my digital wallet. And then relatively similar economics on the cross-border money trends. It is too early to tell. We've only been doing it at scale for 6 months or so, if that will result in -- ultimately result in what I'm seeking, which is greater retention on the cross-border remittance customers, but all early signs would say these people are way more engaged. They're way more involved with Western Union. They're doing a broader range of transaction types with us. So logic would lead you to believe they're not going to leave us to go do a transaction with Remitly, if they have their debit card with us, they have their P2P wallet with us, they're doing 4x exchange with us, et cetera. bill pay with us.

Yes. And you have plans to roll this out in the U.S. and Brazil as well. So there's a lot of digital wallets out there, which kind of begs the question, how do you plan on competing against all these alternative players?

Yes, so again, I have the privilege of having 120 million existing customers. Most of those digital banking players have no customers. Or if they do, they spend a lot of money to acquire them and convince them to stay which is great. We had an investor this morning. Thank you for arranging that [indiscernible]. And we were talking, and he is a Revolut customer. And so we were talking about him as a use case. And I said -- well he's also an HSBC customer. I said, "So have you given up your HSBC relationship to become banked with Revolut," and he looked at me like I was crazy. He was like, "No, why would I do that?" I said, "Exactly." But for my customer, my customer, my customer doesn't have an HSBC account. HSBC won't even talk to them, right? My customer is a migrant. My customer sometimes has documentation issues. They have low balances. They only are looking for a transaction account to be able to buy groceries, buy subway tickets, maybe do something. So my customer is not necessarily one that I have to take away from HSBC or Citi or Chase or anybody else like Revolut's trying to do. my customer is happy that somebody is willing to offer them a bank account, to put a card in their hands, to be part of financial society that they normally are excluded from. Nobody is really trying to bank my customer. So it's not like it's that competitive. The real ticket and the real question is: How am I going to make money, right? One of the reasons Revolut doesn't want my customers is they're hard to make money on, because they don't have balances, they're not going to borrow money, right? All the things money -- the banks make money on, I'm not going to do. So it really comes down to the transactional economics of the cross-border remittance. If I can increase retention, that's my target customer. And in some markets, I might even interchange on debit. In some markets, I might earn a per transaction fee on bill pay. I will always earn money when somebody exchanges one currency for another currency, that's the core of the economics of my business. And so those increments help make the customer relationship more value, but the real economics is retention of IMT revenue.

Got it. That makes sense. And I think that's spot on. I remember coming to the U.S. when I was '17 and how difficult it was to establish a banking relationship.

There we go. See? Somebody said to you, welcome, here's a bank account, [indiscernible] would you stay with them, if it was a decent product?

Yes, I think I agree. And I'm using Pigeonhole. But maybe let's move on. So over the last few quarters, you've been sharing updates on the new targeted marketing approach and promotional pricing activity. So how do you and the team think about the risk of this maybe bringing pricing in the industry down faster than what otherwise would have occurred? And if that happens, how are you preparing to respond?

So the great news is, industry pricing is not really my worry, that's more of your worry. So you guys can worry about that. What I worry about is, can I make money at a price that I can acquire and serve customers? And what we've proven over the, I think, the last 9 months is we can be competitively priced but still earn a 19% to 21% margin, which, by the way, is anywhere from infinity to 10 points higher than my competitors. So we're doing a great job of understanding where the market is, how we compete in that market and how do we bring our product, service and value proposition to the customers at a price that is acceptable to them and allows us to earn a return for our owners.

Got it. That makes sense. And we understand most of this promotional activity has historically been on the sender side. But at the Investor Day, you mentioned shifting marketing efforts to include the receiver side as well. Can you elaborate a little bit on the shift on what exactly you are doing?

Yes. So we're getting much more engaged with our receivers. So every sender starts in a receiver country, right? So if you engage in the markets with marketing, with brand building, before people leave home, their natural inclination when they get to their new home is to use us, right? And so we publicly have signed -- we've renewed an important partnership just as an example with the Philippines overseas employment office. Every Filipino who leaves the Philippines, passes through the overseas employment office, has their Visa stamped, their work permits given. We are the official partner with that organization for everybody who leaves, gets an offer to send money home via Western Union. And so those kinds of received market partnerships drive [ sent, ] right? The other thing we're doing is we're getting very thoughtful about our 2-sided network, right? And so part of the wallet strategy going all the way back to the beginning, is in our big receive markets where we've launched the wallet like Romania and Poland, we are giving an incentive to receive. So if you were to receive money in Romania, you could now get 100 extra RON, which is $10, for depositing your money in a Western Union digital wallet instead of depositing in your bank account or taking it in cash, right? So that's an incentive for people to keep money within our ecosystem. And because we know you're going to get the money, we can, a, [indiscernible] communicate to you and say, "Hey, you're about to get a $500. Would you like an extra $10? If you would, open one of our accounts," right?

Makes sense. And maybe on that point and on your previous example about the HSBC-Revolut relationship. So digital is becoming clearly a bigger focus, but most of those transactions are still paid out in cash. So what would it take for you to get comfortable with perhaps opening up the network a little more and partnering with some of these digital players or banks?

Economics. I'm going to do anything for money. Well, tell them they should pay me, and I'd be happy to do it.

Makes sense. And maybe just a follow-up on the digital wallet strategy. So on the new -- so even as a conclusion of the pilot stage in Germany and Romania, and how should investors really think about the next steps?

Look, it is all -- and I said this on the earnings call in April, we're running a very tight program around returning our digital business to double-digit growth and stabilizing our retail business. And all of the work we're doing around operating excellence, around technology innovation is driving results in that. The digital bank, the prepaid product, the crypto product, those are all future growth opportunities and platforms. They're not powering our results now. They're not even going to power our results next year. But they're all experiments on what works, how do we learn more about our customers, how do we work to increase the TAM and the LTV of our customer base, right? And if I knew exactly what it was, I wouldn't have to try so many things, but we're experimenting. And like we talked about, it's not like this is a path well-trodden by others, right? Nobody really targets my customer. Nobody really has an economic model that works well for the moderately banked and there's lots of people trying. And so we are investing in a portfolio of opportunities, the digital bank and wallet is one of them, to expand our ability to serve our customers. The interesting thing, and we talked about this in the call is those customers who are doing 4x as many transactions basically fall into 3 groups: They fall into new to franchise, customers who we've never seen before; customers that were transacting with us in our digital or in our retail, so they were active customers that have migrated to the bank; or customers that we hadn't seen in either our digital or our retail in the past 12 months. The customers we've never seen before, they look like every other digital bank's customers. It's going to be tough to make money on those. The customers that we had before, they are behaving exactly as they were behaving before, we just now have an opportunity to interact with them differently. And so we're waiting on that one to see does retention really improve over 1- and 2-year cycles because that's really the real money is, right? But the most interesting one is this group of customers that have come back to us, right? So they left us sometime 12 months ago, we call it R12. They left us sometimes more than 12 months ago. They've come back to Western Union. They are transacting with us, particularly on IMT at levels that were higher than when they left, right? So the win back opportunity because of my scale and my size, it's quite interesting that if you improve the value proposition, you give them something that's more digitally native. You give them something that is more bank-like. Many of them graduated for me, right? They left the retail network. They would -- they will come back. They like the brand, they like the value proposition and they're turning out to be very attractive customers.

So maybe as a follow-up to that. What do you think drove these customers back? I mean it's -- I think it's pretty impressive that they are transacting more. And I think it speaks to your brand a bit, but I would love to hear you elaborate on that a little bit more.

Again, it's early days, so I'm hypothesizing. They like Western Union. I have very high brand awareness. I have a very high brand likability, particularly amongst my customers -- my target customers. So they like Western Union. We just didn't have something that met their needs, right? Again, like you and I were talking about, these people are not well served by traditional financial institutions. By coming back to Western Union, they're getting products and services at good value for the kinds of people they are. They're not high balance. They're not high borrowers, they're not buying BMWs, right? They're looking for basic transactional accounts, and we're providing that, right? So they're coming back, because we ask them to come back and we're providing them with a value proposition that resonates with their needs.

That actually brings up an interesting point. So the company obviously has a long history and a strong brand. But we had always thought that the vast physical [ pay on ] network was really the main driver behind those strong returns. So how much does this shift to account to account or account payouts really lower the barrier to entry in this industry?

So we have more than 3 billion endpoints in our payout network. Bank accounts, digital wallets, pretty much any way you want to receive money we can deliver it to you. That's hard to replicate. 3 billion is a lot. You got to go country by country, banking system by banking system. And by the way, many of them, we have direct connects and can do -- so over 90% of the payments that we send to bank accounts to India are in real time. That just doesn't automatically happen. Some clever young man or woman in Silicon Valley doesn't wake up and say, "Oh, poof, I'm going to send money to India in real time. That will be easy." Yes, it's a little different moat than having -- by the way, I still have more than 400,000 retail locations around the world. That's hard to replicate. But the billions of endpoints that we've enabled, many of them for real-time money movement around the world is just -- it's the digital equivalent of the retail moat.

Got it. That makes sense. And I guess once you build out than network that also just gives you a ton of scale. So makes sense.

And then you can go to your digital friends you were talking about earlier and have them pay me a lot of money to move [ money for them. ] We'd be happy to do that, too.

Yes. Well, maybe just one more question on account-to-account. So I believe the last update that the company provided was that this business was doing about $200 million in annual run rate revenue back in 2Q '21. And it was around 20% of digital revenue and 4% of overall C2C revenue. So where does this business stand today in terms of size and kind of just overall growth rate?

So we have not publicly disclosed that since we disclosed that, but you seem like you'd be good at math. So if you take those growth rates over that time period and continue it, you'd get to be about right.

Got it. Well, we'll have to make sure to sharpen our model a bit. So maybe let's move on to the EVOLVE strategy and a key part of it is using the retail channel as a gateway for the digital business and to drive better acquisition costs. So how are you thinking about leveraging the physical retail network to your advantage when it comes to these digital acquisition costs? And it looks like CAC was down 20% in 1Q for the North America digital business. What's driving that?

Yes. So those are 2 very different questions. Let's tackle the second one first. So part of our relaunch of our marketing program back in August of last year, lots of people talk about just like you did, "Oh, first-time free, what does that mean?" That's really only the top of the program, right? The real work in the program is on converting a higher percentage of the people. So we have a natural competitive advantage in that our brand index is much higher on a non-native basis than anybody else. So converting more organic traffic from landing page to transaction, right? And the work we've been doing in that funnel, that first, that onboarding funnel and then that repeat transaction funnel is what's driving the improvements in CAC. Because we're spending roughly the same amount of money as we were. You can see that in the K. We're getting 20% new customer growth, which means we're converting more of the people who are marketing dollars are bringing to us to actual customers, right? And then we're getting more of them to come back and do repeat transactions, which is causing the transaction growth now to accelerate as well. So that work is all continuing. We continue to refine the funnel. We continue to monitor and measure every step along the way to say how will we make it better, how will we make it better, how will we make it better? Separately, so if you went to Singapore, you went to one of the big shopping malls in Singapore. We've -- we own -- I'll get it wrong, 8 -- something like that, 8 locations in Singapore, they're company-owned stores. We've completely rebranded them as, in essence, digital lounges, right, big screen TVs, [indiscernible], kiosks. In the FLAs, yes, they'll do a transaction, but Singapore is a highly digital country, right? And so the real thing we're using them for is to enroll people. Come in, we'll help you download the app, we'll onboard you. We'll get you through the KYC. So that you're set up and you can walk out and do digital transactions. So it's an example of using our retail network and our retail presence to really create an onboarding ramp for our digital business. And in places like Singapore, where it's a very digital economy, a new person, a new migrant comes in, they go into one of our stores, and we just enrolled them into our digital, right? We're not trying to build a retail business. We're trying to push people quickly into our digital ecosystem at very cost-effective rates.

Got it. So maybe as a follow-up to that, I guess as you think about physical retail, what's the right balance between kind of high grading these existing locations versus growth moving forward?

So we don't own a lot of physical locations. So just to be clear, people get confused by that. And we'll never like -- so we aren't interested in having tens of thousands of owned physical locations. So it will only ever be a small slice in the highest volume locations where the economics really work out. And we can do things in markets like Singapore as kind of digital lounges, it's both a brand-building exercise. It's an onboarding exercise. So that's a micro strategy in the overall strategy. The rest of the retail network as you probably saw in the K, we're not indexed any longer on total count. We're indexed on productive locations, right? And I've said it's the right agents in the right locations with the right value proposition and incentives. And so we're in the process of recasting our network, getting the right partners. In some cases, those partners, we are branding exclusively Western Union. And we spend a few thousand bucks to help them do that. In other cases, they're independent, so we compete side-by-side with the Rias and the MoneyGrams of the world. And in some cases, they still -- and this is a very important asset for us, there are big strategic relationships. They're the Krogers, the Publix, the HEVs, the Walgreens of the world. That is a strategic asset for us because they're exclusive. They have a large captive customer base. And so we're spending a lot of time working with them, integrating into their loyalty programs, cross marketing, their products and services to our customers and vice versa. So we're not [indiscernible] away from exclusive strategic -- large network, strategic partnerships because it is a differentiator for us relative to our competitors.

Got it. And maybe this is a good time to leave in a question from the audience as it relates to...

Those probably aren't allowed to ask any questions. I just want to be clear if I came from over there, you say no.

As a softball, yes. So as you continue to keep the new customers engaged, what kind of innovation, partnerships and acquisition strategies can investors really expect?

So we are full on kind of in the partnership strategy mode. We talked about this one on the call, so I'll bring it up again. We did a partnership with Santander in Argentina. We have 300-some retail locations. There, we actually do have a big own network because we have the largest walk-in bill pay business in Argentina called Pago Fácil. So we did a deal with Santander, where we originate unsecured personal loans in our locations on their behalf, and we service them. Santander, super excited because their acquisition costs are down and their -- and the loss profile of our customers is significantly better than the general populace and where we've got it to scale, we're making enough money to pay the rent on the office, right? So again, we've partnership -- we don't want to use the balance sheet, but our customers are better credit risks than the general populace. There are people who do. So we're doing partnerships with people to bring those products and services. We get a referral, we get some servicing. We make transaction economics. We leverage the customer relationship and we have a higher retention, happier customer using somebody else's balance sheet. So that's just an example. So we are doing that in different ways with different products and services all around the world.

Got it. So maybe sticking with Argentina and LACA more broadly.

I can't answer no questions about Argentinian inflation. My CFO is over there, so he'd be happy to tell you anything you need to know about that.

Well, let's take it a different, but your growth in the region has been very robust. And I think you mentioned opening corporate-owned locations in several countries in the region. Can you just talk about your strategy there?

So look, Latin America is a great market for us. And I talked about this recently. We have a market privilege position in terms of the strength of our customer franchise, the strength of our brand. We have great partners. It's a market where we've had master agents, some of which have been partners with us for 30 years, who do a great job of serving our customers together of representing our brand and our products and services. And I have a great management team. I've got a great management team down there that's been doing this for a long time. What people don't talk as much about is people think it's an entirely because of the "Hey, you own a lot of stores, you're opening stores." What people don't talk about is it "Is an exciting digital story as it is a retail story?" The digital business there, while small, is growing very rapidly. And in some markets, like Brazil is the only market in the world where our digital business is bigger than our retail business. So I'll talk about the fact that we're opening 10 more stores in Brazil. The real excitement in Brazil is what we're doing with the digital bank that we're launching, the fact that our digital business is growing mid-double digits. It's -- the whole market is great for us.

Got it. That makes sense. And yes, another great question from the audience. So with these new markets, what are the metrics that you are using to decide whether to launch the promotional pricing? And I guess what's -- I know you're already in a lot of different countries around the world, but what's the appetite to expand the network even further.

Look, so we talked about this. We're very disciplined. So when we launched it in the U.S., we actually launched it in July. We launched 10 corridors, right? We monitored those. And based on the results, we tweaked them left and right. We then went from 10 corridors to 50 corridors. And that's what we did in August. That's what we came out with publicly. So we then managed those. Once you get to that critical mass, we can start putting real marketing dollars behind because the marketing message falls on enough people across enough quarters that you don't -- you can keep your CAC, right? So then once we do that, we opened it up across the whole market, right? So now we're putting -- we've honed the methodology. We've got the right response from the offer, and now we can advertise it, so that we can get broad-based engagement. So we did that. It was working great. We took it to the U.K. I am growing new customers in the U.K. for the first time in at least 8 quarters, right? U.K. is a highly competitive digital market, Revolut, N26. It's very, very digital, right? And so we did the same thing. We picked a couple of important corridors where we have strengths. We started focusing on those, and we added more, and then we rolled it across the U.K. Then we went into Central Europe, and then we went into the Middle East. In the last call, we announced we're going into Australia. So we're just keeping this process going. Matt talked publicly that we intend to keep -- so if you're modeling, we're going to keep doing this. And so every time we launch a market, first, you'll see customer growth go into the 15% to 20%, then you'll see transaction growth start and somewhere 12 to 18 months later, you'll see revenue growth. It's followed that pattern in every market we've gone in. And we use the North American market, which is the largest market and the one we launched first as a way for people to understand how this progresses across our system.

Got it. And in terms of this reinvestment, maybe taking a step back on margins having been at the business for some time now. We have investors debating whether it makes sense to reduce EBIT margin to really try to accelerate growth across the business. So has the thinking on the balance between growth and profitability changed at all?

So you should send your investors to me. There's a chapter in every finance book, you've probably read it. There's a terminal value equation. And there's a little thing called G. And the value of the company is highly dependent on that little thing called G. Right now, those investors and others have that as 0 for me, which is why I have a P of like 6 for a company that produces nearly $1 billion of free cash flow and has 20% margins. So working on the G is far more valuable to my long-term investors, then taking margins from '22. By the way, I'm still operating between 19% and 21%. It's not like I took the margin to [ 2 ]. What they're doubting is can I get G. What they're really asking is, we don't think you can get G. So if you can't get G, you're destroying value. I'm proving I'm going to get G. I've got transaction growth now. I think I think we announced in the last call in every major region of the world, I'm up at least 150 basis points period-over-period, right? I'm driving improvements in transaction growth across the entire footprint. I just need a little bit more time.

Got it. And part of that G is really product enhancements and additional solutions, right? So when we are thinking about these new potential capabilities and solutions, are there any missing pieces to the portfolio? Or is there a solution where you kind of say to yourself, well, this would be nice to have?

Look, I think it all goes to what can my customers -- my customers, not somebody else's customers, what can my customers reasonably use that I can earn a return on, right? And so as I said, we're trying a bunch of different stuff. But in general, it's transactional in nature, retail money order, retail bill payment, digital bill payment, foreign currency exchange, retail or digitally. We're going to play with a crypto offering here in the U.S. in the not-too-distant future. But it's all in the expanding the transactional financial services set, which I'll either manufacture myself, or like in the example of the Santander, I'll go find a partner who can provide, right?

Got it. Well, we have about 10 minutes here. So let's shift to capital allocation a bit. Can you talk about your preference for acquisitions versus buybacks? And how do you think about the ROI across those 2 methods of capital deployment as you pursue to really keep that G higher?

So look, we've publicly said, our hierarchy for capital allocation. We will maintain our dividend and part of keeping margins in the 19% to 21% should give all investors security that there's plenty of capital generation potential at those margins to ensure the dividend. Excess capital beyond the dividend, per this conversation, we're looking for opportunities to enhance the product set, grow the capabilities, the technology, and we would do that through acquisitions. And then at the end of the day, if there isn't a robust pipeline of that, we'll return it. In the fourth quarter, we returned $170 million through stock buybacks, because we got to the end of the year, and we hadn't bought anything, right? So look, I come from a place and Matt comes from a place that's highly disciplined about capital allocation. It's in our genes. We're not going to make bad decisions. We're going to evaluate value creation from the shareholders' perspective and allocate capital accordingly.

Got it. And one question that we've gotten recently is just about Title 42, which allowed the U.S. to quickly turn back migrants. How do you expect the ending of that to impact your business?

Well, the Biden administration put in a whole set of rules that just look like Title 42. So not a lot changed. But the Biden administration has also created "amnesty" programs where they're letting people kind of apply and manage the process on both sides of the border, right, instead of just on this side of the border. These things all come and go, right? The difference for me in that question relative to some others that might be is if you're primarily a corridor player with a U.S. outbound business, the answer to that question is really important. If you are me and you're on all sides of the equation, so when someone leaves, make it up, Guatemala, Honduras, Nicaragua and they go to Mexico, waiting, someone is supporting them. There is money flowing from those countries into Mexico. So one of the reasons my LACA business is doing well is supporting people who are on the migratory journey into the United States. When they come into the United States, now they get a job, they start working, they start sending money home, right? But again, an interesting dynamic that benefits someone like me is most of those corridor specialists are in Los Angeles. They're in Arizona, they're in Houston and San Antonio. They're in those Southwest border states because that's historically. But because of our current political situation, many of those people are now ending up in Chicago or here in New York or in other places where those corridor specialists don't have distribution. But I got great distribution. So our Midwest, particularly Chicago to LACA business is doing great, right? Because we got populace of people who have immigrated into this country, who have jobs and are working and they're sending money home. And I'm the natural player, because I got distribution in Chicago, and a bunch of other people don't.

Yes. Well, having scale really is an advantage. And I guess in terms of those migrants who shifted to initiating transactions online, can you share some update how on -- what they are exactly doing right now? Did they go back to sending money at physical locations? Or are they kind of omnichannel customers today?

Look, we involved -- we have customers who are deeply wed to the retail environment. And when we talk about retail, people assume automatically that that's cash. That's not necessarily cash. You can walk into a retail environment and use a debit card. You walk into a retail environment and send from your bank account. But the convenience, the relationship, the trust that comes from talking to the person who knows the village that your mother lives in to guarantee that the money is getting to where it needs to go, some people really value that. Some people go digital, the convenience of being able to send money from home, not have to be in a retail environment. And we have those customers as well. And then there's customers who do both. Sometimes they send money home, sometimes they send money in the retail environment. So I use an example of a personal employee of mine. She works as a sous-chef in a restaurant. When she sends money home from her job, she uses her bank account, and she uses our digital app. She also happens to walk my dogs, right? We pay her in cash when she walks my dogs. She uses that in a retail environment to send money home on her way home, right? And so she has multiple needs. She has multiple sources of income. And so she uses multiple Western Union channels to accomplish her goals.

Got it. That makes sense. I guess we have a little bit under 5 minutes left here. So let's end on a couple of high [indiscernible] questions. Yes, so well, it certainly takes a lot of effort to reoriented large companies such as Western Union, I think, 20,000 full-time equivalents, right? So if you had to transmit a message to investors, I mean, what are the most important KPIs you would highlight to them to track your progress from here through 2025?

Yes. So the great news is we did that in Investor Day, there's 4, right? Digital transaction growth, digital customers, omnichannel customers, retail retention, right? Those are the -- if we drive those the right way, you will get the results that we've talked about.

Got it. And in terms of order of importance, are they the same? Do you have a fear of [indiscernible] for?

[indiscernible]

Makes sense. Well, maybe lastly, you've been CEO for coming up on 1.5 years, right? What are some of the...

Like 524 days, just to be clear.

But who's counting, right?

Who's counting?

So what are some of the biggest lessons that you've learned over your tenure so far about Western Union and maybe the industry?

Yes. So we have a wonderful brand and a very broad set of unique capabilities at scale, right? So -- you don't understand from the outside, the breadth that it takes to be able to send money in a highly compliant way to over 200 countries and territories around the world, right? So if you want to send money to Afghanistan, I'm your guy. If you want to send money out of Gabon or the DRC in Africa, I'm your guy. If you want to send money to Ukraine, I'm your guy, right? And so you can talk a lot about people who send money to Mexico, anybody can send money to Mexico, right? So this capability that's been built up, and whether it's the 400,000 retail locations, whether it's the 3 billion endpoints for our digital payout network, those things have been built in a high-quality manner that enables us to do what we do to provide trust, confidence and security at scale around the world. And so that, I didn't appreciate. Now to your point, getting that at that scale to behave slightly differently to generate growth and to expand relationships, that's taking time and energy. But I'm very pleased with the progress we've made. We are on track with what we laid out at Investor Day here in New York back in October of last year, and it's a journey, right? It's a 172-year-old company. 1.5 Years is nothing like I'm not -- I don't even like -- I don't even yet hit the register of people have pictures on the wall, right? You got to be there at least 5 years before you can get your picture on the wall.

Yes. well, looking forward to following your progress. But I think we'll have to leave it there. Devin, thank you so much for joining us.

Ben, that's been great. Thank you so much. Really appreciate it.

And thank you to the investors and everyone attending this session. Have a great day, and I hope you enjoy the rest of the conference.