The Western Union's (WU) CEO Hikmet Ersek on Q2 2021 Results - Earnings Call Transcript

The Western Union Company (NYSE:WU) Q2 2021 Earnings Conference Call August 4, 2021 4:30 PM ET

Company Participants

Brad Windbigler – Head of Treasury and Investor Relations

Hikmet Ersek – Chief Executive Officer

Raj Agrawal – Chief Financial Officer

Conference Call Participants

Darrin Peller – Wolfe Research

Tien-Tsin Huang – JPMorgan

Jason Kupferberg – Bank of America

James Faucette – Morgan Stanley

Benjamin Budish – Barclays

Andrew Jeffrey – Truist Securities

Vasu Govil – KBW

Jeff Cantwell – Guggenheim Securities

Jamie Friedman – Susquehanna

Operator

Good day, and welcome to the Western Union Company Second Quarter 2021 Earnings Release Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today’s event is being recorded.

I would now like to turn the conference over to Brad Windbigler, Head of Treasury and Investor Relations. Please go ahead.

Brad Windbigler

Thank you. On today's call, we will discuss the company's second quarter 2021 results and our financial outlook for 2021 and then we will take your questions. The slides that accompany this call and webcast can be found at westernunion.com under the Investor Relations tab and will remain available after the call. Additional operational statistics have been provided in supplemental tables with our press release.

On our call today is our CEO, Hikmet Ersek; and our CFO, Raj Agrawal. 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 2020 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 in the most comparable GAAP measures on our website, westernunion.com, under the Investor Relations section. We will also discuss certain adjusted metrics. The expenses that have been excluded from adjusted metrics are specific to certain initiatives but may be similar to the types of expenses that the company has previously incurred and can reasonably expect to incur in the future.

All statements made by Western Union officers on this call are the property of the Western Union Company and subject to copyright protection. Other than the replay noted in our press release, Western Union has not authorized and disclaims responsibility for any recording, replay or distribution of any transcription of this call.

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

Hikmet Ersek

Thank you, Brad, and thank you all for joining us this afternoon to review our second quarter results and the progress of our business. Our second quarter performance was strong, and we are on track to achieve our adjusted 2021 financial outlook with revenue growth, reflecting sequential improvement in underlying trends and a favorable comparison to the prior year period, which was impacted by COVID-19 pandemic.

Profit trended as expected in the quarter as we continue to make strategic technology investments to strengthen our market-leading platform and digital capabilities. Our business remained resilient despite global uncertainties related to ongoing COVID-19 resurgences from the delta variant and the potential risk this poses to economic recovery.

Our strategy to be a leader in cross-border, cross-currency, money movement and payments, serving consumers, businesses and financial institutions remains unchanged. We remain confident in our ability to exceed $1 billion of digital revenue in 2021, supported by continued strong growth in our WU.com business and our digital partnership business.

The expansion of our WU.com customer base position us well as we look to build a consumer ecosystem, deepening engagement with our customers and providing them access to a wider array of products and services. We will discuss more on our consumer ecosystem strategy in just a moment. But first, I'd like to highlight another important strategic development, which is the Business Solutions transaction we announced today.

Today, we separately announced that, we reached a definitive agreement to sell our Business Solutions business to Goldfinch Partners and the Baupost Group for $910 million. Small and medium-sized businesses and organizations around the world to rely on Western Union Business Solutions, as they are global payments, foreign exchange and hedging partner, and we believe that, Goldfinch Partners and The Baupost Group are well positioned to invest in the business to deliver good value and innovation to these clients.

With the planned sale of Western Union Business Solutions, which was approximately 7% of total company revenue during the last 12 months ended June 30, 2021, now we will be fully focused on increasing our penetration of the global cross-border consumer payments market, expanding our digital partnership business and increasing our total addressable market, through our Western Union branded ecosystem strategy. The company will benefit by having a single global payments platform capable of serving multiple use cases and customer segments, including Fintech companies like, Google Pay, telecom companies like, STC Pay and banks and other financial institutions like Spare.

This requires a modern, adaptable platform that provides a strong user experience for our customers, agents and partners. And we are well on our way in this regard with significant recent progress in our cloud migration, pricing, automated marketing and customer support built, on the foundation of advanced machine learning and omnichannel engagement. These developments enable us to be more efficient, but most importantly, improve the customer experience and identify incremental revenue opportunities. Continuing technology investment and our unique global platform remains a key area of focus for us. We also remain focused on enhancing our market-leading network by improving our coverage, cost and quality.

On a year-to-date basis, our new agent signings will expand our network by approximately 18,000 retail locations. We have also renegotiated contracts with over 50 agents' year-to-date, reflecting our commitment to optimize commissions. Finally, we continue to enhance our global account payout capabilities, which is now available in over 125 countries with real-time capabilities in approximately 100 countries. Over 60% of our global account payout transaction volume was delivered real-time.

Turning back to our consumer ecosystem strategy, we are excited about our plan to pilot through our Western Union International Bank as WU-branded multicurrency bank account, debit card and integrated money transfer solution in a couple of European countries later this year. Our initial focus will be testing and learning and then we will evaluate how we expand from there.

Longer term, we see significant opportunity for our consumer ecosystem strategy. We are a trusted provider to a large, unique customer segment, the global migrant community, which has many needs beyond money transfer, such as insurance, lending and travel. And it's often not well served in the market. Western Union with its trusted brand, large and growing digital customer base, and global platform is well positioned to execute on this opportunity.

While we are fully focused on the implementation of our profitable growth strategy, we also remain committed to advance environmental, social and governance, or ESG, at Western Union. I would encourage you to read our 2020 ESG report released in June to learn more about our 2020 impact and our ESG strategy and goals, which are closely aligned to our business, our values and our purpose.

Now turning back to second quarter results. We see pricing stability in the market and varying levels of recovery from the effects of the ongoing pandemic, particularly outside the U.S., where economic activity and government policies are more mixed. This was evident in my recent market tour in Europe where agents, customers and business leaders confirmed that while local economies are reopening and travel was sections are being lifted, the pace of economic recovery is being impacted by labor shortages and the spike in cases from the delta variant. Fortunately, for our customers around the globe, we offer remarkable choice with our omnichannel offering with a comprehensive set of funding and payout options, so they can transfer and receive money in a way that it's most convenient for them.

During the quarter, we saw continued strength in principal per transaction or PPT with growth over 11% and cross-border total principal growth of 29%, benefiting from continued demand for support in received markets and improving economic and employment trends in central regions like the U.S. and Western Europe. Total company revenue grew 16% or 13% on a constant currency basis, with underlying trends aided by continued growth in our digital business and sequential improvement in the retail business.

C2C revenues and transactions, each grew 15% in the quarter with C2C revenue growing 12% on a constant currency basis. Digital revenues were up from the first quarter and grew 22% year-over-year to over $265 million with quarterly highs for revenue, transactions and principal. Digital comprised 36% of transactions and 24% of revenues for the C2C segment. As expected, we are beginning to see digital growth ease after exceptionally strong performance during the height of the COVID-19 pandemic.

WU.com results were healthy with transaction growth over 18%, driven by 14% growth in average monthly active users. WU.com continue to lead money transfer appears in mobile app downloads by a wide margin and grow principle over 30%.

Our customer engagement trends remained favorable year-over-year with positive trends in retention, transaction per customer and principal by customer. We continue to expand in the new market launch in Chile and Peru in the second quarter and enhancing the customer experience with new futures and tools, including the rollout of additional electronic Know Your Customer options across European and transaction reminders. Improving the customer experience not only supports the continued growth in westernunion.com, but also provides a growing customer base for the consumer ecosystem strategy that I mentioned earlier.

Retail revenue achieved strong year-over-year growth, cycling over the disruption from the pandemic in the prior year period and is growing sequentially. We remain focused on ramping up our partnership with Walmart in the US. Our domestic and international money transfers, bill payments and money order services are now available in nearly 4,700 Walmart stores across the US. Trends in the Business Solutions segment continued to move in the right direction with strong improvement in the new business and stable trends in hedging and across most segment verticals. While we have announced, a definitive agreement to divest Western Union Business Solutions, it will be business as usual until the transaction closes.

Now, overall, we are pleased with the announcement of the Western Union Business Solution today. I'm excited for the Business Solutions management team to receive strong support from the new ownership. Additionally, with our healthy second quarter results, we are confident in our ability to execute to include market conditions and our strategy, with our resilient retail channel, strong growth of our digital channel, building a WU branded ecosystem with additional products and serving multiple enterprises with our unique and agile cross-border platform positions the company well for long-term incremental growth opportunities.

I'll now pass it over to Raj, to review our financial results in more detail.

Raj Agrawal

Thank you, Hikmet, and good afternoon, everyone. Let me first summarize second quarter performance. And then, I will provide more color on the Business Solutions divestiture, the planned termination of our defined benefit plan, and finally, our 2021 full year outlook. Moving to the second quarter results, revenue of $1.3 billion increased 16%, on a reported basis or 13% constant currency. Currency translation, net of the impact from hedges benefited second quarter revenues by approximately $29 million compared to the prior year.

In the C2C segment, revenue increased 15%, on a reported basis or 12% constant currency, with transaction growth partially offset by mix. C2C transactions grew 15% for the quarter led by 33% transaction growth in digital money transfer, and supported by growth in retail money transfer, which improved sequentially, particularly in North America and Europe and CIS. In line with our expectations, spread between C2C transactions and revenue growth moderated this quarter and was flat on a reported basis or three percentage points constant currency, as we cycled through the mix impact from the high growth of digital partnership transactions, which represents a lower revenue per transaction category.

We expect the spread will remain fairly tight during the remainder of the year. Globally, we continue to see pricing environment as stable. Total C2C cross-border principal increased 29% on a reported basis or 25% constant currency driven by growth in retail and digital money transfer. Total C2C Principal per Transaction or PPT was up 11% or 8% constant currency. Both, retail and WU.com continued to experience higher average PPT, due to mix and changes in consumer behavior. Digital money transfer revenues which include WU.com and digital partnerships increased 22% on a reported basis or 19% constant currency. WU.com revenue grew 18% or 15% constant currency on transaction growth of 18%.

WU.com cross-border revenue was up 23% in the quarter. Digital partnerships continued to show, strong growth across revenue, transactions and principal in the quarter. Trends in our digital business moderated somewhat as expected, from the exceptional growth we experienced from the second quarter onwards last year, as demand for our digital services grew significantly, adding incremental revenue, profit and transactions to our business. While we expect this moderating trend will continue the remainder of the year, we are now growing off a much larger base.

Moving to the regional results, North America revenue increased 4% on both a reported and constant currency basis, on transaction growth of 3%. The increase in constant currency revenue and transaction growth was driven by U.S. outbound, partially offset by current U.S. regulations in Cuba that limit our ability to operate and declines in U.S. domestic money transfer. U.S. domestic money transfer represented approximately 4% of total C2C revenue in the quarter. Revenue in the Europe and CIS region increased 18% on a reported basis or 10% constant currency on transaction growth of 26%.

Constant currency revenue growth was led by the United Kingdom, France and Russia with the spread between transaction and constant currency revenue growth driven by the digital partnership business in Russia. Revenue in the Middle East, Africa and South Asia region increased 19% on a reported basis or 18% constant currency, while transactions grew 22%. The digital partnership business in Saudi Arabia led constant currency revenue growth in the quarter, followed by Kuwait and Qatar. The impact of the digital partnership business on the spread between transaction and constant currency revenue growth diminished in the quarter but was still the primary contributor.

Revenue growth in the Latin America and Caribbean region was up 70% or 68% constant currency on transaction growth of 42%. Constant currency revenue growth was broad-based across the region, led by Chile, Ecuador and Mexico. Much higher average principal amount resulted in constant currency revenue growth greatly exceeding transaction growth in the quarter. Revenue in the APAC region increased 20% on a reported basis or 13% constant currency led by the Philippines and Australia.

Transactions increased 3% with the Philippines driving the difference between constant currency revenue and transaction growth. Business Solutions revenue increased 25% on a reported basis or 16% constant currency, benefiting from favorable comparisons to prior year. Revenue trends remained on a positive course with the continuing recovery in cross-border trade. The segment represented 8% of company revenues in the quarter. Other revenues represented 5% of total company revenues and increased 8% in the quarter. Other revenues primarily consist of retail bill payments in the U.S. and Argentina and retail money orders.

Turning to margins and profitability. The consolidated GAAP operating margin in the quarter was 19.8% compared to 19. 9% in the prior year period. While the consolidated adjusted operating margin was 20.2% in the quarter compared to 20.4% in the prior year period. Adjusted operating margin excludes M&A expenses in both the current and prior year periods and last year's restructuring expenses. The decrease in consolidated operating margin continues to reflect how COVID-19 impacted the level and timing of certain expenses and investments as the company curtailed spending last year.

Compensation-related expenses and strategic investments in marketing and technology were the primary contributors to the slight margin decrease in the quarter. Foreign exchange hedges had a negative impact of $2 million on operating profit in the current quarter and a benefit of $7 million in the prior year period.

Moving to segment margins. Note that M&A expenses are included in other operating margins for both the current and prior year period, and segment margins exclude last year's restructuring charges. B2C operating margin was 20.7% compared to 21.8% in the prior year period. Given that our C2C segment comprises most of total company operating income, the decrease in operating margin was driven by the same factors that impacted total company margin.

Business Solutions operating margin was 10.9% in the quarter compared to 1.6% in the prior year period. The increase in operating margin was largely due to increased revenue, partially offset by increased compensation-related expenses. Other operating margin was 16.2%, compared to 21.9% in the prior year period, with the decrease driven by higher M&A expenses, related to the divestiture of Western Union Business Solutions announced today.

The GAAP effective tax rate in the quarter was 14.5%, compared to 16.2% in the prior year period, while the adjusted effective tax rate in the quarter was 14.2%, compared to 15.7% in the prior year period. The decrease in the company's GAAP and adjusted effective tax rates was due to changes in pre-tax earnings, including differences in the composition between high tax and low tax jurisdictions.

GAAP Earnings per Share or EPS was $0.54 in the quarter compared to $0.39 and in the prior year period, while adjusted EPS was $0.48 in the quarter compared to $0.41 in the prior year period. The increase in GAAP EPS reflects benefits of revenue growth, the gain on an investment sale and a lower effective tax rate, partially offset by debt retirement expenses, compensation-related expenses and strategic investments in marketing and technology. Both the gain on an investment sale and the debt retirement expenses are excluded from adjusted EPS, in addition to the expenses we noted earlier during the operating margin discussion. The net impact of these two items was a $0.07 benefit to GAAP EPS in the quarter.

Turning to our cash flow and balance sheet, year-to-date cash flow from operating activities was $349 million. Capital expenditures in the quarter were approximately $48 million. At the end of the quarter, we had cash of $1.1 billion and debt of $3 billion. We returned $171 million to shareholders in the second quarter, consisting of $96 million in dividends and $75 million in share repurchases. The outstanding share count at quarter end was 407 million shares. And we had $633 million remaining under our share repurchase authorization, which expires in December of this year.

As Hikmet highlighted previously, today we announce the divestiture of Western Union Business Solutions. The sales price of $910 million is expected to generate in excess of $800 million in proceeds, net of tax in 2022 and result in a gain on sale. Our net proceeds estimate is based on current tax policy and is subject to certain regulatory and working capital adjustments. The transaction is expected to close in two stages with the majority of the business and the entire proceeds, transferring in early 2022 and the European business transferring by late 2022. Both closings are subject to requisite work council consultations, regulatory approvals and other customary closing conditions.

Following the transaction, we will evaluate options for the use of proceeds based on market conditions and opportunities and in accordance with our established capital allocation priorities, which include reinvestment in the business to drive organic growth, dividends, acquisitions, including technological capabilities that support our growth strategy and share repurchases. As a reference point, during the last 12 months ended June 30th, 2021, the Business Solutions segment generated revenue, EBITDA and operating profit of $374 million, $64 million and $33 million, respectively.

Turning to our outlook for 2021, the outlook we provided today assumes moderate improvement in macroeconomic conditions as the quarters' progress in line with current prevailing macroeconomic forecast with no material changes related to the COVID-19 pandemic. We reaffirmed our expectations for revenue growth, including our expectation that the digital business will achieve over $1 billion in revenue this year. We also affirmed our remaining metrics on an adjusted basis while updating our full-year GAAP financial outlook for pension plan termination expenses and M&A costs related to the sale of the Business Solutions business.

The pension plan termination is expected to accelerate the recognition of approximately $110 million of non-cash expenses on a pre-tax basis, lowering GAAP EPS by approximately $0.22 in the fourth quarter and will be recorded to other expense in the P&L. With our plan over funded by more than $35 million as of June 30, we believe it is a good time to transition the plan to an annuity provider. We continue to expect full year 2021 revenues will grow mid- to high single digits on a GAAP basis or mid-single digits on a constant currency basis, which also excludes the impact of Argentina inflation.

GAAP operating margin is expected to be approximately 21% and adjusted operating margin is expected to be approximately 21.5% with the difference attributable to M&A costs. We anticipate our effective tax rate will be in the mid-teens range on a GAAP and adjusted basis. GAAP EPS for the year is now expected to be in a range of $1.82 to $1.92, which now reflects the impact of pension plan termination expenses and M&A costs. Adjusted EPS is still expected to be in the range of $2 to $2.10. As we move into the second half of the year, let me provide some context for how we think the results may progress over the remaining quarters.

Starting with revenue, our underlying assumption for revenue progression includes moderate improvement in the global macroeconomic environment in line with the current prevailing economic forecast. However, as Hikmet discussed earlier, global uncertainties remain, especially related to the emergence of the delta variant and the potential risks this poses to broader economic recovery. As the quarters progress, we expect moderate improvement in our business similar to the current prevailing economic forecast, although overall company growth rates will be lower than we have seen in the second quarter due to the grow-over impacts from last year.

We continue to expect to generate over $1 billion in digital revenue this year, along with a relatively stable retail business. Lastly, we expect that the Business Solutions and other segments will continue to rebound this year as global macroeconomic conditions improve. With respect to margins, we expect the margin for the second half of the year will be above our full-year adjusted margin outlook of approximately 21.5%, primarily driven by expected higher revenue levels. To wrap up, we delivered a solid second quarter performance and are on track to achieve our financial outlook for the year. With the planned divestiture of the Business Solutions business, we are also sharpening our focus on the strategy that Hikmet laid out.

Thank you for joining our call today. And operator, we are now ready to take questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session [Operator Instructions] Today's first question comes from Darrin Peller at Wolfe Research. Please go ahead.

Darrin Peller

Thanks guys. I wanted to touch on. Hey guys, congrats, by the way, on the sale of the Business Solutions business for – I think it looks like it will enable you guys to really align to what you want to on your core C2C side.

Raj Agrawal

Thanks.

Darrin Peller

When we look at the C2C side of the business, though, just the transactions on a stack growth rate basis did actually accelerate, which was nice to see from our asset base. When we're trying to figure out the dynamics, especially as you – the spread narrowing now as well, I mean was it as simple as saying like, digital obviously continues to grow well. And do you see that being sustainable from here, if we do get into more reopening? And then, just give us a reminder of where we are on the retail correction. I guess the retail reopening element where we are versus where you think you can get to by the end of the year?

Hikmet Ersek

Yes. Let me give overall the sense of the business. First of all, we are really happy with the performance of the business. Digital expansion is really doing very well. Also retention rates are extremely high. The customers are using. Now we are in 75 countries with our westernunion.com business. And addition on that, we also have our white label business, enterprise partnerships, which brings us to exceed $1 billion by year-end. And we really like that. We already have $500 million achieved.

And we believe that's going to continue. If you look at that from what base, right, especially if you compare that with competition. We are really growing very strong on a huge base year. So I'm pleased on that. And retail is coming back, especially in places where retail is open, where volatility due to coronavirus is less, it's really doing well. Our pump business is doing very well. It's coming back. So that's also stable. The stability of the retail – the resilience of the retail business, adding on that on the digital business, it's really good news here we have here.

And then also, dotcom business gives us the ability with the return customers, have that customer relationship. We have about 9 million customers now with only dotcom business that gives us really a great base for our ecosystem strategy. And the customer loyalty is increasing here and really allows us to offer additional products to our westernunion.com customers in the future and the test, as you saw, starts this year in Europe with our Western Union Bank. Do you want to add something on that?

Raj Agrawal

Yes. Darrin, on your question around the spread, it is generally as simple as we are growing over some of the really fast growth from our digital partnership digital white label business, which was the key driver of the wider spread over the course of the last year. So we had expected that it would narrow. I do think that it's going to continue to be narrow the rest of the year, because of that impact.

And I think the – in terms of where is retail, the way we think about it is if you look at the total C2C business, this second quarter, compared to the second quarter of 2019, we're slightly ahead of where we were. We're about a point ahead in total of where the overall consumer business is, obviously, that business has shifted dramatically over that period of time. Now in the second quarter, we have digital, it is about 24% of consumer revenues.

And back in the second quarter of 2019, it was only about mid-teens. So we've had a significant shift in the business, if you will. And I think that's a really good story for us going forward where the consumer business is more digitally, heavily oriented and provides a good growth profile going forward.

Darrin Peller

That's really helpful. It's the big data point, I think, that from I think, that from the retail I think, that from the retail side is actually for the 2019 level now from a transactional standpoint, which I guess underscores the digital side is holding up and helping your growth profile. But one quick one is just when we look at the investment and the progress you've made on the WU.com number of the 9 million users, can you just touch on engagement levels for a minute in terms of where they are now versus where they've been in years past, how many transactions you see for those kinds of users versus the retail side, and what that can be [Technical Difficulty] monetization? Thanks again.

Hikmet Ersek

Yes. I think on the westernunion.com, retention levels are really increasing in the countries we've been longer. The customers are using us more and more once they open an account. As you know, the big difference between retail money transfer and westernunion.com money transfer is that you have to know your customer. You have to register at westernunion.com. And biggest advantage we recently did also that helps a lot is the electronic KYC. The customers don't have to go to a location to preregister in many countries. That's a huge step to get more customers and have them really well.

And one thing also changed recently is that the PPT is higher, the principal transaction with the customers. We do see that we acquire new customer segments here with higher PPT. And additional to that, what I like, as you know, most of the transactions are paid out on our locations, a retail locations globally we have in 200 countries 550,000 locations, they paid out in cash. But the new customers are also wanted to send money to an account. In fact, this business is growing very strong. We are really gaining market share, and it's on the $200 million business almost now.

Raj Agrawal

Account-to-account, pure account-to-account is on a annual run rate, that's $200 million revenue.

Hikmet Ersek

$200 million annual run rate business. So you could see we are really adding new customers. And the customers – so to your question, yes, the retention is high, the revenues are coming from the customers who have been already here. But don't forget also, we are in 75 countries. We are sending money from 75 countries. We recently opened new countries and they're also adding to our success on digital growth.

Darrin Peller

Right. That's great. Thanks guys.

Hikmet Ersek

Thank you, Darrin

Operator

And our next question today comes from Tien-Tsin Huang with JPMorgan. Please go ahead.

Hikmet Ersek

Hi, Tien-Tsin.

Tien-Tsin Huang

Excellent guys. Good afternoon here. Hi Hikmet. Good afternoon, good to connect to as always. Just, I totally understand the focus in selling Business Solutions. But Hikmet, I just wanted to clarify the strategy. Is the idea to focus more on consumer-based payments as alluded to with the consumer ecosystem strategy or is still servicing businesses with money movement as stated in your strategy statement here. Is that still on the table? Just wanted to clarify that point.

Hikmet Ersek

So great question, Tien-Tsin on that. First of all, our strategy has not changed, right? We being a leader on the cross-border, cross-currency money transfer, serving multiple use cases, it's really a big advantage of Western Union. And to do so, we heavily invest in our one platform strategy, right, one unique platform, which serves multiple use cases. As you look at our platform, the investment we did in the technology, the automation, the cloud-based systems, transaction processing systems, which have been really a huge advantage for us, and it's continued to go investments there, serves multiple use cases. C2B, B2C, B2C, C2C, all this case is going to continue to expand. And that our white label expansion is going to continue to happen.

As I mentioned earlier, we do have customers like – technology customers like Google Pay, and that's going to continue to happen or retailers like Amazon, that's going to continue to happen. And we have strategy to expand that. Then we have mobile telephone companies, telecom companies like, STC Pay. So their customers are also businesses. And most importantly, we do have financial institutions. As you know, we are serving with our white labeling also about more than 40 financial institutions globally white labeling our system.

And the big two – the biggest that we have a very successful business [indiscernible] in Russia, that continues to happen. So our strategy is, and if I summarize that, serving our customers, existing customers with westernunion.com in retail with Western Union brand, but also adding new customer segments like businesses, financial institutions, tech company with our unique platform. That has not changed. And that's a very successful strategy, I believe.

Tien-Tsin Huang

Yes. Okay, understood. I just want to make sure…

Hikmet Ersek

And by the way, Tien-Tsin, remember in 2019 our Investor Day, I showed also C2B and B2C segment is $2 trillion market opportunity, right, and that focus continues to happen.

Tien-Tsin Huang

Okay. Yes, that's what has got me thinking about it. Thank you for that clarification, I do go back to that Investor Day quite often, so thanks for that. And my quick follow-up, if you don't mind, just with retail getting better, it was good to see that. I have to ask on the Walmart side. How – if you can comment, how is that performing relative to your expectations? Any surprises there?

Hikmet Ersek

No surprises, Tien-Tsin. We are rolling out now – we did roll out sorry, we did roll out with all our products in 4,700 locations. We have not only money transfer, domestic money transfer, international money transfer. We also rolled out the bill payments products at the Walmart locations. It's ramping up. And we are and associates are aware, customers are aware. I think we see now the good ramp-up at the Walmart locations with Western Union transactions. We like it.

Tien-Tsin Huang

Great. Thank you for the update. Thanks a lot for that.

Raj Agrawal

Thanks, Tien-Tsin.

Hikmet Ersek

Thanks Tien-Tsin.

Operator

And our next question comes from Jason Kupferberg with Bank of America. Please go ahead.

Jason Kupferberg

Hey. Thanks guys. Good afternoon. Since you brought up the Investor Day, Hikmet, I'll ask you one, just going back to that, which I know was six months or so before the start of the pandemic. I think back then, you had talked about a multiyear revenue CAGR target of 2% to 3% for the C2C business. And obviously, there is been a mix shift to digital that's been accelerated further due to the pandemic. So, just wondering how you would figure now as we move forward and would kind of the year-over-year comparisons normalize?

Hikmet Ersek

First of all, great question. Obviously, pandemic, as you said, Jason, had some impact to forecast obviously, but on the timing wise. I think we are well underway to executing our strategy, as we presented at the Investors Day. And we are really expanding not only with The Western Union branded products, also with white labeling and offering our platform to third-parties has been a good strategy. And our digital growth, as we outlined at the Investor Day is really in the good path.

COVID-19, the pandemic definitely helped us also to gain new customer segments with higher principal numbers in digital, it has – but we were ready. We were already ready to serve this kind of customers. They want us to send money to their loved ones. One thing that has not changed is that customers want to support their loved ones in good and bad times, in good times and challenging times. And that's resilience of our business and using the omnichannel capabilities, which Western Union offers, from the send side, also from the receive side is unique. And that has been – that has not changed in the consumer business.

Also on our businesses like offering to financial institutions to FI, it's a big focus within the company. As you know, we have been investing in our platform – technology platform, significant investment. We have now – one example is that, the technology investment gives us the capabilities, really serving our platform to banks and to financial institutions to getting easy connections to them really kind of going after the headaches of correspondent banking, as you know, the correspondent bank is sending money from one account to another account especially when it comes to exotic currencies on the emerging countries, it's painful, but our unique platform can really serve that.

So that's all been outlined at our Investors Day, and I'm pleased with that. Maybe the biggest –another advantage we didn't talk too much at the Investors Day, but recently, we start to talk is about our ecosystem. It's unique, our platform, westernunion.com, capability really gives us a unique platform that we can offer additional products like credit cards, like debit cards, like loans, like insurance, even like travel, all the building that ecosystem. And there is no other company who can talk to these unique customers like we can talk to global migrant community. And examples like in the UK, we are not talking to the Albanian customer in English or in their British way, we are really talking with their way to understand that this loyalty, this brand awareness is huge. And that gives us really a basis of building additional products.

Jason Kupferberg

Yes, that's a comprehensive answer. I appreciate it. Raj, I know you mentioned there is over [indiscernible] authorization. I think you've spent just about $75 million in the second quarter. Do you expect to use up the rest of the authorization by the time it expires at the end of the year?

Raj Agrawal

No, we don't, Jason. There would be a lot of share repurchase for this year. But we do plan to continue to be active. I would expect that we're going to re-up an authorization after this year is over just to continue to be active. And then obviously, we have the sale of Business Solutions, which will close – the first close will be early next year. And so we'll have a view on how we're going to deploy those proceeds. And so all of that will play a factor in terms of the share repurchase amounts. But we're very pleased with the cash flow generations the business has had and we're paying healthy dividends and buying back stock as we have historically.

Jason Kupferberg

Yes. I was just wondering about the second half would be better than the second quarter just given the pullback and the stuff?

Raj Agrawal

Yes. I mean, look, we don't have an exact forecast to give you on how much stock buyback, but we're always going to be nimble on that depending on the market conditions and other factors, but that's the current plan.

Jason Kupferberg

Okay. Thank you, guys. Appreciate it.

Hikmet Ersek

Thanks.

Raj Agrawal

Thank you.

Operator

Thank you. [Operator Instructions] Today's next question comes from James Faucette with Morgan Stanley. Please go ahead.

James Faucette

Great. Thank you very much. I'm wondering if – I know that you're moving gradually to draw up the WU banking services in Europe. But I'm wondering if you can kind of give us an outline of what we should expect around that? What you think the opportunities are? And kind of the key milestones that we should be keeping track of or watching for and what time frame, just trying to get some more color on that initiative.

Hikmet Ersek

Yes. First of all, we believe it's extremely exciting, this opportunity, because what we have maybe is a big competitive advantage is, that we are really starting with brand awareness, customer relationship already and really having a unique customer segmentation, which others don't have it. And by the way, given this – having a European Union bank license and having offering financial services, we really start from a very good base actually to offer our services. We will start to test that in two countries in Europe now. And I would say that internally, we look at that, I would say that no bank has been launching so far the product like we have done it, and we will do it. And I'm very proud of what the team has done and very excited about that. Obviously, when time comes, we will kind of give you more details about that, what metrics will be. But I'm excited. And customers also told us that they want to have additional products on Western Union. So we want to get a better service and they trust our brand.

Raj Agrawal

Yes. James, I would just add that depending on the outcome of this test, we'll be ready to go to more markets and expand further as appropriate. So I think the beauty of our business is the send and receive dynamics that we'll be testing out between the – a sending market and a receiving market as part of this test. So it's – we're excited about what it can be.

Operator

Thank you. Our next question today comes from Ramsey El-Assal with Barclays. Please go ahead.

Benjamin Budish

Hi. This is Ben on for Ramsey. Thanks so much for taking my question. I wanted to ask about the continuing pace of your digital revenue growth. It looked like the sequential step-up in revenues was quite a bit bigger in this quarter, 2Q versus 1Q than it has been in previous quarters. Does that look like that's on track to continue? Or should it kind of grow a little bit more moderately because it looks like you're already kind of nicely on track to hit like at least $1 billion a year. So I just wanted to get a better sense of what we should expect in the next couple of quarters.

Raj Agrawal

Yes. I mean, that's our outlook. Our outlook is to grow at least $1 billion. And you're right on the mark. I mean, we got really good sequential improvement in the second quarter, and that was with both WU.com as well as our digital white label business that make up this digital business for the first half of the year. We're over $500 million. And we're well on pace to exceed that. And so we feel very good about it. I won't give you specific numbers beyond what's going to happen in the second half, but we should reach $500 million in the second half, if not more.

Benjamin Budish

Okay. That's helpful. And if I could just ask kind of one follow-up just on the digital side as well, it looks just from our math, like the pricing on digital has kind of stabilized a little bit in the last couple of quarters. Is there any possibility that could go up? I mean, are you perhaps lapping some introductory pricing that's going to – as you go past it, pricing come up a little bit? Or is a stabilization kind of the way to think about it?

Raj Agrawal

Yes. I would say that pricing overall is quite stable in the market. And but we always are moving pricing up and down in our 20,000 corridors in all of our channels. So it's never static in nature. But what you're seeing from a year-over-year standpoint is that we are beginning to grow over some of the price changes we made in the WU.com business for customer acquisition last year, if you recall. And so we see this as quite stable, but we're always going to be nimble on what is it that's going to drive the best customer acquisition and the best customer adoption.

And that's really what's going to drive the long-term health of this business, not just what is the price in this quarter or that quarter. It really is about getting lifetime value of customers. And one thing I would just add or a couple of things is the dynamic pricing capabilities that we have, have really started to gain some traction, and we're not even done with that opportunity yet. So whether it's retail or digital, the dynamic pricing capabilities we continue to add to our technical capabilities. And that team is doing an amazing job in capturing additional opportunities there.

And then the account-to-account part of the business also is quite interesting that's at a lower yield, typically. However, we're getting about $200 million of annual revenue run rate in the pure account-to-account business within digital. So that's sort of a hidden gem, if you will, on the purely digital part of our business. It's not something that we've spoken about before, but it's quite interesting and quite attractive. And that is the fastest-growing part of our digital business.

Benjamin Budish

Very helpful and interesting. And thank you so much for taking my questions.

Operator

And our next question today comes from Andrew Jeffrey with Truist Securities.

Andrew Jeffrey

Hi, good afternoon. Appreciate you taking the questions.

Hikmet Ersek

Hi, Andrew.

Andrew Jeffrey

Hi, Hikmet. I'm curious about the Western Union branded ecosystem strategy and how you think about sort of timing. Obviously, there are some digital negative competitors in the market, one, in particular, one that have sort of been doing this for several years. And I just wonder, the brand is an important advantage. I wonder about whether or not you feel like you're maybe behind the curve a little bit competitively? And how you're going to balance the commitment to shareholders and free cash flow with the investments required to grow that business?

Hikmet Ersek

Well, first of all, obviously, we wouldn't start such an exciting project if we wouldn't be very motivated about that. And we have – as I mentioned earlier, we have all the basis and all the regulatory environment to start this ecosystem project. It's a – it's really a long-term opportunity. It's a very exciting opportunity to have the customers loyal for a long time for different, different kind of – with different products, what they need.

The investment is really a low investment. We have the basis. We don't have to start like a neobank or all the banks from zero we need to – don’t need the investment. As you know, we've been as a company, we're a shareholder friendly and we're always profitable growth focus. Saying that, though, we are – think that that's incremental growth opportunity with lower investment requirements than others would have it here and that gives us a base and our bank, which is based in Europe, allows us also to run that in a way that the others maybe have some challenges. And that's – so I don't see a big investment. We do invest, of course, but not that means that we will have to change our guidance suddenly or something like that. We are very pleased with the opportunity.

Raj Agrawal

Yes. I would just say the advantage we have is that we already operate everywhere in the world. So it's about adding additional capabilities. That's why we think we're uniquely positioned to be able to take advantage of our 9 million consumers that are on WU.com and give them additional products and services. So yes, there is investment, but it's really within our outlook certainly this year and if it drives additional revenue growth, that's the real beauty of what we're trying to create here.

Hikmet Ersek

I think the question comes up, because it's something new as we stock a little bit in the and concerning that in the Investor Day. But I can tell you that, we're going to give you more color over the coming quarters and years because this is really exciting. And so we can't really build to tell the story even more in detail.

Andrew Jeffrey

Thanks for that.

Hikmet Ersek

Thank you.

Operator

And our next question comes from Vasu Govil with KBW

Please go ahead.

Vasu Govil

Hi. Thanks for taking my question. I guess, I wanted to go back to the last Investor Day as well, and I know you guys have talked about a 23% margin goal by 2022. And I know a lot has changed since then, but now with this divestiture of the Business Solutions segment, at least a part of that is expected in the first part of the year. Is that potentially a goal on the table now? If you could comment on that, and then, if you could also just talk about how we should be modeling The Western Union – the Business Solutions divestiture because I know it's getting done in two parts?

Raj Agrawal

Yes. Hi Vasu, this is Raj. Let me try to answer both your questions. On the original targets that we set in 2019, I think you've sort of answered your own question, which is a lot has changed, since then. We certainly had objectives of expanding margins by 300 basis points. And the key driver behind that were our cost savings initiatives of $150 million, which we are very much on track to achieve. So we'll get to $150 million of run rate savings next year, which itself was the primary driver of the margin expansion.

In addition to that, we needed 2% to 3% revenue growth each of the following three years, which, obviously, we didn't get because of COVID. So we really have to reassess where we are. I would say one thing that the model hasn't changed. So our cost structure is still 40% to 45% fixed. And our variable costs are 55% to 60%. So as we get revenue growth, it gives us a lot of flexibility to not only, think about margins but also to invest back in the business. So if we can get back on track and you've seen and you've heard some of the commentary around the mix shift of the business, we're now almost about 24% of our consumer revenues are digital.

It really gives us potentially a different growth profile going forward. So we're very excited about that. And then, on your second question related to Western Union Business Solutions, no real impact this year because the first transaction, first part of the closing won't happen until early part of next year. We've called out the M&A costs that are related to the Woods divestiture. But other than that, nothing else really changes the P&L will still reflect the business. Next year, as we get into the first closing, we will start to show you the impacts for Business Solutions on a pro forma basis. And we did give you some data points that you can use just as some data points. The last 12 months, the business generated about $374 million of revenue, about $64 million of EBITDA and about $33 million of operating income. So I just need to give you a sense of what the business has looked like the last 12 months.

Vasu Govil

Thank you very much.

Raj Agrawal

Sure.

Operator

And our next question today comes from Jeff Cantwell of Guggenheim Securities. Please go ahead.

Jeff Cantwell

Hi. How are you? Congrats on results, guys. Mine's a follow-up to earlier questions that you're being asked. I wanted to ask you, can you talk some more about your digital business. We see you reaching a new hyper revenue, and that's Slide 8, you show WU.com principal growth is up 37%, new users up 14%. We can see the data on your app download is pretty strong over the past few quarters. So the digital results stood out to us and you're lapping the height of the pandemic last year. So it's good to see some continued expansion there.

So maybe, is there anything more you can share that stood out about right now as far as your ability to attract new customers, maybe about the growth you're seeing with your existing customers and whether there's any pockets where WU’s expanding geographically. Just hoping to get any further kind of granularity and so forth? And then maybe can you talk more about the opportunities that you're seeing in digital right now as you're looking ahead? Thanks very much.

Raj Agrawal

Yes. I mean that's – if you have a couple of hours later, Jeff, we have to talk to you, but we're very – let me just try to summarize, we're very excited about the digital opportunity. The growth rates are not really reflective of what the business is because we're growing off of a much larger base, whether you're talking about customers or revenue from last year and the 14% growth in MAUs is still very good on a much larger base, if you will. So very pleased with that. We do think that the digital business in total has a lot of great growth opportunities ahead of it. Obviously, we're doing a lot of things in WU.com, improving features and functionality, which drives better retention. We're also continuing to acquire more customers, and then we have a heavy focus on distribution. So more mobile funding, more mobile payout, more account funding, account payout in more geographies. We expanded Chile and Peru in the quarter. So that's on the WU.com.

Hikmet Ersek

And maybe you can also mention the app downloads...

Raj Agrawal

Yes. Yes. The app downloads, as we said in our press release and commentary is still number one with number one app download by far, according to Sensor Tower data. And then on the digital partnership side, we have a pipeline of partners that are coming. You'll see some more that are activated this year. And then we have – that's a long-term growth opportunity. Not all the partners on the digital side need to be like Saudi Telecom or Sberbank, which has really far exceeded our expectations.

But if we can get a partner to in every market in 200 countries, that becomes a really big opportunity for us, long-term. So we're very pleased, and we can certainly talk more offline, if you'd like, about just generally how we feel about the business.

Jeff Cantwell

Okay, great. Thank you.

Raj Agrawal

Sure.

Operator

Ladies and gentlemen, our final question today comes from Jamie Friedman with Susquehanna. Please go ahead.

Jamie Friedman

Hi, let me echo congratulations on the results and the transaction. If you were to map Slide 8 which Jeff was just referencing over to Slide 11, like the geographic footprint. What would that look like? What – are there any callouts or characteristics on that? Like what does the geographic footprint of WU.com specifically look like?

Hikmet Ersek

On WU.com, obviously, we are very much focused. We are having 75 countries, and we are very much focused on the send countries because by nature, WU.com is a central agents, right? We happen to own it and with us what we are doing. That's the 9 million customers sending money to the loved ones in 200 countries. Most of the transactions are dual happening in North America and in Europe, Europe Union and recently very strong growth also in the Gulf states with our WU.com transaction to sending from 75 countries. But recently we also saw that some receiving countries. Traditional receiving countries started to send money also certain customer segments with a higher band. There are different customer segments, really supporting like their children, cross-border or doing medical payments, doing really via westernunion.com. And this kind of transactions are really driving the growth of dot-com business. And region, maybe you want to add something...

Raj Agrawal

Yes. Let me see if I can also answer part of your question, Jamie. The heaviest concentration of the digital business from a geographic standpoint will be in North America, and Europe NCIS. The next two probably are Middle East and Asia Pacific, because we've seen some good concentration there. I would say the part of our business that is least leverage on digital is Latin America. And that's why you actually saw some significant growth rates in Latin America, because it was more heavily impacted negatively last year, because they didn't really have a digital business to mitigate some of the decline.

And this year, in the second quarter, you see the big pop upward because there's no digital business there really to speak of. And so the Chilean Peru launches for WU.com this year and this quarter are going to be important components as we keep building that digital business in Latin America. So there continues to be opportunity around the world to keep going from a geographic expansion standpoint.

Jamie Friedman

Got it. Thank you very much.

Raj Agrawal

Thank you.

Operator

And ladies and gentlemen, this concludes today's question-and-answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines. And have a wonderful day.