Good day, and welcome to The Western Union Company Second Quarter 2019 Earnings Release Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Salop, Senior Vice President, Investor Relations. Please go ahead.
Thank you, Andrew. On today's call, we will discuss the company's second quarter results and our full-year financial outlook, and then we will take your questions. The slides of the company, 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 2018 Form 10-K, for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements. During the call, we will discuss some items that do not conform to generally accepted accounting principles.
We have reconciled those items to the most comparable GAAP measures on our website, westernunion.com, under the Investor Relations section. We will also discuss certain adjusted metrics. Although the expenses that have been excluded from adjusted metrics are specific to these initiatives, the 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 the 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 afternoon, everyone. I will begin with an overview of our second quarter results and business highlights. Afterwards, I will provide more information on the implementation of our new strategy that we announced today. Revenue trends were steady in the second quarter, and we remain on track with our full-year expectations for core business performance. The digital business continues to drive our results with 20% constant currency growth and 15% transaction growth in the quarter for westernunion.com money transfer. Declines in U.S. domestic money transfer are impacting the digital results. westernunion.com cross-border transaction and constant currency revenue are very strong, with each growing well over 25% in the quarter. Total consumer-to-consumer revenues, which represented 83% of company revenue in the quarter, declined 1% on the reported basis or increased 1% constant currency, while transactions grew 1%.
Pricing in the quarter was favorable by 2%, which was partially driven by price increases in the U.S. domestic money transfer. We continue to believe that overall cross-border pricing environment is stable. Geographically, our U.S. outbound and U.S. to Mexico money transfer business delivered good results. We continue to gain market share in the Mexico corridor based on the latest Banco de México data. Latin America outbound also remains strong. The gains were partially offset by declines in Asia Pacific and U.S. domestic money transfer. In Business Solutions, we achieved constant currency revenue growth for the fourth straight quarter. Revenue increased 3% on a reported basis or 7% constant currency, driven by strong growth in Europe and Australia. We continue to offer our unique cross-border platform to existing and additional partners.
Recently, we announced collaborations that allow other financial institutions and global brands to leverage our cross-border platform and compliance capabilities to make payments from almost any type of account to almost anywhere in the world. Today, we announced an agreement with Toronto-Dominion Bank, the TD Bank, one of the largest financial institutions in Canada, that gives TD customers the ability to send money digitally from their accounts for payout at Western Union locations in over 200 countries and territories around the world. Last month, we announced an agreement with the U.K. Post Office, which offers U.K. consumers and businesses expanded digital international payment services by integrating Western Union's cross-border platform with the Post Office digital channel. Customers will be able to access international payment services via U.K. Post and Western Union branded online portal.
Businesses will be able to make near real-time payments in multiple currencies, allowing them to expand their network and connect with new business partners across the world. These are only two prime examples where leading brands are turning to Western Union for our deep financial services expertise, digital know-how, and leading compliance capabilities to expand access and create new choices for their customers. Financial institutions, fintechs, and global companies like Amazon are also choosing our platform, global regulatory framework, and network to offer our capabilities to additional customer segments. We think this validates our model and market position, and crucially underlines the principle upon which this business has been built, convenience, the highest standards of compliance, and reliability for the users and communities who interact with the platform.
We believe we have a responsibility as we evolve our business to maintain our commitment for those principles, both for the benefit of the customers that use our platform, and because it's a competitive advantage for Western Union. I'd now like to provide some additional color on the Global Strategy Initiative that we announced today. We are very confident in the underlying strength of Western Union and enduring value of our unique cross-border platform. This is a stable business with strong margins, but we believe we can deliver additional value to customers and shareholders through a new Global Strategy designed to drive improved efficiency, profitability, and long-term revenue growth. This Global Strategy is the result of strategic review of the business that we will detail at our Investors Day on September 24.
At Investor Day, we'll provide you with a full view of our new strategy, discuss new initiatives to drive growth, as well as detail additional opportunities for efficiencies. We plan to give you an overview of how we expect to generate long-term growth by offering our more efficient and advanced WU platform and operating model to customers globally. As discussed on our last call, we identified opportunities to run our business more effectively and efficiently. The global strategy is focused on executing on our opportunities through important changes to our operating model that will meaningfully reduce our structural cost base. Planned changes include a reduction in our total headcount by approximately 10% and the consolidation of corporate and business offices, while we continue to be a leader in the global cross-border money movement and payments industry.
We believe that these actions will have relatively quick return on investments for shareholders while better positioning us to drive growth. Specifically, only from these actions we announced today, we expect to generate $100 million in annual savings beginning in 2021, which should help drive significant margin expansion from where we are today. We have been working hard and planning these initiatives for some time, and we look forward to sharing more details on our Investor Day. Our goal is not only to drive cost savings and margin expansion, but to drive growth by delivering the efficient and advanced WU Platform to more customers, clients, and global brands. Now, I would like to turn it over to Raj for a more detailed discussion of the second quarter financial results.
Thank you, Hikmet. Second quarter revenue of $1.3 billion declined 5% compared to the prior year period. While adjusted constant currency revenue, which excludes our divested businesses for both the current and prior year increased 4%. Currency translation net of the impact from hedgers reduced second quarter revenue by approximately $74 million compared to the prior year, primarily due to depreciation of the Argentine peso. The decline in the peso negatively impacted reported revenue by 3%, while the effect of inflation on our Argentina businesses is estimated to have positively impacted both reported and constant currency revenue by approximately 2%. In the consumer-to-consumer segment, revenue declined 1% or increased 1% on a constant currency basis, while transactions grew 1%. The total C2C cross-border principal was flat or increased 3% on a constant currency basis, while principal per transaction was down 1% or increased 1% constant currency.
The spread between C2C transaction and revenue growth in the quarter was 2%, with a negative 2% impact from currency. Pricing and mix were offsets, as pricing positively impacted revenue by 2% in the quarter compared to the prior year period, while mix had a negative impact of approximately 2%. Turning to the regional results. North America revenue grew 2% on a reported and constant currency basis, while transactions declined 1%. The U.S. to Mexico corridor delivered strong revenue growth in the quarter, and the U.S. outbound business also generated solid growth, led by transfers to Latin America. These increases were partially offset by continued declines in U.S. domestic money transfer. In the Europe and CIS region, revenue declined 3% or increased 1% on a constant currency basis, with growth led by Spain and France. Transactions in the region increased 4%.
Revenue in the Middle East, Africa, and South Asia region declined 3% on a reported basis or 1% constant currency, while transactions decreased 3%, primarily due to softness in Saudi Arabia and the UAE and hard currency limitations in certain African markets. The Latin America and Caribbean region continued to deliver strong constant currency revenue growth led by Ecuador, Peru, and Mexico outbound. Revenue in the region increased 4% on a reported basis or 16% constant currency while transactions grew 11%. In the APAC region, revenue declined 14% or 12% constant currency and transactions were down 9%, with Australia, Korea, and Malaysia contributing to the revenue declines. WesternUnion.com revenue grew 18% or 20% constant currency with transaction growth of 15%. WesternUnion.com represented 13% of total C2C revenue in the quarter.
Business Solutions revenue increased 3% on a reported basis or increased 7% constant currency and represented 7% of company revenues in the quarter. Constant currency revenue growth was driven by increased sales of hedging products and strong growth in the education and financial institution verticals. Other revenues, which consist primarily of our retail bill payments businesses in the U.S. and Argentina, decreased 31% in the quarter. The decline was due to the Speedpay and Paymap divestitures in May, which were non-core domestic-focused businesses, and the impact of the depreciation of the Argentine peso. Although the Pago Fácil walk-in business in Argentina grew transactions and local currency revenue, it declined in U.S. dollar terms. Other revenues represented 10% of total company revenues in the quarter.
Turning to 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 the impact of the net gain on the Speedpay and Paymap divestitures, restructuring expenses, merger and acquisition costs, and related tax effects. The consolidated GAAP operating margin was 19.3% in the quarter, compared to 20.1% in the prior year period. The decline was due to the impact of the sale of the Speedpay business, higher marketing spending, and restructuring expenses, which were partially offset by Business Solutions margin improvement and other operating efficiencies. We incurred $7 million of restructuring expense related to the operating model changes in the quarter.
We anticipate $100 million of restructuring expense for the full year and $50 million to be incurred in 2020. These costs relate primarily to severance as we are reducing our headcount by 10% and also include cost for relocation of operations, facility closures, consulting, and other related expenses. We anticipate these changes will generate $100 million of annual savings beginning in 2021, with $50 million of the savings realized in 2020. We expect these savings to contribute to operating profit and drive strong margin expansion over the same period. Adjusted operating margin in the second quarter was 20.3% compared to 20.2% in the prior year period. As Business Solutions improvement and other operating efficiencies offset the impact of the Speedpay and Paymap divestitures and the increase in marketing spending.
Speedpay and Paymap contributed about 80 basis points to last year's second quarter margin but had no contribution to the current period margin, while foreign exchange hedges provided a benefit of $6 million in the current quarter compared to no impact in the prior year period. The GAAP effective tax rate was 17.5% in the quarter compared to 14.8% in the prior year period, while the adjusted tax rate of 16.8% compared to 17.3% in the prior year period. The increase in the GAAP rate was primarily due to changes in estimates for Tax Act provisional accounting in the prior year period. GAAP earnings per share in the quarter was $1.42 compared to $0.47 in the prior year period, with the increase driven by the gain on the sale of the Speedpay business. Adjusted earnings per share in the second quarter was $0.45 compared to $0.46 in the prior year.
We completed the sale of the Speedpay business on May 9th for approximately $750 million in cash and also completed the sale of our Paymap mortgage services business in the second quarter. The sale of these businesses generated a pre-tax gain of approximately $525 million with related taxes estimated to be approximately $145 million based on statutory rates. As we mentioned last quarter, the Speedpay gain also produced a favorable effect on our overall U.S. tax position with respect to the BEAT provision in 2019, which should result in a separate tax benefit of approximately $50 million this year compared to our initial February outlook. Turning to our cash flow and balance sheet, year-to-date cash flow from operating activities was $403 million. Capital expenditures in the quarter were approximately $37 million.
At the end of the quarter, we had cash of $1.2 billion and debt of $3.1 billion as we paid down some notes that matured in May. We returned $246 million to shareholders in the second quarter, including $86 million in dividends and $160 million of share repurchases, which represented approximately eight million shares. The outstanding share count at quarter end was 426 million shares, and we had $1.2 billion remaining under our existing and new share repurchase authorizations, the majority of which expires in December 2021. Turning to our financial outlook, we are updating our full-year GAAP financial outlook to reflect the restructuring expenses related to the operating model changes we announced today.
We are also providing adjusted operating profit tax rate, earnings per share, and operating cash flow outlooks, which exclude the net gain on the Speedpay and Paymap divestitures, the restructuring costs, merger and acquisition expenses, and all related tax impacts, including the BEAT benefit. We continue to expect GAAP revenues for the full year to decrease mid-single digits due to the divestiture of the Speedpay business in May. On an adjusted constant currency basis, excluding Speedpay and Paymap from both years, we expect low single-digit constant currency revenue increase, which is unchanged from the previous outlook. GAAP operating margin is expected to be approximately 18%, while the adjusted operating margin is expected to be approximately 20%. The change in GAAP margin from our prior outlook reflects the inclusion of the $100 million of expected restructuring expenses.
We expect both the GAAP and adjusted effective tax rates to be in the range of approximately 18%-19% in 2019, and continue to expect the effective tax rate in 2020 to be in the mid-teens range. GAAP EPS for the year is now expected to be in a range of $2.47-$2.57, down from the previous $2.66-$2.76 to reflect the restructuring expenses, which impact the full-year outlook by approximately $0.19 per share on an after-tax basis. Adjusted earnings per share is expected to be in a range of $1.70-$1.80. GAAP cash flow from operating activities for 2019 is expected to be approximately $800 million, while adjusted operating cash flow is expected to be approximately $950 million.
We continue to expect to spend between $500 million and $600 million on share repurchases in 2019, and we already spent $335 million in the first half of the year. In summary, the quarter's results were stable, with improved pro forma revenue growth compared to the first quarter and solid margins. Excluding the costs related to the restructuring, we remain on track with our full-year earnings outlook. We continue to return significant funds to shareholders and maintain a strong balance sheet. We began implementing our new global strategy designed to drive profitability, efficiency, and long-term growth with immediate changes that will generate $100 million in annual savings. Operator, we are now ready to take questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Tien-Tsin Huang of J.P. Morgan. Please go ahead.
Hi, Tien-Tsin.
Thank you. Hey, good afternoon. Thanks as always for the time. On the savings, makes sense. I'm sure you'll give us a lot more at the Analyst Day. Is that a net number that we should expect in savings net of any kind of incremental investments that you might make for growth? I just wanted to clarify that because I've been getting that question.
Yeah.
Yeah.
Yeah. We expect most of the $100 million of savings to go to the bottom line and to impact positively our margins. It is a net concept.
Yeah. Okay, terrific. If you don't mind, Hikmet, I want to ask you a crypto question, because we've been getting that question a lot since the Libra news came out and then MoneyGram with Ripple. I know in light of some of these savings you're highlighting, I'm curious how crypto might fit in your roadmap, something around the fiat currency, et cetera, what that might mean. Anything to say there? Thank you.
Sure. Actually, all the discussion shows how valuable our platform is. It really is built on that and all the discussion shows how valuable it is to be in 200 countries and moving money in 137 currencies. It shows the value of our platform and the regulatory challenges that many environment has. Western Union has that, right? At the same time, we are looking at the innovation on the crypto industry. We are basically the cross-border machine for many fintech companies, many global companies, many financial institutions. I think it's a very important thing. The question is always what is the cryptocurrency? Is it a fiat currency or is it a settlement currency? I think the differentiation has to be done in a very good way and understood by the industry. I think there's a lot of noise there.
They're mixing everything between fiat currency and the settlement currency. I think that needs more discussion. Most important thing is that it is a regulated environment and Western Union has all the framework. It has the settlement machine, and we can offer our settlement to many fintech companies.
Got it. Well said. Thank you.
Thank you.
The next question comes from Darrin Peller of Wolfe Research. Please go ahead.
Hey, thanks guys. Just to take the other side of Tien-Tsin's question on the margins. I guess, in terms of investment and growth that we might want to hear about at the Investor Day. First of all, can we expect to hear some greater discussion of where you're going to invest for purposes of accelerating growth, or is it really going to be more of a margin focus and maybe just give us a preview of a couple of areas you're hoping to talk about on enhancing growth? I just have a quick follow-up on the westernunion.com business.
Yeah, I think that's a great question. This initiative is really making our platform more efficient and really looking at additional growth opportunities. We believe that we can run this business, especially the core business, more efficient way. We've been thinking about that for a longer time. We were planning about that, and we are very confident that we could do that. This is very important. This platform running in a different way with all our WU Way activities, with all our pro forma, gives us also growth opportunities. As I mentioned on the call, as my script, as I mentioned, many companies turning to us, financial institutions, fintech companies, Amazon, global brands are using our platform to achieve also new customer segments. That means for us also growth opportunities, long-term growth opportunities.
I think besides serving Western Union C2C customers, we believe there are also big opportunities to serve with our platform new customer segments, and this is something that I would like to share at the Investors Day. The other thing is also the growth opportunities of our existing business like using artificial intelligence for more dynamic pricing. We are today at 20,000 corridors, but we could be more with artificial intelligence, with more corridors, more dynamic.
Okay
growth opportunities I believe are there.
All right. That's helpful. Thanks. Then just my quick follow-up is on the WesternUnion.com side. Look, obviously, revenue growth continues to hold up well. I think it accelerated a little bit this quarter, but I noticed transactions did decelerate. I'm just curious if that, I may have missed some of the prepared remarks. Was that just mix or are you finding ways to have a higher revenue yield on certain transactions?
Yeah. As Raj and I mentioned earlier, I think the transaction growth was impacted by the U.S. domestic money transfer declines. As you know the U.S. domestic money transfer has been quite under pressure for a while, it's 80% of our revenue and westernunion.com is cross-border, and that has been very well growing, 25% accelerating even transaction and revenue. We are now in 71 countries with our Outbound business, and we believe that we can expand even more there. It's impacted mainly by U.S. domestic.
Okay. All right. That's helpful. Thanks, guys.
Thanks, Darrin.
The next question comes from Bryan Keane of Deutsche Bank. Please go ahead.
Hi, guys. I want to ask about the global strategy and how it compares and contrasts with WU Way.
WU Way, as you know, was driving the lean operating principle throughout our organization to enable that our platform is much more better, and we operate in a more efficient way. We did find significant increases in productivity on areas. What we have done is that over time, over the WU Way activities, we learned a lot, and we're really taking this WU Way activities to the next level. During our first phase of WU Way, we invested back into compliance, in GDPR, in privacy, in marketing activities, growing the westernunion.com to more countries. Here what we have done is it's really taking our learnings and taking the WU Way to the next level actually. We trained 6,000 people. They're all lean manager trained.
We trained looking at the process in a different way. We found, we've been working longer time on that, really identified additional opportunities to run this business more efficient, using more technology in a more efficient way, consolidating some of the offices, and using more artificial intelligence. We really identified them. That's first result of the global strategy. There are more to come at the Investors Day to share with you, Bryan. I'm looking forward to that actually. I'm very excited because the team is really very motivated and management will share more detail on that.
Got it. Post 2021, after you expect to generate the $100 million in savings, I think that'll be starting in 2021. When you look a little longer term then, what is the operating margin and profit look like in the global strategy longer term? Does it have leverage or is it more stable margins as we've seen post the WU Way originally?
Yeah. Bryan, we will give you more color on our growth strategies. Obviously, that plays a big part in where the margins go beyond 2021, but we do believe that there are additional opportunities for efficiencies that can drive further cost opportunities and margin expansion beyond what we announced today. Obviously, revenue plays a big part of that, and that's something we want to give you more color on, but we feel good about the longer-term opportunities here.
Okay, great. Thanks for taking the questions.
Thanks, Bryan.
The next question comes from James Faucette of Morgan Stanley. Please go ahead.
Hey, it's Steven Wald on for James. Just a couple of questions. We've been seeing Visa and Mastercard and some of the other diversified payments names make some more cross-border moves recently. Just wanted to get a sense of how you view the competitive environment on the cross-border side from the more diversified players.
Well, competitive environment has not changed in the cross-border, and we are a leader on this area, and this is our expertise. This is our sweet spot. This is being activated really in that area. I think the others are catching up on that one and really trying to acquire things. What I see here is that our new cross-border is really a competitive advantage because we are building on our existing strength and existing values, and we really want to expand that to new customer segments. Like today we are serving a certain customer segment, the C2C customer segment with Western Union brand. The examples I brought before and the other examples are really serving also additional businesses, additional brands for their customers offering our platform. The big difference probably in our is that not many companies own the end-to-end processes. We do end-to-end processes.
Not many companies have the compliance programs. We do have the compliance programs. Not many companies can settle in 137 currencies. We do settle in 137 currencies. It is a big advantage. We additionally have our network that people can walk in to our network, but we also have four billion bank accounts and wallets. We build that. I think, in the future, we're going to talk more about the Investors Day, but I'm excited also how we offer the network to new brands and new customer segments, and really using our facility. Others have to build that, we have it.
Okay, great. Yeah, thanks for the color. Just maybe one more quick one there. I think I might have missed this earlier on, when you guys were talking about the headcount reductions and the relocation, can you give us any additional granularity on where some of those headcount reductions are going to focus or be focused on in terms of job functions?
Yeah. The best way to answer that, it really is throughout our entire business. It's not focused on any particular area. There are some more senior type roles that we are taking on in places. We're consolidating corporate and business offices in different parts of the world, so it's not particularly focused in a particular area. We're still in the process of notifying employees over the coming weeks. It's really a global effort on our part.
It's also really finding the right place to be operating in the right way. That doesn't mean that we're going to have closing some corporate offices, that we are not going to operate in 200 countries. As I said, that's our strength. We are continuing to operate even more efficient there, but really consolidating some of the offices where the experts are where we can really get more efficient go-to-market activities. That's what we are doing.
Perfect. All right. Thanks. I appreciate that.
Thank you.
The next question comes from Ramsey El-Assal of Barclays. Please go ahead.
Hi, guys. This is Damian Wille on for Ramsey. Thanks for taking the questions. I just wanted to ask on this recently announced partnership with Visa. Just how much of your volume do you think could ultimately be sent through cards instead of bank accounts and then paid out in cash? Do you see this sort of opening up a new service potentially for your customers?
Ramsey, this is Raj. We look at that as just being another channel for our customers to use. Customers will have the ability to initiate a transfer online and send it to somebody's Visa debit card in many different countries around the world. We're going to start piloting it later this year and roll it out more broadly next year. It's still early stages, but for us, it's another channel. We're trying to have account capabilities all over the world, and this is just another angle to that. We're pleased to have an opportunity with them, and we'll see how it transpires.
It shows also how companies like Visa cooperate with us. It shows also our competency where Visa's strengths combine with our strengths and really reach out to new customer segments.
Okay. That's great to hear. Maybe a little bit more on the U.S. domestic money transfer business. I know you previously mentioned that despite the competition from folks like Zelle and Venmo, that there's still the need for cash-to-cash payments. Do you see the decline sort of stabilizing in the near term? Or maybe a broader question too, do you see that this P2P app phenomenon occurring in other geographies around the world?
Yeah, I would say on the domestic money transfer side in total, last year was about 7% of our revenues. The year before it was about 8% of our revenues. It has been a gradual decline. For the digital business, as Hikmet mentioned, DMT is about 20% of the digital revenues, so that's seeing more of a decline. Overall, we've taken those things into account in our outlook, and we assume that the domestic business will continue to decline. It's not very large in any other part of the world other than in the U.S. That's really where we have the most material revenue. In other markets, it's still relatively small and most of our businesses are still really cross-border in nature. I would say it's on a more stable basis.
The digital part we did see a little bit more of a decline in the quarter than last quarter, but we're certainly managing that, and we see good things overall for our digital business. As Hikmet mentioned, 80%, which is cross-border for our digital business, is growing well over 25% in both transactions and revenues. We feel very good about that part of the business.
All right. Thanks, guys.
The next question comes from Ashwin Shirvaikar of Citi. Please go ahead.
Hello, Ashwin.
Oh, thanks. Hi Hikmet, how are you? Hi, Raj.
Good. How are you, Ashwin?
I'm good, thank you. Thanks for asking. The question I have is as I look at the last five, six years there have been multiple transformation initiatives, restructurings, including WU Way for the prior question. Frankly, it's in some ways creditable that you're maintaining a stable rev growth and stable margins, but none of these initiatives have actually managed to increase Either of those, even with the benefit of the cycle. I guess I'm a little bit confused with regards to, again, if you could just explain to me why this is different and why this should improve margins or help your growth rate.
Yeah. This is different, Ashwin. As you know, in the past, we announced several actions, but we also had savings, and we used them mainly for the regulatory environment, upgrading our regulatory framework, upgrading our technology, investing on the WesternUnion.com, which you could see already it's paying back, right? I mean, how strong our WesternUnion.com is. Other competitors are far away from the growth of WesternUnion.com and from the business of WesternUnion.com. This is different because we are also committing to margin expansion. In the past, we said that we're going to do further investment in the business where we need it and where we had to upgrade some of the things because the regulatory environment has changed and technology has changed, but this is really different. This is really commitment to our shareholders.
This is really a commitment that we're going to have $100 million run rate savings, and that's a big difference than in the previous one, as you recall, Ashwin.
Yeah, Ashwin, we have set up specific processes internally, to ensure that the savings that we've identified, we are able to capture and take to the bottom line. We have different things in place, controls in place that we are driving for these savings. We feel comfortable and confident that we will be able to get these savings. As we mentioned earlier, as we talk over the next few weeks and at Investor Day, we do wanna talk about the growth opportunities because we still see more growth opportunities, and we see further efficiency opportunities beyond the scope of what we announced today. I would just say-
There are definitely further opportunities on that.
Got it. I guess a quick follow-up if I can. Are you seeing any kind of benefit then, the question still is why now? Are you seeing a benefit from maybe the ID requirements that two of your competitors have talked about at a major retailer? I mean, any optionality for agent gains as well, anything like that? Are you seeing change in the market?
Yeah, I think this is an issue for the other competitors, not for us. We have the right compliance programs into place. We use a lot of investment. As you mentioned earlier, what happened to the WU Way savings? It went to the compliance investment part of it, part of it to the artificial intelligence. I think this is particular for one area for the competition to have an ID requirement. We do have our control programs. We have our business model, which is really very compliant. I don't see any changes there from that. The first question was why now, Ashwin?
Yeah. Why now?
I mean, now it's because we are coming from position of strength. We feel really very comfortable with our business. The pricing environment is stable. This quarter there were some parts of that was mixed and some U.S. domestic price increases. pricing environment stable. We feel really we are acting from position of strength. We are not leaning back, we are really looking forward. That's why we are doing also the Investors Day, to show you, to investors and to analysts how that company will look on a longer way, how our platform will be slimmer and more agile and more effective to go for new opportunities. Our commitment on the savings, our commitment to the shareholders for margin expansion. Of course, we need also revenue growth, right? That's exactly what we are focused. All this based on our today's economic view.
Of course, you never know, but we feel very confident about our future.
Got it. Look forward to seeing you in September.
Thanks.
Thanks, Ashwin.
The next question comes from James Schneider of Goldman Sachs. Please go ahead.
Good afternoon.
Hello
taking my question. Hello.
Hello, Jim.
Hi. Just wanted to ask on the performance in Latin America, that continues to improve relative to I think last couple of quarters. You called out a couple of countries, including Ecuador, Peru, and some others. I'm curious, is the improvement more a statement about the market and the macro trends, or is this a statement about your market share within it?
I believe it's a little bit of both. Economic conditions are generally good in the markets that we called out. We also see a good amount of business going to Colombia as a result of the exodus from Venezuela. The inbound business to Colombia is also benefiting us there. It's been a good grower for us, as you mentioned, Jim, for quite some time now, and we hope to keep that going as much as we can. It's been performing well, as you said.
Great. Just curious, in terms of making the network more efficient from a delivery perspective, any examples you can give us in terms of what costs might be rationalized and whether that would in any way kind of reduce the span or footprint in any way on the receive side of your network?
Yeah.
We are not reducing the network.
No. I think what we've announced today is really more around the headcount reduction throughout the globe, then also some corporate and business offices. We are going to look at other components of our cost structure, which would include commissions and other things. That's some of what we want to lay out for you as we get to Investor Day, but it does not sacrifice the quality of distribution that we have around the world.
It's the opposite, actually. Right?
Yeah, exactly. We're also driving for account payout, Jim. That is going to be a big part of our distribution strategy, both funding and payout. That along with other commission strategies, we believe have some additional opportunities which we want to talk to you about.
Remember, Jim, we announced even the wallet strategy, which had good results in Kenya with Safaricom. All these things, dropping money not only on retail, also in an account, but also in a wallet. It's a big competitive advantage. That means that our network looks totally different than it was in the past because we are serving new use cases with our agile platform. That's the story we want to tell you also on the WU Way, how we can see the opportunities for the future.
That's helpful clarification. Thank you very much.
Thanks.
Thanks, Jim.
The next question comes from David Togut of Evercore ISI. Please go ahead.
Thank you. Good afternoon.
Good afternoon.
Could you provide a little detail behind the 2% price increase in the quarter? I thought I heard you say domestic. Is it all domestic or is some of it cross-border? If there are any specific corridors to call out, that would be helpful.
David, as you know, we operate in 20,000 cross-border corridors. We have a domestic money transfer business which is about 7% of our revenue, and we did do some price increases there as the transactions are going. I think our competitive advantage is in the cross-border. In the 20,000 corridors, we sometimes increases prices, sometimes decreasing prices. We've been doing that for a lot of time. It's a really portfolio management. We use dynamic pricing actions like an airliner, right? We really use different street corner pricing, different band prices that impacts to our revenue. In this environment, actually, the last quarters, last two years, the environment has been very stable, the pricing environment. We mentioned that several times.
The pricing lift was primarily focused in North America, David, and the single biggest area was domestic money transfer. If you look around the world in the other regions, there were other factors like in Asia Pacific, the transaction growth got worse, but it doesn't have much of a revenue impact because it's mostly around the intra business there. Most of the pricing lift was focused in North America.
Thank you. That's helpful. Just a quick follow-up question. On the competitive front, Xoom announced an expansion to more than 30 European countries in the second quarter. How do you assess the competitive threat from Xoom? Are there any counteractions you need to take to protect and continue to grow Europe and CIS, which was particularly strong in the quarter?
Yeah. We feel very good about our long-term growth opportunities in our digital business, particularly the international business. We said that the cross-border part is growing above 25%. The international part is growing even faster than that. The one differentiating factor compared to others who are in the market is that we have most of our revenue, even today, being paid out at a retail location. Even though it's being initiated digitally, it's still paid out retail. For us, our growth opportunity is to go account to account and look at digital ways of sending and receiving money, which is where other companies are also trying to play. We really believe that we're going to be able to create a better overall global cross-border digital business than anyone else will have over the next few years.
Long term, I'm going to share more at the Investors Day, long term, I believe is that our network coming such a competitive advantage. Is it account? Is it wallet? Is it the retail? Many companies are turning to us, want to use our services, and it's really thinking about our strategy, giving you more color on that on September 24th. The European environment has been doing very well, actually, and it's continued to doing well. We do have our regulatory framework there. We have our bank license there and our compliance programs, and we are now in 71 countries, and it's just the beginning. In the U.S. digital business, we have been longer time. European and other countries are new to us and growing that fast. We feel very comfortable with the growth rates in international environments.
Understood. Appreciate the helpful insights.
Thank you.
Thank you, David.
The next question comes from Kartik Mehta of Northcoast Research. Please go ahead.
Hey, Hikmet and Raj.
Hey, Kartik.
Hey, Kartik.
Raj, in the past, you've talked about needing a certain type of revenue growth to get to margin expansion. I understand this new cost-cutting will help you get to margin expansion. Is the formula changed at all once you put in these efficiencies in terms of the revenue growth you need to really drive margin?
Yeah. Kartik, what I've tried to say in the past is that all else being equal, revenue growth needed to be in the low to mid-single digit type of range to drive margin expansion. Here, we're focused on taking some costs out. In terms of margin expansion, we do believe we're going to get quite a bit over the next couple of years, and we've assumed a normal level of growth, I would say, in that regard. Normal meaning it's not too extremely high or too low. It's sort of low single digit type of growth needs to be there for us to get this margin expansion with the cost savings initiatives that we've announced today.
There are additional opportunities also, right?
Yeah.
I think on WU Way, you had talked about WU Way doing two things. One was obviously reducing costs, the other was helping you drive revenue. I think obviously the cost-cutting has really gone through. As you look back at the program, did it help drive revenue for you?
Yeah. Initially it's not that big. All the new initiatives, how we launched 27 countries internationally with .com, there was a lean management process behind that. We wouldn't get Amazon on our network if we wouldn't have the WU Way mindset, lean management operating activities. These are all examples which are also driving the revenue. This is really a new way of going to the market, being more efficient and really offering our platform to the customers. That has been definitely driven by WU Way Initiative. It's not only a program, it's really how we operate is the WU Way. For that, it's a multi-year training, multi-year way of thinking differently and operating differently.
Just one last question, Raj. I know you're now giving adjusted EPS guidance. I guess if you compared that to if you had given that in the previous quarter, how would it compare?
Not much has changed, Kartik. We're adjusting for the restructuring charges and M&A as well as the gain, just to call it out because there's so many moving pieces. Largely our outlook that we began with at the beginning of the year has stayed relatively consistent. With the Speedpay divestiture, we mentioned last time that that was worth about a $0.10 dilutive impact this year. Then our tax rate is slightly higher. If you actually look at the range that we initially gave, we're right on track with what we thought at the beginning of the year.
Okay. Thank you. Appreciate it.
Sure.
The next question comes from Jennifer Dugan of SunTrust. Please go ahead.
Hi, it's Jennifer Dugan on for Andrew Jeffrey.
Hi, Jenny.
Hi. If you look at growth in your big 4 receive markets, how does that growth compare with, say, the combined growth trends in all the other corridors? I'm wondering if there's a meaningful disparity with faster growth outside of those 4 main corridors.
Four main corridors? Tell it again, Jenny. I'm a little-
Yeah, if you look at the growth in.
Well, U.S. to Mexico, for example, is one of our key corridors, and we had very strong growth in the U.S. to Mexico corridor. Obviously we have other corridors like the Middle East to India that are also large that are having their own issues. You have some large corridors that are performing well, but you also have some large corridors that are not performing so well. I would say it's a mixed bag. There's not a clear differentiation there.
Okay. Thank you.
Sure.
Thank you.
The next question comes from James Friedman of Susquehanna. Please go ahead.
Hi. Thanks. It's Jamie at Susquehanna. Raj, I want to revisit the tax conversation. Thank you for those helpful comments that you made. I heard you say something about the $50 million adjustment to BEAT from the Speedpay sale. You made some comments about the trajectory for next year. Where are we generally in the tax journey, though? It's a question we get a lot from investors.
In the tax journey? Well, this year as we mentioned, we expect an 18%-19% tax rate, and that includes a number of different moving pieces, whether you look at GAAP tax rate or adjusted. Next year, we do believe that the tax rate will be in the mid-teens range. We have solved most of the BEAT issue going forward, and so we're comfortable that we will be back down to the mid-teens level next year for our tax rate.
Got it. Okay, that's helpful. I just was wondering, it's not that intuitive that you would have raised prices domestically at a time when there was seemingly some pressure on the business. Maybe I'm just oversimplifying, but was there any elasticity there, or am I on the wrong track?
No. Domestic money transfer is not a business. We've assumed that that business will continue to decline for quite some time because it's not a business that has key competitive advantages to it. Our competitive advantage is really cross-border in nature. We are trying to maximize our cash flow in that business. We do a good balance. We have to make sure we're aware of what the market is like but we also want to maximize the outcome for our business. We try to balance both factors.
That makes sense. Thank you.
Sure.
Okay. Andrew, I understand there's one more question in the queue, so we'll take the final question. Yes, sir. That question comes from Vasu Govil of KBW. Please go ahead.
Hi. Thanks for taking my question. I guess first I had a quick follow-up on the Visa Direct partnership that you guys signed. I understand that it's opening up more channels for you, is it also an incremental cost-saving opportunity where you can maybe complete transactions for cheaper using the Visa rails versus traditional means of moving money?
Obviously, as Raj mentioned earlier, the Visa Direct and we came together, we looked at our competency, they looked at their competency. With Visa Direct, you're obviously coming to new customer segments, additional customer segments where you can drop money, and this link directly to an account with Visa numbers. Our capability to move money in 137 currencies, being Visa also a global brand, we believe that there is additional opportunity on that to grow this business even stronger. I think that shows again our capability to offer another brand to our customers that they can move money globally in an easy way, in a compliant way, in a regulated way, and that's probably the most important part on this agreement.
Got it. That's helpful. I guess just a quick one. I know we'll get more detail on the growth opportunities under this new global strategy at the Investor Day. Should we expect to get long-term growth targets, both for revenue and margins at the Investor Day as well?
Vasu, we don't really want to get into what we're going to talk about there, but we certainly want to talk about our long-term growth objectives and how we see the growth playing out, and then we also want to talk more about additional opportunities that we may have for efficiencies and to give you more of the full picture there in just a few weeks.
Great. Appreciate it. Thank you very much.
Great. Thank you.
Okay, thanks everyone for joining us. Have a pleasant afternoon.