Western Union (WU) Q1 2021 Earnings Call Transcript

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Western Union (WU 0.70%)
Q1 2021 Earnings Call
May 4, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

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

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

Brendan James Metrano -- Vice President of Investor Relations

Thank you. On today's call, we will discuss the company's first quarter 2021 results, our financial outlook for 2021, and then we'll take 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; our CFO, Raj Agrawal; and Head of Treasury and Investor Relations, Brad Windbigler.

Today's call is being recorded, and our comments include forward-looking statements. Please refer to the cautionary language in the earnings release and in Western Union's filings with the Securities and Exchange Commission, including the 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 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 maybe similar to types of expenses that the company has previously occurred and can reasonably expect to occur 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 -- Chief Executive Officer and Director

Thank you, Brandon, and thank you all for joining us this afternoon. As noted in today's press release, our business is off to a good start in what we believe it's a very important year for Western Union. We weathered COVID-19 better than many companies in 2020, owing to our resilient fundamentals and the foresight behind our leading digital business that had us ready for accelerated demand for digital services.

Before I give you an update about the encouraging first quarter results and share my thoughts about the rest of the year, I would like to take a moment and mention that although we do see some modest economic improvement and there are signs of some COVID-19 recovery like in the US, parts of Europe and parts of Asia Pacific due to progress with vaccinations, at the same time, I am saddened by the hard breaking current situation in countries like India, Brazil and many others.

Our thoughts are with all of the people who are currently navigating this challenging situation. The recent outbreaks in many countries show us that as a global community, we still have work to do in the fight against the virus. However, at the same time, I am hopeful and I know that all my colleagues and all our partners in more than 200 countries, we will do their best to recover from the virus as soon as possible.

Back to our business. The conditions were fairly stable in the first quarter.

I am pleased that trends for our business improved over the quarter and held up well in April, giving us confidence to push forward with an ambitious agenda and reaffirm 2021 financial targets on an adjusted basis. Raj will discuss our outlook in more detail in a few minutes.

With that, let's review business highlights for the quarter. Starting with the big picture, our cross-border consumer-to-consumer or C2C business grew principal 28%, which was the highest quarterly growth in years and the third consecutive quarter with growth over 20%. This really shows the momentum we are seeing today, especially when compared to forecast from third parties projecting modest growth or even declines in principals for 2021.

Total company revenue grew 2% on a constant currency basis, around a 300 basis points increase from declines in the third and fourth quarter of last year. C2C revenues and transactions grew 4% and 9%, respectively, and both digital and retail revenue trends improved sequentially.

Digital performed exceptionally well again. Revenues were up from the fourth quarter and grew 45% year-over-year to over $240 million, putting us on target to exceed $1 billion in 2021. Digital comprised 34% of transactions and 23% of revenues for the C2C segment and was a key source of new customers and incremental profit.

Wu.com delivered impressive results and shows the potential we see as a foundation for a consumer ecosystem. This is the fourth consecutive quarter of transaction growth of 50% or more and average monthly active users growth of over 40%. Wu.com led money transfer peers in mobile app downloads by a wide margin and grew principal 78% off of an already large base, which we believe is well ahead of the market.

Our customer engagement efforts also appear to be paying off with favorable trends in retention, transaction per customer and principal per customer. Digital partnerships revenue more than doubled year-over-year, and it has exceeded our expectation over the past 18 months since we announced it in late 2019. We continue to have more encouraging developments in the pipeline.

Retail trends improved sequentially from the fourth quarter to the first quarter, despite the effects of additional rates of COVID-19. While the business is not back to pre-pandemic levels yet, it has demonstrated resilience and we expect continued improvement to the rest of the year, assuming the pandemic and global economy doesn't worsen.

Our business solution trends also improved. We made progress on key initiatives, including launching our payment solutions in Spain and implementing technology upgrades that will allow us to add differentiated solutions and capabilities. We are optimistic that the business will continue to rebound over the course of the year.

Shifting to an update on operating and strategic objectives during this quarter. Starting with wu.com, we continue to invest in consumer acquisition and marketing, which drove 46% growth in average monthly active users for the first quarter. On the branding side, we launched one of our highest-rated television campaigns in recent years, send more than money, which future wu.com. We also made progress on a number of product initiatives to improve our customer experience, faster registration, better web page performance and enhanced visibility into transaction status. We achieved an important platform milestone by completing a major phase of our multiyear settlement transformation project. We also advanced a number of initiatives that will make us more nimble and efficient like cloud migration and adding artificial intelligence and machine learning into processes to reduce project run times and enhance analytics.

Moving on to our global network. The team has done a great job optimizing commission costs while still enhancing the quality of our global payments distribution capabilities. During the quarter, we renewed agreements with 34 existing agents and added 41 new agents with favorable terms. Over 50% of our global account payout transaction volume was delivered real time. Our launch with Walmart is off to a good start, and we look forward to getting all 4,700 US locations up and running in the second quarter.

To wrap up the first quarter discussion, despite ongoing challenges from the pandemic, we are off to an encouraging start with financial and operating performance on course with our expectations for 2021. Given the strong customer trends, we have seen over the last year in our C2C business, including almost 9 million wu.com annual active users in 2020, the agenda for the rest of 2021 is largely centered around enhancing the customer experience. Convenience, reliability and speed are fundamental for a good customer experience in payments, which makes a high-quality network important.

On the digital side, we can reach billions of accounts today, but we are expanding access to even more accounts with new partnerships. Speed is increasingly valued by customers, and we already have one of the broadest real-time cross-border payment networks in the industry. So the focus this year is making it more robust by adding additional direct third-party relationships and multiple partners in markets. Our retail distribution will continue to benefit from ongoing agent optimization, upgrading the caliber of agents and filling in gaps in distribution.

Platform initiatives for 2021 include upgrading and modernizing technology, incorporating cutting-edge solutions and bolstering our executive talent. This will enhance customer experience in a number of ways, such as better processing speed and enabling more innovation. Ultimately, we are working toward building a best-in-class tax stack that can support the range of cross-border use cases, including C2C, C2B, B2C and B2B and serve as a foundation for ecosystems.

I'm really excited about the slate of product initiatives this year that can be impactful for customer experience. A few examples include improving the functionality of our mobile app advancing dynamic pricing, revamping our customer loyalty program and the pilot in Europe with our Western Union International Bank later this year, extending our offerings to a wider set of financial services. Given the customer-centric agenda we have for 2021, I think it makes sense to discuss why we are so optimistic about the long-term prospects of serving our core customer segment, the global migrant community.

Let me start by saying, we are extremely proud and privileged to serve the global migrant community and we are honored that they trust Western Union with one of the most important financial aspects of their lives, supporting loved ones in home countries.

As highlighted in our ESG reports for 2018, 2019 and our 2020 report coming in June, we are proud of the contribution our business mix around the world by promoting economic growth and prosperity for the people we serve. Our purpose underpins our market position and strategy, and we believe our business offers strong potential value creation for all stakeholders.

First, the migrant and their loved ones is a large customer segment for Western Union. According to the United Nations, there are more than 270 million migrant residents globally and many of them send remittances. Factoring in remittance, recipients in home country, who also use our services and desire more options for financial services could more than double the potential customer base to over 0.5 billion people.

Second, migrants are a growing, hardworking and upwardly mobile group. They are expected to drive a significant share of future population growth in higher-income countries and have above-average labor participation rates, higher rates of entrepreneurship and contribute significantly to innovation.

The third and final point, migrants have significant spending power. According to our 2019 new American economy study, migrants represented $1.3 trillion of spending power in the US alone. And obviously, globally, this amount is even higher.

To summarize, we believe migrants and their families and loved ones are special group of people that have an important role in societies and economies around the world. Serving our customers' needs is a good business that offers Western Union organic growth and opportunity to expand into new services.

On top of this, in cross-border expertise and capabilities we gain through serving our core customer segments enables us to offer our cross-border platform for financial institutions and other third parties, extending our market opportunity beyond our own Western Union consumer services.

In closing, I'm pleased with the direction of our business. Based on what we see internally and in the market, we are confident in the strategy and plan for the year, and we are off to a good start. With that, I'll turn the call over to Raj.

Rajesh K. Agrawal -- Chief Financial Officer

Thank you, Hikmet, and good afternoon, everyone. Please note that my comments on growth refer to first quarter results compared to the prior year period, unless otherwise noted.

Moving to first quarter results. Revenue of $1.2 billion increased 2% on both a reported and constant currency basis. Currency translation net of the impact from hedges had a limited impact on first quarter revenues.

In the C2C segment, revenue increased 4% on a reported basis or 2% constant currency with transaction growth partially offset by mix. B2C transactions grew 9% for the quarter, led by 77% transaction growth in digital money transfer. Retail money transfer transactions were down in the quarter, but the business continued to move in the right direction with trends improving sequentially from the fourth quarter. The mix impact from the high growth of digital white label partnerships and account-to-account digital transactions both lower revenue per transaction or RPT, continued to contribute to a spread between C2C transaction and revenue growth in the quarter. We do expect this gap to moderate over the next three quarters.

Total C2C cross-border principal increased 28% on a reported basis or 26% constant currency, driven by growth in digital money transfer and retail. Total C2C principal per transaction or PPT was up 15% or 12% constant currency led by retail and wu.com. Evolving business mix, coupled with changes in consumer behavior, more widely contributed to a higher PPT. Digital money transfer revenues, which include wu.com and digital partnerships, increased 45% on a reported basis or 44% constant currency. Similar to the broader C2C business, the mix impact from digital white label partnerships and account-to-account digital transactions contributed to a spread between transactions and revenue growth. And from our vantage point, the pricing environment in the digital market remains constructive.

As Hikmet mentioned, wu.com had another very strong quarter. Revenue grew 38% or 37% constant currency on transaction growth of 55%. Cross-border revenue was up 49% in the quarter. PPT trends were impressive, and we saw continued double-digit growth. Digital partnerships, transactions and revenues more than doubled in the quarter. As you may recall, the business experienced a step-up in transactions in the second quarter of 2020 with the initial global wave of COVID-19, and then another step-up for the second half of 2020. This strong prior year growth is expected to cause a moderation in growth over the rest of 2021.

Moving to the regional results. North America revenue was flat on a reported basis or increased 1% constant currency on transaction growth of 1%. The increase in constant currency revenue and transaction growth was driven by US outbound, partially offset by declines in US domestic money transfer and Cuba where current US regulations limit our ability to operate. Revenue in the Europe and CIS region increased 8% on a reported basis or 4% constant currency on transaction growth of 28%. Constant currency revenue growth was led by France and Russia.

Growth in Russia was driven by the incremental digital white label business, which continued to contribute to a spread between transaction in constant currency growth. Revenue in the Middle East, Africa and South Asia region increased 1% on a reported basis or was flat constant currency while transactions grew 13%. Qatar had solid constant currency revenue growth in the quarter, while the United Arab Emirates continued to experience soft trends. Incremental digital white label business in Saudi Arabia was the primary driver of the spread between transaction growth and constant currency revenue growth.

Revenue growth in the Latin America and Caribbean region continued to improve sequentially and was up 3% or 8% constant currency on transaction declines of 8%. The constant currency revenue growth was driven by a broad increase in principal across the region with higher PPT driving the spread between constant currency revenue growth and transaction growth in the quarter. Revenue in the APAC region increased 9% on a reported basis or 3% constant currency, led by strength in Australia. Transactions declined 2%, primarily driven by the Philippines domestic business, which has limited impact on revenue. Business Solutions revenue decreased 2% on a reported basis or 8% constant currency as COVID-19 continue to impact certain verticals and hedging activity. However, revenue trends continue to improve sequentially, and we expect will remain on an improving trajectory for the remainder of the year with a broader recovery in cross-border trade. The segment represented 8% of company revenues in the quarter.

Other revenues represented 5% of total company revenues and declined 18% in the quarter. Other revenues primarily consist of retail bill payments in the US and Argentina and retail money orders. The revenue decline was due to the ongoing impact of COVID-19 and the depreciation of the Argentine peso.

Turning to margins and profitability. Consolidated operating margin in the quarter was 19.2% compared to the prior year period margin of 19.6% on a GAAP basis and 20.5% on an adjusted basis, which excluded costs related to our restructuring program. The decrease in the operating margin primarily reflects how COVID-19 impacted the level and timing of certain expenses and investments in 2021 compared to 2020, including investments in strategic initiatives and marketing and compensation-related expenses, partially offset by changes in FX. Foreign exchange hedges had a negative impact of $4 million on operating profit in the quarter and a benefit of $10 million in the prior year period.

Moving to segment margins. Note that segment margins exclude last year's restructuring charges. B2C operating margin was 19.6% compared to 20.7% in the prior year period. Given that our C2C segment comprises almost 90% 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 13.1% in the quarter compared to 14.1% in the prior year period. The decline in operating margin was primarily due to an increase in compensation-related expenses. Other operating margin was 22.6% compared to 26.1% in the prior year period, with the decline primarily due to lower revenue.

The effective tax rate in the quarter was 10.4% compared to a 12.5% effective tax rate on both a GAAP and adjusted basis in the prior year period. The decrease in the company's effective tax rate was due to changes in composition between higher tax and lower tax foreign earnings and an increase in discrete tax benefits.

Earnings per share or EPS was $0.44 compared to the prior year period GAAP EPS of $0.42 and adjusted EPS of $0.44. Year-over-year comparisons of EPS in the quarter reflects benefits of revenue growth, a lower effective tax rate and share repurchases, offset by increased investments in strategic initiatives and marketing and compensation-related expenses.

Turning to our cash flow and balance sheet. Cash flow from operating activities in the first quarter was $176 million. Capital expenditures in the quarter were approximately $97 million driven by agent signing bonuses and should be in a normal range for the full year. At the end of the quarter, we had cash of $1.5 billion and debt of $3.2 billion.

During the quarter, we took advantage of historically low interest rates to issue new notes. Proceeds were used to prepay a portion of the term loan in the first quarter, and we repaid our notes due in 2022 in early April. We returned $172 million to shareholders in the first quarter consisting of $97 million of dividends and $75 million in share repurchases. The outstanding share count at quarter end was 410 million shares. And we had $708 million remaining under our share repurchase authorization, which expires in December of this year.

As Hikmet noted a few minutes ago, in today's earnings release, we updated our 2021 financial outlook affirming expectations for revenue growth and operating margin and raising GAAP EPS. We are also on track to achieve our digital revenue target exceeding $1 billion. The increase in GAAP EPS reflects the sale of an investment, partially offset by expenses related to the early retirement of the company's notes due in 2022. Both of these items will be reflected in second quarter results. Excluding the impact of these two items, the 2021 EPS outlook would be unchanged, which we have reflected with an adjusted EPS outlook. Note that our outlook assumes no material worsening in current global macroeconomic conditions or the COVID-19 pandemic. We 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.

Operating margin is expected to be approximately 21.5%, reflecting revenue growth and benefits from our three year productivity program that we expect to generate approximately $150 million of annual savings by the end of 2022, partially offset by higher operating expenses and investments in strategic initiatives. We expect 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 $2.06 to $2.16, including approximately a $0.06 net benefit in other income on an investment sale and debt retirement expenses that occurred early in the second quarter of 2021. Adjusted EPS, which excludes those items, is expected to be in a range of $2 to $2.10.

Given the variability that COVID-19 caused on quarterly results, I will provide some context for how we think results may progress over the remainder of the year. Note that our underlying assumptions include no material worsening in the effects of the pandemic and moderate improvement in global macro environment as the quarters progress.

Starting with revenue, we saw continued positive momentum in April. And for the second quarter, we expect to see the strongest year-over-year growth rate as we cycle over the largest quarterly decline at the prior year. For the third and fourth quarter of 2021, given the stability we had in the back half of last year, we expect general stability and trends and similar year-over-year growth rates. Keep in mind that as a result of COVID-19, our digital business delivered exceptional growth from the second quarter onward in 2020. So growth rates this year should moderate somewhat for the remainder of, 2021. Although, we still expect to generate more than $1 billion in digital money transfer revenues this year.

Our retail business experienced a significant decline in the second quarter of 2020. And while it began to come back quickly, we expect recovery will occur gradually. As a result, we expect retail will generate growth in 2021. The Business Solutions segment and other revenues were adversely impacted by COVID-19 in 2020. So we expect that those businesses will continue to rebound this year.

Moving on to margin. Based on our current view, we expect that second quarter margin will be below the full year margin outlook, while the back half of the year will be above the full year margin outlook. To wrap up, we are off to a solid start to the year, optimistic that the macro environment will remain constructive, confident in our competitive position and underlying fundamentals. And we are enthusiastic that our strategic agenda for the year will position us to realize the significant opportunities we see for our business over the next few years and beyond.

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

Questions and Answers:

Operator

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Jason Kupferberg with Bank of America. Please go ahead.

Jason Kupferberg -- BofA Securities -- Analyst

Thanks. Good afternoon, guys. Nice job here on the quarter, and that's what I wanted to start with here. So your adjusted constant currency revenue growth came in at up 2%. I think you had been expecting it to be more in line with Q4, which was down 1%. So that was materially better. And I wanted to get a sense of whether the upside surprise here was primarily the digital side of C2C or were there other areas of the business that also outperformed your expectations?

Hikmet Ersek -- Chief Executive Officer and Director

I think it's a good question, Jason. Hi, how are you doing?

Jason Kupferberg -- BofA Securities -- Analyst

Fine.

Hikmet Ersek -- Chief Executive Officer and Director

I believe that all over the company, we see really the business coming back. Obviously, the digital business had been an extraordinary, again, delivering. And if you think that the growth rates coming from a huge phase already compared with the competition, and I think we are targeting $1 billion plus for year-end, and we are well on the way. The westernunion.com business has been performing very well. And we see also a lot of customer acquisition on the westernunion.com business, new customers, and that has been doing well.

And the most important one, a big part of our business retail business is recovering, right? And this added to our 2% growth. And as we see -- look, the COVID-19 is not over. It's still there, but we do see some recoveries and that helps our business. People are using more digital, but turn -- coming back to our retail business.

Jason Kupferberg -- BofA Securities -- Analyst

And just a quick follow-up, maybe the wu.com constant currency revenue growth accelerated to 37% from 26% last quarter. It looks like the transaction growth there was pretty stable. So just wondering if there were some mix factors that worked in your favor during the first quarter in wu.com? Thanks.

Rajesh K. Agrawal -- Chief Financial Officer

Yes. Hi, Jason. Not really, we continue to get growth throughout the.com business. I would say that the yields on.com were relatively stable from Q4 to Q1. And -- but then the transaction growth stayed quite stable to Q4, as you said. And so that just provided the overall lift in the business. And the RPT was quite stable as well. And I think it's really playing out according to our expectations and we see good things for the entire digital business this year.

Jason Kupferberg -- BofA Securities -- Analyst

Okay. Thank you.

Operator

Perfect. And our next question today comes from Darrin Peller with Wolfe Research. Please go ahead.

Darrin Peller -- Wolfe Research -- Analyst

Hey, guys. Thanks. If we look at the trends, if you can give us a little more detail on the trends, call it, second half March exiting the quarter into April, specifically on the digital side. Because I think folks are looking into how sustainable that growth rate will be as we start to lap the big growth you had in digital sometime last year.

And then the second part of this question is, also on the retail growth, you're saying it's going to grow. When we compare retail to 2019, do you actually anticipate getting back to those levels again? So if we can get that on top of digital strength, it would be good to see. Thanks.

Rajesh K. Agrawal -- Chief Financial Officer

Yes. Hi, Darrin. Let me try to address both questions. First one, we -- as we mentioned when we gave the outlook initially earlier this year, Digital is going to moderate in second, third and fourth quarter. And that's what we expect to happen because we got the largest growth and the strongest growth beginning in the second quarter of last year. And so that's what you should expect. But we're still going to get to above $1 billion in total digital revenue. So that should give you a sense of the overall growth potential in that business. With respect to retail, we're probably not going to get back to 2019 levels this year. But it's going to be -- it really depends on what happens, certainly, there will be some grow-over impact, but we have other things that are coming into the business like a Walmart and other initiatives in the second half of the year. So those will also play a big part in where the retail business goes.

Darrin Peller -- Wolfe Research -- Analyst

Okay. I guess my follow-up is really around the digital transformation you have in the company. Hikmet, there's been a lot of discussion over taking some of this active user growth on westernunion.com and trying to monetize it more. And I think you alluded to some of the profile of the under-banked or migrant customer base being pretty strong. So what kind of progression can we expect to see from you guys around that throughout this year? Thanks again.

Hikmet Ersek -- Chief Executive Officer and Director

Yeah. Great question. Obviously, via westernunion.com, we have direct access to customers. It's really where we communicate directly with our customers. And we know that westernunion.com customer is more loyal to Western Union. They use more often, and we can communicate directly with them. And what we do, we are in 75 countries. And these customers are migrant customers. For instance, UK to Albanian customers, we speak in Albanian. In Italy to Romanian customers, speak in Romania, right? And we -- they trust us. They also tell us that they really want new products besides Western Union services.

The Financial Services will be the focus area, which we are looking at that. We started test this year in Europe with our European -- with our Western Union international bank license. And we're going to learn more on that. But long-term, I really see a big opportunity here. We have about 9 million customers with westernunion.com, and it's growing. We just saw the numbers coming in, the new customer acquisition. And this is a big opportunity besides having our core business, which is the money transfer business, really adding additional services long term.

Darrin Peller -- Wolfe Research -- Analyst

Understood. Thanks guys.

Hikmet Ersek -- Chief Executive Officer and Director

Thanks.

Operator

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

Tien-Tsin Huang -- JPMorgan Securities -- Analyst

Thanks. Good afternoon. I appreciate the disclosure on the digital. I'm curious about the 9 million active user figure. If I remember, and I could be wrong, I think at some point, you disclosed 150 million active customers in your traditional retail business. So I'm curious how you think about that 9 million today and where it can go, how much of it is new? Anything to -- that you've learned in terms of customer acquisition costs, things like that? Thank you.

Hikmet Ersek -- Chief Executive Officer and Director

Sure. Hi, Tien-Tsin, great question. You asked you that earlier. Also I remember, we have about 150 million customers globally. Half of them are -- more than half of them are senders, and then half of them are kind of receivers, right? So our focus with -- obviously, with the financial services additional customer segment at westernunion. com is obviously from the send side, right in the beginning. And -- but also on the receive side, we know that the customers want to get more services. Is it in Romania? Is it in Poland? Or is it Morocco? They tell us we did some customer service here.

So there are two ways to go. First of all, we are going directly with our westernunion.com business, which we are the agent directly to our customers acquiring them and we know their usages more often with that. The second thing is that we do have, as you know, some locations we have higher traffic, kind of focus on the groups of -- epic groups saying that, OK, they would like to send money from France to Morocco. They would like to send money from Germany to Turkey. And this kind of customers, we have dedicated locations. And these are also repeat customers. And we are also acquiring them and building to our consumer ecosystem because they tell us also they would like to have additional services.

One example is our test with the insurance services with AXA. As you know, AXA is one of the largest insurance companies worldwide. And with time, we are doing a test in France and really expanding our test to the next stages, saying that our customers want additional services. And I see long-term really a revenue opportunity here for the company.

Tien-Tsin Huang -- JPMorgan Securities -- Analyst

Okay. Great. No, that's great to hear. I'm listening to our conversation segment. That's -- I'm glad that you're able to share that. My quick follow-up, if you don't mind, just on the India front. And that's really great that you guys are doing a lot of relief effort there, by the way. Thanks for that. I'm curious if you could see any interesting trends there because I know India is an important receive nation for you?

Hikmet Ersek -- Chief Executive Officer and Director

Yes. I mean, obviously, India is very important for us. First of all, as I said in my remarks, we have millions of customers there. They make the change there when they receive money. We have thousands of employees there. They have -- going through very difficult times. But not only in India, obviously, all over the world. And private there, also family there. As you can imagine, we are taking care, looking at that daily.

From the business side, I mean, the locations are sloping, Tien-Tsin. They are seen as essential services, is that our post office locations, bank locations. As you know, we have huge networks there. But we also have dedicated retail locations. They are open. And then the biggest growth is coming from account payout. We have a huge account payout network in India. You can send direct the money to an account in real time and many people are using.

And it's basically our fastest-growing, I mean, on absolute numbers, it's not that big, but it's the fastest growing part of our business paying out in accounts. And that helps people in India a lot. Because believe me, the situation in India is not easy, and -- but the people are really getting that -- we see also the send site all our people around the world sending and thinking about the relative and sending money. And the money is used for essential services for health services and other things. So thank you for asking that question.

Tien-Tsin Huang -- JPMorgan Securities -- Analyst

Thank you.

Operator

Operator: Thank you. And our next question today comes from Rayna Kumar with Evercore. Please go ahead.

Rayna Kumar -- Evercore ISI -- Analyst

Good evening, Hikmet and Raj. As you mentioned in your commentary, there was a -- there was a spread between your C2C revenue and your transaction, which was largely driven by the white label partnerships. Would you talk specifically about if there were any pricing changes, positive or negative, that may have impacted that spread? And I'll ask my follow-up upfront. You've had dynamic pricing initiatives in place for quite a while now. Can you talk about how that's performed versus your expectations? Thank you.

Rajesh K. Agrawal -- Chief Financial Officer

Yes, Rayna, let me take the first part. On the spread, what you're seeing is really the year-over-year changes that are causing the spread. From a pricing standpoint, the yields have been relatively stable since the third quarter of last year and as well as digital white label mix, that's also having an impact.

But as I mentioned in my comments, the spread between revenues and transactions is going to narrow the next three quarters, and you'll see that happening. And there are reasons why we have -- that we will not have as much of an incremental number of transactions from digital white label. We also -- pricing is relatively stable for wu.com. And then retail is having a significant rebound this year, and you'll see that starting in the second quarter. So the spread is going to narrow quite a bit. And then in terms of dynamic pricing, we have a number of things that we've been putting in place. We are doing a lot of testing all the time looking at various technology improvements.

Hikmet Ersek -- Chief Executive Officer and Director

Yeah. I just -- if -- as you know, we just had another business review on that right now, it's a great question, and it does have a big impact to our growth and our customer acquisition and still keep keeping the revenues in a very good growth area. We do extend that. We started with westernunion.com. Now we also do it in retail business, especially in the dedicated locations. And we see the return there. And this dynamic pricing will be really maybe one of the best worldwide in the future because we hired also really great people who are experts. And that was my comment also, executive hiring on the tech part. We hired great people. They really show us how that works. And I'm very encouraged by dynamic pricing activities, and that keeps really the pricing is very flexible.

Operator

Thank you. Our next question today comes from James Faucette with Morgan Stanley.

James Faucette -- Morgan Stanley -- Analyst

Thank you very much, and thanks for all the details and color on your business thus far this year. A couple of questions for me to kind of follow up on things that you've mentioned. Last year, particularly in the June quarter and as the pandemic was first setting in, I mean you talked a little bit about how the nature of some of your wu.com customers, their profiles and their activity was different. I'm just wondering if you have any color on how retention of those customers that were added at that period has developed if you continue to see ongoing engagement from them? Just trying to get a little bit of idea if there has been any incremental change in your customer profile generally?

Rajesh K. Agrawal -- Chief Financial Officer

I would say, James, this is Raj. I would just say that the profile of the customer has continued to be very strong. The retention levels have continued to increase. These customers are transacting at a frequent level and add a higher PPTs, or principal per transaction in the business, and that's really having a positive impact on the overall company. The digital part of the business was one of the key drivers of the overall cross-border principal growth. So it's a high-quality customer.

Hikmet Ersek -- Chief Executive Officer and Director

A digital partner, just to put things in perspective. We announced that in late 2019 and since then, on digital partners, revenue doubled. I mean this is really incremental to our core business. And on the -- on our customer on westernunion.com, look, these are -- we know that they are more loyal and they use more often. And 80% of the customers around 80% is still new to Western Union brand, which is great, right? I mean, you are really -- it's a different customer segment. And their behavior are a little bit different than the retail behavior. They do use sometimes higher RPT, sometimes lower RPD, really are flexible more often. But also they send a lot money to a wallet or to an account. So it is incremental to us, and it's really the -- it's not like suddenly all the retail customers are switching to Western Union. Western Union, with that approach, extended the portfolio and extended the market share. That's the good news here.

Rajesh K. Agrawal -- Chief Financial Officer

And I think the other factor is that the need to receive money hasn't gone away. It's higher than ever before in terms of people and receive markets wanting to get money. And the digital customers continue to send money at a frequent pace.

James Faucette -- Morgan Stanley -- Analyst

Yes. No, that's great incremental information there, and it seems like you're doing a good job retaining them. My other question was as it relates to the Walmart relationship and just looking for a little bit more detail there from your -- or as it relates to your expectations, can you talk about what contribution you think you can get from Walmart? And I guess, specifically as well, does this relationship make you available in Walmart's international stores?

Hikmet Ersek -- Chief Executive Officer and Director

Yes. I'm very excited about that one. We've Walmart relationship with Mexico and Canada for multi-years. Now we are enrolling, as we speak, the US relationship. We already enrolled like 20% or 10% or 20% of the locations. And by Q2, we will have all 4,700 locations enrolled. We already see good signs of customers which we start to enroll. We didn't even start with the marketing activities yet to announce it. And that will definitely give our additional incremental revenue from that -- since we announced.

But it is within our forecast, the numbers. We hope that, that will be -- especially in the late part of this year, have an impact to our growth rates, and we are very excited about that. And I know that Walmart is also very excited about that. Our relationship that brings definitely customers, incremental customers to their stores. And the cooperation with Walmart has been excellent. We upgraded our point of sale. We worked hard with them to have the best-of-class customer experience on the point of sale. And this is important for Walmart, and we really adapted and the team worked hard. We have own key account management there, really focused on the -- we build a new organization around the Walmart. We have our own key account management there to drive the transactions and the revenue at Walmart locations.

Operator

Operator: Thank you. Our next question today comes from Ashwin Shirvaikar with Citi. Please go ahead.

Ashwin Shirvaikar -- Citi -- Analyst

Thank you. Hi, Hikmet, Raj. Good to hear from you, both.

Rajesh K. Agrawal -- Chief Financial Officer

Ashwin.

Ashwin Shirvaikar -- Citi -- Analyst

Hi. So my first question is with regards to the trend in average monthly active users for wu.com. Obviously, over the last four quarters, you guys have maintained sort of this nice mid-40s, upper 40s growth trajectory. Do you -- does it necessarily have to go back down to prior levels in the mid-teens type of growth? Or can you sustain for a few more quarters this type of growth? And maybe if you could comment on what you saw in April? That might be like a clue to that. I don't know, if you could talk about your quarter-to-date type of trends?

Rajesh K. Agrawal -- Chief Financial Officer

Hi, Ashwin. Yes, on the monthly active average users, I'd say the absolute level will continue to be strong. But because of the significant growth from last year, we will start to grow over that like we are for the revenues and transactions of that business. So it's just a function of numbers going over. But the level of customers and the level of the healthiness of the customers and what they're doing with our business has been very high, and we expect that to continue.

Hikmet Ersek -- Chief Executive Officer and Director

And we're still -- it's an amazing number, Ashwin, $1 billion-plus only on digital revenue, right? I mean this is -- at Western Union is a big contributor of that obviously WesternUnion.com the big contribute of that. And if you just think about that, $1 billion plus, it's like two -- the next competitors, both revenue almost or in that area. So it is really an impressive number, and I'm very proud of my team and how we are expanding that. So it is definitely something really growing very fast.

Operator

Thank you. And our next question today comes from Jeff Cantwell with Guggenheim Securities. Please go ahead.

Jeff Cantwell -- Guggenheim Securities LLC -- Analyst

Hi, good afternoon. Thanks for taking my question. Nice results here. I wanted to ask you one about digital. Now when we all talk about digital, I think oftentimes, the focus tends to be on what's occurring on the front end. Meaning how you're growing digital revenue and how you're addressing your customer base. But it's also sounding now based on your prepared remarks, like we might want to be thinking about digital on the other side of that coin as well, which is the things we're doing to modernize/digitize yourselves internally maybe its state, maybe its cloud, migrating to cloud, et cetera.

So I wanted to ask if you could talk a little bit about that. What have you been doing in terms of going to modernize digitize yourselves operationally? And one of the reasons I'm asking is because we saw that called out by Snowflake and their partnership with you guys. And it got us thinking maybe there's been some progress you're making on the back end. So I was hoping you can maybe share with us, it seems like it might be a nice way to generate some cost savings potentially. So I was hoping you could talk about that? Thanks.

Hikmet Ersek -- Chief Executive Officer and Director

Yes. I think it's -- what I understood -- sorry, the connection was not that well. What I understood is that how do we digitalize also our platform, what do we do here. And also on the receive side, how do we do that, not only on the send side, but that was the question, I guess. Let me start and, Raj, would like to -- if you like to add something more than welcome. Well, obviously, digitalization on the front line didn't happen if you don't digitalize your -- invest in your technology. Recent announcement like artificial intelligence, recent announcement that we did putting our system in the cloud and also our new multiyear settlement transformation program has been big announcement to allow that we are so successful on the front line on digitalization. And that's going to continue. That's only the beginning.

I think on our big part of our investments are really having the -- being a tech company, being a tech stack company and really go in that direction. And look, just to put things in perspective, we are settling in 180 -- 130 currencies. We are doing -- moving billions of billions of money monthly, yearly around -- in 131 currencies. And that's a huge, huge benefit due to our technology, due to our settlement program, due to our artificial intelligence, which we use in compliance programs. So that's going to continue to do, doing this our platform more nimble and faster and more agile.

The other side on that is that maybe if I got your second question -- second part of your question, on the receive side, we do also see more and more sending money to wallets, sending money to accounts. And people are -- if that's available in the area, people are getting money on wallet and using their wallets, and they use sometimes for merchants, sometimes catch it out from their wallet, sometimes they put it on their accounts. I think this is a really new customer segment we see with our digitalization. Anything you want to add on that, Raj?

Rajesh K. Agrawal -- Chief Financial Officer

No. I broke up at the beginning. Jamie, this is you, right?

Jeff Cantwell -- Guggenheim Securities LLC -- Analyst

This is Jeff.

Rajesh K. Agrawal -- Chief Financial Officer

Sorry, the name broke at the beginning. I couldn't tell at the beginning. But yes. I mean I think it's really -- we talked about settlement system. That's a brand-new settlement system. We went live with the biggest piece of it. We are moving many of our operations to the cloud. So all of these things are going to translate into efficiencies down the road, not just in terms of cost savings, but also in terms of how we can interact with the customer and even provide more feedback and information to the customer, making that engagement process very strong. So you're right on the mark there. That is exactly what we are doing and need to continue to do.

Operator

Thank you. Our next question today comes from Timothy Chiodo with Credit Suisse. Please go ahead.

Timothy Chiodo -- Credit Suisse -- Analyst

Thanks a lot. I want to change gears a little bit. You mentioned some of your partnerships to help expand some of your local payout options, whether it be direct to account or potentially to cards. And also just in light of Visa talking about their partnerships with you, Wise, Remitly, MoneyGram, and they publicly called out multiple times very strong transaction growth within remittances with the Visa Direct and Earthport combination.

Just wanted to see if you could bring that to life a little bit more. I know we talked about this in the past, but when would be a good use case that your platform would utilize that? Does it come down to the consumer choice, they would like to send a card? Or is it to extend your account-to-account payout capabilities? Or what are the other use cases?

Rajesh K. Agrawal -- Chief Financial Officer

So the use cases, obviously, it depends on the customer need cases, right? And if you send money, we have -- by the way, partnership with Mastercard, we have partnership with Visa. We have with other companies, the partnership, we do the same thing that the others do also. And the most important thing also we have direct access to the accounts. Most of our account payout is -- we don't use a switch, we go directly to the bank accounts, which is more efficient, faster and in real time.

So if you send money from here to, let's say, from Denver to Bihar in a location in India to our bank account, we could do that directly to our bank account in real time. And these are a big advantage what Western Union has it. And it depends also, we do have wallet payouts. We present direct to money to wallets and really depends on the customer use cases.

Saying that though, today, most of the customers do have cash payout, we do cash payout. The fastest-growing part is digital payout, but most of the customers will still have a cash payout. The reason is very -- we have to understand send and receive dynamics. In some parts of the world, there is no infrastructure to do online payments. There is no infrastructure to do credit card payments. The point-of-sale systems are not there yet. Mobile payments is sometimes challenged. We do definitely read sometime headlines, we all get excited. But the reality is also to paying out the serving to the last mile to the customers, they can go pick up the money and go to a pharmacy and get healthy probably with that money or school fees. We should not forget that there are 7 billion people worldwide, and they have different needs.

Saying that, Western Union adopted the processes, the customer needs all the time. As I said earlier, the fastest-growing receive site dropping money is the account and is the wallet, but the biggest part is still cash payout on the retail locations.

Operator

Thank you. Our next question today comes from Bryan Keane with Deutsche Bank. Please go ahead.

Hikmet Ersek -- Chief Executive Officer and Director

Hey, Bryan.

Bryan C. Keane -- Deutsche Bank -- Analyst

Hey, guys, how are you doing?

Hikmet Ersek -- Chief Executive Officer and Director

Good. How are you?

Bryan C. Keane -- Deutsche Bank -- Analyst

I'm doing well. Solid results here. Just wanted to ask on digital. I'm just trying to think about as we anniversary the large growth rates, what a normalized growth rate might look like and some of the drivers there, thinking about partnerships, maybe how fast retail comes back, some of the things we think about on what a normal digital business might look like as we get through some of the tougher comps?

And then secondly, Just on the margins, Raj. Typically, if you had faster revenue growth or higher revenue growth, you'll have higher margin. But it sounds like you're going to maybe take that opportunity to push some new investments in 2Q. And then maybe some of those expire as you get into 3Q to 4Q and why margins will get a little bit larger in the back half? Thanks.

Rajesh K. Agrawal -- Chief Financial Officer

Sure. Bryan, let me try to address both, and then Hikmet can jump in as well if you'd like to on anything. On the digital growth, if I just take you back 18 months at Investor Day that we had in the fall of 2019, we thought we could grow digital in the 20% range. None of us expected to have happened what happened last year with the level of digital growth that we had. But we would love to see if it can get back to 20% range on an ongoing basis, but we're not giving a long-term outlook right now, but that would be a good place for it to be because then it becomes a significant contributor to the overall company to topline.

Hikmet Ersek -- Chief Executive Officer and Director

I think Bryan, just to add on that, sorry, I interrupted you. But think about that, the digital business is a much bigger base today. So the stronger growth, it's just possible long term. We don't give long-term guidance, but it is possible the stronger growth long-term because we are growing from a digital business with a stronger growth with a bigger base end of this year, $1 billion plus, hopefully, and growing from that with a bigger strong -- I'm confident about long-term opportunities of this company.

Rajesh K. Agrawal -- Chief Financial Officer

Yeah. And it's certainly -- one thing for sure is that it's changed the overall business mix of the company. In 2019, we were thinking about a $600 million business now. We're talking about a $1 billion business. So it becomes a bigger piece of the overall pie, and it will have a bigger impact. And then on your question around margins, I think you said it right, we are going to have some continued spending in the second quarter. Second quarter is probably going to have the best revenue growth of the year, given what happened last year with the dip that we had in the second quarter. And then margins will gradually improve the next three quarters. And so the second half is going to be above the full year average based on our current view and the first half is going to be below the full year average. But it's not about any other component of the business. It's just the timing of spending, I would say, on those components.

Operator

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

Ramsey El-Assal -- Barclays -- Analyst

Hi, gentlemen, thanks for taking my question today.

Hikmet Ersek -- Chief Executive Officer and Director

Hey, Ramsey.

Ramsey El-Assal -- Barclays -- Analyst

I wonder if you could comment on your M&A strategy. In particular, is it evolving in the context of your more intense focus on kind of consumer product development and innovation? Are you positioned now to maybe do some deals to kind of expand the breadth of your product offering that maybe weren't sort of in your viewer a year or two ago?

Hikmet Ersek -- Chief Executive Officer and Director

I think, first of all, our M&A strategy is very much aligned with our corporate strategy. Obviously, we're an operating strategy. And if you look at our business model, obviously, expanding to the consumer ecosystem, which is very exciting. Is there anything which can help us to communicate with the customer in a better way? Is there really connect with the customer in a better way in a technology environment. That's something we are looking at it. Are there companies there, you could support in our vision to grow to be faster, to offer additional services that could be some exciting thing.

But on the other side, also, we are looking on M&A opportunities as we do all the time, which would make our platform more agile, faster, higher technology. And the third one is probably -- is there also other companies which will -- we could find synergy effect. So that's really our strategy. It's nothing that it's without the ordinary our existing strategy. And so this is the environment we are looking at. I mean it has to be also obviously, the most important thing, it has to have a good return for shareholders.

Operator

Thank you. And our next question today comes from Andrew Jeffrey with Truist Securities. Please go ahead.

Andrew Jeffrey -- Truist Securities -- Analyst

Hi. Good afternoon, gentlemen. Appreciate you're taking questions.

Rajesh K. Agrawal -- Chief Financial Officer

Hi, Andrew.

Andrew Jeffrey -- Truist Securities -- Analyst

I noticed that capitalized the agent costs have risen, I think, for four quarters having stayed low for quite some time

Hikmet Ersek -- Chief Executive Officer and Director

Can you speak up a little bit

Rajesh K. Agrawal -- Chief Financial Officer

You're sing out there.

Andrew Jeffrey -- Truist Securities -- Analyst

Sorry about that. Hopefully, this is better. I'm just asking about capitalized agent costs, which I've noticed have risen four quarters in a row after having been pretty low for an extended period of time. So I wonder if you could just talk about agent economics and the competitive environment on that front?

Rajesh K. Agrawal -- Chief Financial Officer

Yes. Andrew, for CapEx, if you look at our history -- historical numbers, we've been in the 3% to 5% of revenues range for capital expenditures and we expect that to be the case again this year. The last couple of years, you're right, we were at the lower end of that range. But it's been in the 3% to 5% range. And the signing bonuses, agent bonuses can be lumpy in nature. It just depends on when the renewals actually come through. But nothing unusual. I mean, in any given year, because our -- most of our contracts are five years in maturity, we have about 20% of our contracts renewing in a given year. And so sometimes that's going to mean some bigger agents and smaller agents, so nothing unusual there. It's part of the plan. And we're within the range again for the full year.

Operator

Thank you. It looks like we have time for one more question. Our next question comes from Jamie Friedman from Susquehanna. Please go ahead.

Jamie Friedman -- Susquehanna -- Analyst

Good results here, guys. I just want to ask the two major digital partners that you showcased at the Analyst Day, when was that back in 2019, is there -- is there one that's more pronounced than the other? I mean, obviously, they're both doing great, but yes, if we could just compare like the Saudi versus the Russia, that would be helpful. Thank you.

Hikmet Ersek -- Chief Executive Officer and Director

I think -- so from performance-wise, they are very exciting for both partners. They are the largest, obviously, as we said, and they are contributing incremental transactions and revenue to our -- with the high profitability contribution margins are amazing of these two partners, which we really likely we see that as incremental. We do also -- by the way, we do also other partners, right? It's not only they do. We have only two partners. We do have other partners, but they are smaller. That's why we don't call them out. But we have about I would say, 50-plus almost 100 partners like that, but smaller banks, smaller financial institutions, they don't have that amount of big transactions.

I'm very excited also about the Saudi Arabia telecom company. As you know, we saw that we invested there in the Saudi Arabia telephone company, and we will hopefully close within this quarter this deal with them. And this still gives us also the opportunity to expand and learn with them and expand the ecosystem into Saudi Arabia and being a partner with them and really serving the Saudi Arabian customer more than only sending money. It is aligned with our -- the previous question with M&A, it is aligned with our strategy. It's within our ecosystem. We are doing -- together, we have a good partner here. It's a long term. It's a very fast-growing partner, and we are excited about that.

Brendan James Metrano -- Vice President of Investor Relations

Great. I want to thank everybody for your time today and your interest in Western Union, and look forward to speaking to her in the future.

Hikmet Ersek -- Chief Executive Officer and Director

Thank you and stay healthy. Stay healthy. That's important. All the best.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Brendan James Metrano -- Vice President of Investor Relations

Hikmet Ersek -- Chief Executive Officer and Director

Rajesh K. Agrawal -- Chief Financial Officer

Jason Kupferberg -- BofA Securities -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

Tien-Tsin Huang -- JPMorgan Securities -- Analyst

Rayna Kumar -- Evercore ISI -- Analyst

James Faucette -- Morgan Stanley -- Analyst

Ashwin Shirvaikar -- Citi -- Analyst

Jeff Cantwell -- Guggenheim Securities LLC -- Analyst

Timothy Chiodo -- Credit Suisse -- Analyst

Bryan C. Keane -- Deutsche Bank -- Analyst

Ramsey El-Assal -- Barclays -- Analyst

Andrew Jeffrey -- Truist Securities -- Analyst

Jamie Friedman -- Susquehanna -- Analyst

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