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The Western Union Co (WU) Q3 2021 Earnings Call Transcript

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WU earnings call for the period ending September 30, 2021.

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The Western Union Co (WU -0.56%)
Q3 2021 Earnings Call
Nov 2, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Western Union Third Quarter 2021 Results Conference Call. [Operator Instructions]

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

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Brad Windbigler -- Head Of Treasury And Investor Relations

Thank you. On today's call, we will discuss the company's third quarter 2021 results, our financial outlook for 2021, and then we will take your questions. The slides that accompany this call and webcast can be found at westernunion.com under the Investor Relations tab and will remain available after the call. Additional operational statistics have been provided in supplemental tables with our press release. On our call today is our CEO, Hikmet Ersek; and our CFO, Raj Agrawal. Today's call is being recorded, and our comments include forward-looking statements. Please refer to the cautionary language in the earnings release and in Western Union's filings with the Securities and Exchange Commission, including the 2020 Form 10-K for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements.

During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items 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 the 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

Thank you, Brad, and good afternoon, everyone. We appreciate you joining us today to discuss our third quarter results and the progress of our business. Our business continues to rebound from the effects of the COVID-19 pandemic delivering double-digit revenue growth in digital and Business Solutions as well as strong profitability and operating cash flow during the quarter. Additionally, we are continuing to make good progress on our key initiatives, including our pricing evolution and platform enhancements. Now let's take a closer look at the third quarter results. Overall, we achieved revenue growth in the quarter of 2% on a reported and constant currency basis, which was driven by 15% growth in digital and 31% growth in Business Solutions. While these two business grew nicely, the Retail business was affected by the slower economic recovery, in particular, recovery in the labor markets where employment of migrant workers remains below 2019 levels.

As a result, our C2C revenue was flat on a reported basis or down 1% in constant currency terms with transaction growth down 1%. Both principal per transaction and cross-border principal increased approximately 4% during the quarter. Year-to-date, our cross-border principal increased 19%, reflecting the elevated levels of support that our customers provide to their loved ones during the period of uneven economic recovery. With that, based on the latest World Bank forecast, we believe we are growing market share. Our digital business continues to generate strong growth. Revenue generated during the quarter was $266 million, maintaining the record high level that we achieved in the second quarter and putting us well on pace to exceed $1 billion in revenue this year. Most of our digital business is westernunion.com, which grew at a healthy pace in the third quarter with 16% principal growth and 12% revenue growth. Wu.com average monthly active users increased 8% in the quarter.

Although wu.com growth is moderating as expected, as we grow from a much larger base and compare results against the prior year's accelerated growth levels, we anticipate growth to remain healthy as we continue to invest in marketing, product and customer experience. We were particularly encouraged by the results we are seeing in our account-to-account business, which is the fastest-growing portion of our business. The other component of our digital business is digital partnerships. Momentum is building in this business as we expand relationships with existing partners and launch new partners. We recently completed our previously announced acquisition of a minority stake in stc Bank, formerly known as STC Pay, which was a leading digital wallet service provider and is now in the process of launching as one of the first digital banks in Saudi Arabia. In addition, we are planning to launch a number of new partners in upcoming months.

Our progress confirms that the capabilities we have built to serve our branded direct digital business is also well suited to serve the needs of leading banks and digital wallet providers. Our solution emphasizes flexibility and choice built on a strong foundation of compliance and technology. We are able to offer a branded solution partners who want to feature our leading brand in cross-border payments or we can offer capabilities that partners incorporate as a white label solution. Our real-time account payout capabilities, currently available in over 100 countries, improve on incumbent solutions while also providing choice for consumers who preferred to direct transfer to our agent network. We recently announced that Western Union International Bank has joined SEPA Instant Credit Transfer scheme as a direct participant, further enhancing our real-time payment capabilities in Europe. Our capabilities have focused on cross-border remittances historically, but partner needs are evolving to include broader use cases.

Thus, as we have integrated with traditional payment systems in the past, our platform can also be extended to incorporate future use cases related to digital currencies. Key to our success, whether serving our direct consumers through our branded offering of -- or serving the customers of our partners is our omnichannel capabilities, which enable payouts to more than 200 countries and territories in over 130 currencies through our extensive global network of billions of bank accounts, millions of wallets and cards, and approximately 600,000 retail locations. We continue to invest in expanding our payment capabilities to provide our customers and partners with additional options and convenience across platforms, devices, borders and currencies. Turning to our profit performance in the quarter.

Profitability was strong, with operating margin increasing to approximately 25%, as a result of solid Business Solutions revenue growth and lower planned marketing investments, which was partially offset as we continued to invest in our technology and global omnichannel platform. Earnings per share for the quarter was $0.57 on a reported basis and $0.63 on an adjusted basis. Before turning it over to Raj to discuss our financial performance for the quarter in more detail and our updated 2021 financial outlook, I'd like to provide an update on a few key strategic initiatives. Starting with Business Solutions, our planned divestiture remains on track. The majority of the business and the entire proceeds are expected to transfer in the first quarter of 2022. As we announced earlier today, we are expanding our ecosystem strategy. We are on track to launch our digital bank pilot in Germany and Romania in the fourth quarter, offering customers a digital banking and integrated money transfer solution through our Western Union International Bank.

The digital banking offerings Western Union branded WU Plus is an important part of our ecosystem strategy, which is focused on bordering and deepening our relationship with customers by offering them additional relevant products and services. Another component of our ecosystem strategy is WU Shop, a shopping and cash back rewards program that enables our customers to shop internationally at over 12,000 online stores and send gifts directly to their families and friends in other countries while receiving cash back on their purchases. WU Shop is now live in Germany and Austria, several more countries, including the U.S., are targeted to launch by year-end. Overall, despite an uneven economic recovery and the continuing effects from the pandemic, our business proved resilient, and we are on solid footing as we finish the year.

With that, I'll now turn it over to Raj to discuss the third quarter results in more detail.

Raj Agrawal -- Chief Financial Officer

Thank you, Hikmet, and good afternoon, everyone. Today, I will discuss third quarter results and our full year 2021 financial outlook. Third quarter revenue of $1.3 billion increased 2% on a reported and constant currency basis. Currency translation net of the impact from hedges benefited third quarter revenues by approximately $3 million compared to the prior year. In the C2C segment, revenue was flat on a reported basis or decreased 1% constant currency. B2C transactions declined 1% for the quarter as the slow recovery from COVID-19 impacted retail money transfer, partially offset by 19% transaction growth in digital money transfer. The spread between C2C transaction and revenue growth was one percentage point on a reported basis and flat on a constant currency basis. Total C2C cross-border principal increased 4% on a reported basis or 3% constant currency, driven by growth in digital money transfer. Total C2C principal for transaction or PPT continued to grow and was up 4% or 3% constant currency, driven by mix and changes in consumer behavior.

Digital money transfer revenues, which include wu.com and digital partnerships increased 15% on a reported basis or 14% constant currency. Wu.com revenue grew 12% or 11% constant currency on transaction growth of 9%. Wu.com cross-border revenue was up 16% in the quarter. Regionally, wu.com revenue growth was led by North America and Europe and CIS. Digital partnerships continued to show solid growth across revenue, transactions and principal in the quarter. Moving to the regional results. North America revenue decreased 2% on both a reported and constant currency basis, on transaction declines of 5%. Constant currency revenue was impacted by U.S. outbound, including U.S. regulations concerning Cuba that limit our ability to provide services there and continued declines in U.S. domestic money transfer. Revenue in the Europe and CIS region declined 3% on a reported basis or 5% constant currency on transaction growth of 3%.

Our digital business continued to generate strong transaction and revenue growth, offset by softness in the retail business. The digital partnership business in Russia was the primary contributor to the spread between transactions and constant currency revenue in the quarter. Revenue in the Middle East, Africa and South Asia region declined 2% on both a reported and constant currency basis, while transactions grew 2%. The digital partnership business continued to generate strong performance, driving regional transaction growth in the quarter and was the main contributor to the spread. Constant currency revenue declines were driven by the regional business. Revenue growth in the Latin America and Caribbean region was up 25% or 26% constant currency on transaction growth of 10%. Constant currency revenue growth was generally broad-based as the region recovered from prior year economic dislocation due to COVID-19 with growth led by Mexico, Chile and Ecuador.

The driver of the spread between transactions and constant currency revenue growth was due to business mix. Revenue in the APAC region increased 1% on a reported basis and declined 1% on a constant currency basis while transactions declined 13%. Constant currency revenue in the region continued to be impacted by COVID-19. Business Solutions revenue increased 31% on a reported basis or 28% constant currency. Revenue growth was driven by increased payment services activity and the education vertical, while trends remained on a positive course with the continuing recovery in cross-border trade. The segment represented 9% of company revenues in the quarter and benefited by growing over lower revenue in the prior year period. Other revenues represented 5% of total company revenues and increased 3% in the quarter. Other revenues primarily consist of retail bill payments in the U.S. and Argentina and retail money orders in the U.S.

Turning to margins and profitability. The consolidated GAAP operating margin in the quarter was 24.8% compared to 22.7% in the prior year period, while the consolidated adjusted operating margin was 25.2% in the quarter compared to 23.5% in the prior year period. The GAAP and adjusted margin increases were primarily driven by revenue growth and lower planned marketing investment, partially offset by higher technology investment. The GAAP operating margin also benefited from prior year restructuring costs. Adjusted operating margin excludes M&A expenses in both the current and prior year period and last year's restructuring expenses. Moving to segment margins. Note that M&A expenses are included in other operating margins for both the current and prior year period and segment margins exclude last year's restructuring charges. B2C operating margin was 24.3% compared to 24.6% in the prior year period. The slightly lower operating margin was due to higher technology spend as we continued to invest in our platform partially offset by lower planned margin investments.

Business Solutions operating margin was 32.9% in the quarter compared to 10.5% in the prior year period. The increase in operating margin was primarily due to increased revenue. During the last 12 months, the Business Solutions segment generated $402 million of revenue and $86 million of EBITDA. Other operating margin was 18.3% compared to 20% in the prior year period due to higher M&A costs this year related to the divestiture of Business Solutions. The GAAP effective tax rate in the quarter was 20.2% compared to 12.4% in the prior year period, while the adjusted effective tax rate in the quarter was 13.7% compared to 12.7% in the prior year period. The increase in the GAAP effective tax rate was due to deferred taxes recorded on the pending sale of Business Solutions. GAAP earnings per share or EPS was $0.57 in the quarter compared to $0.55 in the prior year period, while adjusted EPS was $0.63 in the quarter compared to $0.57 in the prior year period. The increase in EPS reflects the benefit of revenue growth and lower planned marketing investments, partially offset by a higher tax rate and higher technology investment.

GAAP EPS includes a $0.05 impact related to the deferred taxes recorded on the pending sale of Business Solutions. Turning to our cash flow and balance sheet. Year-to-date cash flow from operating activities was $686 million. Capital expenditures in the quarter were approximately $35 million. At the end of the quarter, we had cash of $1 billion and debt of $2.9 billion. We returned $170 million to shareholders in the third quarter, consisting of $95 million in dividends and $75 million in share repurchases. The outstanding share count at quarter end was 404 million shares, and we had $558 million remaining under our share repurchase authorization, which expires at the end of this year. Moving to our outlook for 2021. Today, we provided an updated financial outlook reflecting recent business trends in macroeconomic conditions. As Hikmet mentioned earlier, the pace of recovery from COVID-19 has created a fluid environment. For example, GDP expectations were revised downwards in recent months and labor markets have not fully recovered.

Our outlook assumes that the macroeconomic environment will be similar to what we experienced in the third quarter, while our previous outlook assumed a moderate improvement. We now expect full year 2021 GAAP revenue growth will be approximately 150 basis points higher than constant currency revenue growth. Our previous GAAP revenue outlook calls for a mid- to high single-digit increase. Constant currency revenue, excluding the impact of Argentina inflation is expected to grow between 3% and 4%, while our previous outlook call for a mid-single-digit increase. Our operating margin outlook has not changed, with the full year GAAP operating margin expected to be approximately 21%, while the adjusted operating margin is expected to be approximately 21.5%.

Compared to the third quarter, fourth quarter margins are expected to be closer to the full year average as we anticipated from incremental investment in lower revenue from Business Solutions in the fourth quarter, which benefited from seasonal factors like tuition payments. We continue to anticipate our effective tax rate will be in the mid-teens range on a GAAP and adjusted basis. GAAP EPS for the year is expected to be in the range of $1.80 to $1.85 compared to the previous outlook of $1.82 to $1.92, reflecting the tax impact related to the pending sale of Business Solutions. We are also raising the bottom end of the range for adjusted EPS with a new range of $2.05 to $2.10, which compares to $2 to $2.10 in our previous outlook. To summarize, we're pleased with the progress we continue to make toward achieving our long-term strategic objectives. Thank you for joining our call today.

And operator, we are now ready to take questions.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from Tien-Tsin Huang with JPMorgan. Please go ahead.

Tien-Tsin Huang -- JPMorgan -- Analyst

Okay. Thank you for the question and very good to connect with you all.

Hikmet Ersek -- Chief Executive Officer

Hi Tien-Tsin.

Tien-Tsin Huang -- JPMorgan -- Analyst

Hi Hikmet, Hi Rajesh.

Raj Agrawal -- Chief Financial Officer

Hey.

Tien-Tsin Huang -- JPMorgan -- Analyst

I'll kick it off testing on the retail impact that you talked about with labor and weaker migration. How broad based was that? Any callouts from a regional perspective? And is it more COVID related? Or it sounds like there's some national business with Cuba, anything from a competitive standpoint to note as well?

Hikmet Ersek -- Chief Executive Officer

Yes. Let me start on the -- obviously, macro environment has not been as supportive as we thought, right? We hope that after vaccination became widely available that in the U.S. and the Europe, the economy will be much better -- in a much better position. That impacted especially our Retail business. Our migrant customers have not been employed as we thought. And in fact, the labor market has normalized -- not normalized in the U.S. as we hoped. And the one example I can give you is that U.S. foreign-born employment still sits at 1.2 million people. So the U.S. foreign-born employment is 1.2 million people, which is Tien-Tsin, yes, it is like today, it was 2019. So this environment has been impacting our retail business. However, on the other side, we have seen very good performance in our digital business.

Our digital business has been performing very well and that drives definitely our C2C growth. I mean within the digital business, the account-to-account business has been extremely good performing. The people use their accounts and money and using our platform. So that has been a good factor on that. And then regionally, I would say that U.S. definitely has on Europe has an impact on our retail business. But digital-wise, all over a good growth, and that's going to continue, and I'm very optimistic. And as I said in my opening remarks, we are hitting the $1 billion. And I don't see any competitors who has a $1 billion revenue to report and growing that strong with a very great base, growing that strong. So that's very good. You want to add something, Raj?

Raj Agrawal -- Chief Financial Officer

Yes. Just, Tien-Tsin, the macro factors relate primarily to impacts to our retail consumer, as you noted. And North America is related a lot to U.S. to Cuba because we shut that down late last year. So that's getting to be annualized soon. And then U.S. DMT continued to decline. Latin America was probably the one brighter spot that continued to recover a little bit from last year because Latin America has less relative digital business growth. And so last year, it was hit harder and this year, it's recovering more because of that factor. And then there are a lot of other nuances throughout the rest of the world. But it is generally impacting our retail consumer more than anything else.

Tien-Tsin Huang -- JPMorgan -- Analyst

Great. Maybe just my follow-up. I want to ask on digital banking trials with WU Plus here. What are you looking to learn from the pilots in these two countries in the second quarter? And then, if you have it, what you see? How quickly can you expand on this in the two countries and even in some other countries as well?

Hikmet Ersek -- Chief Executive Officer

Great question. As you know, our digital banking is based on our expanding our ecosystem. We have one big unit, it's called westernunion.com, which acquires millions of customers globally and have direct relationship. We are building on that digital banking, and we use our existing assets, our brand, our global platform, but also our internal bank -- Western Union International Bank license, which allows us to do banking services to our customers and our customers told us, and we are launching services in Germany and Romania. And with that, also, we have launched -- as I mentioned earlier, we launched this morning, you saw that probably press release, WU Shop. WU Shop allows customers to shop online in Germany and Austria and send gift also send money and also gifts to their loved ones, cross-border, it's really unique.

And the customers were asking us and in the future, maybe also buying of airline ticket and really shopping online with our -- for our customers. And we're going to launch that in the U.S., very soon, within this quarter. And we are also expanding definitely digital banking activities globally. And we have this capabilities that not many companies have the unique customer, which is the migrant customer are asking for additional services. I'm very excited about that. And I'll give you more -- once the products are launched, I'll give you more figures and more data, how successful that is, but I'm very excited about that.

Tien-Tsin Huang -- JPMorgan -- Analyst

Yes. Excited to learn more about it. So appreciate it.

Hikmet Ersek -- Chief Executive Officer

Thank you, Tien-Tsin

Operator

The next question comes from Jason Kupferberg of Bank of America. Please go ahead.

Jason Kupferberg -- Bank of America -- Analyst

Thanks, guys. Just wanted to start by building on Tien-Tsin's question. Just regarding the migrant worker employment dynamic. I mean when do you think that starts to turn around? What do you think it takes for that to turn around? And why do you think it's not affecting your digital business, just the retail?

Hikmet Ersek -- Chief Executive Officer

As you know, that digital business customer and migrant retail customers are different segments. And we could also say that over years, I was repeating that these digital customers are new incremental to our brand, and it's not cannibalizing our retail business. We told that digital customers by nature has to have a bank account or credit card to send money globally. On the receive side, the most of the transactions are picked up in retail by cash, but one of the fastest-growing part is the account payout. So this is great. That shows our capabilities as omnichannel and omnichannel environment. So the impact, Jason, to your question why retail, most of the customers have been impacted are probably the cash customers. They want to go and do cash transactions. Some facts, obviously, the global GDP, as you know, was brought down from 7% in the last -- a few months ago to 5%, around 5%; in the U.S., even from 7% to 2% growth.

So these are definitely impacting our customers, our customers' behavior. And Western Union has been always the first indicator of economical environment, and that's probably our customers feel the first. And that's, I guess, has a big impact to our retail customers. And the digital customers have more solid income, have money on their accounts, and they are continuing to support the customers. Now saying that, as you know, this quarter, it was down the retail but that doesn't mean that it will be done. It's a very solid business, a very resilient business. The customers are doing everything still to support their loved one. I'm very optimistic. We are expanding our retail business. We today announced that we crossed approximately 600,000 locations. We are expanding and more and more -- gaining more and more agents.

Jason Kupferberg -- Bank of America -- Analyst

Okay. So if we're trying to hone in on the potential performance of the digital business in Q4, I'm just looking at last year, I think it was up around 4% quarter-over-quarter. I would assume there's probably some seasonal tailwinds around the holidays. Is that kind of a decent proxy for how Q4 digital growth could come in this year?

Raj Agrawal -- Chief Financial Officer

Jason, I'd just say that again. You're comparing it to last year's Q4?

Jason Kupferberg -- Bank of America -- Analyst

I'm saying Q4 '20 versus Q3 '20 was up around 4%. So if we take the 4%...

Raj Agrawal -- Chief Financial Officer

Yes. It's hard to compare growth rates and sequential impacts from last year because there was so much happening last year. And we -- and when you look at the overall growth this quarter, with a mid-teens growth, total digital and then low double digits for wu.com, that's not necessarily what the business will do in the future. I think it just depends on all of the marketing activities, the platform upgrades that we're doing, the features and functionality and then the distribution that we have around the world that we have a lot in the pipeline. So all of those are going to have an impact on where the business ultimately goes. Q3 to Q2 was relatively flat from an overall revenue standpoint. And in our outlook, we have not assumed something too significant for this year. But in terms of longer term, we continue to see good opportunities for growth for the digital business.

Jason Kupferberg -- Bank of America -- Analyst

Okay. Just last one, real quick, a housekeeping thing. Just you bumped up the midpoint of the EPS guidance a little bit, even though you lowered revenue and maintained margins and tax. Is that just a function of buybacks and your share count?

Raj Agrawal -- Chief Financial Officer

No. We have ranges for each of these line items when we come into the year, and they don't always all move in unison. So we have a number of factors that can impact revenue or expenses or level of investments. We're obviously saving some money this year with good expense management. So that's helping us achieve the overall margin goals and bottom line and EPS levels even while revenue is not being hit at the original objective. So -- and as we typically move through the course of the year, Jason, we will tighten those ranges based on what we're seeing. So it's nothing really more than that.

Hikmet Ersek -- Chief Executive Officer

And we feel comfortable with our investments. We continue to invest heavily in technology, into innovation. We are really expanding on that. So we were comfortable. Raj and I talked about that we feel really comfortable with our guidance on the EPS and on the margin guidance. Also, obviously, on the expanded revenue guidance, now with the new revenue guidance also, obviously. Operator, can we have another question?

Operator

Yes. The next question comes from Darrin Peller with Wolfe Research. Please go ahead.

Darrin Peller -- Wolfe Research -- Analyst

Thanks, guys. While there's been a lot of progress made on the...

Raj Agrawal -- Chief Financial Officer

Hey, Darrin.

Darrin Peller -- Wolfe Research -- Analyst

While there's been a lot of progress made on the wu.com business, obviously, and as you mentioned, what's now become the largest digital money transfer business. When you consider the sequential change, just to follow up on that a bit, again, it was pretty flat from a revenue standpoint from last quarter to this quarter. And I think you have average users, you said up 8%. So can you help us understand what kind of dynamic we can expect over user growth for wu.com going forward? It was obviously much higher. It's off a larger base now. But we haven't heard an update to that $9 million metric in a while. And I'm just curious what you think you can do? What kind of growth normalize into '22? And what tactics you're going to be taking from a marketing standpoint to execute on that kind of user growth going forward?

Raj Agrawal -- Chief Financial Officer

Yes. I mean a lot has happened, Darrin, over the last couple of years. At the end of -- if I give you a little bit of history, I'm sure you recall at the end of 2019, we had anticipated that the digital business, which was primarily wu.com back then could grow in the 20% range for the following two or three years or so. And I think that's what we said at our Investor Day last -- that fall. And last year, it doubled the growth. So it was almost 40% revenue growth. This year, it's probably going to be in line with what we would have expected in a normal year. And now we're going to be sitting at over $1 billion in size and on a much larger customer base, too. We do believe that there will continue to be good growth in those various metrics.

But a lot of it will depend on the level of traction we get on the digital partnership side. So that's going to be a key component. And then wu.com, the opportunity is really there. The market growth will come from the digital part of the remittance market, and we continue to have a very strong position there, and we'll continue to invest in marketing for customer acquisition, and we're also spending a fair amount on the technology side to continue to upgrade our -- the features and functionality, which ultimately increases the retention levels of the customers we have. So we feel good about the business and the continued customer growth and traction of the digital business.

Hikmet Ersek -- Chief Executive Officer

Yes. Just turning on that note, I really -- I am very happy with the digital business actually. While the economic conditions and industry trends has been impacted not only us or the overall industry, and you heard that from other calls also, I think our digital business has been performing pretty well, and it's extremely resilient, and it's growing. And that's from our base. And think about that westernunion.com, it's in 75 countries, but only in 75 countries. And maybe 50 of them are pretty new, launch pretty new and really getting new customer segments. So there's a really huge way to go forward with the westernunion.com connecting the 200 countries.

So there is a customer acquisition here. And with our -- also with our new ecosystem strategy, making customers more sticky, lifetime customers. That's what we think that. And also the other one is that our investment on stc Bank, which is basically westernunion.com strategy in Saudi Arabia. They do their digital banking, and we are part of it. These things will continue, and they're optimistic. But to your question, what happened in Q3? A little bit slowdown has been also impacted by economic growth.

Raj Agrawal -- Chief Financial Officer

Well, it's a little grow over from last year. Last year was so high. And Darrin, for the full year, the monthly active average users, the annualized number will be similar to where the revenue growth will be for wu.com. So the quarterly growth was only 8%, and that just reflects the much higher base of customers that we had in last year's third quarter, but the overall customer level is much higher than it has been, obviously.

Darrin Peller -- Wolfe Research -- Analyst

Yes. And then -- OK, that's helpful. And then engagement levels on these users are obviously notably higher than retail. I'm not sure if you've ever disclosed, it would be great to hear. If you can give us a sense of the number of transactions that you would see on wu.com users versus more traditional. And then really adding on to that, what that could turn into with this WU Shop initiative and the WU Plus initiative? And what timing you expect around WU Shop? I'm just curious to hear a little more around your strategy on that, that initiative?

Hikmet Ersek -- Chief Executive Officer

I think, first of all, we don't give -- gave these numbers yet, but that's a good thing that long time, we should maybe disclose more on the -- especially when we talk about our ecosystem, how that can be -- the customer loyalty, how long we keep the customers, how many transactions they do more than different than the retail transactions. By nature at westernunion.com, you have to be a lifetime customer or a longtime customer because you have to have an account. At the retail customers, you work obviously through a retail location, make a transaction and wu.com customers by digital customers by nature are longer customers and we should maybe in the future, disclose that. Regarding strategy, what we do with the ecosystem is definitely something that we will more give a highlight in future earnings releases. And I'm excited as we disclosed that first time in our Investor's Day end of 2019, we are really executing what we said there. And that's an exciting opportunity for Western Union besides doing only money transfer also really satisfying the needs of the migrant customers long term and their loved ones in back home.

Operator

Was there a follow-up, Mr. Peller?

Darrin Peller -- Wolfe Research -- Analyst

It was really about WU Shop and the opportunity there in terms of investment, what you'd expect to be in about, let's call it, a year from now around that initiative?

Hikmet Ersek -- Chief Executive Officer

Yes.

Raj Agrawal -- Chief Financial Officer

We'll have -- we're just launching it now. WU Shop and we're doing the financial services test this quarter as well. So again, hopefully, we will have more feedback after the first quarter or so of next year. We just need to see the level of traction, but it really is a seamless way to shop online when you...

Hikmet Ersek -- Chief Executive Officer

I think there are also a link on the presentation where you can go to WU Shop and look at that. But it's really shopping and sending you -- from home and sending your gift cross-border. And there are about 12,000 retail shops there, which you can send not only money but also send goods there and get cash back, which is a quite attractive way of keeping customers longer and building this ecosystem for a longer time, like a bank, digital banking.

Darrin Peller -- Wolfe Research -- Analyst

Okay. Got it.

Hikmet Ersek -- Chief Executive Officer

Thanks, Darrin. See you later. Operator, can we have a next question, please. Operator? There is any operator?

Raj Agrawal -- Chief Financial Officer

Guys, bear with us one moment.

Hikmet Ersek -- Chief Executive Officer

Bear with us. I think there are some technical issues with the operator. We are trying to reach him to get the next question.

Operator

Hello everyone, this is the operator. I will take over the question-and-answer session at this time. I do apologize. And our next question today comes from David Togut with Evercore ISI. Please go ahead

David Togut -- Evercore ISI -- Analyst

Thank you. Good afternoon.

Raj Agrawal -- Chief Financial Officer

Hey, David.

David Togut -- Evercore ISI -- Analyst

Hey, Raj. How are you?

Raj Agrawal -- Chief Financial Officer

Good.

David Togut -- Evercore ISI -- Analyst

Could you walk through the price mix within C2C both in North America and EU and CIS? For example, it looks like you have negative price mix in EU and CIS, with transactions up 3%, GAAP revenue down 3%. But then in North America, it looks like you have some positive price mix with transactions down 5% and revenue down 2%. Is that just the mix of wu.com? Or is there actual some change in pricing occurring in either region?

Raj Agrawal -- Chief Financial Officer

Yes. There are different things happening in different regions. In Europe and CIS as well as Middle East, Africa and South Asia, the digital white label business is causing most of the transaction in revenue spread. So that -- in those two regions, that's the main factor. In North America, it is just some price optimization that we're doing and primarily in our U.S. domestic money transfer business. And then Latin America has some positive business mix in it where the business continues to recover, but we're getting a lot of good high principle growth within the Latin America region. And so that's causing the bigger spread between transactions and revenue.

And then APAC just continues to recover from some of the COVID-related impacts from last year. And I would just say, overall, when you look at our business on a global macro basis, the pricing environment continues to be quite stable. We have 20,000 corridors, David, as you may know, and for our country pairs, and we're always moving pricing up and down in those corridors. But when you add it all up at a macro level, we don't seem to see too much in the way of pricing pressure. And then we're also moving pricing within our channels. And so hopefully, that gives you a little bit of color on what's happening around the world.

David Togut -- Evercore ISI -- Analyst

That's helpful. Could you just expand upon your comments around price optimization in U.S. domestic price cut you took?

Raj Agrawal -- Chief Financial Officer

Well, it's not necessarily a price cut. Look, the U.S. domestic money transfer business has been in decline for several years. It's now about 4% of total revenues and we don't expect that's going to turn around. As you've heard us say before, that's not a business where we're going to be competitive long term, the U.S. domestic business. And so we are trying to maximize the cash flow opportunity there. The one caveat I would give to it is that we have just launched the relationship with Walmart, and we're seeing some good traction there in our domestic business. So we'll just see how that plays out, but more broadly throughout the rest of the U.S., that's really what I was getting at.

Operator

The next question comes from Bryan Keane of Deutsche Bank. Please go ahead.

Bryan Keane -- Deutsche Bank -- Analyst

Hi guys. I just had a couple of questions or clarifications. Raj, the digital revenues, was that in line with expectations in the quarter? Or was that also impacted by COVID? Because I guess the growth rate of 15% is below the kind of the 20% outlook, yet there are some moving pieces there?

Raj Agrawal -- Chief Financial Officer

Yes. I would say it's generally what we expected, Bryan. So not really impacted by COVID, maybe on the margin, but we're still very much on track to exceed $1 billion of total digital revenue for the year. And we achieved the same level of revenue that we had, which is a record high in the second quarter at $266 million of revenue. So it's very much in line with what we had expected and keeps us on track to hit or exceed $1 billion of revenue this year.

Bryan Keane -- Deutsche Bank -- Analyst

And is 20% the right growth rate to think about going forward in the digital business?

Raj Agrawal -- Chief Financial Officer

Yes, it's hard to tell you what to expect for next year or in future years because we didn't expect to be at this level of revenue this year. We're going to be comfortably above $1 billion for this year. So we'll just have to see where we exit. But again, there are a lot of factors. So if we think about wu.com, the things that we can drive include improving the features and functionality on our platforms to drive better retention levels of our customers. We're also continuing to invest in marketing, which is the main customer acquisition vehicle we have and that's been going quite well. And then lastly, we have a very heavy focus on distribution. So more account funding, more account payout, more mobile capabilities. So those things will help to drive the wu.com business. And then for a digital white label business, it's all about signing more digital partners around the world, and we'll have more that will go live in the next few months that we haven't announced yet, but we have signed. And so all of those will come into play on total digital, but look, the $1 billion base we have gives us a good platform for future growth.

Hikmet Ersek -- Chief Executive Officer

I think, Bryan, also maybe your question is also how are you doing against the competition, all these things. I will say that we are doing pretty well. If you -- generally, the market has been -- obviously, industry has been impacted by Q3 with the economic environment. But our digital business has been performing very well and comparing with the competition also very well. Just to give you some general principal amount, the World Bank tells that we're going to -- the world remittance market will grow about 2%. And we believe we are gaining market share because our principle is growing by 19%. So within that, obviously, mainly driven by digital business. So I would say that our digital business is performing very well. As Raj said, is it 20%, 15% or 25%? I can't tell you now because we had an excellent year on digital business, and we are having an excellent year in digital business. And we're going to reset what -- where do we go from $1 billion? Is it going to be $2 billion soon or $3 billion soon. So let's see, that's going to -- that guidance we will give in February.

Operator

The next question comes from James Faucette with Morgan Stanley. Please go ahead.

James Faucette -- Morgan Stanley -- Analyst

Thank you very much. I appreciate all the details you've given on the business dynamics. I want to turn really quickly to the Business Solutions sale and as that progresses and as long as the clean or finishes the way you expect, I'm wondering if you can talk about the priorities around your use of proceeds there, particularly capital allocations. I know it's early, but just thinking about how you're planning to align business priorities with that contribution.

Hikmet Ersek -- Chief Executive Officer

Yes. I think, first of all, as I mentioned earlier, we are happy with our strategic approaches and within that, also with Business Solutions divestiture. We assume that we're going to have the first closing by end of first quarter. And the proceeds -- all the proceeds will be transferred by -- when we close the first one. There is a second part also, but that doesn't impact the proceeds. So the second part will be probably later given the regulatory environment in Europe. So the business solution has been performing very well this quarter. One of the reason is that, first of all, to grow over. Secondly is that the universities opened again. The people can go back to the universities, can study cross-border after COVID. And so the tuition payments has been good for us, and that has been probably one of the biggest impact on the Business Solutions growth. So maybe on the capital allocation question, James, Raj, do you want to take that?

Raj Agrawal -- Chief Financial Officer

I can. Yes, sure. James, we'll have, obviously, more specific color once we close the transaction, which, as Hikmet said, will be sometime in the first quarter. But whether it's our ongoing cash flow, operating cash flow or proceeds from the transaction, which are expected to be about $800 million net of taxes, we still have not changed our capital priority. So that is to invest in the business to drive organic growth and expansion. Secondly, we pay a very healthy dividend. This year, it will be almost $400 million by the time we're done with this year. And then third, we would like to focus on the right kind of acquisition opportunity. And it doesn't necessarily have to be a direct revenue-generating acquisition. It could be a technology or capability of some sort or something that might help our ecosystem strategy. And then to the extent that we have excess cash left over, we'll buy back stock. And that priority order hasn't really changed, and that's the way we think about whether it's the proceeds from the wood sale or our ongoing operating cash flow, that's how we think about it.

James Faucette -- Morgan Stanley -- Analyst

I appreciate that. And then I wanted to ask quickly because I haven't heard it mentioned, but I know that we're continuing to expect that you're continuing to make progress on some of your trials around broader suite of financial services in Europe. Just can we get an update on kind of what's happening there and the time line that we should start to monitor things more closely, etc.?

Hikmet Ersek -- Chief Executive Officer

Sure. I'm very pleased that in such a short time, probably, as you know, digital banks need six to 10 years to launch a product. We've been launching products very -- in a very short part because one of the biggest advantages we have, we have our platform, then we have our brands and we have a bank in Europe with a bank license, which we have to report to regulators, everything. As you know, finance -- launching products with financial service is not easy. So we are launching this year prepaid card, multicurrency cards, really, talking to the customers with their needs and really having a consumer financial service products for our customers.

And that -- our bank allows that and really building a account relationship, not a transactional relationship, but account relationship with our customers for their financial needs. And that's probably a big advantage that we have compared with other traditional money transfer companies. Really, Western Union is moving to a more multiproduct, multiservice companies with close relationships. And to do so, we have all the fundamentals, and I'm very excited, and we're going to obviously give more information to you once we launch the first product and their results.

Operator

The next question comes from Ashwin Shirvaikar of Citi. Please go ahead.

Hikmet Ersek -- Chief Executive Officer

Hi Ashwin.

Ashwin Shirvaikar -- Citi -- Analyst

Hi how are you?

Hikmet Ersek -- Chief Executive Officer

Good. How are you?

Ashwin Shirvaikar -- Citi -- Analyst

Good. So first question, the Business Solutions rev growth, the benefit from education. How much of it was from sort of reopening the very -- which is a fact that there are actually students coming into universities this year...

Raj Agrawal -- Chief Financial Officer

I'm sorry, Ashwin, do you mind just maybe getting closer to microphone you're a little bit jumbled. I can't hear you clearly.

Ashwin Shirvaikar -- Citi -- Analyst

Yes. Is this better?

Raj Agrawal -- Chief Financial Officer

Yes.

Ashwin Shirvaikar -- Citi -- Analyst

Okay, cool. Now the question is with regards to Business Solutions revenue growth. How much of the growth rate this year or this quarter was because of reopening versus any kind of share gain?

Raj Agrawal -- Chief Financial Officer

Well, the -- I guess the way I would answer it is that it's slightly above where it was in 2019 from an absolute revenue standpoint. And then it's sequentially better, obviously, as well. So I guess that there's some additional revenue there. But I think the primary driver is really about the seasonality around the education or tuition payments. And so sequentially, it was a little bit better and a little bit higher than 2019 levels. Correct me if I'm wrong on that. That's why -- and then I think -- so it's a little bit of both, but I would say it's mostly related to the growover impact and the seasonality of the education business.

Ashwin Shirvaikar -- Citi -- Analyst

Understood. And then as far as the digital bank strategy is concerned, should we be looking for almost a country-by-country approach, like, you mentioned STC Pay -- or is it a broader more global? Are you trying to build components that travel better?

Hikmet Ersek -- Chief Executive Officer

So it's definitely -- starting with Germany and Romania, you'll see announcements soon in a few countries, additional countries. And obviously, we are testing with two big countries, which are Germany on a send country, migrants in Romania more on the receive side to understanding the needs, to adapting the products and it's definitely a global approach. It's not a one part. We, as a global company, look always for global opportunities, and we really want to launch that globally. But obviously, first move will be in Europe, and we are going to expand in Europe to other countries and taking to obviously to U.S. and other countries soon.

Operator

The next question comes from Jamie Friedman with Susquehanna. Please go ahead.

Jamie Friedman -- Susquehanna -- Analyst

Hikmet, in your prepared remarks, you had mentioned that you're integrating the network for future use in digital currencies. That sounded important. So I was wondering if you could elaborate on that.

Hikmet Ersek -- Chief Executive Officer

Yes, sure. Obviously, our platform is allowing us to have any currencies, right? And that's unique. We are in 200 countries. We can take any currency to translate to any currency and settle in that, make the compliance programs, know your customer, and payouts and probably the one of the biggest advantages is that we can also translate the digital currency to Fiat currencies in 130 currencies. So the biggest question on the digital currency, digital currency is such a big word. It's a cryptocurrency or essentially bank issued currency or bitcoin, it's the volatility of sometimes of the coin and the use case is for consumers. And we are looking at that. We are really involved on several discussions.

And for us, digital currency once is regulated once it's really the use case it's like taking another currency and settle in another currency. So we feel very comfortable that our platform can do that. Once we feel comfortable and have the use cases, we will definitely start. And many digital currency companies is also approaching us because they know our capabilities. They understand that we are close to the consumers. We can do both Fiat current and digital currency. That's something very exciting.

Raj Agrawal -- Chief Financial Officer

I mean if you -- Jamie, if you just think about the primary use case in our business, if our customers are sending $200 or $300 at a time, their primary goal is get the money to their recipient as fast as possible, get it there efficiently, get it there with the least amount of time and with transparency. And that's the service we already provide today, right? But if there was certainly another use case or if there was a need to do additional conversions or additional steps, I don't think most of our customers are thinking about cryptocurrency or digital currency in that way. We have the ability to settle in 130 currencies today with consumers. If we have a desire by consumers to do more, we can certainly add to it. But that's not really what they're thinking about. And if you move money from an account to an account in our business, let's say, it's about a 1% yield, that's a $2 or $3 transaction. So it's very efficient. It's very fast. It gets money to the recipient, and that's the end of job for what most consumers are looking for. And we'll see what other applications there are, but that was the main point of the comment.

Brad Windbigler -- Head Of Treasury And Investor Relations

And operator, we have time for one more question.

Operator

And that will come from Vasu Govil with KBW. Please go ahead.

Vasu Govil -- KBW -- Analyst

Hi. Thank you for squeezing me in here. I just had two quick ones. One, I guess, first on just October trends. I know you guys said you're kind of assuming the same 3Q type of trends continuing into the fourth quarter in your guide. But anything on -- particularly in October, but you've seen, have you seen any improvement or trends have been pretty much the same?

Raj Agrawal -- Chief Financial Officer

Yes. We won't comment on October trends, but we were comfortable with the outlook that we're giving today. And I expect that that's the way it's going to turn out. That's why we gave the outlook that we gave today.

Vasu Govil -- KBW -- Analyst

Got it. And I guess just the next quick one I had was on Walmart. I know you called that out earlier, Raj. Any color on how that channel is performing relative to expectations? And I don't know if you can provide any quantification as to how much of a tailwind that might have been in the quarter?

Hikmet Ersek -- Chief Executive Officer

Well, I think, let me start. On Walmart, you can finish it. Well, we are very happy with Walmart, right? We enrolled 4,700 locations in the U.S. As you recall, we already were active with Walmart in Canada and in Mexico. And the performance is picking up and good performance, and we start our marketing activities. If you have time to go to Walmart location, you will see Western Union everywhere there. And I think [Indecipherable] associates has been trained and many customers start to use us through many corridors, and we are gaining customers from Walmart to our network. So that's great.

Raj Agrawal -- Chief Financial Officer

Yes. The business has continued to gain traction every month that we've launched it. And we think it's going to be a bigger contributor next year, and we're doing a lot of promotional and other marketing-type of activity to create the awareness. And so we're pleased with it.

Hikmet Ersek -- Chief Executive Officer

Yes. Thank you. I think we had the last call -- last question, Brad, for this call. Thank you for joining this call. I'm looking forward -- we are looking forward to the next call in February. And we are pleased with our resilience of the business, and we are very proud of Western Union. Thank you for calling and dialing in. Have a good day.

Raj Agrawal -- Chief Financial Officer

Thank you, everyone.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

Brad Windbigler -- Head Of Treasury And Investor Relations

Hikmet Ersek -- Chief Executive Officer

Raj Agrawal -- Chief Financial Officer

Tien-Tsin Huang -- JPMorgan -- Analyst

Jason Kupferberg -- Bank of America -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

David Togut -- Evercore ISI -- Analyst

Bryan Keane -- Deutsche Bank -- Analyst

James Faucette -- Morgan Stanley -- Analyst

Ashwin Shirvaikar -- Citi -- Analyst

Jamie Friedman -- Susquehanna -- Analyst

Vasu Govil -- KBW -- Analyst

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