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Western Union Co
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Good afternoon and welcome to the Western Union Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Brad Windbigler, Head of Investor Relations. Please go ahead.
Thank you, Andrea. On today’s call, we will discuss the company’s fourth quarter and full-year results, and our financial outlook for 2020, 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.
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 & Exchange Commission, including the 2018 Form 10-K, for additional information concerning factors that could cause actual results to differ materially from 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 although expenses that have been excluded from adjusted metrics are specific to those initiatives, these types of expenses may be similar to types of expenses that the company has previously incurred and can reasonably be expected 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.
Before I turn the call over to Hikmet Ersek, I would like to take the opportunity to announce that we have brought in a new deal leader for Investor Relations, Brendan Metrano; who joins from – joins us from Evercore ISI, where he was an Equity Research Analyst. You’ll be hearing more from Brendan in the near future. Hikmet?
Well, thank you, Brad and good afternoon everyone. I am pleased to say that our business delivered solid results in the fourth quarter driven by continued strong performance in our digital offerings. Fourth quarter revenue increased 3% on an adjusted constant currency basis and the adjusted EPS was $0.38. For the full year, our adjusted results were in line with the financial outlook we provided with third quarter results.
Returning cash to shareholders remained a priority as we returned over $880 million to shareholders in 2019. I am pleased that – I am pleased that today, we also announced a 13% increase in the quarterly dividend, which reflects the strength of business and strong profit expectations for 2020 and confidence in our new global strategy. 2019 was a pivotal year for Western Union as we made significant progress towards our vision of being the leader in cross-border, cross-currency money movement and payments, and delivered strong financial results.
So, I would like to take a moment to review some of the key strategic accomplishments from 2019. First, we simplified and created a sharper focus for the business largely completing our exit from non-core operations with the sale of Speedpay U.S. domestic bill payment service and the U.S. payment mortgage service in the second quarter. The $750 million in proceeds funded enhanced cash returns to shareholders. With the divestitures and smaller domestic money transfers, our business is now primarily focused on cross-border services for consumers, financial institutions, banks and other businesses. Our focus aligns with our core competencies in foreign exchange, cross-border settlement, compliance and global retail and account payout network.
Second accomplishment in 2019 was we continued to expand our digital business. The westernunion.com service now accounts for 15% for consumer revenues and cross-border revenue increased 26% in the fourth quarter. We also began unlocking the value of our leading global physical and digital cross-border, cross-currency platform opening into third-party partners. For example, we edit two significant customers among others, STC Pay and Sberbank. Our total digital money transfer revenues increased 24% reported or 25% constant currency in the fourth quarter.
Today, we operate one of the most extensive digital platforms for cross-border, cross-currency money movement whether branded direct offerings like westernunion.com or digital offerings like – that enable our partners like TD Bank, Sberbank or STC Pay. both westernunion.com and white label offerings continue to have very strong growth potential. We have recently integrated digital services with three of Europe’s largest postal institutions, France’s La Banque Postale; Italy’s Postepay, and the UK Post.
We also recently announced a new partnership with Bharti Airtel, a global telecommunications company with operations across Asia and Africa. We will soon offer real-time payments into millions of Airtel payments at bank accounts in India and mobile wallets across 14 countries in Africa. They have established non-remittance white label payments use cases, such as our partnership with Amazon for global e-commerce payments further expanding our addressable market to consumer-to-business payments. And in business payments, Western Union Business Solutions continued its growth trend, led by strong performance in the education and financial institution verticals, which translated into solid revenue growth of 4% on a constant currency basis for 2019.
So, it was a quite good year. While we made significant progress in 2019, we are not content and we'll continue to drive our business forward in 2020. We laid out our strategic vision at our September Investor Day and I would like to highlight three key strategic objectives we will focus on in 2020, enhancing our global network, driving our digital growth and optimizing our organization.
We will work to enhance our global payments network, improving the cost coverage and quality and further leverage it with additional third-party partnership. Today, our vast platform capabilities include both digital and physical money movement networks with over 550,000 locations across more than 200 countries and territories. Digital send capabilities in an over 70 countries and bank account payout capabilities in over 100 markets offering across to billions of accounts.
We will continue to grow our network and we'll also improve the quality by adding new value-added services like real-time account payout, which we expanded during 2019. We now offer customers to have ability to transfer funds into an account in real-time in over 20 countries with plans to expand it to over 100 countries this year. The value-added payout services should help us gain new customers segments such as e-commerce and financial institutions.
We will drive our digital strategy forward to serve consumers whenever, wherever, and however they desire and expand aggressively over the next few years, including larger opportunities like the $120 billion outbound market in the Gulf States or the $25 billion outbound market in China and India. Our goal is to evolve in the world’s ultimate agnostic network for payments and cross-border money movement.
We are also transitioning our Western Union branded consumer business from a transaction-based model to a lifetime value model, optimizing the customer experience and improving retention. To achieve this goal, we have further developing and applying strong data analytic capabilities to our rich pool of global data over 200 countries, allowing us to price dynamically, market more precisely and ultimately enhance our ability to drive revenue growth.
Our third strategic objective is to strengthen and optimize our organization. Western Union has tremendous talent, building on the foundation of WU Way Lean capabilities and the transformation office. We will leverage internal resources more effectively to improve execution, enhance profitability, and drive margin expansion.
In addition to that, we will continue to selectively add new team members, who can impact our business. A great example is the recent addition of Shelly Swanback, our new president of product & platform. Shelley comes to Western Union from Accenture, where she was instrumental in building the firm's digital services. Shelly reports directly to me and play a critical role in enhancing our global platform.
Finally, while we will continue to focus on driving shareholder value, its strong financial results, we will also focus on delivering value for all stakeholders to our environmental, social and governance efforts. The details of these efforts can be found in our 2018 ESG report. We planned to issue our 2019 ESG report later this spring
And one more thing, during the past month, we have also achieved a significant milestone in our U.S. Joint Settlement Agreements. The term of the deferred prosecution agreement with the Department of Justice expired on January 19. under the DPA, to close our – to close out this matter, the DOJ has 90 days from the expiration to file for dismissal of the charges. We understand that DOJ will make emotion to dismiss the DPA promptly. We will continue to work to protect our customers and partners by maintaining strong compliance programs, which we believe give us a competitive advantage.
In closing, we made significant progress in 2019 and we begin 2020 better positioned than ever before to capitalize on the significant opportunity in the large and growing money transfer and global payments market. I'm confident in our ability to deliver the 2022 margin and EPS targets and our outlook this year reflects our expectations for a strong start to achieve our goals.
Raj, will discuss our financial outlook and long-term targets in more detail. I remain excited about our long-term prospects and we like thank to all our team members for their hard work and commitment. And a big thank you to our business partners, agents, consumers and shareholders from all over the world for your trust and loyalty. With that, I'll turn the call over to Raj.
Thank you, Hikmet. I will focus my comments primarily on the fourth quarter, the similar information for the full year can be found in our press release and the attached financial schedules. Given the impact of the divestiture on prior period comparisons and restructuring costs from our productivity program, there are a number of puts and takes in our fourth quarter results.
Our adjusted results removed most of the impact of the factors which will not affect our future results. Fourth quarter revenue of $1.3 billion declined 7% compared to the prior year period, while adjusted constant currency revenue, which excludes our divested businesses in the prior year period increased 3%. Currency translation, net of the impact of hedges reduced fourth quarter revenue by approximately $42 million compared to the prior year, primarily due to the depreciation of the Argentine peso.
The decline in peso negatively impacted reported revenue by 2% while the effect of inflation on our Argentina businesses is estimated to have positively impacted both reported and constant currency revenue by approximately 1%. In the Consumer-to-Consumer segment reported revenue was flat or increased 1% constant currency, while transactions declined 1% primarily due to some civil unrest, macroeconomic and market specific issues in a few countries.
Total C2C cross-border principle increased 1% or 2% on a constant currency basis. Principal per transaction was flat or increased 1% constant currency. The spread between C2C transaction and revenue growth in the quarter was 1% with a negative 1% impact from currency. Pricing was higher in the fourth quarter compared to the prior year and was largely offset by mix. The net impact was positive on revenue in the quarter.
Turning to the regional results, North America revenue grew 1% on a reported and constant currency basis, while transactions declined 4%. Revenue growth in the region was led by the U.S.-to-Mexico corridor and other U.S. outbound businesses which was partially offset by continued declines in U.S. domestic money transfer.
U.S. DMT trends were similar to last quarter and we expect declines will continue this year as we manage the business for cash flow. Revenue in the Europe and CIS region increased 1% or 2% on a constant currency basis driven by Spain, Russia and France. Transactions in the region increased 5% aided again by the Sberbank white-label business. Revenue in the Middle East, Africa and South Asia region was flat on both reported and constant currency basis. Revenue trends in the region reflected slower growth in Saudi Arabia and in the UAE in the quarter, civil unrest in Lebanon and continued hard currency limitations in certain African markets.
Transactions declined 1% and strong growth in digital transactions was offset by declines in retail, sends from the region to India were negatively impacted by a cash tax implemented in September that impacted our agent's ability to make cash payments. It was subsequently removed, but it may take some time to return to previous transaction levels. We are also making adjustments to marketing, pricing and other incentives in the region to improve growth.
The Latin America and Caribbean region delivered strong constant currency revenue growth led by Chile and Mexico outbound, despite civil unrest in multiple South American countries. Revenue in the region declined 2% on a reported basis or increased 6% constant currency, while transactions grew 4%.
In the APAC region revenue declined 10% on both reported and constant currency basis. Revenue trends improved compared to last quarter’s rate, partially due to pricing actions in certain markets. Transactions were down 7% in the region, driven primarily by the Philippines domestic business, which has limited impact on profits.
Digital money transfer revenues increased 25% on a constant currency basis in the quarter, including westernunion.com and third-party white label services. Westernunion.com revenue grew 17% or 18% constant currency. wu.com now represents 15% of total C2C revenue in the quarter. Cross-border westernunion.com revenue increased approximately 26% which was partially offset by declines in domestic money transfer.
Business solutions revenue was flat on a reported basis or increased 1% constant currency and represented 7% of company revenues in the quarter. Constant currency revenue growth was driven by strong performance in Europe as well as strong growth in the education and financial institution verticals which were offset by slower growth in hedging services.
Other revenues, which consists primarily of our retail bill payments businesses in the U.S. and Argentina decreased 52% in the quarter, which reflects the impact of the Speedpay and Paymap divestitures in May. The Pago Facil walk-in business in Argentina posted good increases in transactions and local currency revenue growth. Other revenues represented 7% total company revenues in the quarter.
Financial margins and profitability, we will focus on consolidated margins as segment margins are not comparable with the prior-year period due to reallocation of corporate costs following the divestiture of the Speedpay business. We are also providing adjusted metrics to exclude restructuring expenses, merger and acquisition costs and related tax effects.
The consolidated GAAP operating margin was 17.3% in the quarter compared to 19.3% in the prior year period. The decline was primarily due to higher marketing investment compared to the prior year period. The impact of restructuring expenses in the current quarter and the divestiture of the Speedpay in May of 2019.
We incurred $17 million of restructuring expense in the fourth quarter and $115 million for the full year, which was slightly higher than we expected in 2019 due to the timing of some items, but we continue to expect a total of approximately $150 million of restructuring expense with the remainder to be encouraged this year. Adjusted operating margin in the fourth quarter was 18.7% compared to 19.9% of the prior year period with the decrease primarily due to higher marketing investment and the Speedpay divestiture.
Speedpay contributed about 60 basis points to last year's fourth quarter margin, while foreign exchange hedges provided a benefit of $7 million in the current quarter and a benefit of $4 million in the prior year period. The GAAP effective tax rate was 31.4% in the quarter compared to 9.8% of the prior year period, while the adjusted tax rate of 24.5% compared to 6.8% in the prior year period. The increase in the GAAP and adjusted tax rates primarily due to certain discrete benefits in the prior year period. Also, while we expected the fourth quarter to have the highest tax rate of the year, it was further increased by one-time settlement in certain geographies. The GAAP rate also included additional taxes associated with the May 2019 divestitures.
GAAP earnings per share in the quarter was $0.32 compared to $0.48 in the prior year period and adjusted earnings per share in the quarter was $0.38 compared to $0.51 in the prior year. The year-over-year decrease in both GAAP and adjusted EPS was primarily due to higher effective tax rates, the divestitures and higher marketing investment partially offset by fewer shares outstanding.
Turning to our cash flow and balance sheet. GAAP cash flow from operating activities was $915 million for the full year, which exceeded our outlook primarily due to favorable working capital items. Adjusted cash flow from operating activities was $1.1 billion in 2019. Capital expenditures were approximately $34 million in the quarter and $128 million for the full year. At the end of the year, we had cash at $1.5 billion and debt of $3.2 billion.
During the fourth quarter, we issued $500 million and 2.85% notes. We redeemed $325 million in notes due this year and reduce commercial paper. We returned $149 million to shareholders in the fourth quarter, including $84 million in dividends and $65 million of share repurchases, which represented approximately 2.5 million shares. The outstanding share count at quarter end was 418 million shares, and we had $1 billion remaining under our share repurchase authorizations, which expires December 2021.
As Hikmet noted, we're off to a good start to deliver on our strategic initiatives and restructuring plans, which is reflected in our strong operating margin and EPS growth outlook for 2020. Our outlook assumes no material change from current macro economic conditions. We expect GAAP revenues for the full year to be a flat-to-low single-digit decline, primarily due to the divestiture of Speedpay in May 2019.
On an adjusted constant currency basis we expect low-single-digit revenue growth this year, which excludes Speedpay revenues and any benefit related to Argentina inflation. Operating margin on a GAAP basis is expected to be approximately 20%, while adjusted operating margin is expected to be approximately 21% as we continue to focus on generating efficiencies and we will begin to benefit from restructuring savings weighted toward the second half.
We continue to expect to realize approximately $50 million of annual savings from restructuring in 2020 increasing to $100 million in 2021. In addition to this, we expect to realize other efficiency savings of $50 million by 2022 for a total of $150 million of annual savings in 2022. We expected GAAP and adjusted effective tax rate to be in the mid-teens range this year.
GAAP EPS for the year is expected to be in a range of $1.87 to $1.97, while adjusted earnings per share is expected to be in a range of a $1.95 to $2.05, which represents growth in the teens. Cash flow from operating activities is expected to be approximately $900 million, while adjusted cash flow from operating activities is expected to be approximately $1 billion. We expect to spend approximately $500 million on share repurchases for the full year.
In summary, we delivered our full year adjusted financial outlook in 2019. We made good progress in our restructuring activities and our new global strategy designed to drive profitability, efficiency and long-term growth. We generated strong cash flow and continue to return significant funds to shareholders. We look forward to delivering on our strategy and our long-term financial targets of operating margin of approximately 23% in 2022 and a low-double-digit earnings per share CAGR for the three years ending 2022 off of adjusted 2019 EPS.
Thanks for joining the call today, and operator we are now ready to take your questions.
[Operator Instructions] And our first question comes from Bryan Keane of Deutsche Bank. Please go ahead.
Hey guys, this is Korey Marcello on for Brian Keane. I wanted to ask; I guess first on the guidance, I know the three-year outlook is calling for 2% to 3% growth in consumer, but any color just for next year in terms of how you think business solutions and maybe other revenue will shape up. I guess in particular you're going to have some lapping impacts from the divestiture. So I didn't know if you had any comments on sort of the quarterly cadence of revenue growth for the year?
Well, I can jump in, but let me start. Look in the fundamentals, nothing has changed. We really assume that our business will perform; especially our digital expansion will perform. The digital expansion for us is it branded or white labeling and Bill is going to go and that you saw the recent numbers on our – growth numbers are quite impressive and that's from a different base than the competitors have, right? We have been investing here for a long time and growing very strong in digital expansion, that continue to go.
The other part is that dropping money on real-time on accounts that will continue to grow. And offering retail cash payout and dropping money in real time. It's a huge competitive advantage within our capabilities. And look, we also started to drop money for businesses, right? I mean we are collecting for Amazon – from consumer in different countries, businesses. We are doing transactions for third parties and our business-to-business had a good year growing by 4%.
So generally I would say that nothing has changed from our Investors Day. We are in a good momentum. We like our business, we like how we are affirming, especially those are transformational activities and our efficiency activities are very promising. And we are still in targeted our 2022 goals. Anyone you want to add something?
I think you've covered it. So I think we're good.
Okay, great. I guess just as a follow-up you mentioned obviously Amazon and third parties there. I guess, can you give maybe a broader update on kind of what the pipeline looks like for those third parties and in particular maybe the Amazon partnership, any update there in terms of like plans for the year and market go live. And is there anything kind of baked into the guidance from some of this stuff that you've called out as more longer term, I guess for next year? Thanks.
Yes, I think it's as you said, it's a longer term. We started in a very good stronger digital growth; definitely our partnership helps on our strong growth, right? And look, we go-to-market, we are talking and in some countries we offering our dotcom business in some countries on our digital white labeling part, depending on our partner, depending on the legal environment, depending on the consumer relationship. But the good news is that the partners are choosing our capabilities to move cross border cross currency money. And that's – that capability having two countries and capable of operating in 200 countries is unique.
And so, I mean, it's still small but growing very, very strong and has good potential and we will definitely update with additional partners. I mean, we recently signed three big postal offices like the La Banque Postale, UK Post and the Italy Post. Italy post is for instance having access to 7 million consumers – Italian consumers with their mobile phones, right. And they will go – they do transaction cross-border by using our platform. So it's quite impressive and we dropped money in real time for them.
And that's going to continue. It depends really on the partnership how they choose, if they choose Western Union brand or being a partner like Amazon, which Amazon uses their own codes, we are referred them as service provider to collect money for their online services.
All right, thanks guys.
Thanks Korey.
Thank you.
Our next question comes from Darrin Peller of Wolfe Research. Please go ahead.
Hey guys, this is Andrew, on behalf of Darrin.
Hey, Andrew.
I wanted to drill into North America. Hey, how's it going Raj? I want to drill into North America for a little bit. It looks like the Delta between transactions and revenues was relatively stable over the last couple quarters and widened a little bit this quarter? I was wondering, is there any impact of the digital transactions in that number or is that largely all domestic? And if you can provide any other additional color on what you saw in domestic in the quarter and further into the outlook for 2020?
Yes. North America, I'd say that one of the key driver was really declines in our domestic money transfer transactions in the U.S. We also have a very small Philippines intra business that has a heavy number of transactions, which was also declining. So that has an impact on overall mix.
The U.S.-to-Mexico market also was just softer from a market standpoint, although we continue to gain share there. And then we’ve also put new principal limits in place for U.S.-to-Cuba, so some of these things had an impact in the quarter. But overall I would say the digital part of the business, if you look at the cross-border part of wu.com again, which North America is a contributor there obviously that grew at 26%. So the digital part continues to do well. The domestic part of digital, certainly it was a little bit worse in the quarter than it was in the previous quarter.
And then that new metric, the digital revenues that you called out, how should we think about that mix across all the different regions that you have? I mean, I think it's the first time that you've really been able to separate them like that. So maybe just letting us get a better sense of how we should think about that across the segments? Thanks.
Yes, I mean, right now, the digital, which grew 25% of the quarter includes wu.com and as well as the digital revenue for partners. We only have a handful of those right now. The two primary ones are Saudi Telecom in Saudi Arabia and Sberbank in Russia. So those are the two primary ones that are driving a lot of the additional growth. So there's not much to cut in terms of where it is globally, it's in those two regions if you will, in the Middle East as well as in Europe.
And, certainly we want to sign more partners and more opportunities. We really look at the total digital is being one type of offering, with branded and non-branded offerings and they're both leveraging our platform capabilities, right?
They basically use our same platform, go to market and it's the partner's decision if they use their brand, in that case in Saudi Arabia for Saudi Telecom user, but it's the westernunion.com platform and our platform, by seeing platform and our network, we dropped money in our network. So, it's really a digital transaction with different brands.
All right, thanks guys.
Yes, thank you.
Our next question comes from Ramsey El-Assal of Barclays. Please go ahead.
Hey guys, this is actually by Ben Budish on for Ramsey. I wanted to kind of follow-up on the white-label wallet you guys talked about and just kind of looking at the growth in Europe versus the Middle East. I know you called out some one-time factors impacting the Middle East growth, but, is there anything to read through there, like maybe growth in transactions that's perfect and are growing better than those STC or is that really all related to kind of those one-time factors that you called out?
Yes, I would say most of it is related to the one-time factors and we'll see how long the Lebanon, civil unrest be called out, there’s some in Syria and then obviously the India tax is also the other factor, which the issue was reversed. So that tax came into play late in the third quarter, but then it was reversed in the fourth quarter. But we did have some customer attrition and that's what we're working through right now.
So we've assumed that in the first part of this year we'll see some of that, but we should be able to work through that as the months come along here. So it's really related to those factors rather than any shift in mix if you will.
Okay. And then just kind of following up on again on the white-labels, would you say that performance has been kind of in line with expectations? I mean, we've got like a little hint at the back of the Analyst Day and it looks like things were going quite nicely, is there any change to that or does it seem like things are kind of moving along according to plan?
Yes, I would say things are moving along very much according to plan. They're doing quite well and we're very excited about them. And we want to continue to add more and more partners to the mix.
Okay, great. Thanks for taking my questions.
Thank you.
Our next question comes from the Vasu Govil of KBW. Please go ahead.
Hi. Thanks for taking my question. I guess the first one on the pricing front, it seems like clearly that's been a tailwind for a couple of quarters now. Can you talk about whether you are starting to see an impact from your dynamic pricing initiative or it's just the underlying trends are better. And then if you could also comment on what's enabling the stability in the pricing environment because it doesn't seem like the competitive environment is necessarily abated?
Well pricing environment obviously as we said earlier, partly impacted by mix, partly with the strong pricing environment. We feel comfortable with our dynamic pricing activities. As you know, we adjust our pricing corridor-by-corridor, even a ZIP code by ZIP code, customer behavior by customer behavior and this effort started and we start in few corridors and we will expand that globally. And that’s something that we are very excited about that you can compare like a big airliner, you fly one direction. you have different customers with different needs, with different price payments. That’s going to happen and that’s what we are aiming to and we started in some corridors and we see good return on that. And that’s just the beginning of the story though and we are quite excited about that.
Great. Thanks. And just a quick follow-up on the transaction growth trends, Raj. I think you mentioned on the previous question that you’re assuming that, that will kind of continue to be weak in the first half. Is that true for just the India piece or all the various one timers that you saw this quarter? And then just to confirm, does coronavirus have any impact on your business, positive or negative?
Yes. In terms of the one-time items that we called out for Q4, obviously, the ones that are under our control where we’re auctioning those – there are some things that are more country specific issues, civil unrest. It’s not really under our control, but we’ve assumed that some of these things will continue for the first part of this year. We don’t expect them to continue for the entire year. but certainly we’ll update you as we at least see more. from a coronavirus standpoint, we have not assumed any material impact for coronavirus, China for us is about 2% of our total revenues and it’s mostly inbound in nature. And that’s, obviously the conditions that are evolving every single day. So, we need to see how that plays out.
Yes. And China, I mean, first of all, we support our employees and look after them and it’s very important those agent locations, but most of the agents’ locations are active. And as you said, it’s only 2% of our business. But at the same time, I want to mention that also we can drop money in minutes on an account in China. So, if people don’t feel to go to the location and have a physical payout, they could also do it online and this is one of the growing parts of our business. And so we do really don’t see big impact from coronavirus yet. Now, I can’t judge it generally, what we’ll have that go to general global economy, but at the specific areas we don’t see big impact on our business.
That’s very helpful. Thank you very much.
Sure.
Our next question comes from Andrew Jeffrey of SunTrust. Please go ahead.
Hi, good afternoon. Appreciate you guys taking the question.
Hi, Andrew.
just conceptually, I’m just wondering how you’re thinking about the business, Raj. I think you made a comment about the domestic business increasingly being a source of free cash and presumably, return of capital. it would appear that strictly looking at wu.com, it’s 100% of your CTC growth today. should we think about that as sort of the feature and the balance of the business is really being a cash cow for lack of a better term and fueling investments to support digital and returning capital to shareholders. Is that a reasonable framework?
Yes. I think Andrew, as we laid out at Investor Day, our – we said that our assumption was for 2% to 3% overall growth over the next three years and that has not changed. And the composition of that was a flattish type retail business. obviously, we’d like to get a little bit of growth out of it, but we do believe that can be the case. And then we expected digital to grow in the 20% range and off of a base of $600 million last year. That’s quite a bit of contribution. And then we also expected and continue to expect that the B2B business will grow in the mid single-digit range. So, those are the components we’re thinking about. Obviously, we want to drive to more than just 2% to 3% growth, that’s not satisfactory, and that’s where really our platform strategy comes into play and signing more and more partners as we move along.
But just last point on the domestic business, it was about 6% of our total revenues last year. So, it’s becoming a smaller and smaller piece overall of the company, and that’s probably a trend we’re going to see for a little while, so – and that’s what we’ve assumed in our outlook for this year as well.
Okay. So, still hoping that that retail business I guess can turn the corner for you?
Yes. Yes. Go ahead.
Yes. I mean, we assume a flat business, but nobody has the strength of retail. The mix compared with our global coverage and most importantly, you connect digital with retail, that we can payout in different economical environments, different – we serve different customer segments on the send side. We do serve different customers on the receive side. And combining that, it’s a big advantage for us, that drives the growth of digital paying out in cash or paying out in an account or paying out in a wallet, and that’s in real-time, it’s a huge, and that’s definitely going to continue happening in the retail business.
Yes. And I think as you saw at Investor Day and it continues to be the case, the opportunity on the retail side is to drive more dynamic pricing capabilities. So, time of day, day of week, location density, those kinds of things give us confidence that we can keep the retail business in the flattish type range, because there’s more opportunity there that we haven’t fully maximized yet.
Okay. And I apologize if I missed it, but it looks like yields on wu.com and improved again this quarter. What – what’s driving that?
Yes, I mean there – there was certainly some mix impact from the domestic business and things, because we’re running the domestic parts of our business for cash, if you will. And so that certainly has a positive mix on the revenue side. There was also some pricing that we did as we’ve mentioned, net pricing was beneficial net of the mix in the quarter, and so we feel good about where the overall digital business is. We had 25% revenue growth in digital, but over 30% transaction growth in that digital business. So, we’re doing quite well overall on the digital side.
Okay. So that’s pricing specifically at wu.com or across…
On the branded wu.com offering? Yes.
Okay. All right. Thank you.
Yes.
Our next question comes from Tim Chiodo of Credit Suisse. Please go ahead.
Good afternoon. Thanks for taking my question. I wanted to talk a little bit about the unit economics of some of the digital white labeling programs. I know, we’ve talked about in the past that the revenue per transaction is obviously a little bit lower, but maybe, you could talk about the absolute EBIT dollars per transaction and how that might compare to a traditional Western Union transaction?
Yes. First of all, I would say it’s still early stages on the white label partners and we’re going to continue to learn on what kind of economics they can provide, but you’re absolutely right. You typically will have a lower starting point from a revenue per transaction standpoint, but we also don’t have much cost in that transaction either as we do in our branded offerings. The wu.com transaction, we are paying, we’re investing heavily in marketing to acquire customers. We also have fraud losses and other things that we’re paying for. But in a white label transaction, we are being delivered a customer, who wants to do a transaction with us and has good funds, right?
So, we don’t spend the marketing dollars there and we really have the processing costs. So, the margins in the white label offerings can be quite high actually and we’re going to learn more as we launch more of these partners. But based on our early experience, that can be a very profitable business. And last thing I would say is that we see it largely as an incremental business, so incremental revenues and incremental profits.
Right on, thank you. [Audio Dip] to get a little bit more at the absolute dollar. So, I understand that the revenue is lower and the margin percentage could be higher, but could be – could the absolute dollar actually be similar?
It depends. It depends. I can tell you one of the examples we have that’s currently going on is very profitable. The other one is not as profitable, but we’re getting, again, incremental revenues and incremental profits. So, it’s not – obviously, it’s important on how much money we’re making per transaction. But as long as we’re getting incremental business for the company and it’s within our overall framework that’s the most important thing for us. So, we’ll learn more overtime and we wouldn’t be doing this if it wasn’t profitable for us.
Yes. it’s both are – sorry, both are profitable and – but it depends on the partner, I mean also the new additions of our – the post offices will be very profitable, but it depends on the partner and the geography, and which corridor you are placing that, and it’s like started our westernunion.com business. As you know, as we started, it was only – as we started to report, it was only 1% of our revenue. Now, it’s about 15% of our consumer revenue. It’s a huge part of that. And same approach, we think also could be done by our digital business like adding on the combining wu.com and digital business will be a big part of the future of the company and will be very profitable.
Great. Thanks a lot. That’s really helpful. I appreciate it.
Sure, no problem.
Andrea, do we have anyone else in the queue?
There’s no one in the queue at this time. [Operator Instructions]
Great. Okay. Thank you everyone for joining. We’ll end it here. Thanks.
Thank you.
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.