Devin McGranahan
President and Chief Executive Officer at Western Union
Good afternoon, and welcome to Western Union's second quarter 2024 financial results conference call. Today, we reported another quarter of improving revenue growth, as we continue to implement our Evolve 2025 strategy focused on returning Western Union to a market competitive position. Over the last two years, we have been driving meaningful improvements in our customer and agent experiences and this quarter's results demonstrate that our efforts are working.
Consumer money transfer transactions grew at 5% in the quarter excluding Iraq, a continuation of the mid-single digit trends we have seen for the last four quarters. This continued performance on transaction growth highlights the durability of the improvements we have made. For context, excluding the COVID grow over period, this is the first time we have seen four consecutive quarters of mid-single digit transaction growth since 2018. We continue to believe that the consistent and sustainable transaction growth is the best indicator of the future health of our business.
In addition to maintaining our transaction momentum, this quarter we continued to make progress in reducing the spread between transaction growth and revenue growth. As we have previously discussed, closing this gap towards our long-term goal of 200 basis points to 300 basis points is a priority. For total consumer money transfer, we improved the spread between transaction growth and adjusted revenue growth by approximately 100 basis points compared to the first quarter, when excluding Iraq with our retail business leading the improvement.
The highlight of the quarter was achieving positive adjusted revenue growth for the first time since 2021, when excluding Iraq. This milestone gives us confidence that we are well on our way to returning the business to sustainable, profitable revenue growth, as we continue to report solid transaction trends in both our retail and our digital businesses, narrowing of the revenue to transaction spread and now double-digit revenue growth in our consumer services segment.
For the quarter, our revenue reached $1.70 billion reflecting a 7% decrease on an adjusted basis. Excluding Iraq, our adjusted revenue growth is positive in the second quarter for the first time since 2021. Earnings per share came in strong at $0.44 or down $0.07 relative to a year ago, which benefited meaningfully from higher revenue and operating profits from Iraq. Matt will discuss our financial results in more detail and provide an update on our 2024 outlook later in this call.
Now switching briefly to the macro. In late June, the World Bank released its semiannual migration and development brief, which provided a basis for estimating remittance volumes over the next couple of years and highlighted the fact that Western Union has begun gaining share again in 2023. Previously, we'd been losing market share to aggressive competitors in many parts of the world. With the implementation of our Evolve 2025 strategy, I am pleased to say we are now a market share gainer again. Considering our market share is in the low teens, we believe we still have significant room to continue to grow.
The World Bank's current economic outlook is for north of 3% principal growth for both this year and next year. And with our recent share gain performance, we believe we can continue to see principal growth of mid-single digits or better for Western Union excluding Iraq. Additionally, and contrary to the general market sentiment, the World Bank data would indicate pricing increased on an aggregate basis year-over-year. Even with increased growth in digital money transfer services, the global average cost to send remittances increased.
This is supportive of our belief that higher interest rates are forcing more rational competition and driving out marginal players, who may have been making uneconomic business decisions. So far this year, we have seen multiple players exit the remittance space. We have also seen others raise prices, as they strive for greater profitability and have seen several subscale players seek M&A opportunities in furtherance of increased scale and competitiveness.
As a point of reference in the second quarter, we saw net new independent agent activations in the U.S., up nearly 50% year-over-year. And as the year progresses, we expect to see a similar dynamic in other parts of the world, as smaller scale players are being forced to improve profitability or exit the market entirely.
In addition, banks still hold a substantial share of the global market and continue to provide the pricing umbrella under which all MTOs compete. With the World Bank estimating that the average cost to send a remittance through bank channels globally is roughly 12%. Additionally, banks can take multiple days or more to complete a transaction, while Western Union provides near real-time payouts to over 100 countries across the world.
Over the last two years, we have made significant progress on improving our retail operations, updating our digital platforms, elevating our customer and agent experiences, and enhancing our overall value proposition in the marketplace. This focus is leading to the improving revenue growth we reported today, and while we have made substantial progress, we do believe there is still meaningful opportunities to continue to improve.
As we discussed at our 2022 Investor Day, returning our digital business to double digit growth is a key priority of the organization and is essential to driving top line revenue growth for the overall company. Over the past year, we have been improving the effectiveness of our marketing by cost effectively increasing top of funnel traffic in our digital properties around the globe. These changes have begun to take hold, and as an example, in the final month of the quarter, we saw visits to our U.S. sites up 20% year-over-year.
In addition to driving traffic at the top of the funnel, we have also made meaningful progress in simplifying the journey, customer journey and improving our funnel conversion rates. As part of that process, we have simplified the branded digital customer profile creation, we have reduced the steps required for a customer to complete a transaction and have modernized our user interface and moved from a multi-page transaction funnel to a single page modular view. These improvements have led to a 13% increase in conversion rates and have contributed to the double-digit transaction growth that we achieved in the second quarter, even in the face of a much harder comparison, as we lapped our double-digit transaction growth in this quarter last year.
In addition to the improvements in traffic and conversion, we have also begun using machine learning algorithms to test our marketing messages, page layouts, and landing pages. These algorithms run multivariant testing in real-time and steer traffic to those variants with the highest degree of success, which should help drive continued improvements in coming quarters.
At the start of our efforts, there was some concern that we would only acquire price-sensitive bonus or offer seekers and thus dilute the quality of our existing customer acquisition efforts. I am very pleased to report that concern has not materialized. If we look at cohort level transactions per customer, we continue to see steady improvements in performance, with 2024 cohorts performing meaningfully better than 2023, and the 2023 cohorts performing meaningfully better than 2022. The charts on the screen represent three month and six month transactions per customer post-acquisition. We chose these specific charts to allow you to see the performance of our most recently acquired cohorts, but the 12-month charts show a very similar performance trend.
As I have discussed before, Australia has been at the center of our efforts to turn around our digital business. This is a market that is highly digitized and where we first launched our new next-generation digital app roughly two years ago. At the time of the launch, we were shrinking transactions at 5% and revenue was declining in the high single digits. Since the launch of our new platform, we have continued to iterate from a technological standpoint with the goal of creating a best-in-class user experience, and I feel, we are well on our way. Australia now has a 20-percentage point higher conversion than any other country in our APAC region, and it has some of the highest LTV to CAC ratios we see anywhere among our significant digital countries.
In the most recent quarter, Australia digital transactions grew at 30% with 14% revenue growth and we expect that spread to continue to close in the back half of the year, as we anniversary some of the pricing initiatives we launched with our new go-to market strategy in Australia in mid 2023. All of these changes have enabled us to achieve the 12-plus percent branded digital transaction growth for five quarters in a row, and I believe that they are durable and sustainable improvements. The good news is that as we continue to move forward, we believe we still have significant opportunity in many parts of the world for further improvements across our marketing effectiveness, funnel conversion, and customer retention.
Now onto retail. Last year, we introduced several point-of-sale improvements including Remember Me, Quick Resend and One-Step Refund to improve our customer and agent experiences. We had received feedback that our transactions took too long and required too much repeat information from our customers relative to our competitors.
I am happy to report that in the second quarter we processed almost 3 million transactions using Quick Resend, which is up roughly 70% sequentially compared to the first quarter. We continue to expand the rollout of Quick Resend to allow our customers and our agents in other regions of the world to experience the speed and convenience that we have now had available in North America for a little over a year.
In addition to Quick Resend, we have been expanding our pay-in methods at the retail point-of-sale. Specifically, we have added debit card acceptance, which we have been rolling out across Europe over the last year, with now a planned launch in the U.S. in the third quarter of this year. We are also expanding and driving efficiencies in our account payout network across the globe, which is being used more and more in our retail setting.
Retail initiated paid-out to account transactions have accelerated significantly, and in the second quarter grew at over 30% year-over-year. Our goal with our account payout network is to provide speed, reliability, transparency and lower cost options for our customers. In a relatively significant strategic shift, we have now become more focused on end-to-end customer experience instead of absolute endpoint growth across our payout network. To achieve this goal, we are increasing the number of direct connections we have with banks, wallets, and real-time payout networks, instead of relying on aggregators.
A great example is our recent enablement of our own Western Union International Bank to SEPA in Europe, which will result in increased speed, transparency and we believe, close to $0.5 million of cost savings annually versus our prior approach through an aggregator. Our goal is to meet our customers' needs by building the broadest array of funding and payout options, regardless of channel.
Lastly, I would like to take a minute to discuss our Consumer Services segment. In previous calls, we have talked about how retail money order and bill payments have been the largest two businesses within consumer services and the biggest drivers of growth over the last couple of years. We have also now made it a goal to grow this segment of our business double digits annually. And after a slower start to the year, I am pleased to report we generated 14% adjusted revenue growth in the second quarter.
While we do expect retail money order and bill payments to grow, we believe much of the future incremental growth within consumer services will come from products and services we have recently launched or expanded in the last 18 months, services like prepaid debit cards, foreign exchange, media networks, and the ancillary revenue streams associated with our digital wallets.
In the quarter, we continued to see solid growth in retail money order and our Forex business in Europe is benefiting from a robust travel season. As we expand our control distribution strategy of owned and concept stores, we will add additional products and services to our traditional cross-border money transfer offering. These services not only add convenience and accessibility for our customers, but also improve the economics of our retail footprint.
We currently offer bill payments or retail Forex in nearly a dozen countries around the world, and we expect to continue to expand that list in the coming years. As we look to fulfill our mission of providing accessible financial services to the aspiring populations of the world, we will continue to look for ways to provide our customers with access to the financial products and services they need for their lives.
Looking ahead, we remain optimistic about our market opportunities and the progress we are making on delivering our strategic initiatives. We are pleased with the underlying trajectory of our business driven by improved transaction trends across both our digital and our retail businesses, and we expect to continue improving top line revenue, as a result. I remain confident that we have the right strategy, the right capabilities, the right team, and the right mindset to achieve our evolve 2025 goals. Thank you for joining the call today.
I will now turn the call over to Matt to discuss our financial results in more detail.
