Devin McGranahan
Chief Executive Officer at Western Union
Good afternoon and welcome to Western Union's fourth quarter 2023 financial results conference call. Now two years into my tenure as CEO, I am pleased with the improvements we are seeing in our trajectory under our Evolve 2025 strategy. As you know, over the last 18 months, we have focused on returning our digital business to double-digit revenue growth and achieving stability in our retail business. The fourth quarter is further evidence that we are indeed on the right path.
Today, we are reporting a strong finish to the year with positive adjusted revenue growth and improved transaction trends across both our retail and digital businesses with transaction growth north of 5% for the second consecutive quarter. Consistent and sustainable transaction growth is the strongest indicator of the future health of our business. It has been nearly a decade since the company has delivered 5% plus transaction growth for multiple quarters in a row excluding the COVID recovery period.
We are pleased with this significant change in our trajectory. Digging in, looking at a quarter level trends, you can see the change in trajectory is both widespread and meaningful, whether looking at the U.S. to Mexico, France to Africa, or the world to the Philippines, these corridors show the same picture, considerable improvements in transaction growth rates over the last 18 months. As this graph illustrates, our work over the last 18 months to improve our customer experience, streamline our operational processes and accelerate our market effectiveness is driving significantly improved outcomes.
Our confidence in achieving sustainable, profitable revenue growth by 2025 increases each quarter as we stabilize our retail business, accelerate our digital business, expand our ecosystem offerings, enhance our customer and agent experiences and maintain industry-leading margins like we did this past quarter. For the fourth quarter, our revenue reached $1.050 billion [phonetic], reflecting a 3% increase on a constant currency basis when excluding the contribution from Business Solutions compared to the same period last year. Adjusted earnings per share came in strong at $0.37, up 16% on a year-over-year basis and allowed us to achieve the upper end of our EPS guidance.
Maintaining our long history of returning capital to shareholders, we produced another year of solid cash flow with operating cash flow of $800 million of which $650 million was returned to our shareholders via dividends and stock buybacks. As we discussed at our Investor Day in 2022, to date, we have funded all the required investments in our transformation while maintaining our 19% to 21% adjusted margins and continuing strong returns of capital to our investors.
Matt will further discuss our financial results in more detail and provide our 2024 outlook later in this call. In addition to improving financial results, we continue to execute well on our strategic priorities. Over the last year, we have made meaningful progress on our most important initiatives, including improving our retail operations, updating our digital platforms and go-to-market strategy, refining our customer and agent experiences and enhancing our overall value proposition in the marketplace.
While our journey is not over, I would like to share some of the highlights from this past year. Starting with our retail business. In 2023, we made material enhancements to our point-of-sale system with new functionalities like remember me, quick resend, debit payment enablement, digital receipts, and enhanced payout to account capabilities. These improvements, while not ground-breaking, have made our retail customer and agent experience more competitive and have contributed significantly to the improvements you see in our retail transaction trends over the last 18 months.
Additionally, we will continue to roll out these functionalities across the globe and anticipate further benefits in 2024. In addition to our point-of-sale improvements, we also made significant progress on expanding our controlled distribution strategy which includes both owned and concept stores in LACA, Europe, the Middle East and APAC. Recall that by enabling an exclusive Western Union experience in high-impact locations, we believe we have more control over the customer experience can test new products and services and create a new low-cost acquisition engine for our digital business.
This strategy which prior to 2023, was largely a Latin American phenomena with owned networks in both Argentina and Brazil has now been expanded to every region in the company. In 2023, we opened 100 new owned locations in 200 new concept stores which increased our controlled distribution strategy by over 35%. In addition to new store openings, we also updated roughly 30,000 high-impact retail locations around the world with our new Western Union brand format presenting a more contemporary and omni-channel message to our retail customers.
To complement our controlled distribution strategy, last year, we also enhanced our digital capabilities, including launching our next-generation digital app now in 12 countries around the globe, launching a digital wallet in four European and one Latin American country and implementing a new digital go-to-market strategy. This strategy has allowed us to drive more traffic to our digital platforms, increase our conversion rates, improve our marketing messages, and enhance our value proposition while materially lowering our customer acquisition costs.
As evidence of this, in 2023, we were able to grow new digital customers double digits while at the same time, lowering our customer acquisition costs by over 15%. The scalable, cost-effective new customer acquisition is the foundation for continued double-digit growth of new digital transactions. Given the journey we are on, ongoing operational performance improvement is a powerful driver of agent and customer satisfaction and ultimately will lead to improved retention. Last year, we made significant changes across key elements of our customer and agent experiences.
These changes resulted in millions of fewer phone calls to our call center and improvements in both agent and customer satisfaction. For example, we improved self-service tools like our Track a Transfer to integrate across channels so that customers can get status updates on their transfer through the Western Union mobile app, regardless of whether that transfer was initiated on the app or at more than over 400,000 retail active locations around the world. As you will recall, in late 2022, we started rolling out our new digital go-to-market strategy. This strategy included revised marketing, a focus on funnel effectiveness, improved onboarding processes, promotional pricing for new customers and market-based pricing on subsequent transactions.
The program has led to double-digit new customer growth and double-digit transaction growth throughout 2023. By the end of the first quarter of 2024, we will anniversary both, the U.S. and the European launches of this strategy and as such, we expect the gap between transaction growth rates and revenue growth rates to continue to narrow throughout the year. Likewise, on the retail side, last year, we also began rolling out a new go-to-market program to complement our focus on location productivity. That program included revised marketing, seasonal and holiday promotions, and some corridor and geographic-specific pricing initiatives.
The majority of these actions occurred in the second and third quarters of last year and we are now holistically happy with the results that they are producing. We believe these changes have helped us deliver positive retail transaction growth for the first time in many years and has reinforced our belief that we can achieve a stable retail business in the near future. One of the regions that have benefited immensely from these changes implemented over the last year is our APAC region, a region that has been in cyclical decline for over five years. APAC was early in the launch of our next-generation digital app and they have been advancing our efforts through controlled distribution.
This region now has some of the highest digital new customer growth rates, the highest digital conversion rates and has the most significant change in transaction growth rates we have seen anywhere in the world, led by Australia. Transaction growth rates in APAC have improved 1,000 basis points or more year-over-year in every quarter of 2023. This type of improvement, you can see, when you have the right technology, the right distribution strategy and great customer and agent experience.
We believe the right user interface and a keen focus on funnel management will help us meet our expectations of returning our digital business to double-digit revenue growth. Looking ahead, while there is more work to be done and the team is committed to the ongoing continuous improvement of our core remittance business, we are also working diligently to expand our total addressable market beyond cross-border remittances. Given the strength of our brand, the reach of our distribution and the trust of nearly 120 million customers, we are focused on creating and delivering additional products and services that cater to the needs of the aspiring populations of the world.
This strategy currently includes our digital wallet, our retail money order business, our bill payment business and we have recently added products like our prepaid debit card, lending services in Argentina and Australia and a 4x currency conversion business that we have launched in select locations across Europe and APAC. We now have over 200,000 customers onboarded to our digital wallet in Europe and over 50,000 in Argentina. Our retail money order business which we have focused on over the last 18 months has grown substantially over the last couple of years with principal up nearly 20% and investable assets up over $135 million.
Growth in investable assets has been important for a business that generates substantial revenue on its asset portfolio. This business now accounts for roughly 1/3 of our consumer services revenue, formerly referred to as Other in our financials. With a revamped value proposition, improved distribution and a new point-of-sale system on the horizon, we are excited about continuing to see strong growth in this product ahead. As we continue this journey, our goal is not only to drive organic growth but also seek acquisition opportunities that will enable us to build stronger customer loyalty and an increase in our portion of our customers' financial wallets over time.
As one of the key pillars of our Evolve 2025 strategy, we believe we are in the very early innings of this market expansion opportunity and we'll continue to invest accordingly. Finally, I would like to talk briefly about our automation journey and highlighting new partnership that we entered into in the fourth quarter. We have a long history of innovation and have continued to expand our automation capabilities, resulting in cost efficiencies, higher quality output, improved customer and agent experiences and risk reduction. Over the past two years, we have made significant investments in robotic process automation, building capabilities in agent collections and reactivation, customer refund processing, risk exception decisioning, proactive agent credit limit increases and receiver name changes.
While the elimination of manual processes drives cost efficiencies the speed and quality of the outputs have also led to better experiences. We are now taking a similar approach to artificial intelligence as we have with robotics including exploring ways to use generative AI in areas like software development, marketing content creation, price decisioning, customer care assistance and translation services. While early in the journey, we believe generative AI has the potential to increase revenue, further improve efficiency and productivity over time and thus provide additional value to our shareholders.
Last, we are pleased to announce a meaningful expansion of our relationship with Visa. This long-term global strategic relationship covers issuance, Visa Direct and further enables collaboration between the two companies across 40 countries and five regions. Visa has been a long-term strategic partner of Western Union and we are thrilled to extend this relationship for years to come. Looking ahead, we remain optimistic about our strategic direction and the positive progress we have made. We are pleased with the change in the underlying trajectory of our business driven by improved transaction trends across both digital and retail businesses while continuing to deliver improved top line results and strong cash flow.
We have also made substantial progress on our talent evolution, including a meaningful realignment of the top 100 executives at the company. This was done through both internal promotions and external hires and I believe we now have the right people in the right roles to allow us to execute on our Evolve 2025 strategy. We have a loyal customer base that trust our brand and values our services. We have a global network that provides unparalleled access and convenience to nearly 120 million people around the world and have now achieved a turnaround in transaction trends, thus validating the relevance of our offering and our brand.
We have a talented and dedicated team that is focused on executing our strategy and driving innovation and we have a clear vision and early progress on how we can leverage our assets to create new revenue streams and growth opportunities. I am confident that we have the right strategy, the right capabilities, the right team and the right mindset to achieve our strategic priorities. Thank you for joining the call today. I will now turn the call over to Matt to discuss our financial results and our forecast for next year in more detail.
