Good day, and welcome to The Western Union Company Fourth Quarter and Full-Year 2020 Earnings Release Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Brendan Metrano, Vice President of Investor Relations. Please go ahead.

Brendan Metrano - Vice President of Investor Relations

Today's call, we will discuss the company's fourth quarter and full-year 2020 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; our CFO, Raj Agrawal; and Head of Treasury and Investor Relations, Brad Windbigler.

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 2019 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 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, Brendan. And thank you all for joining us this afternoon to discuss our fourth quarter results and our outlook for 2021. 2020 was an unprecedented year that brought significant changes in the world, as well as, within Western Union. We became a more agile, efficient, and digital focused organization, thanks to the successful execution of the global strategy we announced in September of 2019.

I am proud of how well Western Union faced the crisis, quickly adapted and created solutions to help our customers provide critical economic support to families and communities around the world. I would like to thank our customers, especially the millions of migrants, many of them frontline heroes for their dedication and generalist that has helped ease economic hardship and support resiliency of people in need.

Moving on to an update for our business. We began 2020 with strong momentum from our September 2019 Investors Day, where we unveiled our new strategy designed to advance our position as a leading cross-border omni-channel payments platform. While we continue to stay focused on our long-term strategy towards the end of the first quarter, the global pandemic hit and caused a historic drop in global economic activity in the second quarter. This coupled with widespread lockdowns, reduced consumer foot traffic and negatively impacted our retail business. At the same time, there was tremendous demand for digital services broadly that drove significant growth for our digital business.

In the third quarter, the uncertainty lessened and economic activity improved and we saw a strong rebound in our C2C business led by better retail trends and continued digital strength. The global economy continued to recover in the fourth quarter, and we finished the year with our business and strategic initiatives getting back on track. Our digital business once again achieved new quarterly highs for customers, transactions, principal, and revenue of $240 million. Westernunion.com continued to lead its peer group for app downloads with more than 2 times any other peer and we had 49% growth in average active monthly users.

Retail money transfer maintained the improved trends we saw in the third quarter, despite additional waves of COVID-19 and Business Solutions and other segment trends improved sequentially. Putting the pieces together, total company revenue, margin and EPS were all in line or better than expectations in our revised full-year 2020 outlook.

From a strategic standpoint, we accomplished a lot in 2020. Our agenda was centered on two sets of priorities. The first, continue getting the organization fit to go. The second, implementing growth initiatives. Starting with getting fit, we made significant strides with the organization in 2020 essentially completing the WU Way changes that are expected to drive $100 million in annual cost savings in '21. We also renegotiated more than 250 contracts with agents globally, putting us well on track to achieve the additional three-year $50 million savings target from commissions and third-parties. So by the end of 2020, we had completed the large portion of the actions that drive the $150 million of annual savings by 2022.

Getting fit isn't just getting leaner, it is also adding strength in areas that will improve our competitive position and growth. We continue to improve the coverage and quality of our network, adding almost 100 new agents globally with nearly 20,000 potential new locations. We reduced inefficient locations and renewed relationships with certain key agents for five or more years. We also increased our account payout capabilities to approximately 120 countries, including hitting our goal of 100 new real time payout. So our industry-leading cross-border network got even better in 2020.

Another important way we strengthened our position was upgrading our technology capabilities. We brought on a number of tech professionals and made good progress migrating applications to the cloud making us more agile and able to scale efficiently. These moves have enhanced our progress for key initiatives, including product and applications like wu.com and dynamic pricing, as well as, back-end applications like currency settlement and data management. In summary, we finished 2020 as a leaner and stronger organization, well-positioned to support our strategy in 2021.

Shifting to implementing growth initiatives, 2020 exceeded our expectations for some key growth initiatives and accelerated the pace of our evolution as a global digital-centric payments company. Our overall digital money transfer revenues, which includes wu.com and our digital partnership business increased 38% to more than $850 million, up from over $600 million in 2019, and are expected to grow to around $1 billion in 2021. So the profile of our business changed a lot last year with digital channels accounting for 29% of transactions and 20% of revenue for our C2C business, up from 16% and 14% respectively in 2019.

Wu.com had an amazing year and grew annual active customers almost 30% to 8.6 million benefiting from significant investment in customer acquisition. Customer growth remained highly incremental with more than 80% net new to Western Union and we saw engagement improved with a 12% increase in transactions per customer and a 25% increase in principle per customer.

Importantly wu.com is enabling us to develop a more direct and sticky relationship with customers, closer to an account-based relationship. In the fourth quarter, over 80% of wu.com customers accessed our services through a mobile device; wu.com customers transact more frequently and have less attrition than retail customers and those trends are even better for heavy wu.com users. With the strong growth and improving engagement trends, we think wu.com has potential to serve as the centerpiece of a cross-border consumer ecosystem in the future.

In addition to our strong wu.com results, our digital partnership business was another big success for us in 2020. Opening our cross-border platform to third-parties was a major shift in our operating philosophy that will enable us to become a more diversified payments company, adding incremental customers and expanding our addressable market. We highlighted this initiative at our Investors Day. It started to ramp up in the second half of 2019, but it really took off in 2020, driving significant revenue and profit growth. It is still early days and we are encouraged by our progress, adding new partners in 2020 and in early 2021, and working on a large set of prospects.

An exciting opportunity that arose from our digital partnership business is our recently announced minority investment in STC pay, a key digital partner. This first trans of the transaction is planned to close this quarter and would make us a minority owner of what could someday be a high-growth Fintech company within the Gulf states. Winding up this discussion on 2020, I am pleased with how well we managed the business and executed key objectives under challenging circumstances.

Looking forward to 2021, we remain focused on how we can create long-term value for our shareholders balancing opportunities, risks, and options for allocating our capital and strong cash flow generation. Digging into our plan for the year, I'll start with the big picture. According to the prevailing economic forecasts, the global economy appears to be on a path of recovery, especially, in the second half of the year, all the uncertainty remains higher than normal due to pandemic.

The World Bank currently forecasts a 7% decline in remittances for 2021, which is the same as their latest 2020 remittance forecast from October. You may recall that we grew cross-border principle 12% in 2020 and gained share. A great example of this was seen in Banco de Mexico fourth quarter remittance data. Similarly, we believe we will continue to grow principle and gain share this year. Importantly, we want not only to grow principle and gain share, but to continue to do this profitably. This gives us confidence that we will achieve the 2021 outlook, including mid single-digit constant currency revenue growth. Raj will provide additional details on our outlook in a few minutes.

Our 2021 business agenda builds on the progress of 2020, but with emphasis shifting more towards growth initiatives. Our multi-channel network is still the cornerstone of our competitive advantage today, so we will continue to focus on improving the coverage, quality, and cost. Digital is clearly the top priority and we have had some big recent additions within the last weeks, including the digital wallet of Alipay in China, and another social media company in China, and the new partner in UAE.

We will continue to seek additional partners with account-based relationships that can broaden our network, auto pay, financial institutions, digital wallets, or telecom companies. Feet is an increasingly important factor for cost for the payment networks that we can leverage with potential digital partners and under-penetrated customer segments. So we will continue to expand our leading real-time payout network beyond the 200-country goal, we reached in 2020.

Lastly, we will continue to optimize our retail agent network. In an increasingly digital world, we want to connect with a broader set of customers and we may consider different relationships and classes of trade to do this. Fortunately, the scale and quality of Western Union's cross-border network and capabilities are a big draw for retailers illustrated by our recently announced partnership in the US with the world's largest retailer Walmart. This is an addition to our existing partnership with Walmart in Canada and Mexico. We will continue to develop our market-leading consumer money transfer business, especially digital. We will continue investing in marketing and customer acquisition to expand our customer base and adding additional digital partners.

Last but not least, to expand growth opportunities in 2021, we need to start developing new services and enhancing capabilities, which makes our product and platform functions important areas of focus. We will continue to upgrade and modernize our technology infrastructure, enhance our product portfolio and build the right team to execute our objectives for our C2C, B2C, C2B and B2B business, basically a unique and agile cross-border platform for multi-customer segments.

In closing, despite the unprecedented times, I am proud of all we accomplished in 2020. In 2021, we are celebrating our 170th anniversary. Western Union has always been a landmark of innovation, hope and connection for millions of people and businesses globally. And as I think about where our business stands today and our agenda for 2021, I'm convinced we are again in the early stages of some compelling developments and success. As usual, a big thank you to our business partners, agents and consumers all over the world for your trust and loyalty. Stay healthy.

With that, I'll turn the call over to Raj.

Raj Agrawal - Chief Financial Officer

Thank you, Hikmet. And good afternoon, everyone. My comments today will focus on fourth quarter results along with our financial outlook for 2021, including color on quarterly trends, information for full-year results can be found in our press release and in cash financial schedules.

Moving to fourth quarter results, revenue of $1.3 billion declined 3%, compared to the prior-year period, while constant currency revenue declined 1%. Currency translation, net of the impacts from hedges reduced fourth quarter revenue by approximately $22 million, compared to the prior year, primarily due to the depreciation of the Argentine peso.

In the C2C segment, revenue was flat on both a reported and constant currency basis with transaction growth partially offset by the impact of mix. C2C transactions grew 6% for the quarter, led by 83% transaction growth in digital money transfer, partially offset by transaction declines in retail money transfer. Retail trends held steady in the fourth quarter, despite a recent acceleration of COVID-19 infection and newly introduced US regulation limiting our ability to operate in Cuba for the time being. We believe retail will continue to improve, but the path to recovery may not be linear given the ongoing economic and public policy - effects of the pandemic.

Total C2C cross-border principal increased 24% on a reported basis or 23% constant currency, driven by growth in digital money transfer. Principle per transaction or PPT was up 14% or 13% constant currency, led by retail and wu.com. Multiple factors contributed to higher PPT that can be characterized broadly as changes in consumer behavior and business mix. The spread between C2C transaction and revenue growth in the quarter was 6% on both a reported and constant currency basis.

Similar to last quarter, excluding the mix impact from the significant ramp-up of our digital white label partnerships, transaction growth would have been modestly above revenue growth. As a reminder, digital white label partnerships carry a lower revenue per transaction or RPT than Western Union branded transactions, due to our role as a processor. It is important to keep in mind that these partnerships are highly profitable and incremental to the company. We anticipate the gap between transaction and revenue growth will continue in 2021 as channel mix and customer acquisition strategies are evolving.

Digital money transfer revenues, which include wu.com and digital partnerships increased 36% or 35% constant currency and accounted for 21% of total C2C revenue and 32% of total C2C transactions in the quarter. The spread between transaction and revenue growth was due to our pricing strategy targeting customer acquisition for wu.com and mix driven by the digital white label partnerships, which have a lower RPT.

As noted previously, we expected the year-over-year impact of pricing investments made in wu.com during the fourth quarter would be pronounced due to comping against targeted price increases we took in Q4 2019. Wu.com revenue grew 27% or 26% constant currency with cross-border revenue up approximately 38%. Transactions increased 56% improving sequentially from Q3 and demonstrating the effectiveness of our customer acquisition strategy. We continue to see the pricing environment is broadly stable. As noted earlier, we continued to see strong transaction in revenue growth from our digital partnership businesses.

Turning to the regional results, North America revenue declined 3% on both a reported and constant currency basis with transactions down 1%. Declines in constant currency revenue and transactions were primarily due to the steady decrease in US domestic money transfer, which was less than 5% of total company revenue in the quarter, and newly introduced US regulations remitting our ability to operate in Cuba for the time being. US outline continued to have solid growth in the quarter.

Revenue in the Europe and CIS region increased 3% on a reported basis or was flat constant currency on transaction growth of 23%. Constant currency revenues were positively impacted by growth in Germany, Russia and France. The primary factor driving the spread between transaction growth and constant currency revenue growth was the digital white label business in Russia.

Revenue in the Middle East, Africa and South Asia region increased 1% on a reported basis or was flat constant currency, while transactions grew 12%. Qatar led the region with solid constant currency revenue growth in the quarter, while the UAE continued to experience softening trends due to the ongoing impacts from COVID-19. The spread between transaction growth and constant currency revenue growth was driven by the impact of the incremental digital white label business in Saudi Arabia. It's lessened somewhat sequentially, because the prior-year comp ramped up from the third quarter to the fourth quarter of 2019.

The Latin America and Caribbean region continued to steadily recover from the lows in the second quarter with continued sequential quarterly improvement. Revenue decreased 9% on a reported basis or increased 2% constant currency and transaction declines of 13%. The region continued to face challenges relating to the ongoing impact of COVID-19.

Revenue in the APAC region increased 8% on a reported basis or 6% constant currency. Constant currency revenue growth was led by strength in Australia. Transactions declined 3%, primarily driven by the Philippines domestic business, which has a limited impact from revenue.

Business Solutions revenue improved from Q3 and decreased 8% on a reported basis or 11% constant currency and represented 7% of company revenues in the quarter. Revenue declines were the results of the ongoing impact of COVID-19 on certain verticals like travel and tourism, small and medium-sized enterprises and education, while the overall decline in cross-border trade impacts payment volumes.

Other revenues represented 5% of total company revenues and declined 29% in the quarter. Other revenues primarily consist of retail bill payments in the US and Argentina, as well as money orders. The revenue decline was due to the ongoing impact of COVID-19 and the depreciation of the Argentine peso.

Turning to margins and profitability, I will focus on consolidated margins as segment margins are not comparable with the prior-year period, due to expense allocation changes implemented in the first quarter of 2020. Consolidated GAAP operating margin was 17.9% in the quarter, compared to 17.3% in the prior year period. The increase was primarily attributable to productivity savings, additional cost savings and the timing of marketing investments, compared to the last year, partially offset by declines in revenue.

We completed the restructuring program in the fourth quarter incurring approximately $150 million in restructuring expenses over the course of the multi-year program and $12 million of restructuring expenses in the fourth quarter. Productivity program generated over $50 million in annual restructuring savings in 2020, and we expect to achieve the full $100 million in annual restructuring savings this year. In total, we continue to expect to generate approximately $150 million in annual cost savings by 2022, comprised of $100 million of restructuring savings and an additional $50 million from commissions in third-party spending.

Adjusted operating margin in the fourth quarter was 18.8%, compared to 18.7% in the prior-year period with expansion driven by the same factor stated previously and adjusted for restructuring and M&A costs. Note that in our Business Solutions segment, we incurred a one-time facility closure cost that remained in our adjusted results since it was not part of our initial restructuring program. This one-time cost impacted segment margin by around 1,000 basis points in the fourth quarter.

Foreign exchange hedges had a negative impact of $4 million in the current quarter and a benefit of $7 million in the prior-year period. The GAAP effective tax rate in the quarter was 11%, compared to 31.4% in the prior year period and the adjusted tax rate was 11.6% in the quarter, compared to 24.5% in the prior year period.

The decreases in the company's GAAP and adjusted effective tax rates were primarily, due to higher prior period domestic pretax income associated with the sales of the Speedpay and Paymap businesses, prior period one-time settlements in certain geographies, and discrete tax benefits in the current period.

GAAP earnings per share in the quarter was $0.43, compared to $0.32 in the prior year period. The increase in EPS was driven by a lower effective tax rate, productivity and cost savings, and lower share count, partially offset by revenue declines. Adjusted earnings per share in the quarter was $0.45, compared to $0.38 in the prior year period with the increase due to the factor stated previously and adjusted for restructuring and M&A costs.

Turning to our cash flow and balance sheet, year-to-date cash flow from operating activities was $878 million. Capital expenditures in the quarter were approximately $51 million. At the end of the quarter, we had cash of $1.4 billion and debt of $3.1 billion. In addition, we have an undrawn $1.5 billion revolving credit facility and no significant debt maturities until 2022. Our financial position continues to be among the strongest within our payments peer group.

We returned $93 million in dividends to shareholders in the fourth quarter and had no share repurchases. Furthermore, we announced today that we increased the quarterly dividend by 4% and that we have resumed share repurchases this quarter. The outstanding share count at quarter end was 411 million shares and we have $783 million remaining under our share repurchase authorization, which expires in December 2021.

Turning to our financial outlook for 2021. First, please note that our outlook assumes that there will be no material worsening in the COVID-19 pandemic. Also consistent with the prevailing economic forecast, we believe the macro-economic environment may begin to improve in the latter part of this year as vaccines are more widely distributed. We expect GAAP revenues for the full year to be up mid to high single-digits. On a constant currency basis, which excludes the impact of Argentina inflation, we expect revenues to be up mid-single digits.

Operating margin is expected to be approximately 21.5% benefiting from revenue growth and the remainder of the $100 million of annual restructuring savings we will realize this year. We expect an effective tax rate in the mid-teens range for 2021 and we expect to return a significant portion of our cash flow to shareholders through dividends and share repurchases. EPS for the year is expected to be in a range of $2 to $2.10.

While we expect solid full-year results, we anticipate quarterly variability in growth rates as we cycle through the impact that COVID-19 had on the business last year. So, I will provide some thoughts regarding the potential quarterly cadence for 2021. The first quarter of 2021 will be the softest from a year-over-year growth perspective, where total company constant currency revenue growth may be in a similar range to the fourth quarter of 2020. Note that, retail is not fully rebounded to pre-COVID levels.

The second quarter of 2020 experienced the most significant declines of the year. Accordingly, the second quarter of 2021 should see the strongest year-over-year growth. The third and fourth quarter of 2020 has similar year-over-year growth trend. So looking at the back half of 2021, we expect trends will be generally stable. We expect Business Solutions trends will continue to be soft in the first quarter, if they should improve progressively over the remainder of the year with an expected recovery in broader cross-border trade.

To recap, last year we delivered our adjusted full-year financial outlook and continued to make good progress on key strategic initiatives, while maintaining our strong financial position during a period of profound disruption. As you've heard from Hikmet, we have a full agenda this year that should position us well for the future. The strong 2021 financial outlook we issued today demonstrates confidence in our ability to execute against the initiatives we've outlined for the year, along with our expectation that the business should continue to rebound from the disruptions caused by COVID-19 in 2020.

Thank you for joining our call today. And operator, we are now ready to take questions.

Question & Answers

Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Tien-tsin Huang of JP Morgan. Please go ahead.

Tien-tsin Huang - JP Morgan - Analyst

Hello, everyone. Happy to speak to you all.

Hikmet Ersek - Chief Executive Officer

Thank you, Tien-tsin.

Tien-tsin Huang - JP Morgan - Analyst

Hey, guys. My daughter has her piano lesson going on, so forgive the music. Just the guidance was, I thought encouraging. I know you've given the long-term outlook of 2% to 3% revenue growth at your Investor Day. But maybe would you mind unpacking your general assumptions on the relative performance between digital and traditional retail, could we see some of those growth trends maybe converge? I'm just directionally curious what you're anticipating there? And I don't know if maybe some of these Asian additions like Walmart are also going to contribute in a meaningful way as well? Thanks.

Hikmet Ersek - Chief Executive Officer

Let me start here, Tien-tsin. Nice to hear your good questions. Obviously, we are very pleased with our performance and the recovery helped the business especially, also our digital business growth has been exceptional. So we are very pleased on that. And that's going to continue to happen right? We do see no reason that's going to not happen. And especially, with the economic recovery at the latter part of the year, I think that I'll - we are convinced about our guidance and we are really happy how the customers are really sticky to us. And also, it looks like we are gaining really market share. Our people choosing us Western Union, they trust us. And we are gaining market share.

And then, also the digital customer acquisition continue to happen and we know that most - 80% of the customers are new - for the new customer, newer to the westernunion.com, so this is also huge and once customers stay with us, they stay longer, they do more transactions. They use us more often. And so I - generally I would say that it's great. I'm also very excited about the Walmart addition. Walmart will definitely give us additional customers and - in our retail business. By the way, retail business is also recovering very well. And you know as lockdowns are getting less worldwide as the vaccines are really spreading, I see really good prospects. So saying that though, you know, you never know, we don't think that wave three or wave four or wave five won't happen. We hope all get the vaccine. So it will help to all of us to grow this business and generally also for the industry.

Raj, you want to add something?

Raj Agrawal - Chief Financial Officer

SO I can just give you a little bit of color, Tien-tsin on the trends. Retail, we do expect the retail part of the business to grow this year, but it is going to be a volatile Q1. It's going to follow through the company cap that I laid out and Q1 is going to be the softest. Q2, because we had the lowest Q2 last year will be probably the highest and then much more stable in the third and fourth quarter, but it should get growth for the full-year.

And then, digital, the Q2, Q3, and Q4 last year were very high growth for digital. So we're going to see the grow-over impact of that, so Q1 is likely to be the highest quarter there, and then we'll get some normalization after that. And then, the B2B business is probably going to have a softer first quarter like the rest of the company and then improve as economic conditions improve in the rest of the year. So I don't see those pieces converging as you had asked, but there's certainly they are more normalizing versus what they did last year.

Tien-tsin Huang - JP Morgan - Analyst

Terrific. Thank you, both.

Hikmet Ersek - Chief Executive Officer

Thanks.

Operator

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

Jason Kupferberg - Bank of America Merrill Lynch - Analyst

Thanks, guys. Good afternoon. I wanted to ask about the spread between C2C revenue growth and transaction growth. I know you were at 6% in Q4. I think that was steady versus Q3, but I thought you would actually expected it to widen a little bit in Q4. So if that was the case, I'm just curious where they may have been a little bit of upside surprise if you will?

And then how should we be thinking directionally about that spread in 2021 should it narrow versus that 6 point gap we're currently observing or do you expect it to stay at similar levels? Thanks.

Raj Agrawal - Chief Financial Officer

Sure. Hey, Jason. It's Raj. Yes, the fourth quarter was about the same as in Q3. I would say generally, overall trends are similar. Retail was relatively stable between the two quarters. And then digital, we did start to see some of the grow-over impact of digital both in wu.com from the higher pricing from a year earlier, and then digital white label as we had expected. And then we also got the benefit of some positive mix in other parts of the business and that's why the spread ended up being similar.

As we look at this year, we think there is - going to continue to be a spread, but our focus really has shifted Jason to really the topline growth and that's why we're really happy that we can give a mid single-digit constant currency top-line outlook and with the margin expansion, because there's so many moving pieces, it's a very complex exercise to try to boil it down to just a revenue and transaction spread, because you have a white label business, you have wu.com that's branded, you have retail, you have the geographies playing a part, so really focused on the topline growth outlook that we've given, and that's really what's our ultimate objective and then obviously the margin expansion is also a big part of that.

Hikmet Ersek - Chief Executive Officer

Yes. I just want to add, just in general, Jason. Great question. But in our business model nothing has changed, right? I mean, we are going to continue to invest to get more customers and that's going to continue. And we are very much focused on revenue growth and profit growth. I call that profitable growth and that's also - you could see they also makes here margin expansion to 21.5%. It's important, so it's really good results and I like that, how we acquire customers, how we got the revenue and the profit.

Raj Agrawal - Chief Financial Officer

Yes. And the last thing just to add to that one is that we said at, I think on the call, but digital revenues were 20% of consumer revenues last year and they - that's up 600 basis points from a year earlier. And we obviously expanded margins last year and we're going to do that again this year. So two years in a row of expanding margins, while the digital business continues to track towards $1 billion this year.

Jason Kupferberg - Bank of America Merrill Lynch - Analyst

Right. Okay, good stuff. Thank you, guys.

Hikmet Ersek - Chief Executive Officer

Thanks, Jason.

Operator

The next question comes from Darrin Peller of Wolfe Research. Please [Technical Issues]

Hikmet Ersek - Chief Executive Officer

Hey, Darrin.

Darrin Peller - Wolfe Research - Analyst

Hey, guys. Hey. Listen, I want to just tone in on the westernunion.com monthly active customer growth, which I think was 49% again, which compared to around 45% last couple of quarters. So clearly it's doing well. And I'd be curious to hear, and if you guys can give a little more color on what you think is the driving force in terms of that improvement in active users? What do you actually define as an active user, first of all, would be helpful?

And then when we think about what that could mean for your business model, when you have these active digital users that are more engaged. In terms of strategic opportunities, well, even above and beyond what you're doing now multi-year more thoughts on that too?

Hikmet Ersek - Chief Executive Officer

Let me start strategically where we are going Darrin on that. Maybe Raj you can add more color on that later. I think, I call it Western Union's consumer ecosystem, westernunion.com is an ideal platform to acquire customers and making them more sticky. And we know that the customers, who are using Western Union they're staying longer, they are stickier and they'll use us are more open. So that's a great acquisition opportunity to have a long-term opportunity here.

Within the ecosystem, today we are using - the customers are using us for sending money, paying bills, but also we - as we create this ecosystem and we have about 8.6 million customers on Western Union and these customers are coming from 75 different countries globally. It's a unique platform to - for multicultural unique platform globally to really add additional services in long-term and could be banking services, financial services, or other services to build that ecosystem. So I'm very excited about that long-term strategy. Your question regarding the numbers, maybe Raj, you can help me out here?

Raj Agrawal - Chief Financial Officer

Yes. Darrin, how we define it is, these are the uniquely active customers in a month and so it's sort of the average for the quarter that we're giving here, so 49% growth there. And the great thing as Hikmet said, this is really a sticky business, because these customers are creating an account relationship with us and that's really where they became a repeat customer, and they do more transactions. And these are - so these are good customers to have. That's really been the strategy this year is to continue to drive more customer growth, because that will be the lifeblood of wu.com over the next few years.

Darrin Peller - Wolfe Research - Analyst

Okay. And so that active user growth, kind of, metrics should be sustainable in your minds? I know I'm trying just to keep it in the same question. Thanks guys.

Hikmet Ersek - Chief Executive Officer

Yes. I think you got it.

Raj Agrawal - Chief Financial Officer

Yes. I think the - just like the digital business is going to grow over and it's going to sort of in the second, third and fourth quarter, it's going to normalize more. We would probably see the same thing happened on the customer metric, just because of the impact from last year, but the absolute numbers are going to continue to increase this year quite well.

Darrin Peller - Wolfe Research - Analyst

All right. Thanks, guys.

Hikmet Ersek - Chief Executive Officer

And one other thing, Darrin. Also, we do see that westernunion.com also a little bit different customer segment, especially during the pandemic. Let me give you an one example, people currently within the European Union or within Europe or within US even can't travel, right? They use to use their Mastercard or Visas going to - applying and using their cards and picking up at the receive country at the ATM the money and distributing within the families. Now they have chosen us, because it's easier to send and we really target that kind of customers. We do see additional to our existing customer segment, really new customer segment, and our marketing programs and our product program, promotions are really package around that, so that's an exciting news.

Darrin Peller - Wolfe Research - Analyst

Okay, that makes sense. Thanks, guys.

Hikmet Ersek - Chief Executive Officer

Sure.

Operator

The next question comes from Rayna Kumar of Evercore. Please go ahead.

Hikmet Ersek - Chief Executive Officer

Hey, Rayna.

Rayna Kumar - Evercore ISI - Analyst

Good evening. Thanks for taking my question. Hi, so you are making very strong headway with white label partnerships in 2020. Can you talk a little bit about how your 2021 pipeline would work with new partnerships?

And then I'll ask my second question upfront. Very nice to see the dividend increase plus return to share buyback, how aggressive could you potentially be with the buyback at current prices?

Hikmet Ersek - Chief Executive Officer

Well, let me start on the white label - Rayna, I'll start with it. Hi, Rayna. How are you? Let me start with the white label. I think that we have really a great success in 2020. We announced in 2019 - late 2019 about our white label and started really, is just the beginning of a new era of how we offer our platform to the third-parties. As you know, the banks are currently sending money, bank to bank transactions, account to account transactions using swift and other correspondent banking. It's a model, but it's painful right? So, I mean, the payments industry has a struggle there. So it's really, some banks are choosing especially when it comes to the [Indecipherable] currency are choosing us to replace their existing platform, that's white label. It's huge for us, it's a big opportunity for the future. And we did sign some banks. We're going to announce also bigger ones when we have them. It takes some time as you know to implement our system in their system, and I'm very optimistic that we're going to grow this white label partnership also in the future.

Raj Agrawal - Chief Financial Officer

And just on the capital return. We are also very happy that we could raise the dividend today by 4% or so. I think it's a significant use of our cash flow. In terms of our priorities, we continue to invest in the business to drive organic growth and expansion. Dividends is a significant use of our cash flow. It will be almost $400 million this year. And then we're also looking for the right, kind of, acquisition opportunity that fits within the cross-border payment space.

And then lastly, we'll buyback [Technical Issues], so I would just say Rayna that to the extent there is not a material type of acquisition. We would expect to buy more stock than we did last year. As you know we paused the stock buyback for three quarters of the year, but I expect that will be more active this year.

Rayna Kumar - Evercore ISI - Analyst

Perfect. Thank you.

Hikmet Ersek - Chief Executive Officer

Thanks.

Operator

The next question comes from Jeff Cantwell of Guggenheim Securities. Please go ahead.

Jeff Cantwell - Guggenheim Securities - Analyst

Hey, good afternoon. And thanks for taking my question. Nice results and hope you all doing well?

Hikmet Ersek - Chief Executive Officer

Yes. Thanks, Jeff.

Jeff Cantwell - Guggenheim Securities - Analyst

And thanks for all the detail in your prepared remarks and this presentation, which I'm increasingly enjoying as there's some good color in there. So the guidance for mid single-digit revenue growth sounds great. And underneath that, I thought Slide six and eight drove home, how your strategy in digital is working. And I just wanted to ask you to focus on your digital business, can you talk some more about the pieces that we need to consider though this year. This just kind of on the back of Darrin's question.

I guess on the one hand, you're looking at some tough comps, because of how many transactions migrating to digital during the period pandemic last year? But then on the other hand, we see your app downloads look really strong right? So you are still getting the lion's share of that downloads and that's been persisting since the pandemic. And wu.com monthly actives are now increased by 49% year-over-year. And so I think those are some data points that speak to the fact that the optimal strength on your digital side? And I think those are some nice leading indicators that you might potentially have a fairly positive outlook for digital this year. So could you just help us understand how we should be thinking about transaction growth and revenue growth in digital through this year, 2021? Thanks very much.

Hikmet Ersek - Chief Executive Officer

Thanks, Jeff. First of all, thank you for the compliments for the presentations. I'll give that to my team. They used nice PowerPoint presentation, but it's all about the results. I have to give compliments to my team of their executing especially in digital. Great question. Look, we are very satisfied with our digital, we are going to achieve approximately $1 billion this year. It's a big number and we are very pleased about that.

If you look at our digital business, you have to see it from two parts. One is the Western Union Business - westernunion.com business, which we are kind of an agent, we have direct access to the customers and the other part is the white label there we - there are banks or financial institutions or businesses use our platform to move money cross-border for their digital customers, and both are having a big prospect opportunity.

On the what.com business, we are going to continue to invest in the marketing, we're going to continue to invest on the customer acquisition, consumer acquisition and the stickiness that's a business model for the future having that within our ecosystem, building that is a big opportunity.

On the white label or digital third-party business, it's really the expanding - offering our platform to the banks and our salespeople are on the road as we talk and we signed also some banks late '20 and early '21. I'm very excited about that. And so that's going to grow on that part. So I'm - $1 billion revenue target is something nice, which motivates all of us, and it's a great opportunity.

Raj Agrawal - Chief Financial Officer

Yes. I think, Jeff, I should give you a sense with Mark. We did say that we expect the digital business to get to be - approximately $1 billion in revenue this year. And they ended at just over $850 million last year. So that gives you a sense of the revenue growth. I do expect that transactions are going to be above that level of growth just given the mix of business that we have. And digital white label partners. Just to ground you again, last year it was largely a new business, so that's why the digital white label showed such extreme growth. So you can't really look at it as a new business anymore. WU.com is going to be probably more stable year-over-year from a transaction standpoint, also growing over a little bit, but not as much as the digital white label. So I think - just think of it that way and so the data points we gave you are going to help you get to what we're thinking about from an overall revenue standpoint at least.

Jeff Cantwell - Guggenheim Securities - Analyst

Okay. Great. Thanks for all the color and congrats on the results.

Hikmet Ersek - Chief Executive Officer

Thank you.

Operator

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

James Faucette - Morgan Stanley - Analyst

Thank you very much. And thanks for all the color and detail on both the results and how you're looking at '21. Just a quick clarifying question and then I guess my real question. And the first is, on the clarification, you talked about picking up the pace of buybacks in '21, how much is assumed in your EPS outlook?

And then, as far as a little more color on what you're seeing from a behavior standpoint, any nuance or details you can give us in terms of, you attracted a lot of new customers and a lot of customers outside of traditional demographics especially during the pandemic, anything you can share in terms of like how they repeat business or retention has looked like during the course of the rest of '20?

And then what are you seeing in terms of impact from things like stimulus etc, coming on and fading off etc. Just trying to understand a little bit the behavior of a lot of these new customers you added during the course of '20?

Raj Agrawal - Chief Financial Officer

Yes. Let me start and then Hikmet, feel free to jump in wherever makes sense. On the share buyback, last year I'll just point you to what we bought in the first quarter, it was only - it was about $217 million for the full-year and that was all in the first quarter. The previous year in 2019, we were above the $500 million mark. I would just say that it's not going to be as high as $500 million, it's not going to be as low as $200 million. It's probably going to be somewhere in the middle of that range. And again, it depends on the other capital priorities, James. But that's roughly what we're thinking about. And more than the amount, the timing of repurchases is also going to be important, so that's what we're thinking there.

And then I think we gave some metrics in terms of what we're seeing from a retention standpoint or at least I think we're getting 12% more transactions per customer in dot-com business. We also increased the number of customers by about 30%. And then the principal per customer is also up, I believe, around 25%, we said in the quarter in the dot-com business. And then, James, I'm sorry, I forgot your last - your third question. Third question again?

James Faucette - Morgan Stanley - Analyst

Yes. Just in terms of like what impacts stimulus maybe having on the different aspects?

Hikmet Ersek - Chief Executive Officer

Yes. Let me try this one, James. Good question. I think stimulus programs do benefit our business, but it's hard to quantify. We don't think they have been significant so far to our business. Maybe the US stimulus package was end of Q4, so it may have an impact in Q1 '21. But in general, I would say that the business - recovery of the business really has to do with economical turnaround in different countries.

Just a reminder, as you know, most of our business is out of the US and so distributed within the countries that - as the countries open or close have a net positive impact to our business, but we believe that as the global economy is performing and the lockdowns are getting less and the vaccines are spread Australia, New Zealand is a good example. Japan, Singapore is a great example, I think these are all we can see the first recoveries. And as the US - in the US, millions of people get vaccines, that will also help our business. And then the people are choosing in the - really, in the hard times, I do chose us, they trust us, and they really use us and we believe that's going to continue to do so.

James Faucette - Morgan Stanley - Analyst

That's great. That's great. Thanks a lot.

Hikmet Ersek - Chief Executive Officer

Thanks, James.

Operator

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

Hikmet Ersek - Chief Executive Officer

Hi, Ashwin.

Brendan Metrano - Vice President of Investor Relations

Ashwin, we can't hear you.

Hikmet Ersek - Chief Executive Officer

Ashwin, sorry I can't hear you. Raj, can you hear Ashwin?

Raj Agrawal - Chief Financial Officer

No, no, Ashwin, we're not able to hear, you're saying something. So maybe we go to the next question and maybe Ashwin you can come back again.

Operator

Just one moment. The next question comes from Brian Keane of Deutsche Bank. Please go ahead.

Hikmet Ersek - Chief Executive Officer

Hey, Brian.

Brian Keane - Deutsche Bank - Analyst

Hey guys. How are you doing?

Hikmet Ersek - Chief Executive Officer

Good. How are you, Brian?

Brian Keane - Deutsche Bank - Analyst

Good, good. Hanging in there.

Hikmet Ersek - Chief Executive Officer

Good.

Brian Keane - Deutsche Bank - Analyst

Wanted to talk a little bit about the pricing initiatives in wu.com. It looks like successfully, I've seen transaction growth continue to increase, I think, was up at 56%. Can you talk about what, kind of, pricing initiatives you'll do in wu.com in 2021? And is there other places where it makes sense to maybe make some changes in price to maybe drive a faster transaction rate even in the retail business? Thanks.

Hikmet Ersek - Chief Executive Officer

Yes. I think pricing, our pricing philosophy Brian in general has not changed. What has changed though, we are, more efficient on pricing with our dynamic pricing, and we get customer more and more on wu.com and we know the customer behavior better. We use the artificial intelligence, we use consumer dynamic pricing. That makes us the customers also very sticky. So generally, I would say that our pricing has not changed. We are really focused on customer acquisition especially in dot-com.

But one thing, it's important, Brian, I always say that profitable growth right? I mean, we are focused on the return. We're focused on profitable growth, so it may vary from quarter-to-quarter, it may really vary on the promotions we do with dynamic pricing. As you know, there are so many corridors. We are active in so many countries, with so many currencies and that's what we - really with different brands we do that. In the past, we were doing more dynamic pricing on a corridor basis. We changed that in the swishing.com, they started to dynamic pricing based on a consumer relationship - customer relationship. That makes the customer more stickier and our upgrade on our systems, upgrade on our platform has helped a lot of that. We also have our own department of data management and that's helps a lot. Khalid and Jay, who runs this dot-com business is doing a great job, so that Raj, do you want to add something?

Raj Agrawal - Chief Financial Officer

Yes. Just a couple of words. I'd say, Brian, that we did - we were quite active in last year in driving for the customer acquisition and maybe we have a little bit more to do this year. But a lot of what you'll see in the numbers will be more of the carryover impact of the pricing strategies from last year, so you actually, look at the yield, just comparing the yields between Q3 and Q4 for dot-com, they were quite similar. In fact, our entire business are quite similar. So not a big change from quarter-to-quarter. Year-over-year, you can see it more, but from quarter-to-quarter, not much of a change. And I think that you'll see more of that stability probably this year in terms of yields. A little bit more to view, but mostly - a lot of it was last year.

Brian Keane - Deutsche Bank - Analyst

Yes. You can really see the solid growth in digital. So congrats on that, guys. Thanks.

Raj Agrawal - Chief Financial Officer

Thank you.

Hikmet Ersek - Chief Executive Officer

Thanks, Brian.

Operator

The next question comes from Andrew Jeffrey of Turist Securities. Please go ahead.

Andrew Jeffrey - Turist Securities - Analyst

Hi. Appreciate you taking the question.

Hikmet Ersek - Chief Executive Officer

Hey, Andrew.

Andrew Jeffrey - Turist Securities - Analyst

Lots of good information back and forth here. My question is really high level. And I'm just trying to wrap my head around this dynamic. And maybe it's a simple answer. I'm looking at Slide 11 with C2C transactions, up 6% in the last couple of quarters and cross-border principal, up north of 20%. And I'm also thinking about competitors results this morning where revenue grew significantly faster than transaction.

And I'm just trying to think about what has to happen at the margin given the really good volume growth for revenue growth to accelerate. I know you said retail is going to be up, Raj, this year. And maybe that's part of the answer. But I mean is it mix? Is it price? Is there something else, I'm just trying to still it down to its most basic components.

Raj Agrawal - Chief Financial Officer

Yes. I do think you're going to start to see the benefits of some of the groundwork we've been laying over the last year or so. Last year, Andrew, we had so many customers looking for ways of sending money and we wanted to really back up the trust and take those customers in and engage them in our digital business. And that's really going to start to show up here. We're going to get a lot of revenue growth from digital. Our retail business is going to rebound so that's going to be a piece of it. And we're - and that's why we were able to give the outlook.

I would just say that we - not only did we grow our digital business a lot last year, but we also do margin. So this year we're really happy that we can actually drive revenue growth, which is ultimately our goal and that's in the mid single-digit range. We're also going to drive margins, we're taking the digital business up to about $1 billion in size. So I do think that you're going to start to see more traction from a revenue standpoint, now that we've sort of laid the groundwork from last year.

Hikmet Ersek - Chief Executive Officer

Yes. I will just add those Andrew on that, you mentioned competitor, but if you look at our base $860 million - $850 million this year and growing to $1 billion, it's a good achievement, I believe. It's really very strong growth from this base. And we want to really achieve our approximately $1 billion revenue this year. And that's also the downloads of apps has been huge on the Western Union apps, on the mobile apps. It's 2 times, I believe, bigger than the next competitor. And as you know, so we are pleased with the growth rates and we are really targeting $1 billion. Hopefully, we can celebrate as early as possible.

Andrew Jeffrey - Turist Securities - Analyst

Thank you. I appreciate it.

Hikmet Ersek - Chief Executive Officer

Sure.

Operator

The next question comes from Timothy Chiodo of Credit Suisse. Please go ahead.

Timothy Chiodo - Credit Suisse - Analyst

Great. Thanks a lot for taking my question. I just wanted to dig into the margin guidance a little bit. So operating margins this year came in at about 20.8%, guided to 21.5% next year, so about 70 basis points of margin expansion. Maybe you could just break down some of the components. I know there's more cost saves on the come, perhaps there's more investment behind CAC and digital, maybe some of the - maybe temporary cost savings from this year might come into the model. Maybe just break down the components to bridge us or the walk to the 70 basis points of expansion?

Raj Agrawal - Chief Financial Officer

Yes, sure. Nice to speak with you, Tim. Revenue growth is a key driver of the margin expansion. So that really gives us the big start here. And you're right, we are targeting about $100 million of total savings this year and that's including the more than $50 million or so that we got last year. So there is an incremental amount that will help us on the margin side. We're also investing in the business. So a lot of it - and some of it is just catch-up spending from last year, but we are investing in our technology platforms. We're going to have a new settlement system this year. We're moving applications to the cloud. We're upgrading our dynamic pricing capability, we're also going to spend a little bit more on the marketing side. So all of these things combined sort of give us this additional 70 basis points of expansion. And we are really happy to get now two years in a row of margin expansion. We haven't had that for a while.

Last year that was even in the face of the down revenue environment. This year not only is the revenue going out, but we're also driving margin expansion. And I really do believe that. And the other thing is that we're going to get an additional $50 million of savings next year. So that's part of our original roadmap getting us to the $150 million of run rate savings. So there is more margin potential in the business and we're really getting back on the right track with this year's outlook.

Hikmet Ersek - Chief Executive Officer

And returning significant cash back to the shareholders, all adding on that besides performing well in our business and giving a guidance, returning of the cash back to the shareholders, increasing the dividend and share repurchases.

Timothy Chiodo - Credit Suisse - Analyst

Excellent. Thank you for that context. That's all very, very helpful. The minor, minor, follow-up is, and I apologize if you mentioned this and I missed it. But did you quantify any of the Cuba impacts at all either for the quarter or for the guide? I'm sure it's small, but it's like a few…

Raj Agrawal - Chief Financial Officer

Yes. Cuba, we are obviously working to see what we can do to re-launch it. But, yes, right now it's close. It's about 1% of our revenues, Cuba is typically. So that's - so it's not the biggest impact, but it is about 1% of our revenues.

Timothy Chiodo - Credit Suisse - Analyst

Okay. So is that headwind. I think you were about to anticipate my question. Go ahead, please.

Raj Agrawal - Chief Financial Officer

Yes, we've anticipated some of that in our outlook. So it's - we already knew that it sort of shutdown in mid-November or late-November.

Timothy Chiodo - Credit Suisse - Analyst

Perfect. Thank you so much for taking the questions.

Hikmet Ersek - Chief Executive Officer

Sure.

Operator

And the last question will be from Bob Napoli of William Blair. Please go ahead.

Bob Napoli - William Blair - Analyst

Thank you for getting me in there. I appreciate it. Good afternoon, everybody.

Hikmet Ersek - Chief Executive Officer

Hey, Bob.

Bob Napoli - William Blair - Analyst

How are you? Great. A question, I mean, and maybe just digging in again to the digital business and kind of the long-term outlook. And understanding it's getting close to $1 billion in revenue. But as you look out over the next three to five years. I mean, I realize your active customers were, up 49% with revenue guided up 20%, and I think that's something that's the white label. But what is the right growth rate and is it accretive to margins over the long-term? And what's the right growth for this business over the next three to five years? Where are the biggest opportunities geographically? What's going to sustain the growth of that business?

Hikmet Ersek - Chief Executive Officer

2020 was definitely an exceptional year. We had a very strong year. But we're only in the beginning of the real growth here of the digital. I really believe that our future is the digital send transactions, that's going to happen. And that's going to continue to grow. Is it via westernunion.com or via digital third-parties, I'm really excited about that.

And I think that especially also having customers acquisition in our system, in our westernunion.com consumer acquisition, we are only - or a lot, 8.6 million customers already and that opens us a huge opportunity to extent our customer acquisition globally. And that's something that I'm excited about, that you could do more activities besides money transfer. With 8.6 million customers you can really have them stickier, you can offer additional products. And with westernunion.com and look example like Sberbank. Sberbank is a great partner and they really say that, okay, we have - we would like to choose you to send money to all the [Indecipherable] countries, can you drop the money for us. And can you do the settlement, can you do the payouts, can you do the network activities, can you do the settlement activities, compliance activities for us and that's what we are doing. And we are doing in an efficient way that white label partners are choosing us.

STC Pay is another example, Saudi Arabia telecom pay. We even found the opportunity to invest there and we believe that when they expand their activities in the Gulf States in other countries, that gives us also additional transaction and capabilities and also customer acquisition. So I am excited about that.

And Raj, do you want to add something?

Raj Agrawal - Chief Financial Officer

Just on the margin question you had, Bob. As we said in our last quarter, it's absolutely margin accretive. A lot of the digital business is incremental to us first of all. And then it has a very high margin profile regardless of whether it's wu.com or digital white label. And as you've seen and I think I said it earlier, but the digital business has grown. Now this year it will be about $1 billion and we've continued to expand margins over this period. So I think that really is a case in point about the profit profile of the digital business.

Bob Napoli - William Blair - Analyst

Thank you. Raj, I thought I heard you or Hikmet and just to clear. I mean, did you say as far as capital return that you're focused on looking for an acquisition in cross-border payments. And if so - if I heard that right, I wonder if you could give any more color on that. What are you looking from?

Raj Agrawal - Chief Financial Officer

Yes, we're trying to make a generic comment that that's a top priority for us. So we - in terms of our capital priorities, it's really investing in the business then we use about, almost $400 million for the dividend return. The next thing that we're always looking at is the right kind of acquisition opportunity in the cross-border payment space. And then we returned our excess cash through stock buyback. So that's the order that we think through cash usage. But we're always looking for the right, kind of, acquisition either capability or technology of some sort to advance with a couple of years from what we're doing on our roadmap.

Bob Napoli - William Blair - Analyst

Thank you. I appreciate it.

Hikmet Ersek - Chief Executive Officer

Sure.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Brendan Metrano for any closing remarks.

Brendan Metrano - Vice President of Investor Relations

Yes. Thank you, Andrew. And thank you all for dialing in to the call today. And we appreciate your interest in The Western Union Company.

Operator

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Q4 2020

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