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Western Union (NYSE:WU)

Q3 2011 Earnings Call

October 25, 2011 4:30 pm ET

Executives

Hikmet Ersek - Chief Executive Officer, President and Director

Michael A. Salop - Senior Vice President of Investor Relations

Scott T. Scheirman - Chief Financial Officer and Executive Vice President

Analysts

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Bryan Keane - Deutsche Bank AG, Research Division

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

Kartik Mehta - Northcoast Research

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Tien-Tsin T Huang - JP Morgan Chase & Co, Research Division

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Glenn Fodor - Morgan Stanley, Research Division

Darrin D. Peller - Barclays Capital, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 Western Union Earnings Conference Call. My name is Jonathan, and I'm your operator for today. [Operator Instructions] And as a reminder, this conference call is being recorded for replay purposes. I'd now like to hand the call off to Mr. Mike Salop, Senior Vice President of Investor Relations. You may proceed, sir.

Michael A. Salop

Thank you, and good afternoon, everyone. On today's call, we will have comments from Hikmet Ersek, our President and Chief Executive Officer; and Scott Scheirman, Executive Vice President and Chief Financial Officer. 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 a supplemental table with our press release. As a reminder, today's call is being recorded and our comments include forward-looking statements. Please refer to the cautionary language in the earnings release and in Western Union's filings with the Securities and Exchange Commission, including the 2010 Form 10-K for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements. During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures on our website, westernunion.com, under the Investor Relations section. All statements made by Western Union officers on this call are the property of the Western Union Company and subject to copyright protection. Other than the replay, Western Union has not authorized and disclaims responsibility for any recording, replay or distribution of any transcription of this call. I would now like to turn the call over to Hikmet Ersek.

Hikmet Ersek

Thank you, Mike, and welcome, everyone. Before I discuss the third quarter 2011 results, I would like to take a moment and make a comment regarding the devastating earthquake that struck 3 days ago in my home country, Turkey. Western Union expresses the deepest condolences to the families of the people who died and we wish all the best to those who are injured. To support recovery efforts, the Western Union Foundation is assisting the Turkish Red Crescent and we are also temporarily eliminating transfer fees for certain quarters in affected areas in East Anatolia so our consumers can support their loved ones.

Now turning back to our results. Our business continues to be resilient, with solid consumer-to-consumer trends overall improved in consumer bill payments and a very strong quarter from Western Union Business Solutions. Total revenue increased 6% or 5% on a constant currency basis. As you are all aware, there are a lot of turbulences in the markets in the third quarter, and certainly we are seeing economic challenges in some parts of the world. However, our consumers are loyal, our business is diversified and we remain on track to achieve the full year outlook for revenue that we provided in July. So we have moved our EPS outlook to be at the higher end of our previous range.

In the consumer-to-consumer segment, our geographic diversity and ability to react quickly to changing conditions allowed us to deliver solid results in the quarter. Trends moderated slightly from the second quarter as there was some slowdown in Southern Europe and Russia. However, steady results from the U.S. and the large markets in Europe as well as strength in Mexico led to 4% constant currency revenue growth in the quarter, reported revenue in C2C increased 6% and was aided by a stronger euro. I was pleased with my tour in Mexico last week and still see opportunity to grow our business there.

In the U.S., domestic money transfer continued its strong momentum, with revenue growth of 9% and transaction growth of 14%. Globally, our pricing remained steady and we now project declines of only 1% for the full year. I also just recently returned from a market tour of Europe and Russia. Despite the negative financial headlines in Europe, our business is holding up. We have strong agent relationships and loyal consumers in the region and our brand is well positioned. There are some competitive challenges from the local players in Russia as we need to develop a retail network to complement our bank/agent locations, but we have good action plans in place.

We also continued to extend our network around the world in the quarter, adding another 15,000 agent locations, which brings our total to 485,000 locations. The growth rate in Global Business Payments improved in the quarter, with 7% revenue growth driven by a very strong quarter from Western Union Business Solutions and consistent trends in the consumer bill payment business.

In consumer bill payment, we reported revenue growth of 2%, the second consecutive quarter of positive growth, led by our South American business and steady trends in the U.S. We recently rolled out our enhanced walk-in service across the U.S. and launched a national media promotion to make consumers aware of this convenient service with connections to over 10,000 dealers.

Western Business Solutions delivered 30% revenue growth in the quarter with strong performance across key markets including Canada, the U.S. and Australia. Currency volatility most likely spurred more SME transactions and there was also some currency translation benefit, but there are still strong results and we are on track for a very good growth year in Business Solutions.

As we speak, there are many activities across the globe to capitalize on the business-to-business opportunity. We have signed additional Western Union Money Transfer agents who will now also sell the business-to-business service in certain markets with the Philippines already going alive. Online and mobile FX payments capabilities are now available for SMEs in the market such as France, Germany, Ireland and Italy.

And finally, we are on track to close the Travelex Global Business Payments acquisition in the fourth quarter following the receipt of all regulatory approvals. The business has been performing to our acquisition expectations since we signed the agreement and we have been diligently planning the integration. We are looking forward to combining this business with Western Union Business Solutions, leveraging the many capabilities and assets of each to drive business-to-business growth for many years to come.

Let me now update you on some of our other strategic initiatives. In electronic channels which include westernunion.com, electronic account-based money transfer and mobile money transfer, revenue increased 40% in the quarter and it represented 3% of total company revenue. Our account-based money transfer transaction which includes Cash-to-Account, Account-to-Cash for banks, increased almost 40% in the quarter. We now have over 70 banks signed to offer account-based money transfer service with 35 active. We recently added account-based money transfer with La Banque Postale in France, which is one of our major European agents. Another electronic challenge for money transfer is through ATMs and we now have money transfer service available through over 30,000 ATMs with various banks across Europe and Asia.

westernunion.com, on the other side, have transaction growth of 30%, with transaction growth in international markets of 45%. In stored value, our prepaid cards-in-force in the U.S. now total over 1.2 million with retail distribution at nearly 13,000 locations. In the third quarter, approximately $120 million of principal was loaded onto Western Union prepaid cards through 500,000 loads. We recently announced that our prepaid cards will be available at several thousands 7-Eleven locations in the U.S. in early 2012, which will significantly expand our distribution base. We will also be piloting prepaid card programs in the U.K. and the Philippines over the coming months. Our differentiation in prepaid remains our brand, our relationship with underserved consumers, our global agent network and our consumer-friendly fee structure and we believe, over time, we will be able to leverage these assets and develop this market opportunity to organic growth.

The company continues to generate strong cash flow, with year-to-date cash flow from operations over $880 million through September. In 2011, we are deploying approximately $1.3 billion of capital for the Travelex Global Business Payments, Angelo Costa and Finint acquisitions. These transactions will help spur further growth and efficiencies in key strategic areas. We are also actively returning funds to shareholders. Through the third quarter, we have repurchased $800 million of our shares, which represent 6% of shares outstanding and declared $145 million of dividend. Given the strong allocation of capital year-to-date and our capital structure targets, we do not anticipate purchasing additional shares in the fourth quarter. We will have the flexibility to resume repurchase programs soon in 2012.

The Travelex Global Business Payments acquisition, in combination with our existing Western Union Business Solutions, will give us all the assets we need to capitalize on the business-to-business opportunity. While we may continue to make a cautious smaller acquisition that support our growth strategies, at this time, I do not see us pursuing any sizable acquisitions.

Before I turn the call over to Scott, I want to take a moment to discuss the new business unit structure we announced during the quarter. To align with and drive our key growth priorities, we now have in place 3 primary business units. Most of our revenue today is in the Global Consumer Financial Services unit led by Stewart Stockdale, who is the President of this business. The unit includes our consumer money transfer service and consumer bill payments. This is the heart of the company today and includes our agent network and go-to-market actions for consumer products and services. We also created a separate unit for business-to-business payments, which includes Western Union Business Solutions and will at the Travelex Global Business Payments operations after the acquisition is completed. This unit is led by Roger Raj Agrawal, who has been named President of Western Union Business Solutions. We believe there is a huge market opportunity for served and underserved SMEs with their cost for the payment needs and having a dedicated business unit and executive team will ensure that we execute against the opportunity.

Our third unit is Western Union Ventures. This is a newly created unit led by our Chief Marketing Officer, Diane Scott, who is now also President of Western Union Ventures. This unit will focus on leveraging the company's existing assets such us global brand, our agent network and our extensive customer relationship with the underserved to introduce new products and services. We want to deepen relationship and share of wallet with the existing consumer, but also add new consumers over time. Westernunion.com stored-value prepaid and mobile money transfer are in Ventures. But long-term intent is to develop new services for the untapped, underserved customers as well.

As you know, we are constantly looking to improve our business to grow faster. Over the past several months, we have assembled 2 project teams, one in Denver and another one in San Francisco, consisting of some of our best people and represented diverse functions from across the globe. The teams had been out to create the roadmap for making Western Union a truly consumer-centric organization by accelerating growth in our consumer business and building a plan to significantly grow and enhance westernunion.com.

While these efforts are still in progress, I can truly say I am energized and excited from what I have seen. We will share

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They will take some time and afford to implement, but there are great opportunities to optimize the customer experience, accelerate our share gains around the globe and elevate westernunion.com to become a truly meaningful channel.

Now to give you a more detailed review of the quarter and our full year outlook, I would like to turn the call over to Scott.

Scott T. Scheirman

Thank you, Hikmet. Overall for the quarter, we delivered consolidated revenue growth of 6% on a reported basis or 5% on a constant currency basis. Currency translation added approximately $18 million to GAAP revenues in the quarter, primarily due to continued strengthening in European currencies. The consolidated revenue growth was driven by continued solid trends in our consumer-to-consumer segment and strong growth in Western Union Business Solutions. In addition, our consumer bill payments business delivered positive revenue growth. Transaction fee revenue increased 5%, while foreign exchange revenue grew 12% due to C2C cross-border principal growth and strong revenue from Western Union Business Solutions. Within C2C, revenue increased 6% with transaction fee revenue up 5% and foreign exchange revenue up 9%. C2C foreign exchange revenue was primarily driven by growth in cross-border principal, which increased 8% in the quarter.

In the consumer-to-consumer segment, reported revenue increased 6%. The constant currency revenue growth in C2C was 4% compared with 5% last quarter, while transaction growth was 5%, down slightly from the second quarter. The transaction growth slowdown was mainly due to challenging comparisons in U.S. domestic money transfer, and slowness in Russia and parts of Southern Europe, partially offset by improvement in Mexico and the reopening of the Ivory Coast business. The company's C2C cross-border principle increased 8% or 5% on constant currency basis. We are confident we are gaining share again in 2011. C2C principal per transaction increased 3% year-over-year and was flat on a constant currency basis. In the international C2C business, revenue grew 5% on a reported basis and 4% on a constant currency basis. International transaction growth was 4%. International constant currency principal per transaction increased 1% compared to the prior year, which marked the fourth consecutive quarterly increase. Including the impact of currency, international principal per transaction increased 4% in the quarter.

Turning to the regions. Our C2C business in the Europe, Middle East, Africa and South Asia region grew revenue at 5% on transaction growth of 3%. The transaction growth rate was down slightly from the second quarter, with revenue trends moderated due to currency and some slowness in Southern Europe and Russia. Other larger markets in Europe such as the U.K., France and Germany, remained consistent with second quarter trends as did the Gulf States. In India, trends increased with 13% revenue growth and 11% transaction growth. The Ivory Coast business was operating throughout the quarter, which modestly aided EMEASA trends. Some agents in Libya reopened but activity was light in the quarter.

Turning to the Americas region. Revenue increased 6% on transaction growth of 6%. Domestic money transfer continues to have strong momentum, with revenue growth of 9% on transaction growth of 14% in the quarter. Mexico trends also improved in the quarter, revenue increased 5%, which we believe was partially driven by consumers sending more funds when the Mexican peso depreciated. Mexico transactions increased by 2%. We're still testing $5 for $50 and other price changes for the U.S. to Mexico corridor, including increases in higher bands. So far we have seen some transaction lift, but the revenue impact has been fairly neutral.

U.S. outbound growth remained consistent with the second quarter. Asia-Pacific revenue continued to increase in double digits, with the third quarter at 11% growth. Asia-Pacific transactions increased 7%. Australia and the Philippines delivered good growth although not as strong as the second quarter, which contributed to this lower revenue and transaction growth for the quarter.

In China, revenue grew 5% in the quarter, while transactions increased 4%. China revenue growth was not as strong as the second quarter, which we believe was partially impacted by consumer reaction to the strength of the Chinese currency relative to some key Zen markets.

For the overall C2C business, the spread between transaction and revenue growth in the quarter remained at 1 percentage point, excluding the impact of currency, which had a 2-point benefit. The impact of pricing was 1%, while mix was neutral again in the third quarter. For the full year, we now expect price decreases to be 1% rather than our previous estimate of 1% to 2%.

Moving to Global Business Payments. The overall segment revenue increased 7%. The consumer bill payment business continued its improvement with revenue increasing 2%, led by a strong international growth. U.S. trends were consistent with the second quarter. Western Union Business Solutions reported strong revenue growth of 30%. Currency volatility during the third quarter most likely prompted many SMEs to complete transactions, and currency translation added about 8 points of growth. Overall, we are on track for high teens revenue growth in B2B this year.

Turning to margins. The third quarter consolidated GAAP operating margin was 25.7%, which compares to 26.4% in 2010. Excluding restructuring charges, the consolidated operating margin was 26.7% in this year's third quarter compared to 27.5% in the prior year. Currency translation aided revenue by approximately $18 million, but negatively impacted operating margins. As a reminder, the strengthening of European currencies favorably impacts revenue, but has a less significant impact on operating profits due to the company's hedging programs. The third quarter operating margin excluding restructuring expenses declined by approximately 80 basis points from the same period last year due to the impact of currency translation and higher marketing spending and $5 million of Travelex Global Business Payments deal cost. On a constant currency basis, margins would have increased as restructuring savings and revenue leverage offset higher marketing spending and deal costs. Marketing expenses were 4.5% of revenue in the quarter compared to 3.7% in 2010. We recorded $14 million of restructuring expenses in the quarter related to our previously announced programs. Approximately $3 million of the expenses included in cost of services and $11 million is in SG&A. This compares to $14 million in restructuring charges in the third quarter of 2010. These charges are not included in our segment operating results. The company recorded a total of $47 million of restructuring charges in 2011. As of the end of the third quarter, all restructuring actions related to these previously announced programs have been completed and all related restructuring expenses have been recorded. We now expect approximately $55 million of related savings for the year and $70 million in 2012. We realized $17 million of savings from restructuring activities in the quarter. The tax rate in the quarter was 23.6% or 23.9%, excluding the impact of the restructuring charges, which compares to 22.7% or 23.2%, excluding restructuring charges in the third quarter of last year. Our full year estimated tax rate continues to be in the range of 23% to 24%.

Earnings per share in the quarter were $0.38 or $0.40 excluding restructuring charges. GAAP EPS was $0.36 in the third quarter of last year or $0.37 excluding restructuring charges. Our C2C segment operating margin in the quarter was 29.0% compared to 29.9% in the same period last year. The decrease was due to the impact of currency and higher marketing spending, which offset other efficiencies including restructuring savings and revenue leverage. Global Business Payments' operating margin was 17.7% in the quarter which compared to 15.1% in the third quarter of 2010. The margin improved compared to last year primarily due to revenue increases, restructuring savings and lower integration investment spending in Western Union Business Solutions. We continue to expect Western Union Business Solutions to be non-dilutive to earnings for the full year.

Moving to our cash flow and balance sheet. Year-to-date cash flow from operations was $883 million and capital expenditures were $124 million. Our year-to-date depreciation and amortization was approximately $137 million. Capital spending has been approximately 3% of revenues year-to-date which is the level we expect for the year. At quarter-end, the company had total debt of $4 billion and cash of $2.7 billion, of which approximately $1.5 billion was outside the United States. As a reminder, we have $700 million in notes maturing in November of this year. During the third quarter, we issued $400 million of 7-year senior notes at a rate of 3.65%. These proceeds, combined with the $300 million we issued in the first quarter, provided us the cash to retire the maturing notes in the fourth quarter. In addition, we entered into a $1.65 billion credit facility during the quarter, which expires in 2017 and currently remains undrawn. This replaces the previous facility which was due to expire in 2012.

In the third quarter, we spent $140 million to repurchase 9 million shares or 1% of total shares outstanding at an average price of $16.18. As of September 30, our shares outstanding were 619 million shares. We also declared $50 million in quarterly dividends which were paid on October 7. We managed our capital structure to balance the relationship among returns and cost of capital considering the mix of debt relative to earnings, cash levels and the alternative uses of cash among other items. As Hikmet mentioned, we

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repurchase -- as Hikmet mentioned, we anticipate that the $800 million of share repurchases through third quarter will complete our buyback program for the year. As we enter 2012, a new year of cash flow generation will give us the flexibility to resume an active repurchase program. We have $615 million remaining under our existing authorization which expires at the end of 2012. We believe managing and balancing our capital structure in this manner gives us the most flexibility in running our business, although we do periodically revisit our optimal capital structures with our Board.

Turning to our expectations for the full year. We are affirming our outlook provided on July 26 for revenue and moving our earnings per share outlook to the higher end of the previous range. Our revenue outlook calls for constant currency revenue growth in a range of 4% to 5%, and GAAP revenue growth 1% higher than constant currency. Our outlook does not include any revenues from the Travelex Global Business Payments acquisition, which is expected to close in the fourth quarter. For earnings per share, the outlook is GAAP EPS in a range of $1.50 to $1.53 which compares to $1.48 to $1.53 in our July outlook; and EPS excluding restructuring charges of $1.55 to $1.58 which compares to our July outlook of $1.53 to $1.58. These EPS ranges include a negative $0.02 impact from deal costs associated with the Travelex Global Business Payments acquisition.

Our operating margin outlook is consistent with our July outlook as follows: GAAP operating margin continues to be in a range of 25% to 25.5%, including Travelex deal costs. Operating margins excluding restructuring charges are projected at a range of 26% to 26.5%. On a constant currency basis, operating margins excluding restructuring charges are projected at 26.5% to 27%, including Travelex deal cost. This compares to an operating margin excluding restructuring charges of 26.2% in 2010. We are still projecting full year marketing expenses similar to last year at approximately 4% of revenue. We continue to expect GAAP cash flows from operating activities to be close to the lower

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the year.

In summary, we are pleased with the results we delivered in spite of challenging conditions in some parts of the world and are comfortable with our outlook for the year. Operator, we are now ready to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question is coming from the line of Jason Kupferberg with Jefferies.

Jason Kupferberg - Jefferies & Company, Inc., Research Division

I'm going to start with a question actually on the U.S. and specifically the bank distribution channel. I know that you've had some nice success signing up some new banks. You talked about regions the last quarter and I think you added KeyBank as well, if I'm not mistaken, and I wanted to get an update on what percent every U.S. agent network is now banks and where that might go over time. And is there any material difference in the number of transactions or principal per transaction that you guys see through the bank agent channel in the U.S. compared with your non-bank agents? And I'm just trying to get an overall sense if this bank channel is part of what's contributing to the domestic strength in your business.

Hikmet Ersek

Sure. I think it's a huge opportunity, Jason, for the future of that. It's too early to carve it out as -- on retail but -- on channel but we see new customer segments. We see customers we didn't touch in the past, account holders using our service. We have now about 5 banks in the U.S. which do serve our service. As you recall, we had the U.S. Bank, Regions Bank, we had Alaska bank, Sberbank, and these banks do diversify our channels. As you know we had that in Europe, most of our European agents are the banks, now we are going there to retail and now what we do in the U.S. is we had to retail network we go to diversify our customer base also to U.S. banks. I think it's also a huge opportunity for the banks because they do -- besides the money transfer transaction, they have traffic to their location, they attract new customers, they cross sell with their products. I think it's a win-win situation with the -- our agents also.

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Okay. So is the principal per transaction typically higher with the banks or is there no real appreciable difference?

Scott T. Scheirman

Jason, it varies from bank to bank, so the customer segment is a little bit different, as Hikmet mentioned, but from bank to bank it varies. But in the U.S., the team has done a nice job of adding banks but it's a small part of our distribution in the U.S. compared to globally and we still see a lot of opportunities to continue to add banks as we move forward.

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Okay. That's good to know. And just a question on the guidance. I know that the revenue and the margin outlook is unchanged for 2011, but you did nudge the EPS up to the higher end. Is that simply because of the buybacks that you've been doing or any other nuances kind of below the operating margin line we should be aware of? It sounded like your tax rate outlook is also not changing here.

Scott T. Scheirman

Yes, Jason, I'd say as much as anything, it's just our confidence in the business as we move forward. We've got 3 quarters under our belt. There's about 9 or 10 weeks left in the fourth quarter, so just confident in the business and where we're heading. And so we moved the EPS to the higher end of the range than we had in July.

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Okay. And just last one for me, just to clarify on the restructuring, I know that you guys said that the program that have been announced in 2010 is now fully completed, which is great to see. So is it fair to say that we should not be expecting any more restructuring costs in 2012, at least nothing that would be big enough magnitude to actually call out?

Hikmet Ersek

I take the first part. I think we are, first of all, we are constantly looking at our organization, constant looking to improve our organization, adapting to the market. I would never say that in any restructuring ever, this organization restructuring never stops, right? I think we did our job very well into the 2010. And in 2011, I think we are on track with our numbers here. And we did some really good achievements here. But we will give you more guidance in 2012, for 2012 on our February earnings release and we will give you more direction there, Jason.

Michael A. Salop

And Jason, we will have the Travelex integration expenses next year. We will call those out for you as we get through the year.

Operator

Your next question is coming from the line of Darrin Peller with Barclays Capital.

Darrin D. Peller - Barclays Capital, Research Division

First question, just on the pricing side, I think there was a comment said that the expectation for pricing is about 1% versus your more typical 1% or 2% or it's been even 3% in the past pressure, which is a good thing to see. I mean, 1%, I'm assuming is still somewhat -- is there still some of that coming from the U.S. change that occurred earlier in the year or still dragged on earlier in the year? Is there other things going on? And why is it less now? Is there anything sort of fundamental going on in the industry?

Hikmet Ersek

I wouldn't say it's something fundamental going on there on in the industry. I -- our pricing investments changes from quarter-to-quarter, from year to year. Currently what we say is, we are very well positioned with our 485,000 locations, our brands, our consumers like us despite the economical challenges, they keep with us. So I think that 1% investment, pricing investment, is the direction for this year. In the -- if you look at our pricing that you have mentioned it's 1% to 3% deposit, it gives us the flexibility depending on how we operate in the 16,000 corridors. It gives us the flexibility to gain market share and to grow -- to have the long-term growth.

Darrin D. Peller - Barclays Capital, Research Division

All right. Another question just on the margin, if you don't mind. The operating margin came in pretty strong. I mean sequentially it was up a bit, and then -- but it looks like it was more from the continued success in your Global Business Payments segment in growth there. It looked like the bill bay is still growing, obviously it helps the margin. Just when you think about the C2C margins for a moment, I mean you had revenue growth of 4% on a constant currency basis, and yet your margin year-over-year was obviously not up in that segment. I know advertising, correct me if I'm wrong, advertising may have been up a little bit. I don't know if that drove some of that, but we still expect this to be a fixed cost auto with operating leverage, so should we continue to expect that to be materially evident and going forward in margins if this business does keep growing that we'll see that opportunity?

Scott T. Scheirman

Yes. How I think about -- Darrin, how I think about margins on a long-term basis, then I'll come back to the quarter here, too. But on a long-term basis, that our goal, as a management team over the long-term is to grow the margins. And to your point, we believe the business models are set up to grow margins on a long-term basis on any given year or any given quarter, it will depend upon the revenue growth, what the productivity savings might look like and then the levels of investments that we make in the business. And to that, when you focus just say on the third quarter, a couple of the things that's impacting the margin in C2C business, still very strong at 29% but compared to the prior year, we did invest more in marketing, on a consolidated basis, we're about 4.5% of revenue compared to 3.7% a year ago. So not quite 100 basis points, but quite a bit of it there. And then currency, although currency helped the top line on a consolidated basis and in the C2C division, it did not have as much of an impact on the bottom line. So if you take out currency, and if you factor in the marketing impact, the C2C margins are still very strong in the third quarter.

Darrin D. Peller - Barclays Capital, Research Division

Okay, that's very helpful. Just last quick question for me and I'll go back to the queue. And in Europe, I mean, I know things have been pretty resilient and holding up well, but can you just give us a little more color? Have you seen any evidence of anything slower or changing given the macro backdrop?

Hikmet Ersek

Sure. Well, Darrin, I mean obviously there's no secret that Europe has an issue, right? Economic issues and the finance crisis and debt issues, everything is going on. But our business has been -- especially in countries like U.K., France, and Germany, quite holding quite good, right? We do see some softness in Southern Europe. We do see a little bit challenges in Russia but generally, I would say I'm pleased with the European results. And the transaction and the revenue has been holding in this major countries pretty well. That shows also that's the beauty of our business molding and so many countries we really diversify our opportunities and also managed to risk against the risk areas, right?

Operator

Your next question is coming from the line of Tien-Tsin Huang with JP Morgan.

Tien-Tsin T Huang - JP Morgan Chase & Co, Research Division

Just to follow on to Darrin's questions, just in terms of the softness you're seeing in Southern Europe, did it get depressingly worse month-to-month? And I'm curious how you define softness? Is it -- are you seeing lower principal per transaction or is it just pure transactions? I'm curious if you give a little bit more flavor on that.

Scott T. Scheirman

Tien-Tsin, let me first broadly talk about Europe and then drill down into Southern Europe, which is a much smaller piece of Europe, if you will, but Europe continued to grow. In fact, it was only down about 1 point of growth from Q3 compared to Q2. And if you back out Southern Europe, Europe in itself without Southern Europe, had the same growth rate, Q3 and Q2. So continued to see strength in market such as the U.K., Germany and France. So Southern Europe, you got countries such as Spain with 20% unemployment clearly have had some challenges there. So quarter-over-quarter, there was a little bit more softness in Southern Europe, but not a tremendous amount.

Hikmet Ersek

And also, Scandinavia and Nordic countries are doing -- holding pretty well.

Tien-Tsin T Huang - JP Morgan Chase & Co, Research Division

Yes, understood. I mean, overall the Europe numbers are better than what we expected. I'm just curious if there's -- this is beginning of something to watch because it sounds like it's manageable. The other question I had, just I think you explained the Mexico strength to the peso depreciation. I'm curious, does stronger dollar or weaker euro globally have any real impact on demand? I'm wondering if that's something we should be mindful of now given the FX trends.

Hikmet Ersek

Well, depending on the business-to-business solutions it does obviously have on the business model effect. But on the consumer business, it depends really on the corridor. It depends really on the countries. In some corridors, these payout in local currency and some corridors, we payout in euro and in dollar. So I wouldn't see from the consumer behavior any changes. The consumer really send home what they earn. They really -- they don't hold it so much back. We saw a little bit on Mexico, that changes a little bit. But I wouldn't build a general model out of that, Tien-Tsin.

Scott T. Scheirman

A lot of times when it happens, it's just a movement from one time period to another, so somebody might expedite a $0.01 or [indiscernible] because of the currency movement. So from a long-term perspective, it's not really a change in behavior.

Operator

Your next question is coming from the line of Glenn Fodor with Morgan Stanley.

Glenn Fodor - Morgan Stanley, Research Division

On prepaid, you said the past international's an attractive proposition and I get your message on no acquisition, large acquisitions near term, but once we get past Travelex integration and beyond that, can you talk about your international prepaid strategy, and if it's biased towards partnering, acquiring or a mix of both? And is there any sort of aspect to the value chain where you'll be focused, such as the whole ball of wax program management or distribution only, reloads so on and so forth?

Hikmet Ersek

Yes. First of all, I think we would like to grow the business -- prepaid business, organic. The reason for that is we already have some fundamentals here. We have the branch, plus we have the distribution channels with our agents and we do have the regulatory environment like in the Europe, the European license with the banks and that will give us the issuing credibility, also holding funds, right, Scott, in the -- in our Western Union bank. So that's -- these fundamentals will expand our prepaid strategy. Now again, coming to the prepaid strategy, we believe that our next market within the next months will be U.K. and Philippines for our test expanding that. Don't forget, though, in prepaid, every country has their own specific customer needs, consumer needs, so we have to adapt to programs to the consumer needs. But I am very optimistic that we will be very successful with our prepaid strategy long time -- long-term.

Glenn Fodor - Morgan Stanley, Research Division

Okay. Just one more on prepaid and I'll wrap it up. I thought the recent signing with 7-Eleven was very good. But I just want to step back and get a sense of when you think about competing with your competitors out there and think about the main decision engines for a consumer when he's presented with multiple cards at a j-hook, such as he will be at 7-Eleven with yours versus Green Dot and multiple prepaid cards, what do you think is going to drive his decision and why should we think it's anything other than price?

Hikmet Ersek

I -- first of all, obviously, Glenn, you said that from consumer friendliness, fee friendliness does help to make the decision for us. But don't underestimate our model is a little bit different than the others. We do have the customer relationship to our brand. We do right on our brand. We advertise our brand and the prepaid product is really one of the major products to keep the customer long-term in our network, in our brands.

Operator

Your next question is coming from the line of Julio Quinteros with Goldman Sachs.

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Real quickly, you guys touched on some of the things that you guys have been working on with regards to the Travelex acquisition. I'm curious on what you guys have learned in terms of incremental opportunities on Travelex, sort of weighing revenue growth opportunities versus cost synergies. Where are you guys in terms of thinking of where the upside in terms of contribution, good compromise as you move to 2012 with Travelex?

Hikmet Ersek

Well I am very excited and motivated about -- as you can tell, Julio, about the acquisition. I'm putting this together at the integration. First of all, the deal has not been closed yet officially. We assume that the next few -- within the next few months, we will have closed the deal. The regulatory approvals are coming one after the other. And I'm very optimistic to close this deal as soon as possible. And the next focus will be the integration and will give us the global footprint. I think one of the most strengths of Travelex is the sales force they have on their team. They are very good on getting new customers, getting new accounts. They also have the financial institutions as customers; that will also expand to our new portfolio. Seeing that also, I mean, don't forget the existing business solutions. Now after we focus the first 6 months, really delivers good numbers also. Combining their operations with our operations, I believe that's about $400 million in 2012. It will give us a very strong leg to expand the Western Union brand also to new customer segment, which is the SMEs.

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Got it. And then maybe just switching over to Scott on the margin expectations for the fourth quarter, if you can break out your expectations for Business Solutions relative to the C2C side, anything in particular we should be thinking about for -- from an expense perspective as we think about individual margin modeling here for the segment?

Scott T. Scheirman

Sure, sure. Just to start on Business Solutions, we do expect that business to be non-dilutive to earnings. On Global Business Payments, that division, you did see margins of -- very strong compared to the quarter from a year ago and continued to expect to have improvements in those margins as we move forward in Global Business Payments. We think we're doing the right things there. And then to talk about C2C, Julio, or maybe just to take it back to the consolidated level for the business in that on a full year basis, our outlook from July to today is not too different. We do expect margins, exclude restructuring charges and also exclude the impact of currency. The margins will be somewhere between 26.5% to 27%, which would be up compared to the 26.2% in 2010, excluding restructuring expenses. Now last quarter, we did comment on how we saw the margins among Q3 and Q4. We did spend more marketing in Q3 as we anticipated, but not quite as much as we thought 90 days ago. And some of the deal expenses for Travelex will shift into Q4. So overall, we're on track to hit our margins for the full year and really reconfirming the margin guidance we had back in July, maybe a little bit of timing among the quarters, but back to hitting those margins as we contemplated in July.

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Okay. And then just lastly, going back to the decision to hold off on the buybacks for the rest of the year, when you look at the stock at 10x free cash flow yields of about 10% or so. What was the logic for not continuing the buybacks into the rest of this year other than just sort of feeling like you guys had done your part? But when you look at where the stock is right now, it seems like you guys can still be pretty accretive on the buyback side. Could you just walk us through maybe some of your thinking there?

Hikmet Ersek

Actually if you step back, Julio, a little bit, you will see that the repurchase of about $800 million in total year and we also -- it's almost 6% of our outstanding shares, right, Scott? I mean we repurchased here and plus we paid about $145 million of dividend. So given the financial environment, I think that's pretty well numbered. And plus given our cash flow, we also deployed about $1.3 billion on the acquisitions on Finint, Costa and Travelex which is also for future growth. I think if you look at that plus we are quarter-by-quarter having pretty good results, I think within that environment, we've been -- we are very good, have a good balance here between repurchase, dividends and also hitting the numbers.

Scott T. Scheirman

The only thing I'd add, Julio, we still have a lot of confidence in the business and in the long-term growth of the company. We are trying to balance cash levels with earnings with debt levels and all those things. And just balancing all those things and we did buyback $800 million of stock, which is 6%. And as we turn the page on the calendar to January, we'll have the flexibility to continue to buy back stock and this is the type of business that generates $1 billion-plus of cash flow from operations.

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Got it. So that the rest of the buyback starts again in 2012 and I think you said it was $600 million or so left?

Scott T. Scheirman

Yes, we have about $600 million left on the authorization. We clearly have the flexibility to start that back up in 2012.

Operator

Your next question is coming from Kartik Mehta with Northcoast Research.

Kartik Mehta - Northcoast Research

Scott, I wanted to go back to a comment you made on marketing spend. I think you said you anticipate spending 4.5% and I'm wondering, is that a new level of spending? Or as you look over the next couple of years, we have to spend more on marketing because of the new businesses and maybe the Western Union Ventures program as well?

Scott T. Scheirman

Yes, maybe I should have clarified it a little bit, too, Kartik, that in the third quarter, we spent about 4.5% of our revenue on marketing compared to the third quarter of a year ago. Third quarter of a year ago was about 3.7%. On a full year basis, we still anticipate spending about 4% of our top line on marketing. There is some variation quarter-by-quarter which has some impact on the margins and so forth. But overall, 4% where we've been in 2011, 2010, that feels about at the right level now. It could vary little bit year-by-year but directionally, I would call it out at 4%.

Kartik Mehta - Northcoast Research

And Hikmet, you've had good success using these pricing bands in the U.S. I know Mexico is a little too early to determine how much success you'll have or not have, but is there an opportunity to use this in other corridors? And could that benefit the company and maybe spur some growth?

Hikmet Ersek

If you look at our business, we've been doing that for -- in many corridors already actually, right? But $5 for $50 in the U.S. is probably our biggest price investment ever we did and by the way, it's not only $5 for $50, as you know, Kartik, it's also changing in the other bands and so even in some bands, we increase the pricing here. So we did promote the $5 for $50 in the business in the U.S. and we were very successful. We did also some in U.K. to promote that, we had some successes there. We are really looking market by market and in some countries given this current currency, it doesn't sound $5 for $50 we're well aware that different currencies may be $10 for $100, right? So we use it as a promotion. We use it as attracting customers, gaining market share and increasing our revenue long-term, yes, the short answer is, yes, we do it, but given our pricing investment, and this year we have about, as you heard before, we had about 1% pricing investment.

Kartik Mehta - Northcoast Research

And then just a last question on PSD, how much revenue has PSD generated in 2011 and kind of where it is in terms of your expectations so far for the year?

Hikmet Ersek

No, I'm very pleased with the PSD actions. I mean we have -- we always said it's going to be 1% additional incremental revenue to this retail locations which we are on track and we are hitting the numbers, 1% incremental revenue. And I'm pleased with -- and also not I'm only pleased, the customers are pleased because they are using it and they like it with the longer opening hours and fantastic locations, I think we have been having good results on PSD.

Operator

Your next question is coming from the line of Bryan Keane with Deutsche Bank.

Bryan Keane - Deutsche Bank AG, Research Division

I just want to follow up on the pricing question. I guess it's interesting that it's only going to be 1% this year. Is it just a factor that there's just not other corridors that it makes sense to drop price to drive transactions? Because typically over the history I've covered the company, it's hovered more 2% to 3%. It's just kind of interesting it's down to 1%, so maybe there isn't as many opportunities this year as there has been in the past. I just want to get your thoughts there.

Hikmet Ersek

Yes, I think, first of all, we do price investment, Bryan. I mean, we look corridor by corridor. As you recall, last year the biggest price investment corridor the U.S. impacted our pricing generally on the investment. But we do also sometimes FX increasement and increasement also in the pricing. We would like to keep this flexibility between about the historical flexibility, which we had to invest in the right momentum, the right pricing. But currently, I would say that we are very comfortable with our 1% and also with our revenue guidance. And obviously the global reach, strong brand, agent relationship helps that consumer likes them -- stick with us.

Bryan Keane - Deutsche Bank AG, Research Division

Okay. And let me just about ask about 2 countries. One, maybe you could just talk about Ivory Coast. It sounds like is that fully operational and how much should that help the numbers? And then second on Russia. It sounds like there were some competition in the retail market, and then you guys had a strategy to combat that. I'd just be interested in that.

Hikmet Ersek

Yes, we are operational in Ivory Coast. It's helping us to drive also the revenue which we had some, I think it was Q2, Q1, Q2, we had some issues, right?

Scott T. Scheirman

Yes, Ivory Coast is up and running, so it's helpful to the Q3 trends.

Hikmet Ersek

On Russia, I just recently came back. In Russia, we have about 17,000 locations with Sberbank, with post office, with all the banks. Mainly it's the financial services end. No one has 70,000 locations as we do have. We cover the country. However, they are all financial institutions. Russia recently announced that they will also get the kind of a PSD opening to retail network. They are also for money transfer and other financial services and we would like to be there also and that's the plan to expand, like the PSD we did in Europe, also in Russia, expanding the retail network there.

Bryan Keane - Deutsche Bank AG, Research Division

Okay. And then the weakness in Russia was because there was some competition in the retail area, or was it more an economic issue?

Hikmet Ersek

There are some local players, especially to Russia to Central Asia corridors. And the local players have been doing some actions there and that has impacted a little bit our business. And also, we feel a little bit on the economic environment here, there is a little bit cold outside there.

Operator

Your next question is coming from the line of Ashwin Shirvaikar with Citi.

Ashwin Shirvaikar - Citigroup Inc, Research Division

I guess my first question is on B2B, the revenue growth seems to have accelerated sequentially and I know you mentioned currency, but were there any other factors? Have you changed anything? Is this the investments paying off that you see in the business? What's going on there?

Hikmet Ersek

First of all currency, we mentioned that, but also the team is doing a good job. After the customers re-branded the Western Union Business Solutions, we have dedicated team going up to sales approaches. I think the team is doing good, great. We have businesses which they -- they are loyal to us, right? So once they've signed with us, once they enjoy our service, they stick with us and they stay with us and they are loyal, so that helps also. And that has been a very good quarter and depending on the quarter, but we believe that we are on the right track to have high-teens year. And Raj Agrawal and the team is doing a good job on that; that's we why also created his own business unit. And with the Travelex acquisition and combining this, too, I think we can have a very strong second leg for the future.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Okay. And I guess a second question probably for Scott here. The SG&A growth being faster than revenue growth, how much of that is onetime in nature with deal cost and restructuring-type stuff versus discretionary marketing investments that you're doing? And if you could get into some detail on the kind of marketing investments and what you expect from them.

Scott T. Scheirman

Sure. Ashwin, the first part of your question kind of broke up. Could you repeat your question? Sorry, about that. It kind of broke up coming through our on end.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Sure. Yes, so the question was around the rate of growth of SG&A relative to rate of growth of revenues. And what part of the differential is sort of explained by onetime factors such as deal costs and restructuring versus marketing impact that could be discretionary? And then second part was what are you spending the marketing dollars on? Is it more agent? Is it specific things you're doing that are seasonal in nature?

Scott T. Scheirman

Yes. On the SG&A, and let me just give you a couple of numbers it might help us think about it, too. But in the third quarter if you strip out restructuring charges, SG&A ran about in 16.8%. If you compare that to third quarter a year ago, it was about 16.3%. Clearly, we had deal costs of $5 million that's driving up that line in the third quarter of '11. But also the timing of the marketing where we spent about 4.5% of our revenues on marketing in the third quarter compared to 3.7%. So the timing of the investment spending still on track for the full year margins. As we think about marketing, what's great about our business is we're in 16,000 corridors, 200 countries, so the campaigns can really vary anywhere from national media campaigns, radio, all the way to grassroots events in local villages in India and they kind of run in between all that. And so in the third quarter, we saw some opportunities to spend and invest and we did that, and we think that will aid the top line growth as we move forward too.

Operator

Your next question is coming from the line of Tom McCrohan with Janney Capital Markets.

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

I just have 2 questions, one on prepaid and one on Mexico. On the prepaid, what is the cost to buy the prepaid card through the 7-Eleven retail channel?

Scott T. Scheirman

It will -- it's going to vary but generally, when you first buy the card, you've got to pay a $4.95 fee to reload the card at that time. And then as you subsequently reload it at retail, the $4.95 fee or if you get a direct deposit straight out of your bank account, there's no fee from that. And really the consumer proposition for us is having a strong brand and then also positioning it as a fee-friendly card in being able to, in the U.S., top up that card in almost any of the 50,000 locations in the U.S.

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

Will there be a fee, Scott, to buy the card?

Scott T. Scheirman

No, it will be included in that. That first -- when you first load the card, the $4.95 to load the card.

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

Got it. And the price, pricing, including the reload, is it different for 7-Eleven versus going to a Western Union location?

Scott T. Scheirman

No, it's pretty comparable at all the 13,000 locations that are selling our cards today.

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

Okay, great. And then just on the Mexico trends, if you can talk about October, given it seems like currency played a role in the quarter, in the pesos it just seems to have been kind of moving sideways since the end of the quarter. So I'm wondering if you've seen any moderation of trends in Mexico through today.

Hikmet Ersek

The currency, Tom, they definitely helped us. However, we are pleased with our Mexico numbers, with our position of our 3 brands actually, with our Western Union brand, Vigo brand and Orlando Valuta brand. We have pretty much covered the markets and are very well positioned. And I recently went to Mexico, last week actually. Our business is doing well, but I do still see opportunities to grow the business in Mexico. And the team is working hard to have that long-term success continued success in Mexico.

Operator

Your next question is coming from the line of Bob Napoli with William Blair.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Just on the trends in the quarter, did you see and I understand your guidance is pretty much in line on the top line with where you were, but as you went through the quarter, July, August, September, October, did you see -- have you seen slowdowns, has a slowdown accelerated through the quarter? Has it been pretty steady? How does October look relative to September? If you can give a little bit color on that and obviously, I mean the different markets are different, but...?

Hikmet Ersek

Yes. You're absolutely right. Different markets are different and we did see strong in the U.S., Mexico business doing, as I mentioned before, pretty well. And also, our India business double-digit growth. Middle East is holding. We had this last year, of kind of Gulf issues. I think the Gulf States are quite good. We do see some softness in the southern part of Europe and parts of Russia as it impacted in the some -- in the end of Q2, Q3 a little bit. But generally, I would say I am pleased with our transaction growth and with the despite environment out there, our business is holding pretty well.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

You've been adding a lot of locations, you continue to add lot of locations. I mean the -- I guess, the revenue per location has been coming down. I mean, are you at a point where with close to 500,000 locations, are the -- what -- are the incremental locations essentially less? I mean incrementally profitable but less so than older locations? I mean, what types of locations have you generally been adding -- when you add 10,000 to 15,000 a quarter, so there's a lot of different types in there but are we incrementally getting less value add on the locations that you're adding on?

Hikmet Ersek

So, Bob, I think first of all, under my leadership, expansion of the location will continue. I believe that covered every corner with Western Union brand is essential to continue to drive the transaction and customer loyalty and revenues, that will continue. Most of the locations, though, we are adding are on the receive side, given the coverage on the rural areas of Asia or other parts of the world. But also I think PSD locations, a new class of traits like in Europe and in the U.S., the financial services, the banks will continue to add that. The team is doing great job. We are going after every opportunity here to expand our agent network, and together with that, our location network. Now I would not say that the productivity is going down because if you go to a stent location, you ask the question, can I send money to the rural area of Vietnam? The answer you'll get, "Yes." With Western Union, you can do that because we have the locations, and that's going to go. So then on the send side, the productivity -- the other side, it increases even if you expand the location globally.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

The last question, you talked about more competition in Russia but are you seeing broadly around the world incrementally more competition than you have in the past from some upstarts? And we've heard of some new smaller players that are growing pretty rapidly with aggressive pricing. Are you seeing that more than in Russia? Are you seeing it in other methods of distribution besides retail, mobile, online?

Hikmet Ersek

Shortcut to your answer is that the competition is there, but we are gaining market share. And we are continuing to gaining market share, that puts us in a very good position. We do have competition quarter-by-quarter, country by country, but from the global perspective, we are very well positioned in gaining market share and especially in the cross-border money transfer business but also on the DMT with the U.S. what we did in the U.S. is a very well positioned. Our electronic channel is growing, like westernunion.com. International, for instance, growing by 45% or also our account-based money transfer, electronic money transfer is growing 30%. This will grow if you don't have the locations, if you don't have the network, if you don't have the brand, so I am very confident also that we are very well positioned to grow with our new channels, the electronic channels.

Operator

Your next question is coming from the line of Andrew Jeffrey with SunTrust.

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Just kind of a big-picture question, Western Union would appear to have seen some nice organic revenue growth re-acceleration irrespective of a challenging global macro environment and, Hikmet, I think that's attributable to a lot of things you've done internally and some of the pricing changes and so forth. From here, if we look at marketing that's going to run for around 4% of revenue, if we look at a constant pace of new agent additions, what gets the growth kind of to the next level? I mean, is it cyclical at this point? How much do you control your own destiny vis-à-vis sort of the second derivative of your revenue growth?

Hikmet Ersek

So I don't have the fire alarm here, but I'm fired up with this business. But what I would say that is it's both, right? Obviously economic environment helps our business, drives a lot of job creation, drives a lot of the business and we do see some impact, as you know, in some parts of the world to our business. However, we are driving the business. What are we doing as a big picture is that we are diversifying our portfolio. We are reaching really to new customer segments with our electronic channels in the core business with DMT money transfer, with our price positioning in the U.S., reaching out to new customer segments with our SMEs, that will -- that brings Western Union to a growth area, which we would like to see. That's all our investments. That's all our focus to reaching into new customer segment. And keeping the existing loyal customers within the network which happens. That's the answer to a big question.

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

So in aggregate, given that you've had the success you had in a relatively short period of time, all else being equal, can 2013 -- or 2012, sorry, conceptually be, not asking you to give guidance, but conceptually be a better year for Western Union still than we saw in '11?

Hikmet Ersek

Well generally, we always hope and aim to be every year is better than the other year, right? Obviously we work hard on that. But you know, we are -- really, we have a strategy as we outlined in the last September meeting. We will give more color in our strategy in February meeting. But as I said, with the 3 business lines we have it now, I think we are quite well positioned to gain further market share and be active, but economic environment definitely will also to help drive this business.

Operator

Your next question is coming from the line of James Friedman with Susquehanna.

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

I wanted to ask, with regard to your marketing spend related to prepaid, could you give us some order of magnitude about how much of the marketing is being directed towards that product line?

Scott T. Scheirman

James, it's Scott. In each of our areas, whether it's B2B, C2C, Global Business Payments and prepaid, we are investing behind each of those business. Sometimes that means people, sometimes that means marketing, sometimes it's technology and so forth. So it's hard to specifically break out how much we're investing behind each initiative because it will vary by quarter and by year. But we are excited about the prepaid business. What we think globally, as Hikmet mentioned earlier in the call, with the strength of our brand, our distribution, the bank where we can issue the product, hundreds of millions of customers, we do believe prepaid is a nice long-term opportunity for Western Union.

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

Okay. And then, Scott, if you wouldn't mind just revisiting Slide 16, I know there's been a lot of questions asked about the operating margin, but you actually went through some numbers in your prepared text. If I could ask you just to restate them to support the statement that on a constant currency basis operating margins increased, that will be really helpful.

Scott T. Scheirman

Sure. If you look at the consolidated margins, as you think about Q3 and even on a full year basis that we will get benefit from top line, revenue from currency rates, so it'll be about $18 million in the third quarter. But because of our hedging programs and how those work, in some quarters we actually will have a small profit there even some quarters we would have a loss, if you will, just based on when the hedges were put in place. But the goal of the hedging program is to have long-term predictability of cash flow from that standpoint. So again, you can get a lot of -- when in the third quarter, $18 million on the top line, but it has much less or even potentially a small negative impact on profit which, when you take those back apples to apples, you would have a slight margin improvement on a currency basis.

Michael A. Salop

And James, if you want to go through that, you can call me later, there's a lot of -- it's a little bit complex on the nuances and we can walk through that.

Hikmet Ersek

Well, thank you for all -- for your questions. I just wanted to recap the quarter once again. Despite some economic slowdown in parts of the world, our business is really holding up and well. Large markets across the globe are delivering consistent results in the consumer money transfer. Our customer bill payments turnaround continues and Western Business Solutions is providing strong growth. We are comfortable in affirming our full year revenue and moving earnings per share to the high end of the previous range, and we are on the track to complete the Travelex Global Business Payments acquisition in the fourth quarter. So thank you once again joining to call, asking the good questions, and we wish you all a good day. Thanks.

Operator

Ladies and gentlemen, we appreciate your participation today. This does conclude the presentation. You may now disconnect. Have a good day.

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