Good day and welcome to the Western Union Second Quarter 2022 Results Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Brad Windbigler, Head of Treasury and Investor Relations. Brad, please go ahead.

Thank you. On today’s call, we will discuss the company’s second quarter 2022 results, our updated financial outlook for 2022 and then we will take your questions. 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, Devin McGranahan; 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 2021 Form 10-K for additional information concerning factors that could cause actual results to differ materially from forward-looking statements. During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures on our website, westernunion.com under the Investor Relations section. We will also discuss certain adjusted metrics. 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, Devin McGranahan.

Thank you, Brad. Good afternoon, everyone. Thank you for joining us today to discuss our second quarter 2022 financial results, and a broader business update. Over six months into my tenure as CEO of Western Union, I am not only excited, but I am privileged to lead this great 171-year-old organization. Each day, I have now had enough time and experience in the seat to be able to fully scope the transformation required to reenergize broad-based growth. This transformation will likely take the better part of the next 18 to 24 months to drive the important changes like our new point of sale system or our new digital experiences across all of our channels, partners and markets. It requires us to move from a model focused on growing revenues through geographic expansion and price optimization independently across our retail and digital channels to one that focuses on growing customer counts and customer relationship value on an integrated basis across our channels and our geographies by providing a market-leading experience and a wider range of products and services. This means bringing together products, platforms, and people across geographies and partners. As I have previously indicated, I continue to believe that the company's brand recognition, global reach, large digital business, and our purpose-driven culture focused on improving the lives of our customers through broader financial inclusion, are true sources of competitive advantage and form a strong foundation to build upon. As we move towards this new model, we will be managing the business using a regionally based operating model, accelerating the development of better end-to-end customer experiences across both retail and digital products, moving to a more granular corridor-level marketing strategy, and using our pricing capabilities to maximize customer growth and customer lifetime value. These changes are doable, and in many cases are already underway. But it will take time to further enhance our platform experiences and product offerings and to drive all of this across our large and distributed business. The revenue growth we reported, while largely in line with expectations, is not in line with where I believe this company should be over the longer term. As you saw in our results, as well as in our revised outlook, we did a good job of managing expenses in the quarter and creating capacity quicker than we were able to reinvest in our future growth initiatives. We expect to be able to accelerate investment in the back half of the year as we look to launch new projects to put the company on a path towards a more sustainable growth profile. For the second quarter, we continue to experience year-over-year declines in transactions across our business. In particular, the slowing of our digital business is disappointing, with revenue declining 3% on a constant currency basis, including a 6% negative impact from our decision to suspend operations in Russia and Belarus. The majority of the underperformance in our branded digital revenues in the quarter came from three of our large European markets where we are working hard to improve our competitive position there. Our reported revenues in the quarter were $1.1 billion, which excluded contributions from Business Solutions, decreased 4% on a constant currency basis. This growth rate was negatively impacted by three percentage points by three percentage points by the suspension of operations in Russia and Belarus in March, and reflects the continuing softness in our retail business, as well as the aforementioned slowing of our digital business. Despite these challenges, our business continued to show its resilience by generating nearly $260 million of operating profits, excluding the impact from Business Solutions. Adjusted earnings per share was $0.51 in the quarter compared to $0.48 in the prior period. The increase in adjusted EPS was driven primarily by the lower share count, higher operating profits, and partially offset by a higher effective tax rate. As I noted previously, our digital business has been slowing since the second quarter of 2021, and in the near term, we are working to improve our customer acquisition funnel, the onboarding experience, and several other features that should impact retention by delivering a better customer experience at certain key touchpoints. Ultimately, we are focused on building a new, globally scalable customer acquisition model that can cost-effectively drive net new customers to our digital platform, which in turn will drive growth in revenues. I am very pleased to announce the addition of Bob Rupczynski to the team as our new Chief Marketing Officer. Bob joins us from PayPal, where he was the Global Head of Consumer and Network Marketing. Prior to PayPal, Bob worked for both McDonald's and Kraft Heinz. Bob brings a unique background with strong experience leading marketing teams with both large retail operations and digital platforms on a global basis. Over the past two quarters, we reallocated some of our digital marketing budget and resources from lower return regions and campaigns to North America, where we continue to believe we can successfully invest in cost-effective new customer acquisition. In the quarter, we also successfully relaunched new customer acquisition campaigns in important North American corridors, including first transaction free for new digital customers from the U.S. to Mexico, and a new customer segment pricing approach from the U.S. to Jamaica. While these kinds of marketing programs suppress near-term revenue, they are investments in our ability to drive future growth. Longer term, acquisition, retention, and customer experience improvements will be driven by the introduction of our next generation digital platforms. As we announced last quarter, we're in the process of rolling out an updated version of the Western Union Digital app with an improved user experience. We launched this update in Canada in Q1. We have also recently begun to introduce this new experience in Australia, and we plan to continue rolling it out across several of our major European markets, including France and the United Kingdom in the coming months. One of the biggest benefits of the new platform will be the consolidation of our 50-plus countries specific applications into four to six regional platforms, which will reduce operational complexity and allow for much faster deployment of product enhancements. Our wallet-based digital banking platform, which we launched in Germany and Romania in February of this year, continues to gain traction. We look forward to sharing the details on the 20,000-plus customers we now have on the platform at our investor day in October. The progress we have seen to date further strengthens our belief that a wallet-based experience in our major markets will improve the long-term potential of our business. To that end in Q3, we intend to integrate our current branded digital experience with this separate wallet-based digital banking offer in both Germany and Romania, allowing for multiple journeys seamlessly integrated into one easy-to-use app. We believe this approach with a single integrated experience will be the model for future rollouts across the globe. In retail, unfortunately, we continue to see year-over-year declines in transactions. Our retail business continues to be affected by macroeconomic headwinds, including inflation and slowing economic growth in many parts of the world. In particular, ongoing softness in Europe in certain parts of Asia have negatively impacted our results. To achieve sustainable growth for the company overall, we must stabilize our retail business. Our historic retail model was one driven by growth in agent locations and price optimization at the corridor or even the street corner level. Building on this market-leading network and strong pricing toolkit, we now need to prioritize delivering best-in-class customer and agent experience, location-level marketing and promotions, and corridor-by-corridor messaging and community building. Additionally, we aspire for our retail network to be an ongoing, on-ramp to cost-effectively deliver new customers into our digital ecosystem. As I have previously discussed, we continue development on our next generation point of sale system, and plan to unveil our new platform for testing in the market late this year. Our retail experience work today has focused on improving agent experience and enhancing transaction completion rates. We are now beginning to see small improvements, and in June, we saw a one-point uptick in conversion at our retail point of sale, or nearly 32,000 incremental transactions from our improvement efforts. Our goal for our next generation POS is to bring enhanced capabilities, including digital receipts, customer recognition across channels, ID scanning, optical character recognition, and a broad suite of pricing capabilities to our agents, beginning the rollout in the first half of 2023. Since our discussion on the last call, we have now entered the final phase of our strategy work. We envision being the branded market leader in delivering payments and accessible financial service products to migrants in their communities, helping our customers achieve better financial outcomes. We believe that across our existing markets, this broader definition of our target customer and an expanded portfolio of products and services will allow us to significantly grow our total addressable market and create fundamentally new opportunities to drive profitable growth. Our sizable existing customer base, our trusted brand, our strong compliance capabilities across a diverse set of markets, and our broad reach across both digital and retail position us for success. I look forward to sharing in greater detail in our investor day, which we will host in New York City in October. Previously, I have discussed elements of our updated strategy, including strengthening our core retail and digital customer experiences, improving the performance of our retail distribution network, and creating a one-of-a-kind retail to digital escalator, leveraging our unique scale across markets and channels. An equally important element of our updated strategy is to focus greater attention on our receiver base. In 2021, Western Union interacted with approximately 80 million receivers around the world. As I have seen in my recent travels, Latin America is a great example of the potential of our receiver base and an important growth market for Western Union. The Latin America and Caribbean region generates around $400 million in revenue annually for us, with very little of that coming from the receivers embedded in the Latin American market. According to the latest World Bank Migration and Development brief released in May, Latin America and the Caribbean will see $140 billion of inbound principal in 2022, up roughly 40% over the last two years. Western Union has a unique opportunity to begin to capture more of those payment flows through the development of card-based and digital receive products. We believe that activating this receiver base is a large, untapped opportunity that we can capture while also continuing to grow our core business in the region. Mexico is a great example of the growth opportunity for us, as it is home to over 125 million people where we have strong brand recognition, a growing population of digital-savvy customers, and where today, only approximately 10% of our total revenue in Mexico is generated from within the country. By offering our receivers, as well as a broader cohort of consumers who may be underserved in this marketplace, products like a multi-currency digital wallet, either a virtual or a physical debit card, and an integrated money transfer service, we have the opportunity to engage with millions of new potential customers in multiple ways. Over the last few calls, I've talked extensively about improving our retail experience and using our network to activate the retail to digital escalator, and in my travels through Brazil, I witnessed firsthand the power of controlled distribution for delivering on both of these ideas. In Brazil, of the roughly 1200 total locations we have, approximately 70 of them are Western Union exclusive experience centers. These stores, while only roughly 5% of our locations count in the country, represent over 50% of the country's retail revenue. We believe there is power in having the right stores in the right locations on a branded basis, where we can control the customer experience. We are now in the process of assessing the potential of more Western Union experience centers in other areas of our network with high population densities as a strategic asset to help drive customer awareness of our retail, digital, and omni-channel offerings. Across both our retail and digital channels, we see increased opportunities to capitalize on market demand for payout to account. As you know, our payout to account network operates in over 100 countries with over 5 billion enabled accounts. We see this as a strategic asset and a driver of future growth. Recently, we added two additional markets to our account payout network and can now deliver real-time direct-to-account in both Bolivia and the Dominican Republic. Our payout to account business in the quarter was roughly at a $300 million annual run rate and revenue, with over 70% of the principal being delivered to an account in real time. Before I turn it over to Raj to discuss our financial results and revised outlook in more detail, I would like to highlight that we continue to expand our presence in the Middle East, an important market for Western Union, with the addition of two key partnerships. First in the UAE, we are in the process of integrating our digital services with e& money. e& formally Etisalat Group is a global technology and investment conglomerate driven by the vision of digitally empowering societies. We are excited to partner with e& money by enabling a cashless experience that can make a difference. We will launch the service in the near future. Additionally, we have partnered with Banque Saudi Fransi, one of the leading banks in Saudi Arabia, to provide our digital money transfer services to their customers as well. Finally, please join me in welcoming Ben Adams to our team. Ben joined us in Q2 as our new Chief Legal Officer and Corporate Secretary coming to us from PayPal, where he spent the last seven years. Ben brings great experience leading legal teams supporting the development and delivery of market-leading technology platforms on a global basis. Thank you for your time, and I would now like to turn it over to Raj.

Thank you, Devin and good afternoon everyone. Today I will discuss our second quarter results and our revised 2022 financial outlook. For the second quarter, revenue of $1.1 billion was down 12% on a reported basis or 4% constant currency excluding the contributions from Business Solutions. The suspension of our operations in Russia and Belarus, which occurred late in the first quarter, impacted revenues by 3.3%. Currency translation net of the impact from hedges reduced second quarter revenues by approximately $42 million compared to the prior year period. In the C2C segment, revenue decreased 9% on a reported basis or 6% constant currency and transaction declined 13%. The suspension of operations in Russia and Belarus impacted revenues by 3% and transactions by 8%. Excluding Russia and Belarus, C2C transactions were down compared to the prior year period due to softness across channels. Total C2C cross-border principle declined 12% on a reported basis or 9% constant currency due to softness across channels. The suspension of our operations in Russia and Belarus impacted cross-border principle by 6%. Digital money transfer revenue, which includes our branded digital product and digital white label partnerships, was down 6% on a reported basis or 3% constant currency largely driven by the suspension of our operations in Russia and Belarus, which impacted revenues by 6%. Moving to regional results, in the second quarter, North America revenue decreased 2% on both a reported and constant currency basis on transaction declines of 6%. Softness and retail money transfer was partially offset by revenue growth in the digital business. The U.S. domestic business continued to be a drag on results, representing 4% of consumer revenues in the quarter, while U.S. outbound to Russia reduced revenues by 1%. On a positive note, our partnership with Walmart continues to ramp nicely. Revenue in the Europe and CIS region was down 21% on a reported basis or 16% constant currency, or on transaction declines of 30%. The suspension of operations in Russia and Belarus, including our digital white label partnership, substantially impacted results in the quarter, reducing reported revenue by 6%, constant currency revenue by 7%, and transactions by 22%. The digital white label business in Russia had a much lower revenue per transaction than our corporate average due to our role as a processor. Excluding the impact from Russia and Belarus, the region experienced softness across channels. At a country level, France, Germany, and the U.K. experience weaker revenue trends. Additionally, two key retail agents in the region are discontinuing their retail relationship and moving their customers to our kiosk and digital offering, which will impact the revenue generated from these agents, some of which will start in the fourth quarter of this year. I will discuss the expected impact in more detail as we go through our revised outlook for 2022. Revenue in the Middle East, Africa, and South Asia region declined 4% on a reported basis or 3% constant currency, while transactions decreased 3%. Softness in retail and digital white label were partially offset by growth in our branded digital business. Revenue growth in the Latin America and Caribbean region was up 2% or 4% constant currency on transaction growth of 4% as the region has started to return to a more normalized growth profile, post COVID-19. Revenue growth in the region was driven by strength in Colombia, Nicaragua, and Venezuela. Revenue in the APAC region declined 10% on a reported basis or 6%, constant currency, while transactions declined 11%. Softness in the region was largely due to COVID-related impacts in key send markets like Japan and Australia. The spread between revenue and transaction declines were largely driven by the Philippines domestic business. As previously announced, we completed the first closing of the Business Solutions sale, receiving full proceeds of more than $900 million. The second closing is expected to be completed in the fourth quarter, subject to regulatory approvals. The gain is also expected to be recognized in the fourth quarter related to the transferring of the European business at the second closing. Other revenues, which primarily consist of retail bill payments in Argentina and the United States and retail money orders in the U.S., represented 7% of total company revenues and increased 19% on a reported basis compared to the prior year period. The increase was driven by higher revenue from our Pago Fácil bill payments business and our business-to-consumer payments business. Turning to margins and profitability. The consolidated GAAP operating margin in the quarter was 23.2% compared to 19.8% in the prior year period. Adjusted operating margin, which excludes contributions from Business Solutions and exit costs related to Russia and Belarus in the current period and divestiture and acquisition costs in both periods, was 23.3% in the quarter, compared to 20.2% in the prior year. The prior year margin was negatively impacted by 60 basis points from Business Solutions. The increase in adjusted operating margin was primarily due to changes in foreign currency, lower compensation-related expenses, and product mix. Moving to segment margins, C2C operating margin was 22% compared to 20.7% in the prior year period. The increase was driven by changes in foreign currency, lower compensation-related expenses, and channel mix. Other operating margin was 40.1% compared to 16.2% in the prior year period, primarily due to increased revenue, a decrease in divestiture and acquisition costs, and the reimbursement of expenses associated with transition services provided after the first closing of the sale of Business Solutions. The GAAP effective tax rate in the quarter was 17.9%, compared to 14.5% in the prior year period, while the adjusted effective tax rate in the quarter was 16.9% compared to 14.2% in the prior year period. The increase in the GAAP effective tax rate was primarily due to the sale of Business Solutions and our decision to suspend operations in Russia and Belarus. The increase in the adjusted effective tax rate was primarily due to an increase in the proportion of higher taxed earnings and the effects of changes in U.S. tax rules. GAAP EPS was $0.50 in the quarter compared to $0.54 in the prior year period, while adjusted EPS was $0.51 in the quarter compared to $0.48 in the prior year period. The decreasing GAAP EPS reflects the gain on investment sale recognized in the prior year period. While the increase in adjusted EPS is primarily driven by lower share count, and higher operating profit margin partially offset by a higher effective tax rate. Operations in Russia and Belarus contributed approximately $0.05 to EPS in the prior year period. Turning to our cash flow and balance sheet, year-to-date, we generated $307 million of operating cash flow, which includes a transition tax payment of $64 million paid in the second quarter. As previously disclosed, these transition tax payments resulted from the 2017 U.S. Tax Act and stop after 2025. Year-to-date, we returned over $353 million to shareholders through a combination of dividends and share repurchases, continuing our strong track record of capital return. Capital expenditures were approximately $84 million year-to-date. At the end of the quarter, we had cash and cash equivalents of $1.2 billion and debt of $2.7 billion. Moving to our outlook. Today, we provided an updated 2022 full-year financial outlook reflecting the current trends in the business, the transition of a key retail agent relationship in Europe and CIS that will take effect in the fourth quarter and a change in our investment assumptions in the back half of the year. The GAAP revenue outlook was also adjusted to reflect changes in exchange rates. Two key agents in Europe and CIS have chosen to leave the retail category. The first retail agent departure will take effect in the fourth quarter of 2022, and the second will take effect in the second quarter of 2023. We expect a revenue impact of around one percentage point to total fourth quarter revenues and a potential impact of approximately two percentage points for full year 2023, assuming a reasonable level of migration of these customers to other channels. The revised outlook assumes that macroeconomic conditions will continue to soften as the year progresses in line with prevailing economic forecasts. Debt figures reflect an expected partial year of Business Solutions ownership including contractual payments to buyers, representing profits between the first and second closings, associated divestiture and acquisition costs, exit costs and an estimated pretax gain of approximately $270 million for the full year, of which $151 million has been recognized year-to-date, with the remainder to occur in the fourth quarter subject to regulatory and working capital adjustments. We also expect to incur divestiture costs during the remainder of 2022 as we continue to separate Business Solutions. Adjusted revenue growth and operating margin exclude contributions from Business Solutions. In addition, adjusted metrics for operating margin, the effective tax rate and EPS exclude certain items. Please refer to our press release for a full reconciliation between GAAP and adjusted metrics. We now expect GAAP revenue to decline in a range of approximately 11% to 13%, compared to a range of roughly 9% to 11% previously expected in our April 28 outlook. The changes reflect the continuation of existing business trends, the transition of a retail agent relationship, a stronger U.S. dollar and updated macroeconomic assumptions. Embedded in our GAAP revenue outlook, we now expect Business Solutions to generate approximately $170 million in revenue this year. For adjusted constant currency revenue, we now expect a mid-single digit decline compared to our previous expectation of a low single digit decline. The change reflects continuation of existing business trends, the transition of a retail agent relationship and updated macroeconomic assumptions. Our GAAP and adjusted operating profit margin are now expected to be in a range of 20% to 21% compared to our previous outlook of approximately 20%. The increase in our outlook primarily reflects prudent management of expenses in the second quarter and the pace of investment anticipated for the remainder of the year. We now expect the GAAP effective tax rate to be approximately 20%, down from our previous outlook of 21%, primarily due to a reduction in our estimate of foreign taxes to be paid in connection with the sale of Business Solutions. We continue to expect the adjusted effective tax rate to be in a mid-teens range. The GAAP EPS outlook was revised to a range of $2.18 to $2.28 from a previous range of $2.13 to $2.23. Adjusted EPS for 2022 is expected to be in a range of $1.75 to $1.85 which is unchanged from our previous outlook. Thank you for joining our call today. And operator, we are now ready to take questions.

Our first question comes from Ken Suchoski from Autonomous Research. Please ask your question.

Hey, good afternoon, everyone. Thanks for taking the question. You call out the two key retail partners rolling off over the next 12 months; can you just elaborate on that a bit? What drove their decision to leave the platform? And I guess what can you do differently moving forward, if anything, to ensure that the key partners stay with the company?

Ken, it's Devin, thanks for the question. As you know, in particular parts of the world and in particular, in Europe, there is a secular shift towards moving away from cash. Both of these agents are retaining their relationship with Western Union. We are going to support them on a digital basis in one case, and as Raj indicated on a digital and kiosk basis in another. Both have taken the decision to eliminate the retail cash-oriented part of their business and with it retail cash-oriented cross-border remittances. We believe that as we, and I, as I have said, focus on getting the right agent partners with the right distribution in the right locations. This will not be an ongoing headwind. Raj, I don't know if you want to add anything.

I think you've hit the main points here, Devin.

Alright, great. And then I just from my follow up, I think you mentioned that you created some capacity a little bit quicker. I think on the expense side and that you expect to accelerate investment in the back half of the year, can you just talk about how much of this reinvestment continues into 2023? And are we going to see some catch up in it? Looks like the SG&A expense line came in better in the back half of the year or the first half of next year.

Ken, we're very comfortable with our 20 to 21 margin guidance like that we're pleased to have been able to bring that up. And as you know, the timing in our businesses we've gone from quarter to quarter is timing of expenses, an important element of our margin in any given quarter. I've talked extensively about the need to reinvent our retail point of sale and invest in our digital experiences. We're going to take advantage of the back half of this year to accelerate some of those types of investments. And we'll look forward to updating you on plans for 2023 when we have our investor day.

And Ken you know that our margins vary from quarter to quarter, depending on the revenue growth and the level of spending. And so that's going to be the case again in the back half of this year. And I wouldn't read anything into that, with respect to next year. Next year will be about what level of revenue growth, the level of investment we're doing, and a number of other factors. So, I think it just speaks to the power of our business model where even though we're in a lower revenue environment, we're able to optimize our investments and spending and create this capacity for continued investment in the business to drive that growth.

And Ken, you heard me on the previous two calls. Talk about honing our operating model and finding room within our $3 billion expense base, the organization has reacted very well to that. And in my comments, I noted probably quicker than Raj and I had thought, and so I think this is a good sign.

It's very helpful. Thank you, Devin. Thanks, Raj.

Thank you Ken.

Our next question comes to us from Darrin Peller from Wolfe Research. Please ask your question.

Hey, thanks, guys. Can we just touch on the digital transaction growth rates and the opportunities that you see ahead of you in terms of really investing in that business and the payback from those investments? Obviously, the trend has been decelerating. Even I think excluding Russia, you said it was what 3% revenue growth. So just touch on the path for that now going forward and what you foresee being able to do to really help accelerate that business back to what we think should be a double-digit story long term.

Darrin, I think we do want to disaggregate that. As you said, I think when you take out the fact of our exit from Russia and Belarus. And then when you also look under the covers, you see the impact of our U.S. domestic money transfer business is a significant drag as well. As we've talked about previously, that is a business that with the advent of wallet-based P2P in the U.S. is largely going away. You get another negative two points embedded from the U.S. domestic DMT business. So if we're working off that base, we see opportunities and you heard in my prepared comments, to be able to redirect marketing spend to the highest return places and North America certainly is at the top of that list. We believe with targeted marketing, focused and you heard in my comments, and prioritize new customer acquisition programs, we can re-accelerate net new customer growth, which will then return the business to strong revenue growth.

Yes, and I'll just add to that, I'll do the math for you, Darrin. If you adjust for those two things, you get to mid-single digit type of outcome for digital. That's not where we want the business to be. We really do believe that the business can get back to the levels of growth that it has had historically. But it's going to take us some time to do some of the things that Devin talked about in his commentary. So we continue to feel very good about the digital part of the market, it's going to be the growth driver for the space that we're in. And we're very well positioned there.

Okay, that's helpful. I mean, maybe just a quick follow up would be on timing that you'd expect to see some of the trade off on the investments there to help us get back to some element of acceleration on the digital front. And then Devin, you talked in the past about omni-channel and the way to look at your customer base, more predominant omni-channel lens or do you think that the value is not just digital and not just retail, but really a combination. So I'm curious if you're seeing any evidence of that further as you invest in your business. What that can mean for you guys, both from an investment and a growth rate standpoint?

We clearly see and you heard the idea that we have unique scale in both retail and digital. The customers that we can attract that value both at retail and digital experience are both higher value customers from a revenue standpoint, but they're also more loyal customers from a retention standpoint. Going forward, part of that redirecting of our marketing spend is on our own customer base and on beginning to activate that retail to digital escalator so we can try to create more of those omni-channel customers than just happened organically in the past. We see that both as a cost-effective driver for new customer digital acquisition from our own retail base, and are going to invest both in products. As one of the things I talked about being able to do cross-channel customer recognition and loyalty programs so that those customers who are inclined to be omni-channel find the experience with Western Union to be unparalleled.

Thanks guys.

Thanks, Darrin.

Our next question comes to us from Tim Chiodo from Credit Suisse. Please ask your question.

Great, thanks a lot. When you were talking about the macro impacts, and you were talking about the forecast, sort of going with what the prevailing economic forecasts are for softening in the second half. But you also mentioned in terms of the resilience and the recession resistance, if you will of the remittance market historically, but also called out that there are pockets of your customers that might be more impacted, but also implying that there are pockets that might not be maybe you could just expand upon the various aspects of your underlying customer set that might be more or less impacted by a recessionary scenario.

Tim, it's a great question. And it's one that we as a management team are spending a lot of time on. As the remittance business has traditionally been impacted most by changes in GDP growth rates between send and receive, or changes in employment between send and receive. Inflation, at this scale globally is a relatively new phenomenon for us. And so we're studying closely the effects. And it's different in different parts of the world, as you indicated. We're obviously seeing a negative headwind in Europe, both from inflation, but other geopolitical and macroeconomic effects. But at the same time, the strength of the U.S. dollar is helping U.S. outbound to many places in the world, including to Latin America. We continue to look at it closely. We don't see much in the way of change in principal so far. While we would expect over time inflation will drive up principal balances. It's something we're keeping an eye on.

Right. Thank you for that.

Thanks, Tim.

Our next question comes to us from Rayna Kumar from UBS. Please ask your question.

Hi, Devin and Raj, thanks for taking my question. I just want to better understand the differential between your C2C transaction growth and revenue drop of 13% and revenue drop of 6%. That's a 7% differential, is that a component of pricing or mix?

The closure of Russia and Belarus had an eight percentage point impact on transactions and about a three percentage point effect on revenue growth, which contributed to the declines we observed in the C2C segment. Thus, the overall impact is clearer now. Additionally, there will always be some mix-related effects in the business, which are common. We continuously adjust pricing, so there might be some net impact from those actions. However, the key takeaway is primarily about the closure of Russia and Belarus.

Got it. Okay. And then, Devin, you spoke about 70, Western Union exclusive experience stores. And I thought that was a very interesting concept, is that largely a U.S. strategy? And please just give us a better idea of timing and key milestones to watch out for with that initiative. Thank you.

Rayna, we're very excited about the idea of an, as you know, I'm very excited about the strength of our brand. So branded experience centers I think will be an important part of our go-forward distribution strategy. So we're looking at it, and in fact, have launched a few pilot locations in certain parts of Europe, to understand both where in the network it can have an impact, and the kinds of partners that we can work with to build those kinds of locations. And so the combination of the right partners willing to create the branded experience center and our ability to put them in the right locations will dictate the role that they play in our go-forward network. But as evidenced by my commentary on Brazil, if done well, they can be powerful.

Our next question comes to us from Ramsey El-Assal from Barclays. Please ask your question.

Hi, thanks for taking my question this evening. I wanted to follow up on Rayna’s question and ask about this concept of a retail to digital escalator that you mentioned that I know the branded experience centers is that was sort of one tool that you mentioned. But can you elaborate more on that concept of an escalator? What levers technology and or cross-sell strategies you might be able to deploy to kind of accelerate that migration?

Certainly, and Ramsey, as we talked about on the prior call, as part of our strategy development work, the team has uncovered this customer segment that we have affectionately referred to as hoppers, which we have about 1.5 million of those customers transact with us across both retail and digital channels and have a nearly two times revenue generation profile as either a pure digital customer or a pure retail customer. So we are looking for ways to grow that customer segment. And we are looking for ways, as I have talked about, to accelerate our ability to generate customers for our digital business. Many of our retail customers around the world are becoming more digitally inclined. And as we further develop our power to account and as we focus on receivers, as part of our strategy, this idea of being able to migrate customers across our channels, given our unique breadth across both retail and digital is a very strong intrinsic capability for us. So we will talk more about it when we get to investor day. But it is an important concept for our go-forward strategy.

Great, thanks so much.

Our next question comes to us from David Togut from Evercore Partners. Please ask your question.

Thanks so much and good afternoon.

Hi, David.

Yes, thank you. Could you gauge for us what your second half revenue growth expectations are for the digital solutions business? In other words, what's embedded in your new constant currency mid-single digit revenue growth decline specifically for digital?

Yes, I think David we haven't given us specific outlets for digital, like digital was down in this quarter. And I think you're going to see more of the same if you include all the impacts of Russia and those kinds of things. If you sort of take out the impact of Russia, Belarus, and you take out the impact of the domestic business, it was sort of mid-single digits in the second quarter, as we talked about earlier in the call. And, I'm not necessarily giving you a forecast for the rest of the year. But we've taken into account what we think is going to happen within the digital business, as well as in retail and our overall outlook. And as we had mentioned, we saw some specific softness in the European markets. With respect to our digital business, some of it is macro-related; some of it is competitive in nature. So we're just working through those things. But, we're very prudent with our outlook with mid-single digit decline, given the macro backdrop that we have, and some of the current trends that we now see in the business. And that's really what's reflected there.

Understood, appreciate that. And just as a quick follow up, bridging to the earlier question on expense management, to what extent is this greater expense control sustainable into 2023? In other words, if we're trying to model out your adjusted EPS outlook to next year, should we assume that you're able to hold this very disciplined level of expense control? Or should we assume that some of it kind of moves back into the cost structure, especially wage expense, where we're in an inflationary environment so most companies are actually seeing some upward wage pressure?

Yes, I don't think we're going to be different from other companies with respect to wages. But what I would just say is that and from an expense management standpoint, we can do a lot of things in the short term. But we want to also invest in the business for the long-term health of the business, and it's all about getting to the right level of growth. You're going to see us put a lot more money back into the business, whether it's in technology or marketing, or in some of the digital platforms that we talked about in the second half of this year. That is not necessarily a run rate for next year. But it just gives you a sense of, each quarter, and each year might be a little bit different. Next year is going to ultimately be about how much revenue growth are we getting and what flexibility do we have to invest in the business. Our goal is to keep investing not necessarily to keep taking costs out. But we look, the expense management that we had in the first quarter just gives you a sense of the power that we have in our business model to do things in the short term. But we do want to keep investing for the long term.

Thank you very much.

Our next question comes to us from Vasu Govil from KBW. Please ask your question.

Hi, thanks for taking my question. Devin, you mentioned in your prepared remarks that the company's growth isn't where you'd like it to be. So, I want to ask what you believe is the appropriate long-term growth level for the initiatives you're proposing. Could you provide some high-level insights today?

Vasu, it's a great question. And I look forward to spending time in detail at our investor day outlining our longer-term or medium-term outlook for the growth of the business. Realistically, as we go through the next 12 to 24 months, as you heard from Raj, we're combating secular headwinds and some agent departures that we are going to mitigate the best that we can. And we need to figure out how to re-accelerate the digital growth. And I've talked about focusing more on acquiring customers and growing our net customer count numbers, which will ultimately drive revenue growth, but in the near term, we are focused on re-energizing our ability to acquire new digital customers and new omni-channel customers to the franchise.

Thank you. And I guess for my follow up, I just wanted to ask for an update on capital allocation. In the past, you've sort of shown a preference for doing M&A to double down on sort of the cross-border assets you guys are building. Any more color you can offer us on the size and scope of deals you may be looking at? What geographies are focused on or like if it's the focus shifting more to buybacks, which given the macro environment we're in.

We look forward to continuing to have a disciplined capital allocation strategy, as we've historically done, and continue under the seven months that I've been here. To your point, though, the market environment has become a lot more attractive for companies like ours who focus both on growth and profitability. And so we are actively looking at and evaluating how we can do tuck-in acquisitions, acquire capabilities in either markets or product areas that could help accelerate our growth, under the pretext that we will remain a very disciplined capital allocator.

Our next question comes to us from Jason Kupferberg from Bank of America. Please ask your question.

Thank you. I just wanted to circle back on some of the pockets of weakness in the European Digital Business. I think you mentioned France, Germany and U.K. So wanted to understand what sort of remediation efforts are being employed there? And do you expect those regions to improve in the second half versus the second quarter? Thanks.

Thanks, Jason. There are a couple of factors at work happening in Europe, obviously, the aforementioned macroeconomic and inflationary environment, as well as just a reduction in the mobility of migrants, particularly from places like Romania, which have been very strong for us. The second is some significant competition and important corridors for us from certain of those countries into Africa, particularly in the digital realm with what I'll call corridor-specific digital competitors that we're dealing with. And we're spending a lot of time looking at it, as European payment regulations have changed, being able to ensure that we have the best, what I will call top-of-funnel to bottom-of-funnel conversion rates across all types of possible input or pay-in options, which creates an opportunity for us, given our existing funnel if we can improve on those metrics. Raj?

I think you answered it, Devin. Our goal, again, the broader picture is that we want to continue to drive significant growth and expansion in the digital part of our business. And that is really the objective longer term, whether it's Europe, any other or any other part of our business. So just like Devin said, we were very focused on doing that, whether it's in the second half or longer term.

And how are you planning to go about tapping into the receiver base and regions like Latam and is that mostly accomplished with marketing dollars, or…

I think it's a combination in many of these, let's use Latam markets that are strong receiver bases for us. We have a population of people who get cash from us every day. So it's a combination of marketing, but it's also really bringing forward to products and services that can capture those inflow dollars. So whether they be virtual prepaid cards, whether they be digital wallets, whether they be partnerships with others, that allow us to participate in the use of the proceeds from the remittance, not so much just send the remittance. The other thing that's important for us and for our business, overall, is to remember, pretty much every sender started out in a receiver country. And so strong brand preference by investing in our receiver markets will help our send business as well.

I mean, one great example is the Germany, Romania, digital banking that we have launched, right. We have, as you heard, 20,000 customers, a lot of them are in Germany, but a lot of them are also in Romania. And that's a way of energizing the receiver base in many different countries around the world to get them the money, but then let them cycle and do things within our ecosystem. That's a great example of what we're talking about.

Thank you.

Our next question comes to us from James Faucette from Morgan Stanley. Please ask your question.

Hi, good afternoon. Thanks for all the color. I'm going to go back quickly on the OpEx and obviously, you're demonstrating control, right now. And you've talked about reinvestment. But when you look at the competitive landscape, and particularly kind of how you're assessing where you're at in digital versus where you want to be, I guess, how are you trying to balance that out? And particularly when we start to think about implications for capital return, etcetera? And I'm just wondering if we shouldn't be expecting more of an incremental step up maybe then, then what some of us have modeled at least?

Yes, let me start with that. I think it's pretty clear, James that we're investing a lot more in the second half of the year. That's how we get to our 20% to 21% margin outlook. All right, so I think you got to really think about what we're messaging here, we do want to invest in the business. We're not stepping away from it. Our main message is that we've created a bunch of capacity in the first half of the year, given how the quarters have played out. But we fully expect to deploy that capacity back in the second half of the year. With respect to capital return, we've already bought back more in the first half of this year than we did in the first half of last year. And then dividends continue to be a significant use of our operating cash flow. So capital return is not really taking a backseat that continues to be there. But look, we'll have a lot more to say at our investor day about all these components. And more to come there.

And James, I think we've been pretty transparent and will continue to be so we feel good about the 20 to 21. So that can go in the model. And as we go forward, as Raj said, this is something that we will continue to be transparent about in terms of where we see growth rates, our expectations on being able to manage expense, our desire to invest, and therefore what we expect both from an income statement operating margin perspective, but also from a capital return to shareholders perspective.

Got it. And, and I appreciate that, and I understand, wanting to put together the messaging, etcetera for analysts a little bit later. How are you feeling, though about like your strategic planning and evaluation of the market? And what you'd like to do and what the costs are? I mean, do you feel like you've got that completely? Where you want it to be from a planning perspective? Or is there still more evaluative work to be done?

As I commented, we are in the final phase of the process that I launched in February to re-evaluate the overall strategy for the company to assess what markets and opportunities we have to drive growth. And then what is the platform and capabilities required to capture that. We're going to wrap that work up here in the next month or so. And it will be the foundation and basis for what we talked about in October when we're together with the investment community.

I’m well, Raj, how are you.

Good.

Just on the digital business, Devin, as you look at the digital business, is it that the competition has changed? Or is it that you feel as though Western Union maybe didn't execute on things they could have to grow the business. I'm just wondering what the dynamics are in the business, and how much is in Western Union’s control and maybe how much is not?

I believe that there is a lot in our control. As we continue to refine both the product experience and our marketing approach, we have the ability and will return the business to growth. As it's an exceptionally dynamic market, competitors continue to invest in their experiences, and in some cases continue to make uneconomic decisions on customer acquisition. We remain disciplined and believe that through allocation of our marketing expense to those high-impact areas and through refining our experience, from top-of-funnel to bottom-of-funnel, we can drive growth in customers, which will drive growth in transactions and revenue.

As a follow up, looking at the retail business, Devin do you believe this is a business that it can grow, even if it's low single digits versus a business that there's more now flat because of all the changing dynamics in the world that are happening?

Great question. I believe we can certainly achieve a stable retail business, recently looking at some work with the teams on our distribution strategy on the West Coast. And we have a very strong presence in those markets from the U.S. to Latin America and the Caribbean. It's been a historic strength of the company. But when you also look at it in some of those same neighborhoods, there are other migrant communities that were not serving as well with that physical distribution. And so I think as you see us, you heard in my comments, focusing on specific corridors and specific migrant communities, we can get more leverage out of our retail network than we have, which should help stabilize it.

Thank you very much. I really appreciate it.

And Operator, we'll leave it there. Thank you everyone for joining.

Thank you for joining today’s second quarter 2022 earnings call. We hope you have a great day.