Devin McGranahan
President and Chief Executive Officer at Western Union
Thank you, Brad, and good afternoon, everyone. Thank you for joining us today to discuss our first quarter 2022 financial results and some commentary on our ongoing strategy development efforts. As I have reflected on my first 100 days as CEO of Western Union, I have come to more fully appreciate the significant potential of the platform and the magnitude of some of the changes needed over the next two to three years to really position the business for sustainable growth. Global uncertainty currently remains elevated due to inflation, supply chain and geopolitical issues like the war in Ukraine. Given the scale and maturity of our core business, disruptions like these can have significant negative impacts without any near-term means of mitigation. Russia was an important market for us, and the suspension of our services there will have an ongoing impact in our business. Given the business mix, including our significant digital white label partnership with Spare, Russia was also a very profitable market for us.
While replacing this kind of highly profitable growing revenue will not be easy, the first couple of months of our strategic review have highlighted the overall strength of the brand and the franchise. And we have identified clear opportunities in both the core business in near adjacent products and markets to help us drive incremental growth over time. Furthermore, I believe that accelerating the organization's focus on customer centricity should also, over time, meaningfully help elevate our performance. Due to the suspension of services in Russia and Belarus, we have revised our full year 2022 financial outlook on the expectation that we will not return to either country in 2022, which Raj will walk you through in greater detail next. Turning first to the financial results for the quarter -- for the first quarter.
Results were largely consistent with our expectations, except for the impact of our suspension of services from Russia and Belarus and reflect the ongoing slow recovery in several of our important regions. Our reported revenues were $1.2 billion, and excluding contributions from Business Solutions, decreased 1% on a constant currency basis. This growth rate was negatively impacted by the suspension of services in Russia and Belarus in March and reflects the tapering of digital growth as we expected as the prior year benefited from a surge in demand for our digital offerings. Our retail business has not yet regained momentum and continues to be affected by macroeconomic headwinds as key parts of the labor market remain dislocated in many parts of the world. We continue to see softness, in particular in Europe and in certain parts of Asia. Our domestic money transfer business also continues to be a drag on results. I believe that as we move to a wallet-based platform in many parts of the world, we will have the opportunity to revisit the role in the economics of domestic money transfer for our Western Union digital customers.
Despite these challenges, our businesses continued to show resilience by generating over $230 million of operating profits. As we announced during the quarter, we closed on the initial stage of our divestiture of Business Solutions in early March and have received the entire proceeds from the sale, which strengthens our financial position as an input into our ongoing strategy review. Adjusted earnings per share was $0.51 in the quarter compared to $0.44 in the prior period. The increase in adjusted EPS is primarily driven by higher operating profit margin and lower share count partially offset by a higher adjusted effective tax rate. In the first quarter, Business Solutions contributed $0.05 to adjusted earnings per share. As I discussed on the last call, we've begun an enterprise-wide strategy review process. My goal in this process is to create a plan that will enable the company to have stronger sustainable revenue growth by identifying new relevant business opportunities, evaluating ongoing investments within the existing business, identifying opportunities for performance improvement across all operations, and by creating alignment within the structure of the organization to successfully drive execution.
This process is currently underway, and I am pleased with the progress we are making. The team is rallying around the idea of Western Union being the branded leader in providing payments and other relevant financial services to migrants and mass market consumers around the world. Working alongside many of our important distribution partners, our goal is to put our branded customer at the center of everything we do. The company is in the process of making a meaningful shift towards a more holistic customer relationship mindset, focused on acquiring customers, retaining customers and expanding customer relationship value. I look forward to sharing more in greater detail at our Investor Day, which we will host in New York City in the fall. Before then, I would now like to share a bit about what we are learning. Two of the concepts we are working on as part of the strategy process are accelerating our retail business and driving digital and omnichannel customer growth.
At $3.3 billion of revenue in 2021, our retail business remains a large driver of our overall financial performance. Recognizing our significant market leadership position, we need to identify creative ways to maintain and grow our position. We also believe that the size and strength of our retail business can and will be a competitive advantage in an increasingly omnichannel world if we can deliver a world-class integrated customer experience. While we have the privilege of having close to 14% principal share of the global cross-border remittance market in 2021 according to World Bank estimates, we have struggled to grow revenue at the same pace we have grown principal. To change this dynamic, the team has identified four key opportunity areas as part of the strategy development process. First, targeting opportunity. The team has been focused on identifying markets and corridors where Western Union has the opportunity to grow. For reference, of the top remittances markets globally, in over half, we under-indexed relative to our global market share. Given that each market is different, we are identifying ways to tailor our marketing and product strategy to more tightly match the specific market requirements, which we believe will unlock some potential.
As part of this process, we are developing new tools and insights that will help us drive performance at the individual corridor and even the neighborhood level. Second, improving the customer experience. I spoke of this on the last call. We remain convinced that investing in improving our end-to-end customer experience will have meaningful returns, both in decreasing the percentage of incomplete transactions and improving overall customer loyalty. In the near term, we are launching several new capabilities in key markets, including digital ID scanning via optical character recognition, e-receipts and QR-driven express checkout to drive convenience and experience for both customers and frontline associates. Third, retail marketing effectiveness. In 2022, we plan to spend nearly 1/4 of our marketing budget focused on our retail customers. Over the past few years, much of our retail marketing spend focused on point-of-sale visibility in supporting our major key accounts with in-store messaging.
By refocusing on driving highly targeted segment marketing, including seasonal promotions and grassroots initiatives for core migrant communities both on the send and the receive side, we believe we can influence consumer choice at the point of sale and strengthen our presence in important local markets. Finally, network optimization. We have historically enjoyed a competitive advantage due to the strength and breadth of our distribution network. Many of our competitors recognize this advantage and have worked hard over the years to develop their own networks. We believe the basis of competition is now shifting towards having the right locations in the right markets, having the right partners with the right incentives and having the right mix of key accounts and independent agent locations in any given market. We plan to look at our network on a same-store sales basis, and we'll be driving actions that will improve our relative performance and high potential areas.
As an example of this kind of network analysis and optimization, we are very excited to expand our relationship with the U.K. Post Office. We are pleased to announce the signing of the U.K. Post as a retail distribution partner, ending a competitor's exclusive retail relationship. This recent expansion of our partnership builds on our current digital relationship and will add Western Union services in nearly 4,000 additional retail locations, which nearly doubles our network in the country. The United Kingdom is one of the largest outbound markets globally. We believe this partnership has the potential to improve our position in the U.K. Adding the U.K. Post locations will drive a large network upgrade in markets outside the London Metro area, where the growth in foreign-born population is now faster than it is in London.
Regions outside of London account for 65% of the migrant population but only 43% of our current retail volume in the country. We expect the signing to improve our overall market position, filling in gaps in smaller cities and feeding our customer acquisition engine in both retail and digital for years to come. The environment for digital customer acquisition has become increasingly competitive. During the COVID-19 pandemic, we saw very attractive per customer acquisition costs in Western Union digital business as consumers were driven to digital channels. In 2021, our average customer acquisition cost began to rise with the marginal cost of acquiring the next customer meaningfully higher than what we saw in 2020. As we drive an organizational focus on acquiring customers, retaining customers and expanding customer relationships, the cost of customer acquisition becomes a key performance metric for the company.
We also believe that we have a competitive advantage over our pure digital players given the strength of our brand and the sheer scale of our retail customer base. We are exploring the idea that there is a natural escalator between our retail business and our digital business and that, in fact, many of our digital customers are omnichannel in their usage of our services. For reference, of the more than nine million branded digital customers in 2021, 30% started their relationship with Western Union at a retail location and roughly 15% of them did at least one transaction at a retail location last year. When we look at our customer data, our omnichannel customers who engage with us both digitally and in retail generated over two times the revenue per customer in 2021 compared to either retail-only or digital-only customers. Given these facts and working closely with our distribution partners, we will begin to better integrate both our experiences and our messaging across our channels.
According to internal survey data, over the past couple of years, we have lost a significant number of retail customers to digital competitors as customer preferences have evolved. By increasing our own customers' awareness of Western Union's compelling digital and omnichannel offerings, we believe we can keep more of those customers within the Western Union franchise. In further accelerating our digital and omnichannel growth, we continue to focus on enhancing our top-of-funnel conversion and increasing retention. We have successfully launched our next-generation digital transaction-based platform in Canada. We are seeing an increase in conversion from the improved user experience, and we continue to -- and as we continue to optimize the platform, we expect to achieve approximately three points of conversion upside.
We plan to launch this new platform in Australia in Q2 and many large European markets in Q3. Longer term, replatforming our experience around digital wallet has the potential to create multiple ancillary revenue streams outside of our core remittance business, and fundamentally change the relationship that we have with our customers. As an industry leader, we have a large onetime use contingent in our customer base, thus providing us the opportunity for cost-effective customer acquisition if we can expand the relationship beyond this first interaction with Western Union. Building and growing a high-performing team will be critical to capturing these kinds of opportunities. I believe in the benefits of diverse thinking and experiences and we have strengthened our effort to bring more diverse leaders into our organization.
I am pleased to announce the addition of Andrew Walker as our new Chief Operations Officer, joining us from USAA. Ramya Narayanan will be our new Chief Strategy and Business Development Officer. She's joining us from American Express. And Joaquin Alemany as our new Global Head of Digital Banking joining us from McKinsey & Company. Before I turn it over to Raj to discuss our financial results in more detail, I would like to highlight a few notable partner wins and market expansions. First, I am pleased to announce the next two markets for our digital wallet and banking path. We have opened our service this morning in Poland and Italy on a friends and family basis and plan a broader launch for these countries in early June. Our plan is to get the product into multiple countries and corridors as quickly as possible in order to more fully capture the benefits of our own network effect.
I would expect as the summer goes on, we will announce additional markets across Europe and potentially some markets outside the European Union. Next, I would like to highlight a couple of expansions to our account payout network, which as you know, supports one of the fastest-growing parts of our business. Expanding payout options and giving customers choice around the most convenient delivery method for them is core to the customer-centric mindset we are building here at Western Union. I'm excited today to highlight the expansion of our Visa Direct partnership. We originally launched the partnership in select European markets to 24 receive countries. Today, we have now brought that partnership to our retail customers in the United States and have a go-live with our digital platform in early Q2. Western Union's U.S. retail customers can now send money in near real-time direct to card to Colombia, El Salvador, Jamaica, the Philippines, Romania and Thailand.
Our goal with this partnership is to provide convenience for our consumers and to offer another cross-border account payout option as they look to move money to their loved ones around the globe. Direct to card complements the account payout network we've already developed and expands customer choice. Continuing with the real-time payout theme. During the quarter, we have also activated real-time account payout to Paytm wallets in India. India is one of the largest inbound remittance markets in the world with over $87 billion in inbound remittances in 2021 according to recent estimate from the World Bank. This partnership will enable Western Union customers from the U.K., Canada and Australia to send money directly to millions of Paytm wallets. We anticipate expanding the service to the U.S. in the second quarter.
Lastly, I would like to talk about a small minority investment we made in the quarter in earned wage access company called Wagestream. We believe Wagestream's earned wage access product is compelling, as it provides a technology solution that puts employees in control of their earned wages and the timing of payout. We believe our customers will have a high affinity towards this product and have begun to explore ways in which we can work closely with Wagestream to bring this product into our ecosystem. Thank you for your time. And I would now like to turn the call over to Raj to discuss our financial results in more detail.
