The Western Union Company 2026 Q2 Earnings Call

On today's call, we will discuss the company's second quarter results and our 2026 full-year outlook. 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. Joining me on the call today is our CEO, Devin McGranahan, and our CFO, Matt Cagwin. Today's call is being recorded. 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 2025 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.

Where possible, we have reconciled those items to the most comparable GAAP measures in our earnings release attached to our Form 8-K, as well as on our website, westernunion.com, under the Investor Relations section. I will now turn the call over to our Chief Executive Officer, Devin McGranahan.

Good afternoon. Welcome to Western Union second quarter 2026 financial results conference call. In the second quarter, we continued to face significant margin pressures due to the ongoing slowdown in the retail business in the Americas, higher agent commissions, and the continued acceleration of our digital payout to account business. The quarter came in $0.06 better than Q1, having eliminated many of the one-time effects we saw in the first quarter. The accelerated shift from cash payout transactions with higher revenue per transaction, RPT, and higher contribution profit per transaction, CPPT, to pure digital transactions continues to weigh on profitability. On a more positive note, despite the strong macro headwinds, our strategy and our significant geographic diversification enabled us to report revenue of $1 billion. On an adjusted basis, this was a decline of only 1% year-over-year.

Consumer Money Transfer transactions grew at 3% in the quarter, which was a 300-basis-point improvement from Q1, a 600-basis-point improvement year-over-year, and the highest transaction growth rate since the second quarter of 2024. We continue to see quarter-over-quarter improvements as we lap the worst of last year. For example, U.S. to Mexico declined a little over 3% on a transaction basis in the quarter, a nearly 1,000-point improvement year-over-year. Overall, U.S. retail continued to be mid-teens negative on a transaction basis in the second quarter, well below our expectations. While overall global transaction growth has improved significantly, it is important to know that it comes from lower contribution profit per transaction, which is putting pressure on our margins. Adjusted earnings per share came in at $0.31 in the quarter, compared to $0.42 this quarter a year ago.

This is below our expectations and is driven by lower profitability in our Americas retail business and lower profitability in our Middle East business, as volumes there continue to shift rapidly from our legacy partners in the region to newer digital-only partners at lower RPTs and profitability. Our Branded Digital business continued to perform well, with transactions increasing by 25% this quarter and adjusted revenue by 6%. Transaction growth continues to accelerate, the revenue growth is being muted by strong growth in lower RPT corridors and a significant increase in digital payout to account, which saw 55% growth in the quarter. As I mentioned in previous calls, our new customer acquisition economics remain challenged in the quarter, which impacted the overall revenue growth and profitability of our digital business.

We continue to roll out our Beyond Digital platform, which I believe will enable better customer experience, improve our ability to market at a corridor level, and potentially reduce the magnitude of needed new offer incentives. In Consumer Services, adjusted revenue was up 12% in the quarter, driven by growth in our bill pay business, as well as continued growth in Travel Money. Our financial results in this quarter came in below our expectations for the second quarter in a row. This is not acceptable, we are not satisfied with the current operating performance and will be implementing significant changes as a result. The external macro factors over the past 12 months have undoubtedly accelerated the underlying trends in the business, we recognize that in the near term, these trends are likely to continue at elevated levels.

We have been navigating this mix shift away from payout to cash over the past several years, as well as the move from retail to digital through cost savings initiatives and the reallocation of investments. The impact of ongoing changes in immigration in the Americas has accelerated those dynamics, we must now more aggressively change our cost base to reflect the reality of a future with continued pressure on CPPT. Over the past 12 months, we have seen the percentage of payout to account and payout to wallet transactions grow by 25%. This is an important trend that will likely continue to cause ongoing margin headwinds unless we vigilantly reduce our fixed cost base, lower our account payout costs, increase our ability to cost effectively drive digital growth.

We have spent much of the last eight weeks evaluating what is working across these three dimensions and what is not. That process has reinforced our belief that the long-term fundamentals of our business remain intact. Our brand, customer relationships, market position, scale, and digital capabilities continue to provide a strong foundation upon which to build. However, a strong foundation alone is no longer enough. We must accelerate the transformation of our operating model to enable us to maintain our ability to invest in our next-generation digital initiatives while simultaneously, significantly lowering our ongoing operating costs. The program we have launched is called Beyond Efficiency. It has five key program elements, and we will be targeting a run rate operating cost reduction of $50 million by the end of the year.

The five key program pillars include the first pillar, accelerate the dual track strategy by reducing redundancy and streamlining processes that do not align with the Beyond strategy. As a 175-year-old company, we have a lot in the garage. Organizations build up over time, and what were once new ideas or areas investment are now ongoing operating costs with limited or no contribution to the Beyond strategy. For example, as we move to the Beyond digital framework, we have made the decision to close down our existing digital wallets in Europe, saving the company a run rate of $6 million to $8 million. We anticipate launching our Beyond digital platform to replace those in Europe by the end of the year. The second pillar is to reduce discretionary operations and technology work by 20% that is not directly tied to growing digital.

We are targeting a 20% reduction in discretionary operations and technology capacity by the end of the year, forcing a prioritization that will cause only the most impactful initiatives to get work done. The third pillar is to rapidly adopt AI to drive automation and reduce manual work, given our legacy system limitations. We have ramped up our adoption of AI and other automation platforms significantly over the past six months, and we see meaningful opportunity to eliminate manual work and reduce the friction that results from our large geographically dispersed and highly regulated business. The fourth pillar is to move to a more aligned operating model. As part of our Beyond Efficiency program, we are looking to align people in work closer to the region they support. This will require us to localize what today are distributed global functions.

For example, we have been moving agent onboarding for the Asia-Pacific region from Lithuania and Costa Rica to our operating center in Manila. This will improve time zone and geographical alignment and reduce unit labor costs. We anticipate this will improve on all three dimensions of cost, quality, and speed. The fifth pillar is to reduce the operating costs of moving money. In a world that is rapidly going to digital payouts, we must reduce the cost of capital that we have floating around the system, lower payout costs, improve FX rate competitiveness, and accelerate real-time settlement through our own digital currency, USDPT. These initiatives are focused on creating a leaner organization while maintaining our ability to invest in the areas that matter most strategically. Importantly, this is not a short-term exercise designed solely to reduce near-term costs.

Rather, it is a structural effort to improve how we operate and to position the company for stronger, more sustainable profitability in the years ahead. We understand that our investors expect tangible evidence that these actions are producing results. While meaningful transformation takes time, our expectation is that the combination of improving growth and enhanced cost discipline will strengthen margins, improve profitability, and increase returns over time. Our objective remains straightforward. Generate consistent growth, improve operating profitability, strengthen free cash flow generation, and create long-term shareholder value. I look forward to updating you on the progress of this program in the coming quarters. Now, switching briefly to the macro. As you know, remittances in the Americas have faced meaningful pressure that began in late 2024, driven by the changes in immigration policy.

While growth rates have improved meaningfully from the summer of 2025 lows and continue to improve with U.S. to Mexico, for example, revenue growth rates improving 500 basis points sequentially compared to the first quarter, retail continues to underperform relative to digital, and that dynamic continues to weigh on the profitability of our Americas businesses. As we have discussed, the growth in retail business is almost always dependent on new migration. When immigrants come to a new country, most frequently they transact in retail out of necessity, given cultural and language issues, lack of access to digital funding, and often heavy cash remuneration. When migration goes negative, like we have seen in the U.S. and around parts of the Latin American region, it becomes difficult to replace customers that migrate to digital channels, find alternative options, or leave the country to return home.