WU - NYSE

Good day, and welcome to the Western Union Third Quarter 2025 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tom Hadley, Vice President of Investor Relations. Tom, please go ahead.

Thank you. On today's call, we will discuss the company's Third Quarter 2025 results, 2025 outlook, 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. Joining me on the call today is our CEO, Devin McGranahan; and our CFO, Matt Cagwin. 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 2024 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 in our earnings release attached to our Form 8-K as well as on our website, westernunion.com, under the Investor Relations section. I will now turn the call over to our Chief Executive Officer, Devin McGranahan.

Good afternoon, and welcome to Western Union's Third Quarter 2025 Financial Results Conference Call. Today, we reported a solid quarter against a difficult macro backdrop, demonstrating the benefits of our large-scale global and now multiproduct business model. We saw strong performance in many corridors and product categories, offset by continued weakness in North America across several specific large corridors, most notably U.S. to Mexico. While we are on our way to becoming a much more customer-centric company, we have invested significantly in becoming market competitive and have increased our executional and operational rigor. We are now delivering an improved omnichannel customer experience across our products and channels. As a result, in this quarter, we saw reasonable to strong performance in Europe, South America and Asia, driven by our retail business in Europe, our digital business in Asia and our consumer services business in Europe and LACA. Our opportunity is to continue to drive our strategy across all geographies and channels and see the benefits as market conditions improve. An important element of the strategy has been to accelerate the development of our retail model in the U.S. Our goal is to have a strong base of strategic accounts, a large and competitive mix composed of exclusive and nonexclusive agents -- independent agents in the middle and a small selection of high-performing company-owned stores at the top. Upon completion, our recently announced acquisition of Intermex will help accelerate our progress towards this goal. With the passing of the HSR review period 2 weeks ago, we are now excited to begin the appropriate integration planning with [ earnestness ]. We remain optimistic about the longer-term outlook for our business as we expect migration patterns to stabilize and our investment in becoming market competitive over the past 2 years has provided a foundation for ongoing revenue and share gains. We also see many opportunities to continue to expand our consumer services business, which contributed significantly to the company's results in the quarter. Over the past 3 years, we have delivered above-average industry margins and returned substantial capital to our shareholders via dividend and share buyback. We have and will continue to fund the necessary investments in our transformation through cost discipline and good operational performance management. For the third quarter, we reported revenue at $1.033 billion (sic)[ $1.03 billion ] on an adjusted basis and excluding the impacts from Iraq, this was a decline of 1% year-over-year. Consumer money transfer transaction growth was down 2.5% in the quarter, excluding Iraq, and cross-border principal growth was up mid-single digits on a constant currency basis, speaking to the resilience of our customer base and their perseverance in the current macro environment. While our retail business in the Americas continues to face headwinds associated with the current geopolitical environment, we are encouraged by some improving trends in recent months. And while it is too early to say that we have reached the bottom, we are potentially seeing some stabilization. Our strategy continues to perform well with our retail business in Europe with mid-single-digit transaction and revenue growth. Our branded digital business increased transactions by 12% and adjusted revenue by 6% in the quarter. Consumer Services adjusted revenue was up 49% in the quarter, driven by our acquisition of Euro Change and a strong European travel quarter, which is the driver of our travel money business. I was in London last week with our new team discussing our plans for 2026, and we remain excited about the potential for expanding that business across both retail and digital channels. We expect Consumer Services to have another strong quarter to the end of the year, and our travel money business is likely to approach $150 million in revenue in 2026, up from nearly nothing just a few years ago. Adjusted earnings per share came in at $0.47 compared to $0.46 this quarter a year ago. Our discipline in managing operating costs continues to come through. Matt will discuss our third quarter results and 2025 outlook in more detail later in the call. Switching now briefly to the macro environment. Economic conditions globally remain reasonable with inflation rates declining in key markets around the world and GDP outlooks remaining relatively strong despite elevated interest rates. These economic conditions are providing a stable backdrop for our business and should improve further as we have begun an interest rate cutting cycle, both here in the United States and in Europe. Globally, migration continues to evolve in complex and dynamic ways. Our business remains fundamentally linked to human mobility. When people move, they rely on Western Union to send money home. This connection makes our business sensitive to shifts in migration patterns, policies and enforcement practices. The good news is that our business is globally diversified across countries and channels, mitigating much of any one region's specific risk. When we see trends towards more restrictive migration policies like we are seeing in the United States now, it does influence our business. Recent policy changes have led to a substantial decline in border crossings and an increase in enforcement actions, including workplace inspections and deportations, which have created uncertainty and hesitation within migrant communities. These developments continue to impact customer behavior with some customers reducing transaction frequency or shifting to other channels. That said, the U.S. is not monolithic. And in the quarter, we saw transaction growth that was positive to places like Brazil, India, Haiti, Panama and Vietnam, flat to slightly negative in important corridors like the Philippines, Jamaica, Guatemala and Colombia, offset by significant declines to Mexico, El Salvador, Peru and Ecuador. The U.S. to Mexico corridor is the most important to monitor going forward to which we have begun to see some recent improvements from the lows in June. The Bank of Mexico data would also indicate some improvements with the most recent month down 8%, improving materially from the June lows. In other instances, we see beneficial new patterns emerging from the macro changes, such as strong growth in outbound remittances in Argentina and growth in corridors like Canada to India and Singapore to Indonesia. Despite these short-term headwinds, we believe the long-term trajectory remains clear. Global migration is not disappearing. It is adapting. People will continue to move in search of opportunity, education and family. And Western Union will continue to stand with them, providing trusted, compliant and accessible financial services. Looking ahead, our role is clear. We will support the evolving needs of senders and receivers with a broad base of solutions that are fast, secure and built on trust. Our 100 million-plus customers around the world are a resilient force and so are we. Over the last several years, we have frequently spoken about our desire to make Western Union a more digital company and to expand our product set to meet the needs of our customers as they evolve. We also see our strong brand recognition and the large base of existing customers as key building blocks to cost effectively build our digital business without having to invest hundreds of millions of dollars in nonscalable marketing. In advance of our Investor Day in a couple of weeks, I want to take a moment to highlight the significant progress we've made in becoming a more digital-centric company. Our transformation is not just about technology. It's about reimagining how we serve our customers, deepening relationship and unlocking new areas of growth. Over the past several quarters, we've accelerated the shift towards digital channels. Our branded digital business has now delivered 8 consecutive quarters of mid-single-digit or better revenue growth with strong transaction momentum in key regions like the Middle East and APAC. Our digital business now accounts for over 40% of the principal we move around the world. We are also seeing a continued expansion in our payout-to-account capabilities, which now represent over half the principal we send through our digital business. Our expansion of card acceptance and digital funding options across both our retail and digital channels is another example of how we're becoming a more digital company. Today, over 55% of all of our money transactions are digital. Our global digital payment network is a fundamental asset that we will continue to lever and grow as a foundation for future expansion and growth. We have been making progress on our digital wallet strategy. We are now live in 7 countries, having launched Brazil in the first quarter and the U.S. in the second. We have onboarded over 0.5 million customers and now have a growing number of active and loyal monthly users. We see real benefits in capturing payouts in our wallets with Argentina now approaching 15% of all inflows and Brazil after less than a year of -- post launch, nearing 5%, saving us on commissions and enabling a better and more digital receive customer experience. We anticipate change of control regulatory approval in Mexico before the end of the year and have received a license for a digital wallet offering in Australia with an anticipated Q1 launch of 2026. We envision our future as a broad-based 2-sided payment network with digital wallet options on both sides in all of our major markets. We also anticipate being able to facilitate both traditional and digital asset transfers for our customers and potentially others as well. But digital is more than a channel. It is a platform for innovation. This includes our new point-of-sale system, which is now nearly ubiquitous around the world and allows our retail network to connect digitally to all of our account and wallet payout points quickly. Executing the rollout of a new point-of-sale system in under 12 months is something that we would not have been able to do just a few years ago and is a true testament to the progress we are making on the technology front. With this new platform fully implemented in the U.S., we are continuing to make progress in meeting the needs of our customers with digital payment options, when the new U.S. 1% remittance tax on cash transfers goes into effect in January, we will be well positioned. Looking ahead, our strategy is clear. We will continue to modernize the movement of money, expand our product suite and deliver trusted, compliant financial services to our global customer base. We are building a platform that is resilient, scalable and ready for the future. And we look forward to discussing this with you more in detail at our Investor Day in just a couple of weeks. To capitalize on our strong brand, trusted customer relationships and omnichannel platform, we have been enhancing our product suite with new or revamped products that our customers want and value. We have made significant progress in this effort within what is now our Consumer Services segment. Over the last 2 years, we have invested in our existing product offering to improve functionality and value and added new products like travel money, prepaid cards, digital wallets and our out-of-home advertising business. Today, Consumer Services now accounts for roughly 15% of total company revenues, which is up 70% or over $200 million in just the last 2 years. That incremental $200 million is about 5 percentage points of additional revenue growth for the company. Travel Money, which has been a big driver and which we believe will account for roughly $150 million of revenue in 2026 is up from almost nothing in 2023. We believe there is a much longer runway to finding unique and interesting ways to monetize our highly differentiated asset base, including our 100 million-plus customers, our growing portfolio of well-recognized and trusted brands, our global reach and scale and our digital payments network. More recently, we have seen an opportunity to accelerate our development and use of digital assets. The work we have been doing to modernize our technology stack, invest in digital payments network and roll out digital wallets around the world are all foundational enablers that will help us accelerate a digital asset strategy. Historically, Western Union has taken a cautious stance towards crypto, driven by concerns around volatility, regulatory uncertainty and customer protection. However, with the passage of the GENIUS Act, we are now seeing potentially interesting opportunities to integrate digital assets into our business in ways that enhance efficiency, reduce friction and improve customer experience. We are actively testing stablecoin-enabled solutions in our treasury operations. These pilots are focused on leveraging on-change settlement rails to reduce dependency on legacy correspondent banking systems, shorten settlement windows and improve capital efficiency. We see significant opportunities for us to be able to move money faster with greater transparency and at lower cost without compromising compliance or customer trust. Beyond treasury, we are exploring how our global payments network can serve as an on-ramp and an off-ramp between fiat and digital currencies. We are seeing strong interest from potential parter -- potential digital native partners using our infrastructure to bridge these worlds, particularly in regions where access to traditional banking is limited, but crypto adoption is growing. Finally, we are expanding our partnerships and capabilities to allow customers to move and hold stablecoin digital assets. This is not about speculation. It is about giving our customers more choice and control in how they manage and move their money. In many parts of the world, being able to hold a U.S. dollar-denominated asset has real value as inflation and currency devaluation can rapidly erode an individual's purchasing power. These innovations align closely with our broader strategy to modernize the movement of money. They complement our investments in digital channels, payout-to-account capabilities and next-generation platforms like our digital wallets. Together, they position Western Union to lead in a future where digital assets could play a growing role in global finance. We look forward to sharing more with you at our Investor Day in a couple of weeks. In closing, I want to reiterate our confidence in the path we are on. Western Union is transforming. We are becoming more digital, more agile and more aligned with the evolving needs of our global customer base. We are expanding our product suite, modernizing our platforms and unlocking new opportunities for growth across all of our channels. This transformation is not just about technology. It's about building a resilient, scalable business that delivers trusted financial services in a rapidly changing world, whether it's through faster account-directed payments, expanded digital wallet capabilities or innovative digital asset-enabled solutions, we are positioning Western Union to lead in the future of cross-border money movement. We remain focused, disciplined and optimistic. Our strategy is working, our execution is accelerating, and our platform is stronger than ever. I look forward to sharing more with you at our upcoming Investor Day and continuing this journey with all of you. Thank you. I would now like to turn the call over to Matt Cagwin, our Chief Financial Officer.

Thank you, Devin, and good afternoon, everyone. I'm delighted to be here today to walk you through our third quarter results as well as our 2025 financial outlook. In the third quarter, GAAP revenue was $1.033 billion and consistent with our expectations, our adjusted revenue, excluding Iraq, was down 1%, driven by growth in Consumer Services and branded digital offset by our retail business. Our industry-leading adjusted operating margins was 20% in the quarter, up from 19% in the prior year period. Our adjusted operating margins primarily benefited from the continued cost discipline that we've now -- as we've now completed our cost redeployment program 2 years ahead of schedule. Adjusted EPS was better than our expectations at $0.47 in the current period compared to $0.46 in the prior year. Adjusted EPS benefited from our cost management discipline as well as fewer shares outstanding, primarily offset by higher interest expense and higher adjusted tax rate. Our adjusted effective tax rate was 12% in the quarter, up from 8% in the prior year period. The adjusted effective tax rate was higher due to discrete benefits in the prior year period. Consumer Services adjusted revenue was up 49% in the third quarter, driven by our Travel Money business, and strength in our bill pay business. The Consumer Services segment has accelerated since the first quarter due to the acquisition of Euro change. Our Travel Money business drove about half of our growth this quarter. Organically, consumer services continue to grow double digit. And as expected, consumer service margins have improved 1,300 basis points to 22% in the third quarter as our new product sets began to scale. As Devin mentioned, we've made meaningful progress expanding the products and services we offer, and we believe there's meaningful runway ahead. Travel Money is a great example. It is now $100 million of revenue and on its way to $150 million next year from close to nothing just a few years ago. We believe there are many other potential opportunities to serve our 100 million-plus customers and look forward to sharing those as ideas developed and get launched. Now turning to our consumer money transfer or CMT business. Transactions declined 3% in the quarter or 2% excluding Iraq, U.S. immigration policies continue to disrupt our business, although the third quarter was not meaningfully different than what we saw in the second quarter. Customers continue to send fewer transactions but higher average principal per transaction. Our PPT increased roughly 6% in the third quarter compared to the prior year on a constant currency basis. Our branded digital business grew adjusted revenue 6% and transactions by 12%. This marks the eighth straight quarter of solid revenue growth. It also marks a return of double-digit transaction growth driven by the Middle East, where we saw a meaningful acceleration of our business from partnerships that we announced in the second quarter this year. These partnerships are primarily focused on account-to-account transactions. Which has put pressure on the gap between revenue and transactions. However, we're super excited about these relationships because they expand our reach in the fast-growing Middle East. We also continue to see strong growth in our digitally initiated paid out to account business. In the quarter, principal grew over 40% and now accounts for over 50% of all principal sent from our branded digital business. We continue to expand our payout capabilities worldwide to meet the evolving needs of every customer segment. The rising demand of account directed payouts reflects our customers' desire for speed, flexibility and convenience. This shift provides a unique opportunity to deliver higher-quality service while building a long-lasting relationship with our customers. Turning to our retail business. Overall, the performance has remained relatively consistent with the second quarter, with softness in North America, driven by the effects of immigration policies in mid-single-digit revenue growth in Europe. Now turning to cash -- now turning to our cash flow and balance sheet. We have generated over $400 million in operating cash flow year-to-date compared to $272 million in the prior year period. Included in this number is over $200 million in cash taxes paid this year related to the transition tax. We're excited about these obligations being behind us and look forward to the additional flexibility that we'll have to invest our free cash flow in support of our business or return to our owners. Year-to-date, our CapEx was $101 million, up 10% year-over-year. I'd like to highlight that our CapEx will be up slightly this year versus prior trends. As this has been a large strategic agent renewal year as well as we've had an infrastructure refresh. We continue to maintain our strong balance sheet with cash and cash equivalents of roughly $1 billion and debt of $2.6 billion. Our leverage ratios remained at 2.6x and 1.7x on a gross and net basis, which we believe provides us ample flexibility to return capital or potential M&A while maintaining our investment-grade credit rating. In the third quarter, we returned over $120 million to our owners, via dividends and share repurchases and over $400 million during the first 9 months of this year. This represents a cash return to our owners of over 15% based on our current market cap. Through the first 9 months this year. Now moving on to our 2025 outlook, which assumes no material changes in macroeconomic conditions. We are reaffirming our guidance today, which includes adjusted revenue to be in the range of $4.035 billion to $4.135 billion. However, based on our current trends, we anticipate adjusted revenue to be at the lower end of this range. This range reflects the continued benefit of our branded digital business. Double-digit growth in Consumer Services and a slight improvement in retail. I would also like to remind everyone that our consumer services -- consumer service business has different seasonality in our CMT business. Travel Money is seasonally higher in the second than third quarter. And I'd also like to remind everyone that we had a very strong media network business in the fourth quarter of last year due to higher media demands related to the U.S. presidential election. These comments are not meant to foreshadow consumer service growth being below our double-digit goal but rather to highlight it will probably not be at 49% next quarter. We continue to expect adjusted operating margins to be in the range of 19% to 21%. And finally, we expect adjusted EPS to be in the range of $1.65 to $1.75. Based on our current trends, we expect adjusted EPS to be at the upper end of this range. In conclusion, I want to emphasize the momentum that we're building across our business. Western Union is executing with discipline, clarity and delivering results while transforming for the future. Our strategic focus is on becoming a more digital-first company is yielding tangible outcomes. This is the eighth consecutive quarter of mid-single-digit branded digital revenue growth or better to also the rapid expansion of our payout to account capabilities. We're not just adapting to change. We're also leaning into it. Our Consumer Services segment is unlocking new revenue streams. Our operational efficiency program has exceeded expectations and our financial foundation remains strong, which gives us the flexibility to invest and innovation as well as returning capital to shareholders. I look forward to seeing many of you at our Investor Day on November 6, and thank you for joining today's call. Operator, we're ready to take questions.

[Operator Instructions] Our first question comes to us from Tien-Tsin Huang from JPMorgan.

Good to catch up with all of you. Yes, no surprises. It sounds like -- and it sounded like you were encouraged by some of the recent trends in recent months in the retail and Americas segment that in your prepared remarks. Can you maybe elaborate on that? Was that just some of the Mexico statements you made in the recent months? Just wanted to get a little bit more detail on that.

Yes. Tien-Tsin, thanks. We are seeing the lows from the mid-summer have come back a bit, particularly in Mexico. But more or less across some of the important corridors. As highlighted in the prepared comments, we still see corridors that are growing and some important ones that are now approaching what I'll call stable or flat. So we remain positive that in the back half of the year, those trends will continue and the outlook will improve, but I would say things are still lumpy.

Okay. Good. I'll ask on Consumer Services quickly. Just Travel Money. You mentioned a few times that will probably grow 50% next year. Just curious on the visibility there and the incremental margins on that business, just to highlight it because it is a bigger contributor now.

So our expansion next year is we'll have one more quarter of the grow over from Eurochange. We're pushing into other new markets based on now, we've got a good scale. We've got a management team that's very competent. As Devin talked about, we were in Europe last week, and we actually spent most of the week with the management team there and came away very impressed by their quality of the stores, the strength of the management team and their vision for how we can continue to expand both same-store sales as well as across new footprints. And the last little fun fact for you. When we did the acquisition, we had talked probably 2 quarters ago that we bought it for a little under 5x. Now having owned it for a couple of quarters, they're meaningfully above our models that we had done and on track to have a great return for us.

Our next question comes to us from Darrin Peller from Wolfe Research. .

See the profitability. We see [indiscernible]but I wouldn't or were use penetration [indiscernible]

Darrin?

Yes, can you hear me?

Your mic is really, really hard.

I think you might be better now. Try it again.

Just the same reason of penetration.

DarrIn, you got a bad connection, maybe try coming back in, and we'll put you back in the queue.

Our next question comes to us from Will Nance from Goldman Sachs. Please ask your question.

I hope my audio is not also bad. But because I'm hearing it on a couple of people's calls now -- so I guess, I just wanted to hit on some of the trends that you saw on LACA. It looked like the trends there actually got a little bit better this quarter. So maybe just echoing the earlier question on the North American trends -- anything to kind of call out and just the linearity of results? Are we starting to hit easier comps and maybe some of the -- starting to lap some of the changes in migration patterns? And just any color on how you're thinking about that over the next -- in the near term?

Yes. And so a couple of things. One, we've seen some overall market stability, which we commented in the public comments. And as you know, it was in this quarter last year where we highlighted the impacts and the effects of the then recent elections across certain parts of South America, Northern South America and Latin America. We are now starting to see the lapping effects of some of those declines when the Darién Gap was closed and when we had presidential elections in Venezuela and a few other places. Including Mexico. And so I think you're starting to see both the effects of some market stability as well as now we're a year into what was a relatively significant change in outlook and trajectory for the region following a series of elections.

Our next question comes to us from Bryan Keane from Citi.

Guys, thanks for having me on the call. Just wanted to ask on digital, in particular, it improved from 9% to 12% in transaction growth from the second and third quarter. But the revenue growth stayed about the same at 6%. Just trying to figure out the delta change there, why we didn't see a lift in the revenue as well?

Bryan, thanks for joining the call. Really, the vast majority of the acceleration we saw from our partnerships in the Middle East, which are account-to-account payout, which, as you know, come generally with a lower RPT. So it's really a combination of that. So we've seen a little bit of -- we would have had a hair of slowdown in revenue and trans about [indiscernible] but that didn't help provide a little uplift on both sides. .

I think the Bryan, the other thing that we've historically talked about given the current market dynamics where new customer pricing and we've actually seen some more aggressiveness in the marketplace on some of those offers, not just offering 1 time fee-free but in some cases, by some folks, 2 and 3 transactions free for new customers. The new customer growth causes a degradation in the revenue line. And so anytime we see an acceleration in transactions, we're likely to see, a, as you saw this time, stability or maybe even if we could accelerate it enough, some degradation in the revenue line relative to the transaction line. And historically, we are and will continue to be in looks of ways to cost-effectively accelerate and knowing that revenue will catch up over time.

Got it. And then just one follow-up on the guidance in fourth quarter. You're talking about an improved -- a slight improvement in retail going into the fourth. Is that all macro driven? Or is that something specific you guys are doing for the improvement in retail into the fourth quarter?

Really, it's driven by a few things. One is the comment was made a minute ago about LACA. We're starting to lap easier comps as we hit the latter part of the year. We've also seen some good momentum and some customer wins that will help or agent wins.

The other thing I would add, Bryan, we talked about this, I think in the second quarter, we've asked one of our leaders who leads our European region to spend some material time with us here in the U.S., implementing much of the model that's been successful in terms of our go-to-market, particularly around independent agents the strategic pricing model that we employed there and a bit more rigor around managing that independent agent network. We're starting to see some of the fruits of that as well, and we are excited about the ability to integrate -- Intermex and accelerate that retail program at a much faster rate than we have been able to over the last year, 1.5 years.

We're going to take the call from -- or the next question from Darrin Peller from Wolf Research.

Yes. Is that better now, guys?

Much better.

Just where do you see overall digital penetration going long term I mean the company is basically near global penetration of 38% of transactions this quarter. Does that continue to move higher? And just talk a little bit more about how that impacts the take rate. And then a quick follow-up would just be just -- just when I look at the principal per transaction up 6%, is that a trend around people that are setting more now, but less often, just maybe associated with migration policies in the U.S. or something more structural?

Yes. It's a great question, Darrin. And so I think there are 2 or 3 things I think we would highlight what we believe and aspire to a reasonably stable retail business around the world, which will be somewhere between minus [ 2% ] and plus [ 1% ] over time as we get our operating model in place as we believe the retail value proposition does have merit, and there are many migrants, particularly new to country see value in that. We do expect digital to continue to grow at double-digit rates into the certainly intermediate if not indefinite future, which we will see over time, the ability of that digital become a larger and larger piece of our business with the stability in retail. We also know, at least for Western Union, there are a lot of places in the world. U.S. to India is one of them. U.S. to Guatemala is another one, where our digital penetration still has plenty of opportunity to grow relative to both the size of the market and our current market share. So we could even see some acceleration in that low double-digit growth that we've been seeing for the last 8, 10 quarters as we focus on specific corridors going forward.

All right. Thanks, Devin. Matt, just a very quick follow-up with just the understanding where Eurochange -- is Eurochange entirely in consumer services? I'm just trying to get a sense of organic growth segments.

So, no, it's not. So we actually use the business for both CMT but also CS. They were an agent of ours before we acquired them. So if we're doing any remittance transactions would go to our CMT line and the rest CS. But to take away is, we're using that footprint for money -- travel money, we're using for prepaid cards. We're using it for remittances, and we split it up based on the type of product.

Our next question comes to us from James Faucette from Morgan Stanley.

I wanted to ask quickly about dynamic pricing in Spain. It seems like you've seen some good results there. And just curious how quickly you may be able to roll out to other markets and maybe start to garner some of the same benefits?

Thanks, James. Great question. We have rolled out dynamic pricing or strategic pricing, as we call it, probably in about half to 2/3 of our European market. We asked the leader of our European market to come here to the U.S. to help us. And we are in 3 metro markets at some scale now in the U.S. with the anticipation that over the course of '26 and the integration with Intermex who has a very similar model that will be able to be kind of across the U.S. by the end of 2026. It has less applicability in other parts of the world like the Middle East, which, we have a lot of large master agents where they have a lot more control over pricing or frankly, in Asia, which has gone significantly more digital than either the U.S. or Europe is.

Got it. That's really helpful. And then I think, Matt, you touched on this a little bit, but I may have missed it, is that you guys have done a really good job in terms of your cost efficiencies, programs, et cetera. How should we think about like future programs or where there may be incremental opportunities on that side?

Yes. Thanks for the question. I'll actually spend about 5 minutes of that in 2 weeks from the day talking about our next step, but I'll leave a teaser. We still think there's meaningful opportunity ahead and look forward to sharing that with you on the 6.

Stay tuned to like it.

And James, one of the things, the first part of our program really was what I'll call the blocking and tackling and Matt and the team, the broader management team did a great job of creating the normal operational efficiencies in terms of managing our real estate footprint. Reducing customer service calls, managing vendors, we're now starting to really see the benefits as we implement new technology. We have some adoption of AI into both our development functions, our customer service functions. Where we could start to see some shifting of the business model, which will, again, as Matt said, yield results for a reasonably long period of time relative to the first chapter of this, which was really just blocking and tackling.

Now I got to remove that page in my presentation. So, I got more work on Investor Day.

Our next question comes to us from Tim Chiodo from UBS.

Great. On the Intermex, 10,000 locations, they were always viewed to be as very strategically well placed, but one of the advantages was the speed, the UI, the UX, and it was generally talked about as being better for the agent, and that was something that was attractive to them. Is that an advantage that somehow gets ported over to Western Union? Or does that system get retired in the sunset and those locations move on to the Western Union platform. How will that all play out?

It is our intention to maintain both the Intermex brand, the Intermex locations and the Intermex go-to-market model. We also are now as we begin integration planning, looking at ways in which we can take that into Intermex model and bring it into our Vigo independent agents and our Western Union branded independent agents here in the U.S. So we have aspirations of belief that we think we can learn a lot from what they do, and we will preserve everything that they do, the way they do it today.

Our next question comes to us from Rayna Kumar from Oppenheimer.

I think there's an echo here. So [indiscernible] to hear me. Just on North America, it looks like trends have gotten a little bit worse versus the second quarter. You expected to improve from here? Like have we reached the bottom in North America?

Yes. So the quarter was, as I described in the call, what I would say is lumpy. We had a little bit better July than August was pretty tough. And then we started to see some trends in the back half of September and a little bit early here in October. But the linear improvement is certainly not there, but the directional improvement would seem to indicate that we may be hitting some stability relative to what we saw in either June or August.

Our next question comes to us from Nate Svensson from Deutsche Bank.

Thanks for the question. I wanted to ask on payout to account -- so I think last quarter in the Q&A, you mentioned a slowdown in growth there, but it sounds like in 3Q principal was up 40%, and it now represents 50% of the digital business. So maybe it's the Middle East partnerships, but I was hoping you could unpack some of the drivers and the improvement there and maybe how sustainable you think the trajectory impact to account could be?

I don't remember making that comment last quarter. We've seen very consistent 30%-plus growth rates for going on 2, 3 years now for account payout. So we see it everywhere. We're seeing strong growth in our retail business to be digitally funded. We've seen growth there with our rolling out more digital acceptance or card acceptance in Europe and North America. We've seen growth in account payout from retail. We've seen great account payout from our digital business as well as the new partnerships in the Middle East. So don't remember the comment from last quarter, but there was not a dip last quarter. There has been a modest acceleration this quarter, but I would argue it's modest, and the new partnerships have driven that because they're a largely account payout or digitally funded relationship.

Nate, I think we believe that this is a secular change in customer behavior. And again, whether it's originated in a retail transaction or a digital transaction, the received customers are rapidly entering the banking or digital wallet infrastructure in their countries. And we've seen that, whether that's in the Philippines or Malaysia, now even to a certain extent in Mexico, where the receiver preference is to receive the money in a more digital form. We think that has implications over time for us in terms of our payout network and our ability to create efficiency and streamlining some of our retail payout network. And the shift also in payout costs will become margin beneficial to us as payout to account has a different economic profile than pay out to cash in many regions around the world.

Our next question comes to us from Cris Kennedy from William Blair.

Can you just talk a little bit more about the 500,000 digital wallet users. What kind of engagement are you seeing or retention trends? Or anything you could talk about that?

Cris, we are on a journey, right? And so -- we launched our first digital wallet in the third quarter of 2022. And over the course of the last 3 years, we've iterated both the platform the value proposition and to a certain extent, the nature of the customers that we're acquiring. The customers that we're currently acquiring tend to be much more in the receive markets. And as I highlighted in the prepared comments in Argentina, Brazil, also in Romania and to a certain extent, even here in the U.S., people putting money into their wallets from inbound remittances and then using that either for everyday living expenses through our cards or through like in Brazil, the [ PICK ] system, is a growing trend for us. And so what I would say is our most engaged customers are those that are in our received markets and are using the product as an alternative to having received cash in one of our retail locations.

Our next question comes to us from Jamie Friedman from Susquehanna.

I wanted to ask about the ability to transfer some of the best practices you've had in Europe, the European orders really doing well for you. I think you alluded, Devin, to some similarities or differences between there and here, like you talked about the independent agent network. But to what extent are those -- are there like synergies between those markets? And how can you transfer the success that you're having there here?

Jamie, great question. Thank you. We'll actually spend a bunch of time at our Investor Day talking about this. But recall, our European go-to-market model really has 3 components to it. One is the nature and shape of the distribution. Two is our go-to-market strategy in terms of how we structure our sales teams and our support model for the agents. And then third, which we talked about on this call already, really is the strategic pricing capability where we manage and monitor on a daily basis, market prices in specific locations in order to present the best possible option while maintaining our discipline on margins. And so those 3 components in certain ways differ in the U.S. So part of the rationale for the Intermex acquisition was historically, in the U.S., we had a much larger base of the large strategic accounts, the Kroger's, the Publix, the Walmart and as Matt mentioned in the commentary, we've gone through a big renewal cycle with those. We think they're important, but you have less ability to influence what happens in those than you do in the independent agent channel. So adding Intermex into that mix significantly broadens the middle of that pyramid of distribution with a very strong independent agent, nonexclusive independent agent channel. The other part of the pyramid in Europe that we have is -- Matt will know this, but I think we're up to 300 or 400 company-owned stores across the European footprint. And the company-owned stores are 6 to 8x more productive than your average agent, and therefore, they play an important but small role in the strategy. Here in the U.S., we had 3 when we get done with the Intermex acquisition and some other work we're doing, we'll end up close to a couple of hundred. So that change is kind of in process to get the distribution right. The strategic pricing, we're in the process of putting in place. I said we're now kind of in 3 metro markets with an aspiration to roll that out over the course of the next 12 months. And then on our go-to-market model, as we do the integration with Intermex, we will restructure our sales force and our agent support model to align much more closely with our European approach and the historic Intermex approach here in the U.S. So again, I see that as in the second half of '26 getting fully implemented.

Our next question comes to us from Kartik Mehta from Northcoast.

Devin, just to understand North America a little bit better, I think you said August was a lot worse than maybe July or the second half of September. Was that a result of icing competition or just the market was really slow?

From our view, it was a market view. We didn't see any different, what I would call, competitor behavior, but we certainly did see different consumer behavior and so again, we don't have complete transparency, but the Bank of Mexico data would also support some of that as well where June was probably the worst. July improved moderately significantly and then August reverted back to a double-digit decline. So I can't explain it. I can just tell you what we observed.

And just to build on Devin's point there, just give you some external data. Bank of Mexico had a low point for the year of down 18%. July got down 13% down 17%, then down 12% and the improved from there. So it's bounced around as time has passed on a transaction basis.

Our next question comes to us from

I wanted to ask on consumer services and apologies if this is -- if I missed this, but what was the contribution from euro changes over I know you stated consumer services still grew double digit organically. And just with that in mind, I appreciate the comments on 4Q and some of the headwinds in consumer services. But how do we think about the sustainability of that growth kind of going forward?

Our final question will come to us from Gus Gala from Monness, Crespi, Hardt & Co. Please ask your question.

I wanted to ask about the [indiscernible]strategy to the U.S. from Europe. As we think about that, I mean, is your fleet in Europe a little bit more focused on smaller retail format versus a large retail format in U.S., and then just by thinking about how cities are set up in Europe versus the U.S. what are kind of some of the differences as changes that you're having in terms of trying to approach in retail?

Yes Gus. great question. So the European model is slightly different than the U.S. model, but there are analogies. So the European model does have a relatively significant independent agent network, of which Western Union has a pretty strong presence in, which is different in the U.S. where we've historically participated in the independent agent channel with our Vigo brand and less so with our Western Union brand. But there is a large and significant independent channel in the U.S. We've just had less presence in it than say a Ria or an Intermex, which was part of the opportunity with Intermex. The U.S. does have a large base of what I will call the strategic accounts for us, the Walgreens, the Kroger's, the Walmart's, that is not true in Europe. The analogy in Europe, though, is a fair number of relatively significant postal systems. And so like in the U.K., we have the U.K. post or in Spain, we have the Spanish post. We work with La Banque Postale in France. And so that big base of what I'll call relatively lower productivity, but omnipresent distribution is done with postal systems in Europe versus grocery or convenience retailers here in the U.S. So we see the biggest opportunity really to bring and import some more of that independent agent model and do it on a -- as I said, we're doing it on a city-by-city basis, just like in Europe, so we're now implementing it in 3 major metropolitan areas in the U.S. But the reason it's going to take some time is you got to do it across 50 or 60 when in any European country, you do it across 3 or 4, and you've covered the majority of it. So we see upside. We see potential. We like the Intermex acquisition. As an ability to accelerate it, but we think the model is right, whether it is in Europe or here in the U.S. Thanks, everybody.