The Western Union Company (WU) Q2 2013 Earnings Report, Transcript and Summary

Good morning, and welcome to the Western Union Second Quarter 2013 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mike Salop, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, and good morning, everyone. On today's call, Hikmet Ersek, Western Union's President and Chief Executive Officer; and Scott Scheirman, Executive Vice President and Chief Financial Officer, will discuss the company's second quarter results and take your questions. We expect the call to last about 45 minutes. 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 and Exchange Commission, including the 2012 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. 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 would now like to turn the call over to Hikmet Ersek.

Thank you, Mike, and good morning, all. Earlier this year, we reoriented our strategy for growing our global business so we could return to revenue and profit growth in 2014 by strengthening Consumer Money Transfer, increasing customers' end usage in Business Solutions and generating and deploying strong cash flow for our shareholders. We said we could restore our competitive position and drive future growth. Now halfway through a transitional 2013, our second quarter performance shows we have made substantial progress in achieving these objectives and demonstrates the strength and resilience of our business models. As we expected, our second quarter Consumer Money Transfer transaction growth rates accelerated compared to the first quarter, as our pricing actions continue to build momentum with consumers. Electronic channels growth also increased, with strong contributions from both westernunion.com and electronic account-based money transfer through banks. Western Union Business Solutions delivered a second consecutive quarter of solid growth and, more importantly, initiated new services, partnerships and markets to drive future performance. And additionally, Consumer Bill Payments improved, with strong constant currency revenue growth in the quarter. While consolidated operating margins are down from last year, as expected, partially as a result of our strategic pricing and other actions, we remain solidly on track with our full year financial outlook, and we are affirming our 2013 guidance. Before turning the call over to Scott to discuss our financial results in more detail, let me give a few examples of progress on each of our key strategic priorities for 2013. In Consumer Money Transfer, we are seeing that our pricing actions are having the desired effect. In Mexico, Western Union brand transactions increased 22% in the quarter. This was an improvement from the 9% growth in the first quarter and 2% in last year's fourth quarter, when we first implemented the price reductions. We are regaining momentum in Mexico, which should also be aided by activating new agent locations over the next several quarters. The price actions in other corridors are also performing well. And, overall, we are meeting our transaction objectives for the priced corridors. Entering the second quarter, we have completed about 75% of the planned pricing initiatives. In these priced corridors, transactions increased 17% in the quarter, or 11% if you exclude westernunion.com. Prior to implementing the pricing, transactions in these retail corridors were decreasing slightly, so we are seeing a good lift in consumer usage. The westernunion.com online pricing actions are also yielding very strong results. Overall, westernunion.com Money Transfer transaction growth accelerated to 68% in the quarter. As of end of June, we have initiated substantially all of the previously planned pricing actions. We also made progress in other areas to strengthen Consumer Money Transfer for the future by further increasing the number of agent locations, expanding our electronic channels, introducing more direct-to-bank services and becoming more mobile. Our total agent locations increased to 520,000 as of end of the quarter. We remain focused on adding productive new locations and other points of presence, although there have been some offsets, as we remove some locations that were dormant or required compliance-related changes. We mentioned last quarter that we have signed agents in Mexico, which will give us approximately 10,000 new locations there once implemented. And we also just greatly expanded in Germany. In July, 3,000 additional locations were activated with the German POS bank increasing our presence in that country by over 50%. I am pleased with the new relationships we continue to formulate. Recently, we added a major new bank in Saudi Arabia with the signing of Riyad Bank, which will offer both cash and account-based money transfer services in one of the world's top 3 outbound markets for remittances. And this month, in the U.S., we also activated 1,500 agent locations with SunTrust bank, which has a strong branch network across the Southern states. Electronic channels revenue increased 26% in the second quarter. Westernunion.com Money Transfer transactions increased 68%, and account-based Money Transfer transactions increased 51%, as we activated new services with banks in Turkey, Jordan and Vietnam. We now have over 70 banks connected for account-based money transfer service. Earlier this month, I was in India for the launch of a new direct-to-bank service, which give us the capability to send money transfers from westernunion.com and agents location in the U.S. and U.K. directly into a bank account in India. Direct-to-bank is a large market opportunity that we plan to develop over the coming years. I also visited Nigeria, where we are working to expand account-based and mobile money transfer services with both banks and mobile network operators. We now have 17 active partners globally for mobile money transfer. And our money transfer services are also available for bank customers at approximately 115,000 ATMs, including new rollouts with banks in Thailand and Turkey. Providing both senders and receivers of their choice of channel is a key element of our money transfer strategy, and we continue to add online, mobile and account-based options for our foundational retail network around the world. Western Union is uniquely positioned to connect the digital and physical world for money transfer, and we believe these new channels will be a key driver of future growth. Overall, we are on track with our plans for Consumer Money Transfer in 2013, and we continue to expect our Western Union brand C2C transactions to increase mid- to high-single digit for the full year. Our second strategic initiative for 2013 is to drive growth in customers and usage in business-to-business. And during the quarter, we made solid progress. Western Union Business Solutions delivered 6% revenue growth in the quarter, or 8% in constant currency terms. We are gaining traction in the market with our refocused sales efforts and continue to expand our service offerings and capabilities. In the quarter, we launched a new service with the MasterCard Business Network, where we provide cross-border payment services to their business customers. The network is an online resource that help streamline business operations and enhance productivity for small- and mid-sized businesses. We also significantly expanded our services in India and Japan. And we increased offerings for university student cross-border tuition payment services in several countries, including China, India and South Korea. Business Solutions now offers cross-border payments services in 32 countries, with Colombia being the most recent addition. Although we still believe we can generate stronger business solutions growth in the future, as global trade recovers and our new services and market contribute more meaningfully, we are pleased with the progress we have made so far in 2013. Our third strategic initiative for 2013 is to generate strong cash flow and deploy it for our shareholders. Year-to-date, through June, we generated $478 million of cash flow from operating activities and returned over $450 million to shareholders. This consisted of $314 million of share repurchases and $140 million of dividends. As Scott will discuss in a moment, we continue to expect to generate $900 million of operating cash flow for the year, with approximately $700 million returned to shareholders, representing approximately 7% of the current market capitalization. So based on the year-to-date performance and current trends, we have affirmed our full year financial outlook. Our Consumer Money Transfer actions are meeting our objectives, with Western Union brand transactions increasing 7% in the second quarter, up from a 2% increase in the first quarter. Electronic channels are growing rapidly, with revenue growth of 26%, compared to 18% last quarter. And we are adding more choices and convenience for consumers around the world. Business Solutions is picking up momentum, with constant currency revenue growth of 8% compared with 7% last quarter. Consumer Bill Payments is delivering good constant currency revenue growth of 7%, up from 3% last quarter. And we continue to generate strong cash flow. So far, our strategic actions are working, and we remain confident that these actions will lead to revenue and profit growth in 2014. Now to give you a more detailed review of the financial results for the quarter, I will turn the call over to Scott.

Thank you, Hikmet. As mentioned, we are pleased with the progress we are making in our key businesses, and we are affirming our full year financial outlook for 2013. In the second quarter, we reported total consolidated revenue of $1.4 billion, which was down 3% compared to the year ago quarter, or 2% on a constant currency basis. Pricing investments and compliance actions led to C2C revenue decline, as expected, but the rate of decline moderated compared to the first quarter, as transaction growth accelerated. As Hikmet mentioned, Business Solutions and Consumer Bill Payments each delivered good revenue growth in the quarter. In the Consumer-to-Consumer segment, revenue declined 4%, or 3% constant currency. The decline included a negative 1% impact from the Vigo and Orlandi Valuta brands, which are still being affected by the compliance-related changes implemented in the third quarter of 2012. Transaction growth for Western Union brand accelerated to 7% in the second quarter compared to 2% in the first quarter. The second quarter growth was driven by the pricing actions and strong performance in the electronic channels. Overall transactions, including the Vigo and Orlandi Valuta brands, increased 3%, up from a decline of 2% in the first quarter. C2C cross-border principal increased 2% in the quarter, with no impact from currency, while Western Union branded cross-border principal increased 5%, including a negative 1% impact from currency. Total principal per transaction declined 1%. The spread between the C2C transaction growth and the revenue decline in the quarter was 7 percentage points, including a negative 1% impact from currency. For C2C, the impact of net price decreases was approximately 7% in the quarter, while mix had a positive impact of approximately 1%. We continue to expect the full year pricing investments to be approximately 6% to 7% of C2C revenue, or approximately 5% of total company revenue. Turning to the regions. All of the regions delivered improved transaction growth rates compared with the first quarter trends. In the Europe and CIS region, C2C revenue decreased 4% year-over-year, including a positive 1% impact from currency. Transactions in the region increased 3%, aided primarily by pricing actions and continued strong growth in markets, such as Germany and France. North America revenue declined 12% from the prior year, while transactions were down 2%. The transaction decline was driven by the Vigo and Orlandi Valuta brands, while revenue was also impacted by price reductions. Mexico revenue, including Vigo and Orlandi Valuta, declined 23%, and transactions decreased 3% in the quarter. For the Western Union brand, Mexico revenue declined 11%, while transaction growth accelerated to 22%. The Western Union brand grew significantly faster than the market based on the Banco de Mexico data available for April and May. Domestic money transfer revenue was down 1% on transaction growth of 5% in the quarter. The difference between transaction and revenue was attributable to fewer large principal transfers at price reductions in westernunion.com. Lower principal bands and domestic money transfer continued to perform well, with increases in both transactions and revenue. Revenue in the Middle East and Africa region was flat compared to the year-ago quarter with no impact from currency, and transactions grew 6%. We're seeing good results from our pricing actions from Europe to Africa, and the Gulf states are providing steady growth. Asia-Pacific region revenue was down 4% in the quarter, including a negative 1% impact from currency translation, while transactions in the region increased 5%. The Latin American Caribbean region revenue was flat with the prior year period, including a negative 7% impact from currency, while transactions declined 3%. Revenue in the region was positively impacted by geographic and product mix, although this was offset by currency translation. Turning to our digital business. Westernunion.com again delivered strong results, with Money Transfer transaction growth of 68% and a revenue increase of 25% in the quarter. U.S.-originated online transactions increased over 75% in the quarter. Total electronic channel revenue, which includes westernunion.com, account-based money transfer through banks, and mobile increased 26% in the quarter. Electronic channels represented 4% of total company revenue, up from 3% of revenue in the year-ago period. In addition to the strong growth from westernunion.com, transactions from account-based money transfer through banks increased 51%. Prepaid revenue, including third-party reload, declined 9% in the quarter, primarily due to softness in our U.S. business. Moving to the Consumer-to-Business segment. Revenue increased 2% in the quarter, or 7% in constant currency terms. Good growth in South America and in the U.S. electronic business drove the Consumer Bill Payment improvement, with a partial offset from decline in the U.S. cash walk-in business. Business Solutions reported another solid quarter with revenue growth of 6% or 8% constant currency. Both spot payments and customer hedging activity contributed to the growth, with particularly strong performance from the U.K. and several countries in Asia. The acquisition of the French Travelex Global Business Payments business, which was completed in May of 2012, contributed 1 point to the Business Solutions growth in the quarter. Turning to consolidated margins. As expected, the second quarter GAAP operating margin was 20%, compared to 24.3% in the prior year period. The margin decline was primarily the result of increased compliance costs; pricing-driven revenue declines in mix; strategic investments, primarily in IT; expenses for cost-savings initiatives; and higher marketing. These impacts were partially offset by lower Travelex integration expense. There were approximately $14 million of expenses related to the cost-savings initiatives in the quarter. Increased compliance costs included additional expenses related to anticipated extension of our Southwest Border agreement. As noted in an 8-K filing in June, we agreed with the State of Arizona to extend the current Southwest Border agreement, which was due to expire on July 31, by an additional 90 days. The extension is intended to give both parties time to discuss potential amendments to the settlement agreement, which may include further extending the terms to allow additional time to implement the monitor's recommendations. EBITDA margin was 24.8% compared to 28.4% a year ago. Reported earnings per share in the quarter were -- was $0.36 compared to $0.44 in the prior year. The C2C operating segment margin was 23.2% compared to 28.5% in the prior year period. The margin was impacted in the quarter primarily by increased compliance costs, strategic investments, price-driven revenue declines and mix, expenses related to cost-savings initiatives and higher marketing. The Consumer-to-Business operating margin was 20.5% compared to 22.4% in the prior year period. The margin was negatively impacted compared to prior year by pass-throughs to billers of Durbin-related debit card savings, which reduced revenue. Business Solutions reported an operating loss of $7 million for the quarter compared with a loss of $15 million in the year-ago period. The reduction in operating loss was primarily driven by lower Travelex integration expense. The second quarter $7 million loss includes $15 million of depreciation and amortization and $6 million of Travelex integration expense. The second quarter of last year depreciation and amortization was $15 million, while integration expense was $14 million. Turning to our cash flow and balance sheet. Year-to-date, cash flow from operations was $478 million. Capital expenditures were $69 million in the second quarter. At the end of the quarter, the company had debt of $3.7 billion and cash of $1.4 billion. Approximately 50% of the cash was held by United States entities. During the second quarter, we repurchased approximately 8 million shares at an average price of $15.92, totaling $125 million. In addition, we paid $69 million in dividends. Earlier this month, we also declared another $0.125 quarterly dividend, which will be paid on September 30. As of quarter end, we have 552 million shares outstanding, approximately $80 million remaining under our repurchase authorization, which expires at the end of 2013. We continue to project 2013 repurchases and dividends to total approximately $700 million this year, or about 7% of current market capitalization, including $400 million of share repurchases. We expect to generate approximately $900 million of cash flow from operations or approximately $1 billion, excluding the remaining $100 million of tax payments from our 2011 IRS agreement. These payments are included in our 2013 cash flow outlook, although it is possible that some of the payments may not occur until 2014. We are affirming the 2013 full year financial outlook that we provided in April. As we stated at the end of last year, we expect 2013 to be a transitional year, as we implement our strategic actions. And we are pleased with the progress we made during the first half of the year. Laura, we are now ready for the first question.

[Operator Instructions] And our first question is from Tien-Tsin Huang of JPMorgan. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: I wanted to ask about just industry growth in general. It sounds like -- listening to your comments, Hikmet, and then, obviously, what your peers have said, it feels like industry growth is improving. Can you elaborate on that? I'm just curious if it's safe to say that there's an improvement in industry growth, broadly speaking?

Well, fortunately we are acting in a market which is growing in totally. As you know, especially, cross-border remittance market is what World Bank says got 5% to 6% growth approximately [indiscernible].

Yes, about 6%, yes. And [indiscernible] too, in principal.

And [indiscernible] too, also. It's about 5%, 6% growth in principal amount. So obviously, revenue is a little bit different on that part. But, generally, I would say that I'm very pleased with our performance. And as you recall that we said that last year, we're going to implement all these actions. The actions are working. And to gain -- and our -- to gain market share. And we are very pleased with the results. Just to give an example, Western Union-branded transaction. Mexico, growing by 22%, up from 9%. And it was lower than little [ph] quarter before. So I think the actions are working. Also, the other actions on the different parts of the world are working. And price is not the only one, right, which impacts. We are having 520,000 locations. Electronic channels are growing very fast. We have 115,000 ATMs. So being everywhere, anywhere and serving the customers, it does work, so I am pleased with the progress we made. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: Two quick, just, clarifications. Just transaction growth in the quarters where pricing was not addressed. It looked like it accelerated from 1% to 5%. Are we calculating that correctly, Scott?

Yes, yes, it's correct. It was right around 4%, Tien-Tsin, but the specific number is 4%. But we feel good about those corridors too and the progress that we saw. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: So it did accelerate. And lastly, just any impact on transactions, in general, from all the FX volatility? I know that was called out with -- at Xoom, so, especially, with the rupee move. Any impact on transactions worth calling out?

I'd say, in simple terms, no. Consumers do vary their behavior a little bit. But the Indian rupee, there was some movement there. But we're in 200 countries. India is a very important market. But consumers, their loved ones have needs, so they routinely send money back. So didn't have a significant impact on our results this quarter.

Just a reminder, Tien-Tsin. We have 123 currencies, which the customer uses, right? So that's, definitely, also something. We don't see the impact on that so much.

The next question will come from Bryan Keane of Deutsche Bank.

Just wanted to ask about going forward. Do you still expect the transaction growth to accelerate in the third and the fourth quarters, just given what you see so far?

The answer is yes. The answer is yes. And we are affirming our year-end guidance, as you know. And part of it is the acceleration of the transaction growth, and the pricing actions are working. We have now implemented -- or activated 75% of them, implemented all of the pricing actions. And they should work. And the -- and non-priced corridors are also growing 1% to 4% abroad. So, generally, I see a good momentum.

And then, Scott, can you remind us when OV and Vigo -- I know it's been a tough comp here. When does that anniversary? Is that in the middle of this quarter?

Yes, it'd be in the middle of the third quarter, so we'll have some of it through the third quarter. And then the fourth quarter would be the first, I'll say, clean quarter, if you will, Bryan, where the comps get easier from that standpoint.

Yes, fourth is more to measure it -- better to measure it.

Okay. And then, just, finally, for me, the -- do you still expect pricing to return to its normal declines of 1% to 3% cycle in 2014 after giving the pricing initiatives this year?

Well, I believe that we did a big investment in 2012, which affects 2013 numbers. Generally, I would say that it's not only pricing. I think we really pulled this strategy here, which we are -- our focus is revenue and profit growth for '14. And to achieve that, there are many factors too, and pricing is one of them. I don't see that we're going to have a big investment as we did it in -- from today's point of view, as we did it in -- in end of 2012.

And the next question will come from Smittipon Srethapramote of Morgan Stanley.

First question is, I was wondering if you guys are seeing any different in the trends in this round of price reductions versus past rounds of price reductions that you guys have implemented.

Smitti, I would say we're in 200 countries, 16,000 corridors, so you do get some variations. But I'd say that the key headline is the price investments are working. And in those corridors, we did make pricing investments. Transactions were up 17%, so they're spot on to our objectives.

Got it. And for westernunion.com, are the top corridors that you have in that business similar to the top corridors that you have in the off-line space?

Well, generally, yes. But if you look at our business, we are in 32 countries in westernunion.com, or is it...

We're -- yes, we're in 23 countries.

23, I'm sorry -- to 23 countries and sending to 200 countries. So you can multiple to -- from 200 countries, which means that we are serving many, many corridors, right? And our goal is to expand these countries, adding more and more countries, which means that adding more and more corridors and, eventually, being in 200 countries with our westernunion.com and electronic channels. And the team is working very hard on that.

And the next question is from Julio Quinteros of Goldman Sachs.

It's Roman in for Julio. First, a clarification question in Mexico. The agent locations that are to be added there, are these agents that have been signed up and just, they need to be implemented? Or do these include some of that, perhaps, are in the pipeline and not yet signed up?

No, they have been signed up. Giving the time to implement them. It takes time to implement that. You have to activate the IT systems and everything and the programs -- compliance programs, so -- but we have signed them.

Yes. And just to be clear, Roman, we have signed about 10,000 locations that'll roll out in the next 12 months, but they are signed agreements.

Great, okay. We noticed the headlines, so that's helpful. And maybe as a follow-up, and we can speak specifically to Mexico or other corridors. But as you add agent locations in corridors that you repriced, how did the dynamics work there? Are you trying to manage the pricing a little differently with these new agents? Or are you -- is the pricing going to be the same as the new prevailing prices in those corridors?

Generally speaking, we price to the market and where we see the consumer value proposition lies. So as new agents come on board, what they love about our business is the strength of our brand that we can connect 520,000 locations. We have westernunion.com for -- on the payout side. So, if you will, the pricing market-by-market will vary. But generally, we treat all the agents the same, which is important to our brand and who we are.

Okay. And then, finally, on Business Solutions. What type of revenue growth do we need to see there in the near term to get to profitability? The integration expense coming down, obviously, helps. But what kind of top line performance do we need to see there?

Yes. As I stated in last time, we do see a long-term, lower double-digit growth rate in this business. I think, now we accelerated our constant currency revenue growth from 7% to 8%. And I think the team is really, really focused and expanding also the countries there have been. So we have a roadmap to go there. And that will definitely help the bottom line. But maybe, Scott, you want to add something on the...

Yes, yes. The only other color I would give to add to Hikmet's comments. If you look at the margins on a year-to-date basis, EBITDA margins, minus the integrations expense, those margins are in the neighborhood of 14%, if you will, so it is profitable today. And those margins are up compared to a year-to-date basis from the prior year. And so as we expand to more countries, as we gain scale, as we launch more products -- for example, we've launched the options in the U.K. in the last quarter. We signed a deal with MasterCard this quarter that we're excited about. So as we generate that long-term, that low, double-digit revenue growth, the scale and leverage should allow us to get EBITDA margins comparable to the company average.

And our next question will come from Greg Smith of Sterne Agee. Gregory Smith - Sterne Agee & Leach Inc., Research Division: Can you comment on the prepaid business? Just looks likes it's kind of weakening there. What are your thoughts, broadly, on the opportunity in U.S. and north and as well as international?

Yes.

I'd go with -- maybe...

Go ahead, Hikmet, yes.

If you like to add something -- if you look, our prepaid business is a small part of our business today. It's around 1% of our revenue. And it has been a little bit difficult to build the awareness and get the advantages of that. However, it does open to Western Union brand. All these cards are Western Union-branded cards. And once the customer gets the loyalty, it uses also potential other products. And what we do is that we are really bringing the prepaid customers to our core business. Is it cash in, cash out, or using the Money Transfer or Bill Payment businesses? Do you want to add something on that?

No. I think, Greg, the other opportunity for us, well, as Hikmet kind of mentioned, is to take our prepaid business, which we think is a nice long-term opportunity. But we're experimenting with some different business models in different countries and better connect that back to the core business, which we think leverages our brand, our distribution and our customer base. So we want to, as the years come, kind of tighten those a little bit closer together as we move forward. Gregory Smith - Sterne Agee & Leach Inc., Research Division: Sure. And then, just if you step back and think about your business as it's moving to digital channels. And is that happening faster than maybe you would have expected a year ago or slower or, obviously, about as expected?

No, it's really -- if you recall, we said that we want to accelerate our growth here. Don't forget that we had -- 2%, 3%, 4% of our total revenue is non-electronic channels. The westernunion.com, as you know, that we opened an office in San Francisco. And this team is doing great. It's growing by 68% on transactions. We are right on our plan to achieve, well, approximately $500,000 -- $500 million by year 2015. And the revenues also accelerated from 18% to 26% in this quarter. So we have a roadmap to get there on westernunion.com and our digital business. One good thing is also on the digital business, electronic account-based money transfer business. We have now 70 banks globally on that. And where you go to your electronic banking account and you click and send money worldwide to 200 countries, and that grew by 51%. So I think our strategies on the electronic channels are working. Last year, just to give it a -- just to compare with the environment, last year, revenue was $150 million on westernunion.com. And this is something that -- we want to bring that to $500 million by end of year 2015.

And the other color I would add, Greg, which I think is important too, really, 2 things, is one is that we're really well positioned to bring together the best of the electronic world and the retail world with our brand and our network. But, also, on the electronic channel with dot-com, 80% of the customers we're seeing are new.

And our next question is from George Mihalos of Credit Suisse. Ryan Davis - Crédit Suisse AG, Research Division: This is Ryan Davis calling in for George. I have a few questions. First off, kind of following up on the question earlier on the second half of the year. Could you kind of give us an update on the July trends, whether there's a big acceleration in transactions in your quarter relative to the second quarter?

Ryan, this is Scott. Thanks for joining us this morning. But as customary with our past practice, we do not comment on trends within a quarter during a quarter. But what I will say is that we're cognizant of what those trends are. And, if you will, led to the confidence to reaffirm our guidance for 2013. So we're pleased with how the year-to-date results have been through June. And our outlook gives us confidence to reconfirm the guidance. Ryan Davis - Crédit Suisse AG, Research Division: Okay, okay. Can you provide us some color on how the transactions progress throughout 2Q monthly?

Yes. I'll just come back to my prior comments. Just consistent with past practices, we don't comment month-by-month. And the reason being is you have holidays or calendar impact and other things. But again, what we saw in the first quarter and the second quarter, again, transactions increased from 2% in the first quarter to 7% in the second quarter, very nice acceleration. And those priced markets went up 17% growth. So all those things give us confidence that our strategy is working. Customers love the brand and the network. They're coming back in the front door, so we did reaffirm guidance. Ryan Davis - Crédit Suisse AG, Research Division: Okay. And then, one more. What's driving principal per transaction lower on a constant currency basis? I just thought it was the aggressive online channel. Shouldn't that kind of be reversed?

Yes, just to frame it. For the quarter, it was down about 1%. I think one of the key points is C2C transactions grew 7%, so customers came back in the front door. The one item that's having some impact on that, and we called it out during the call, is domestic money transfer. The high principal sends there were down somewhat. But overall, what we really like about our business model is that if the transactions come in the door, what's the most important thing is getting the transaction. And that really drives our revenue model.

And the next question is from Sara Gubins of Merrill Lynch.

This is David Chu for Sara. How should we think about pricing for the second half? So should we expect a more significant impact in 3Q versus 2Q and then like less of an impact in 4Q, as you have lapped some of the Mexico initiative?

Yes. David, thank you for your question. How I frame it is from a customer transaction standpoint, we do expect transactions to accelerate in the second half of the year versus the first half of the year. As far as lapping pricing, we did start the pricing actions mid-November of 2012, so we'll begin lapping those in mid-November of 2013.

Yes, when you look at the reporting, David, I mean, the actions themselves are largely done. We've -- after the end of the quarter -- as of end of the quarter, we completed most of the pricing. But when you look at the reporting, in the third quarter, it probably is going to be the highest, because all the actions will be in place and then we start anniversary-ing, as Scott said, in the fourth quarter.

Okay. No, that's helpful. And maybe this is a little bit early, but are you seeing anything in the market place that suggests a meaningful pickup in compliance costs in 2014?

What I'd say, David, is that having a robust compliance program and a strong culture of compliance is very important to us. And so, broadly, as we think about the global landscape, the regulatory environment continues to move. So as I think about '14 and '15, right now, I'd expect our compliance regulatory cost to increase. But what's important about that is that it protects the brand, it protects the customer, it protects our agents. And longer term, we believe that's going to be a competitive advantage because of our scale and our scope of what we can do with compliance and the regulatory.

Yes, I'd just add on that. I do see that as a competitive advantage. We have really the culture in our company. And most importantly, it protects the consumer. And it has been some investment down here. I believe it will continue to -- we're going to have those investments. But long term, as Scott said, I just want to repeat that, I believe it will be -- given our scale, it will be a competitive advantage. But don't forget, we are in 200 countries. We comply with all regulations world and try to be the best in class and leading in this industry here.

Okay. And just last one, if I may. So are most of your larger agent renewals for 2013 finished at this point, or is there more in the second half?

If you look at our agent network globally, we have always negotiations constantly, being in 200 countries, have a global agent network. And as I said, we recently added new agent negotiations -- we had new agent negotiations, and we added new agents. And one of the best one was probably the Riyad Bank in Saudi Arabia or 10,000 locations in Mexico, so it's constantly growing. And we activate the SunTrust Bank in the U.S.. So I think that seasonality, year-by-year, it changes, but most of the -- we have constant negotiation with the agents. Most of the contracts are 5-year contracts in average, so it comes every time.

And what I'd add is I'd say, we enjoy high renewal rates. The example I would give is our top 40 agents have been with us for an average of 17 years. They very much value the brand, the customers that we bring to their locations and our network.

And the next question will come from Glenn Fodor of Autonomous Research.

You've had some large declines in yields in the online channel for several quarters now. How much longer do you think it'll take for your actions to anniversary here? And can you give us your best estimate of the delta between your online pricing and the competitors'? And then, secondly, your differential between your online pricing versus your offline pricing as best as apples-to-apples as you can?

Maybe you can give him some detail on that. But let me start how we see that. We do see it corridor by corridor. Probably you're asking the question, "What's your online pricing in the U.S. against the competition?" I just want to say that our U.S.-originated transactions last quarter grow by 75%. The biggest advantage of we're seeing is that online, we serve from one point 200 countries. If you have our Germany, online transfer, we serve from Germany 200 countries. So that's the biggest advantage. And we adapt our pricing corridor by corridor. We pick up corridors, and we do price promotions on that.

And Glenn, what I would add there is that we will lap the western.com (sic) [westernunion.com] pricing in November, so we'll grow through that, if you will. But just with transactions being up 68% in the second quarter, I think that's a very strong statement from our customers that they very much value the consumer proposition. So whether it's the attribute of price, the brand, the customer payout, customers truly like the business. And in the U.S., U.S., we saw over 75% transaction growth from second quarter.

Okay. And then, just thinking about pricing actions outside of where you've been active over the last couple of quarters, and what you're going through now, are there any rumblings of measures you might have to take elsewhere? You haven't mentioned it, but I just wanted to see if there's any texture of things we should be aware of? Any rumblings just to avoid any surprises over the coming quarters of new pricing -- new larger-scale pricing implementation?

Glenn, so far, so good. Our pricing, non-priced corridor's growing by 4%, 75% of our business, as you know. But it's so far, so good. I feel comfortable with the progress. Pricing, as you know, Glenn, our business very well. It's only a part of our actions. It's the -- we, as Western Union, I believe deserve the premium pricing. Our brand is very valuable. Our compliance programs are very valuable. We are protecting the customers. The customers trust us. And we do really choose corridor by corridor. And pricing is nothing new for us. We did the last 10 to 15 years, corridor by corridor, different pricing. But I don't see, from today's point of view, a big investment -- corrective investment, transformational investment. We did it in last year, 2012.

And that final question will come from James Friedman of Susquehanna.

I also wanted to ask about the regulatory. Earlier in the year, you had described the regulatory is getting hotter, and you had outlined the mandatory callback obligations. I was wondering, do those -- are those obligations mandatory callback, extending to other corridors? And how you would characterize regulatory at wu.com (sic) [westernunion.com] versus WU off line?

Yes, first, I think the important point is that we very much have a culture of compliance and want to have best-in-class compliance programs. That's very important for our brand, protecting our customers, our agents and so forth. As we think about compliance, broadly, we are doing things such as high principal dollar callback to protect the customer. That's what we want to do. We have expanded that to other markets and other corridors. And we'll continue from time to time to implement things to protect the customers and to protect the agents.

That's for both wu.com (sic) [westernunion.com] and off-line.

Yes, thank you, Mike -- for both channels.

Yes. Okay, interesting. And then with regard to wu.com (sic) [westernunion.com] I was just wondering, and I hadn't heard you mention this before, if you have, I apologize. But being that wu.com (sic) [westernunion.com] is more of a one-to-many as opposed to one-to-one model. Are you seeing customers use it to remit to multiple countries? Or is that behavior any different than the typical pattern of one sender to one country?

Well, if you look at our customer base, right? I mean, let's assume a Filipino customer using online from here to send money to Philippines, obviously, uses that channel. But in the U.S., as you know, there are many ethnic groups, many migrants, many customer from different ethnic groups. And we do give them the availability to use different things. So in the U.S., for instance, I'm sending from my online account from my iPhone to my father, Turkey, money, and it works pretty well. And my father in Turkey picks the money up. So I think it's really -- what I wanted to say is that from one point, you can serve 200 countries. You can serve one from westernunion.france (sic) [westernunion.fr] 200 countries. I think that's the huge advantage of Western Union.

Thanks, James. Thanks, everyone, for joining us. We hope you all have a good day.

Thank you.