The Western Union Co. (NYSE: WU) Q4 2021 earnings call dated Feb. 10, 2022
Corporate Participants:
Brad Windbigler — Head of Treasury and Investor Relations
Devin McGranahan — President and Chief Executive Officer
Raj Agrawal — Chief Financial Officer
Analysts:
Tien-Tsin Huang — J.P Morgan — Analyst
Darrin Peller — Wolfe Research, LLC — Analyst
Vasu Govil — Keefe, Bruyette & Woods, Inc. — Analyst
Ashwin Shirvaikar — Citigroup Inc. — Analyst
Ken Suchoski — Autonomous Research — Analyst
David Togut — Evercore — Analyst
Cassie Chan — Bank of America — Analyst
Jamie Friedman — Susquehanna International Group, LLP — Analyst
Damian Wille — Barclays plc — Analyst
Joel Fishbein — Truist Securities — Analyst
Presentation:
Operator
Good day, and welcome to The Western Union Fourth Quarter and Full Year 2021 Results Conference Call. [Operator Instructions] Please note that this event is being recorded.
I would now like to turn the conference over to Brad Windbigler, Head of Treasury and Investor Relations. Brad, please go ahead.
Brad Windbigler — Head of Treasury and Investor Relations
Thank you. On today’s call, we will discuss the company’s fourth quarter and full year 2021 results, our financial outlook for 2022, and then we will take your questions. The slides that accompany this call and webcast can be found at westernunion.com under the Investor Relations tab and will remain available after the call. Additional operational statistics have been provided in supplemental tables with our press release.
On our call today is our CEO, Devin McGranahan; and our CFO, Raj Agrawal. Devin McGranahan joined Western Union in late December 2021 succeeding Hikmet Ersek. As many — as you may know before joining Western Union, Devin served as Executive Vice President and Senior Group President, Global Business Solutions at Fiserv, a global provider of payments and financial services technology solutions.
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 2020 Form 10-K for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements.
During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures on our website, westernunion.com, under the Investor Relations section. We will also discuss certain adjusted metrics. The expenses that have been included from adjusted metrics are specific to certain initiatives but may be similar to the types of expenses that the Company has previously incurred and can reasonably expect to incur in the future. All statements made by Western Union officers on this call are the property of the Western Company and subject to copyright protection. Other than the replay noted in our press release, Western Union has not authorized and disclaims responsibility for any recording, replay, or distribution of any transcription of this call.
I will now turn the call over to our CEO, Devin McGranahan.
Devin McGranahan — President and Chief Executive Officer
Thank you, Brad. Good afternoon, everyone. We appreciate you joining us today to discuss our fourth quarter 2021 financial results. As all of you know, this is my inaugural Western Union earnings call. I’m very happy to be here and to have the opportunity to talk with you about my initial thoughts 45 days into the job.
Given my background in payments and financial services technology, I am quickly getting up to speed and learning about the uniqueness of Western Union as a business. I’m excited about being in a consumer-facing business with strong operations, a global footprint, and an amazing brand. These are assets we can build upon. In the short time that I’ve been here, I’ve begun to develop some hypotheses about where we might take the business that I will share later in this call. But before we go there, let’s look at our fourth quarter and the full year of 2021 results.
As shared in our earnings press release, Western Union had a solid fourth quarter leading to strong profitability. For the full year, constant currency revenues were up 4.5% to $5.1 billion with strong performance from our digital platform and our Western Union Business Solutions. Nevertheless, we did see a slowing of topline growth as the year progressed, and we see this continuing as we move into the first quarter of 2022.
For the fourth quarter, our results were similar to what we saw in the third quarter of 2021. The digital business has generated strong growth while our retail business declined due to uneven economic recovery, negatively impacting our customers. As you know, labor-force participation is an important driver of our retail business and while there have been small improvements in labor-force participation, we remain below pre-pandemic trend. In addition, although economic improvement is occurring broadly, we continue to see the lingering effects of COVID in key industries like hospitality and service, which employ many of our customers.
In the face of some of these adverse factors, our business continued to show its resilience by generating strong operating cash flows year-over-year, which enabled us to return over $780 million to shareholders during 2021 consisting of over $380 million in dividends and $400 million in share repurchases. As you would imagine, we are in the midst of reviewing many aspects of our business. We are planning an Investor Day in the September-October time frame at which time we will provide a comprehensive update on our vision for the future and our medium to long-term plans. We hope to see all of you there and in-person pandemic-permitting.
In the meantime, I have begun to develop some perspectives that will guide our go-forward strategy. I believe that despite uneven and potentially adverse market conditions in our core business, we do have significant opportunities to create shareholder value. First, we have strong and hard to replicate foundational assets. We start with an iconic, trusted global brand, which is both well-known and given our 170-year history, elastic.
We have a diversified omnichannel offering with a global retail agent network consisting of hundreds of thousands of locations, serving millions of loyal Western Union customers around the globe every day. We have strong regulatory compliance and risk management assets that enable us to move money reliably in over 200 countries and territories.
We have a $1 billion-plus digital business, which grew double-digits in the fourth quarter including over 9 million westernunion.com customers who trust their cross-border financial transactions to us. We also have a talented and dedicated workforce that wakes up every day to help our customers and their families build social and economic bridges that enable the upward mobility of millions of people. I personally am very excited to be part of a purpose-driven company that is recognized for the value that our services bring to society. A genuine purpose is an increasingly valuable asset as more and more people want to work for and do business with a company that stands for something.
Secondly, we can use these assets to expand our addressable markets. We need to position the company for better long-term growth by focusing on products in markets that have strong underlying growth characteristics. Here are three interesting opportunities that we need to accelerate. These should not be judged as our go-forward strategy, but rather as opportunities I have observed from my first month.
We have opportunities to leverage our brand to expand beyond cross-border remittance. With the commercial launch of our multi-currency wallet and digital bank, we are moving in the right direction. We need to accelerate the rollout beyond Germany and Romania and at a pace that can begin to make a difference for our customers and our performance. We must take advantage of the strength of our network and our core capabilities in compliance and money movement. In an increasingly digital and potentially crypto-enabled world, we believe that demand for our core assets and capabilities will grow, including omnichannel, on and off-ramps, KYC, and our retail distribution. We must now prioritize opportunities and then rigorously drive integration and execution efforts.
We believe we can accelerate the growth of our digital footprint and our customer acquisition engine. Over the past two years, we have seen market demand for leveraging our digital money movement platform by large financial institutions. We must pick partners that fit with our brand and can accelerate our trajectory in certain parts of the world.
Thirdly, I see opportunities to improve our core operations. Our focus will be on delivering performance improvements that can improve both near term results and also create capacity for further investment. You’ll be hearing about more of this in the future, but I believe a few highlights might include growing our base of high-value digital and omnichannel customers, significantly increasing the percentage of customers that return to Western Union year-over-year, improving our competitive position at the point of sale, particularly in non-exclusive situations, and innovating on our end-to-end customer experience across all channels.
Finally, we will continue to have growing opportunities to prudently deploy capital. I’m sure many of you are asking if there will be a change in capital allocation strategy. With the pending sale of Western Union Business Solutions, this question is even more relevant. It is obviously too early in my tenure to be able to fully answer this question. However, what I can tell you is that we will continue to allocate our strong cash flows in ways that maximize long-term shareholder value.
Our focus is and will always be on creating sustainable shareholder value through disciplined capital and resource allocation. I understand that capital is a finite resource and it is our obligation as stewards of your capital to find the best opportunities with the highest risk-adjusted returns. We will assess those opportunities through the lens of returning that capital to you, our shareholders, and we will provide you with the roadmaps, the milestones, and the detailed progress updates for you to be able to evaluate our performance on capital management.
We clearly have work to do and it must be done with speed and focus. I am confident that our strong foundation combined with the trusted relationships that we have established with our customers will enable us to become a broader digital payments platform helping customers address more of their payments and financial services needs either directly under our brand or via our strategic growth partners.
Now, I’d like to highlight some important recent developments in our business, and then I will turn it over to Raj to talk in more detail about our results and our outlook for 2022. As we begin the year, I am pleased to announce today that we have renewed our partnership with Sber in Russia, one of our largest digital partners.
In addition, we are happy to announce the renewal of our long-term relationship with Seven Bank in Japan, who has been a valued Western Union partner for over a decade. This is an exciting development as Japan is one of the largest remittance markets in the APAC region and Seven Bank is an important partner of ours in that region. These partners and others rely on our platforms and technology to serve their customers. I too view our company at its core as a technology company, and as with all technology companies, we have the need to continue to innovate and invest in next-generation capabilities.
A few highlights from 2021. We are making a significant technology migration to the cloud. Many of our core processes and most of our data have been migrated. We are working to finish the migration of our core transaction engine, which will be completed by the end of this year. We have also improved our customer experience and servicing platforms by placing many of our CRM components in the cloud.
Finally, our previously announced pilot in Germany and Romania for our next-generation real-time multi-currency digital wallet and digital banking platform that started in the fourth quarter has been successfully concluded and we are now live in those markets with production technology. While there is always work to be done, I am pleased with the progress we are making on technology and the platform that we will have going forward.
In closing, I look forward to meeting with many of you and hearing your perspectives as our owners. In the meantime, you can expect that I will bring passion and discipline to driving the in-period results of our company while working to identify, prioritize, and commercialize a set of initiatives that will increase the long-term value of this business. You can expect to hear more on our next earnings call, and certainly, at our Investor Day later this year.
I will now turn the call over to Raj to discuss our fourth quarter results in more detail.
Raj Agrawal — Chief Financial Officer
Thank you, Devin, and good afternoon everyone. Today I will discuss our fourth quarter results and 2022 financial outlook. I will focus my comments primarily on the fourth quarter. The similar information for the full year can be found in our press release and the attached financial schedules.
Fourth quarter revenue of $1.3 billion increased 1% on a reported basis or 2% on a constant currency basis. Currency translation, net of the impact from hedges reduced fourth quarter revenues by approximately $15 million compared to the prior year. In the C2C segment, revenue declined 1% on a reported basis and was also slightly negative on a constant currency basis.
C2C transactions were flat compared to the same period in the prior year while digital money transfer continued the strong transaction trend with 17% growth in the fourth quarter, which was offset by a decline in retail money transfer. Total C2C cross-border principal growth accelerated to 5% on both a reported and constant currency basis, primarily due to growth in digital money transfer. Total C2C principal per transaction or PPT was up 4% on a reported and constant currency basis, driven by mix and changes in consumer behavior.
Digital money transfer revenues, which include wu.com and digital partnerships increased 13% on a reported basis or 12% constant currency. Our digital money transfer business again achieved a quarterly high in transactions, revenue, and principal. Wu.com revenue grew 9% on a reported and constant currency basis on transaction growth of 6%. Wu.com cross-border revenue was up 12% in the quarter.
Moving to regional results. In the fourth quarter, North America revenue increased 2% on both a reported and constant currency basis on transaction declines of 2%. Revenue growth was supported by solid U.S. outbound trends, partially offset by U.S. to Cuba due to regulations limiting our ability to provide services and we continue to see softness in U.S. domestic money transfer. We are pleased with the momentum we are seeing at Walmart in the U.S. and we expect this to be a more meaningful contributor to 2022 results.
Revenue in the Europe and CIS region declined 8% on a reported basis or 7% constant currency on transaction growth of 1%. The digital partnership business continued to show solid growth offset by softness in the retail business as the region grew over a tough comparison given the strong rebound we saw in the prior year period. The spread between transactions and constant currency revenue in the quarter was primarily related to the digital partnership business which has been performing very well.
Revenue in the Middle East, Africa, and South Asia region grew 2% on both a reported and constant currency basis, while transactions increased 6%. Digital offerings continue to drive revenue and transaction growth in the region, offset by softness in retail. The digital partnership business continued to generate strong solid performance and was the main contributor to the spread between revenue and transactions. Revenue growth in the Latin America and Caribbean region was up 8% or 12% constant currency on transaction growth of 2% as the region grew over COVID-19 impacts.
We continue to see solid growth coming from Mexico, Colombia and Chile. The driver of the spread between transactions and constant currency revenue growth resulted from mix factors in the retail business. Revenue in the APAC region was flat on both a reported and constant currency basis, while transactions declined 13% driven by softness in our intra-Philippines business. This is a lower revenue per transaction business, resulting in a larger impact on transactions and relatively lower impact on revenue.
Business Solutions revenue increased 22% on both a reported and constant currency basis. Revenue growth was driven by improvements in international trade as well as increased activity in the education and financial institution verticals. The segment represented 8% of company revenues in the quarter and benefited by growing over a depressed revenue level in the prior year period. In addition, we remain on track with the timing of the planned divestiture of Business Solutions. As a reminder, the transaction is anticipated to close in two parts with the first closing expected to occur in the first quarter of 2022 and the second closing expected to occur later in the year. I will discuss the impacts to our financial outlook in the — to our financials in the Outlook section.
The other revenues represented 5% of total company revenues and increased 5% on a reported basis compared to the prior year period. Other revenues primarily consist of retail bill payments in the U.S. and Argentina and retail money orders in the U.S.
Turning to margins and profitability. The consolidated GAAP operating margin in the quarter was 24.7% compared to 17.9% in the prior year period while the consolidated adjusted operating margin was 24.9% in the quarter compared to 18.8% in the prior year. The GAAP and adjusted margin increases resulted primarily from increased profitability in our Business Solutions segment, lower planned marketing expense, lower agent losses, and the favorable foreign exchange impact.
Our marketing investment for the full year was consistent with the prior year. However, the timing differed on a quarter-by-quarter basis. The GAAP operating margin also improved during — due to restructuring costs in the prior year period. Adjusted operating margin excludes M&A expenses in both the current and prior year period and last year’s restructuring expenses.
Moving to segment margins. Note that M&A expenses are included in other operating margin for both the current and prior year periods and segment margins exclude last year’s restructuring charges. In the fourth quarter of 2021, C2C operating margin was 24.2% compared to 20.5% in the prior year period. The increase in the operating margin was driven by favorability and commission mix and other variable costs, including lower agent losses as well as lower planned marketing expense.
Business Solutions operating margin was 30.8% in the quarter compared to negative 0.2% in the prior year period. The increase in operating margin was primarily due to increased revenue and a facility closure costs incurred in 2020. During 2021, the Business Solutions segment generated $422 million of revenue, and excluding corporate allocations delivered $120 million of EBITDA and $104 million of operating profit. In total, Business Solutions contributed approximately $0.22 to 2021 adjusted EPS.
Other operating margin was 21.3% compared to 15.8% in the prior-year period, primarily due to higher revenue. The GAAP effective tax rate in the quarter was 6.7% compared to 11% in the prior-year period, while the adjusted effective tax rate in the quarter was 12.1% compared to 11.6% in the prior year period. The decrease in the company’s GAAP effective tax rate was due to discrete benefits associated with the pension termination.
GAAP earnings per share or EPS was $0.42 in the quarter compared to $0.43 in the prior year period, while adjusted EPS was $0.64 in the quarter compared to $0.45 in the prior year period. The decrease in GAAP EPS reflects the non-cash charge for the pension plan termination, partially offset by increased Business Solutions segment operating profit and lower planned marketing expense, while adjusted EPS increased due to the same factors adjusted for certain items including the pension plan termination and acquisition and divestiture costs. To offer some color on our pension plan termination non-cash charge, we have transitioned our obligations through the purchase of annuities completing the previously announced process in a surplus position.
Turning to our cash flow and balance sheet. During 2021, our business generated over $1 billion of operating cash flows of which, almost 75% was returned to our shareholders as a combination of dividends and share repurchases. The outstanding share count at quarter-end was 394 million shares and today, we announced that our Board of Directors has approved a new three-year, $1 billion share repurchase authorization and a $0.235 quarterly dividend payable on March 31, 2022. Capital expenditures in the year were approximately $215 million. At the end of the quarter, we had cash and cash equivalents of $1.2 billion and debt of $3 billion.
Moving to our outlook. Today, we provided the financial outlook for full year 2022 reflecting recent business trends and macroeconomic conditions. Our outlook assumes no material change of macroeconomic conditions. GAAP figures reflect an expected partial year of Business Solutions ownership including contractual payments to the buyer, representing profits between the first and second closings, associated divestiture and acquisition costs, and an estimated pre-tax gain of approximately $280 million subject to regulatory and working capital adjustments.
As the divestiture is expected to close in two phases, approximately 60% of the pre-tax gain is expected to be recognized in the first quarter at the time of the first expected closing, with the remainder recognized at the time of the second closing approximately six months after the first closing. Please note that the precise timing of closings may differ from our current estimates. We also expect to incur incremental divestiture costs in 2022 as we separate Business Solutions.
Adjusted revenue growth and operating margin exclude contributions from Business Solutions. In addition, adjusted operating margin excludes associated divestiture and acquisition costs. The adjusted effective tax rate and EPS exclude the expected gain on sale and M&A costs but will include approximately $0.03 of EPS from Business Solutions partial year results.
We expect GAAP revenue to decline mid-single digits, primarily due to the Business Solutions divestiture and currency. Embedded in our GAAP revenue new year outlook, we have included approximately $130 million of revenue from Business Solutions for the full year. Adjusted constant currency revenue growth is expected to be flat to low single-digit increase excluding the impact of Argentina inflation and excluding the results of Business Solutions in both 2021 and 2022. Our GAAP and adjusted operating profit margin is expected to be between 21% and 22%. We anticipate the GAAP effective tax rate will be in the high teens range reflecting tax on the gain on the sale of Business Solutions. The adjusted effective tax rate is expected to be in the mid-teens range.
GAAP EPS for the year is expected to be in a range of $2.38 to $2.48, which includes the gain on the sale of Business Solutions. Adjusted EPS for 2022 is expected to be in the range of $1.90 to $2.00. During 2022, we anticipate adjusted revenue growth rates in the second half of the year to exceed growth rates in the first half of the year as our business with Walmart, new agent signings, and our digital partnership business continues to ramp.
We also expect 2022 adjusted operating profit margin and adjusted EPS to be higher in the second half of the year, similar to the progression we saw in 2021 due to seasonality and the timing of investments. For the first quarter, we expect recent macro trends to continue, resulting in revenue and the consumer business performing consistent with last year’s exit rate. For the first quarter GAAP revenue, our outlook includes $75 million related to Business Solutions.
Thank you for joining our call today, and, operator, we are now ready to take questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from Tien-Tsin Huang from J.P Morgan. Please ask your question.
Tien-Tsin Huang — J.P Morgan — Analyst
Hey. Thanks. Appreciate the update, Devin. Welcome to the call. I guess I’ll kick it off and ask you, Devin, I know, appreciate your initial insights here and look forward to learning more. I heard the concept of strong brand and consumer tech platform, so I’m curious if you’ve thought about benchmarking growth and margins and thoughts on balancing new customer growth versus ARPU expansion because I did hear a little bit about products, so I don’t know if you’ve thought about some of those big picture things. Love to hear your thoughts on those if you don’t mind.
Devin McGranahan — President and Chief Executive Officer
Tien-Tsin, thanks for the call or the question. It’s great to be on the call. We are clearly going through a end-to-end strategy review process. We are looking at our business across markets and across market opportunities. You highlighted an important idea, which is, what is the value of our customers and the power of our customer acquisition engine, which is quite strong, given the $1 billion revenue digital business that has been built over the last couple of years, and then how do we do think about ARPU and potentially expanding those relationships relative to this digital acquisition engine that we have built. That is all work that is underway, and as you heard in my comments, I believe given the relationship that we have with our customers, the trust that they place in our brand, we do have opportunities to expand that product set and ARPU on a going-forward basis. I look forward to coming back to you both on the next call and back in October — September-October time frame with more detail about how we might do that and what the implications will be longer-term for our growth.
Tien-Tsin Huang — J.P Morgan — Analyst
Terrific. Good. It’s always good to get a little bit of sneak — preview there. So maybe my follow-up for you, Raj. Just thinking about the year and the — and digital versus traditional retail, I heard the Walmart and some of the agent ramping that should help in the second half. Anything you can share on outlook between those two channels, traditional versus digital?
Raj Agrawal — Chief Financial Officer
Yeah, Tien-Tsin, it’s nice to speak with you. As I mentioned, we see the growth being better in the second half. In both channels, we should see a progression. First quarter is likely to be the lowest. For digital, specifically, as you may recall, one year ago in the first quarter of 2021, we grew in the mid 40% range, so we’re going to have a tougher comp in the first quarter of this year and that’s why you’re going to see lower digital growth. We expect digital to be in the double-digit range this year, but it’s going to be lower in the first quarter.
And then, retail, given the exit rates that we had last year, which is — which was negative, we expect that to be the case again in the early part of the year, but then ramping up as some of these other initiatives gain hold like Walmart, like the other agent signings, and other initiatives that we have going on. So that’s why we see more of a ramp-up during the course of the year.
Tien-Tsin Huang — J.P Morgan — Analyst
Good. Got it. Thank you, both.
Operator
Our next question comes to us from Darrin Peller from Wolfe Research. Please ask your question.
Darrin Peller — Wolfe Research, LLC — Analyst
Hey. Thanks, guys. Devin, nice to have you on the call and look forward to connecting more. Guys, when we look at the digital opportunity in terms of where you think it can get to as a percentage of your C2C mix, I think there is just a gray level of looking for understanding on what you think it could really reach and what kind of implications that could have on the model, both margins and growth potentially over time as retail levels off. Said another way, where do we expect to see the retail side leveling off where there’s just enough consumers that may not either be banked or may really rely on the cash ecosystem more. Maybe you could just start there with some thoughts.
Devin McGranahan — President and Chief Executive Officer
Darrin, it’s Devin. Thanks for the question. In the short time that I’ve been sitting in this seat, there is a powerful correlation I’m starting to see between our digital business and our retail business. As you know from previous commentary, a high percentage of our transactions that start digitally end up as a cash-out somewhere in the world. So I think as we look at this picture and we look at what we can do with the digital customer acquisition engine, the expansion of a set of products and services that can be delivered both digitally and, potentially, physically through our network as where we’re looking to take the company and I would start thinking about the combo of our digital and our retail business and what can that do to drive the overall company in a more integrated fashion potentially than we might have talked about it in the past. Raj?
Raj Agrawal — Chief Financial Officer
I think that’s right. With the digital banking initiatives that is now live in Europe, the digital banking platform and the multi-currency payments wallet, I think those are additional opportunities that are outside of the direct remittance space for us to add more to the digital opportunity overall for the company. And we’ve gone a long way, Darrin, just in the last two or three years where last year, our business was about 24% of our consumer revenues and that’s from mid-teens, probably a couple of years ago. So it’s gone quite far quite fast and our objective is to try to drive that even further over the next couple of years.
Darrin Peller — Wolfe Research, LLC — Analyst
All right. That’s helpful. Just one quick follow-up, guys. I mean as we kick off the year with valuations having certainly reset across the market and in the private side of the world, your proceeds coming in from the sale, can you give us more color on your thought process on capital allocation going forward from here whether it’s M&A, buybacks, or other?
Raj Agrawal — Chief Financial Officer
Yeah. I mean you saw from the announcement today, Darrin, that we announced the next quarterly dividend, which we’re very pleased with. That’s going to be a significant use of our cash this year, the dividends. We also announced a three-year buyback program for $1 billion, so we’re very excited about that. So you can see that we’re continuing the pattern of things that we’ve had historically.
With respect to the proceeds from the business sale, Business Solutions sale, we want to retain flexibility on how we’re going to use those. That’s reflected in our outlook this year with the impact from — on EPS. We really do you want to dose up the strategy evaluation process that Devin mentioned, that now we’re going through the next several months and take a fresh look at what opportunities might be there for us to deploy those proceeds in a more strategic manner. So that’s really our objective. Devin, I don’t know if you want to add to that?
Devin McGranahan — President and Chief Executive Officer
I would reiterate Raj’s comments that we have launched a robust strategic review process. We would like to retain the flexibility as we go through that process. I anticipate us having a pretty good view by mid-year on what that would look like and one of the great attributes of this business is its ability to generate strong cash flow. So this will, fortunately, be a problem that we continue to struggle with if that’s appropriate, but we will continue to be disciplined allocators of capital and we promise to do the same with the Western Union Business Solutions proceeds.
Operator
Thanks, guys. Our next question comes to us from Vasu Govil from KBW. Please ask your question.
Vasu Govil — Keefe, Bruyette & Woods, Inc. — Analyst
Can you hear me?
Raj Agrawal — Chief Financial Officer
Yes, we can hear you.
Vasu Govil — Keefe, Bruyette & Woods, Inc. — Analyst
All right. Thank you for taking my question, and again, nice to talk to you, Devin. I guess my first question for you, you just talked about leveraging the Western Union brand beyond cross border remittance and I know the digital banking strategy is obviously a part of it, but maybe you can elaborate a little bit more on what are some of the areas or use cases that we see as a natural extension for Western Union.
Devin McGranahan — President and Chief Executive Officer
Great question. As you know, the company was down the path before my arrival as evidenced by the launch of the bank in terms of expanding the financial ecosystem and the products and services we can bring to our client base. Obviously, in the near term, those would be more financially services related with the addition of a wallet capability and a deposit banking capability, we can collect and hold funds, we’ve started issuing debit cards in some places in the world, that will become a revenue stream for us as well.
We are looking at opportunities that fit well with our customer base, whether that be things like offering earned early waged access or the ability to provide people with alternative payment types and solutions, maybe now, even buy-now-pay-later types of solutions in certain parts of the world. That is the strategy work that is underway to understand given our core customer base, our capabilities, and platforms, which of those kinds of products and ideas resonate and we have confidence that we could deliver into the marketplace successfully. We will be back to you with more clarity and distinct ideas that we intend to pursue both in the latter half of this year but, more importantly, into 2023 and 2024.
Vasu Govil — Keefe, Bruyette & Woods, Inc. — Analyst
Great, and just as my follow-up. My question was around cryptocurrencies and stable coins. That is something that frequently comes up in our discussions with investors as a potential disruption to map to the money remittance industry, so maybe you can share your thoughts and if that is something plan to incorporate into your strategy going forward.
Devin McGranahan — President and Chief Executive Officer
Great question. One of our core strategy workstreams is indeed around cryptocurrency, but more importantly around blockchain technology. It offers both as you suggest, potentially a threat, although we could have a longer conversation about that but also an opportunity. So we are looking at and considering ways in which we can participate and what I’ll call the crypto economy, leveraging our very strong compliance and risk management capabilities, I have a belief that as the world evolves and crypto becomes more of an accepted form of transaction, the kinds of things that we are very good at, ensuring KYC, ensuring risk and compliance management across different regulatory regimes in the world can be very valuable to any offer we did develop, but more importantly potentially to the offer of others who could leverage our platform and capabilities. So it’s obviously a robust area that we will continue to explore, and again, we will be back with further ideas later in the year.
Vasu Govil — Keefe, Bruyette & Woods, Inc. — Analyst
Great. Thank you very much.
Operator
Our next question comes to us from Ashwin Shirvaikar from Citi. Please ask your question.
Ashwin Shirvaikar — Citigroup Inc. — Analyst
Can you hear me?
Raj Agrawal — Chief Financial Officer
Yes.
Ashwin Shirvaikar — Citigroup Inc. — Analyst
Great. Hey, Devin. Hi, Raj.
Devin McGranahan — President and Chief Executive Officer
Hi.
Ashwin Shirvaikar — Citigroup Inc. — Analyst
How are you guys? And, Devin, welcome to the call. My first question for you, Devin, you had a preliminary look at what you inherited and I completely appreciate it’s too early to provide any specifics, but do you have a view with regards to whether you’re going to primarily go towards what I would call incremental investments and adjustments or does this — is this a situation that it might require maybe a bigger slug of investment to kind of kick start a major transformation?
Devin McGranahan — President and Chief Executive Officer
Ashwin, thank you for the question. In the near term, we have a $4 billion cost base. I see real opportunities for us, both to prioritize within that cost base as well as to create efficiency and effectiveness on how and where we spend our money. So at least in the short term, there is the ability for us to invest in the initiatives that we have laid out and talked about on this call, and we’ll be coming back with broader perspectives if we have ideas that require us working outside of that box.
Ashwin Shirvaikar — Citigroup Inc. — Analyst
Got it. Got it. And digital bank update, it’s good to hear of the successful pilot. But maybe I can push that a little further and ask what are some of the learnings or parameters that led you to conclude that it was successful? Maybe provide some color with regards to next steps.
Devin McGranahan — President and Chief Executive Officer
Ashwin, it’s exceptionally early days having just concluded the pilot and launched commercially, but there’s a couple of important concepts that have encouraged us and we will continue to push on. The first is the platform is a wallet-based platform, which allows us to move to an account or a customer-specific view, it allows us to converse and manage those customer relationships differently than we can on our largely transaction-based platform, and it opens up our ability, per earlier comments in this call, to bring additional products and services to that customer via that digital platform. So the combination of moving to a customer-oriented technology architecture and giving ourselves the flexibility to bring new products and services encourages us that this is the direction will be moving.
Ashwin Shirvaikar — Citigroup Inc. — Analyst
Got it. Good to hear. Wish you all the best.
Operator
Our next question comes to us from Ken Suchoski from Autonomous. Please ask your question.
Ken Suchoski — Autonomous Research — Analyst
Hi. Good afternoon, everyone. Thanks for taking the questions, and I want to echo the welcome to Devin. So look forward to working with you going forward. Devin, we could start with you, a question for you. You mentioned strong cash flow margins came in better this quarter. I mean you obviously had an opportunity to look at the business, can you talk about your appetite to take on more risks around investment and trying new things out where maybe you’re willing to sacrifice some short-term profitability for faster growth would love to get your thoughts on that?
Devin McGranahan — President and Chief Executive Officer
Ken, it’s a great question. As we look at the business, I think we are initially focused on how can we drive the business particularly in ways that are relatively recognizable to us. So how do we increase our ability to acquire customers on our digital platform, which to your commentary, will likely require us to increase the marketing dollars that we are allocating. I feel comfortable though within the parameters that we have laid out in terms of our guidance. We can achieve that and start to accelerate things like our digital customer acquisition and things like the rollout of our digital wallet and our bank.
As we explore broader ideas that could have bigger implications on the go-forward growth rate, we will be back to you on what the implications of that might be from a go-forward margin book as well as from a go-forward capital requirement look.
Ken Suchoski — Autonomous Research — Analyst
Okay. Great. And maybe just for my follow-up question, just on the digital side. It looks like the transaction growth for the wu.com business and the digital business slowed during the quarter. Can you guys just talk about what’s driving that, and I’m curious what kind of visibility do you have into the growth of that business going forward? Thank you.
Raj Agrawal — Chief Financial Officer
Yeah. Ken, let me take that one. It’s primarily a result of just growing over tougher comparisons from the previous year. We had very strong growth as you know during the course of 2020 and into the early part of last year, and so that’s really one of the key drivers. As I mentioned in some of my other commentary, the first quarter of this year is going to see some of that impact as well. We had very high growth in the first quarter of 2021 in the mid 40% range from a revenue standpoint, but we’re still — we’re very confident about longer-term trajectory around digital and what it can become. But we’re going to have to sort of grow into it during the course of this year and the underlying characteristics of our digital business have not changed, so we’re comfortable with that and as I mentioned, we still expect to grow double-digits in the digital business this year.
Operator
Our next question comes to us from David Togut from Evercore. Please ask your question.
David Togut — Evercore — Analyst
Thank you, and congratulations, Devin. Look forward to meeting you in person sometime soon. You’ve highlighted an increased focus on repeat business. Have you started to think through initiatives to drive more repeat business, for example, rewards, anything to encourage sort of repeat customer buying?
Devin McGranahan — President and Chief Executive Officer
David, it’s — in the short 45 days that I’ve been here, a couple of things that we’ve started to talk about and to accelerate the rollout of, in addition to the rollout of our wallet-based technology that we are doing right now in Germany and Romania, we are putting forward a refresh of our core Western Union digital platform. We will be piloting and launching that as we speak with hopefully a go-live before the end of the first quarter. We expect that to help us increase both transaction throughput but also loyalty and return customers. We are revising our existing westernunion.com loyalty program and we are investing in that as a potential retentive device.
And then, as mentioned earlier, we are investing in our CRM technology and our ability to transact — to move from a transaction-based platform to a customer-oriented — orientation, which will again allow us to go back to customers who haven’t transacted in a while, to do customer-specific offers to entice people to come back to our platform. So there is a couple of avenues that we’re going down that I think can and will bear fruit over time.
David Togut — Evercore — Analyst
Thanks for that. Just as a follow-up. You’ve indicated that some of your customers still remain pretty hard hit financially by the pandemic and you called out hospitality industry. Have you started to review Western Union’s pricing from a competitive standpoint and whether or not some reduction in price, would lead to an attractive increase in volume?
Raj Agrawal — Chief Financial Officer
Yeah. Let me start with that one. I would say, David, that our — the pricing environment continues to be stable on a global macro basis as we look at it. As we’ve mentioned before, we have 20,000 corridors and/or country pairs and we’re always moving pricing up and down depending on the specific local situation and we’re in the different channels. But on a global macro basis, there seems to be a fair amount of stability, and obviously, we’re going to be proactive and do what we need to do to try to drive transaction. But as you know, on some of the most competitive quarters, we’re very price competitive and in others, we may not need to be that price competitive. So we really need to look at it on a quarter-by-quarter basis. And — but we don’t see a significant change in the overall pricing environment nor a significant need to do anything too dramatic.
David Togut — Evercore — Analyst
Thank you.
Raj Agrawal — Chief Financial Officer
Sure.
Operator
Our next question comes to us from Cassie Chan from Bank of America. Please ask your question.
Cassie Chan — Bank of America — Analyst
Hey. Can you hear me?
Raj Agrawal — Chief Financial Officer
Yes.
Cassie Chan — Bank of America — Analyst
Okay. Hey, this is Cassie on for Jason Kupferberg. Thanks for taking my questions. So I first wanted to ask on margins. I know you guys touched upon it on your like prepared remarks, but they were obviously very strong in 4Q. Book sales are going to be down year-over-year based on the 21% to 22% outlook you guys provided for next year. I guess, like what were the factors impacting it in this quarter and can you kind of help us bridge that with your outlook for next year? I know you guys — some of it does sound like Business Solutions is being taken out, but just help us — just like call out any other factors that we should be aware of. Thanks.
Raj Agrawal — Chief Financial Officer
Yeah. Cassie, nice to speak with you. It really is the factors that I mentioned. So in the fourth quarter, we had a very strong growth again in the B2B business and that business has a relatively higher fixed cost base. So every incremental dollar of revenue has a large contribution to the profit line. We also had a very positive impact from foreign exchange. It was in the range of 70 to 80 basis points, positive impact in the fourth quarter. And then just overall expense management. So that’s why you saw higher margins in the fourth quarter. Most of those things go away as we go into this year, particularly in the first quarter, but what I would just say is if you look at it ’21 to ’22 — 2021 to 2022, the business, the outlook we’ve given for this year of 21% to 22% margins is very similar to the outlook we gave last year if you put aside these one-off type of items and the impact from Business Solutions in FX. So it’s in that same range as what we had last year. So not a big change in terms of what the business can achieve.
Cassie Chan — Bank of America — Analyst
Got it. Got it. Okay. That’s helpful, and then just like, second question, I just wanted to ask if there were any like country-specific dynamic that we should be aware of in any of your key quarters? So I know you guys had talked about Cuba, you’re probably not really baking anything in there in your outlook, but just any other dynamics that you could share with us. Thanks.
Raj Agrawal — Chief Financial Officer
Yeah. You’re right. We have not built in anything for Cuba. We’re hopeful that can be turned on at some point, but there is no specific timing around that. And — but nothing else to really call out. I think we gave you some color around the different regions. So nothing specific to call out, Cassie.
Cassie Chan — Bank of America — Analyst
All right. Thanks, guys.
Raj Agrawal — Chief Financial Officer
Sure.
Operator
Our next question comes to us from Jamie Friedman from Susquehanna. Please ask your question.
Jamie Friedman — Susquehanna International Group, LLP — Analyst
Hi. Devin, pleasure to meet you. It’s great to get a fresh set of eyes on the business. My questions are a little bit more financial, I apologize but, Raj, should we anticipate any stranded costs, I’m not sure if you said that? I heard you say something about $25 million but anyway, that’s one thing related to disposition. And then, obviously, as my second one at the same time, which is, in your answer to the last question, Raj, you had also called out a couple of other things that impacted the margin like commission mix and agent losses, and I haven’t — I don’t remember you talking about those that much in the past. So just hoping you could elaborate a bit. Thank you.
Raj Agrawal — Chief Financial Officer
Yeah. Yeah. Let me start with the second one first. Jamie, the agent losses were lower in the fourth quarter compared to one year ago. We had some higher agent losses in the fourth quarter of 2020. So that was certainly from a year-over-year standpoint, that was a factor. Commissions have been trending down so variable costs were lower in 2021 compared to the previous year, so those are true.
And with respect to stranded costs, we will have some stranded costs. If you look at the segment results for the B2B business versus what I said, it implies stranded costs in the range of $10 million less. And so we are working to try to eliminate some of those costs, and we have some activities potentially in place that will take out some of those costs and it’s not a significant number, Jamie, but it is something that we want to try to address.
Operator
Our next question comes to us from Ramsey El-Assal from Barclays. Please ask your question.
Damian Wille — Barclays plc — Analyst
Good evening, gentlemen. This is Damian on for Ramsey. Appreciate the question. So I’m hoping you can give an update on the account to account, the cash account businesses. How does that fit into your broader digital strategy and if you see that being a more important piece of business over time?
Devin McGranahan — President and Chief Executive Officer
Hi. It’s Devin here. Let me just comment and then I’ll turn it over to Raj. Clearly, in a growing digital ecosystem and an aspiration to be a broader payments provider and payments facilitator for our customers and on behalf of our partners, the account to account plays an important role. The company has invested significantly in our account payout network. I believe we are somewhere around 4 billion endpoints, Raj can verify that, which gives us a strategic platform and capability that I see us being able to leverage for growth. As I mentioned in my earlier comments, we should not diminish though, particularly, for certain corridors and certain parts of the world the ability in a send country to originate a digital transaction that then gets delivered as a cash-out in fiat currency some place in the world and that is actually one of the benefits and strength of our ecosystem is to be enable to — continue to enable those kinds of transactions as different parts of the world move at different paces towards payment digitization. Raj?
Raj Agrawal — Chief Financial Officer
Yeah. The business that’s purely account to account as we had mentioned last quarter, it is running at around $200 million annually. That includes any digitally initiated transactions that are paid out to an account and is one of the fastest-growing parts of our consumer business. So we’re very excited about that, but there is a lot more than we can do there to keep driving activity in that space.
Damian Wille — Barclays plc — Analyst
Very helpful, guys. Appreciate it. I’ll ask one follow-up here and I’ll pick up on — I want to cast these questions here about geographies. I just wanted to dig in on potential implications and it’s early days but implications of the current political — geopolitical risk and Eastern Europe. Is this something that we should be mindful of that might have a material impact on your business?
Raj Agrawal — Chief Financial Officer
Look, we’re very focused on that. We are certainly aware of the issues there in Russia and what that might mean. It’s mostly not under our control. We certainly have a great business that’s going to — it’s both an inbound and an outbound business in Russia. As you heard, we’ve renewed our relationship with Sber and we’re very happy with that relationship. So we are certainly monitoring the situation. I can tell you that it’s not our top 10 markets, but it’s very important to us. And just to give you a sense, there is no single market that’s more than 7% of our revenues outside the U.S. and Russia is on the smaller side of that scale. But it’s very important to us obviously and we’re certainly monitoring. We’re hopeful that we can get through this situation without any significant impact. But we’re monitoring the situation.
Damian Wille — Barclays plc — Analyst
Great. Thanks so much, gentlemen.
Operator
Our next question comes to us from Andrew Jeffrey from Truist. Please ask your question.
Joel Fishbein — Truist Securities — Analyst
Great. Sorry, can you hear me okay?
Raj Agrawal — Chief Financial Officer
Yes, we can.
Joel Fishbein — Truist Securities — Analyst
All right. Yeah. Hi. This is Joel on for Andrew Jeffrey. I just had one question. I was wondering if you could just provide a little bit of additional color related to LTV/CAC or new digital customers kind of just in terms of how we should think about quantifying that and any expectations you’re going to have for customer acquisition going forward? I know you mentioned some acceleration and marketing spend towards back half 2022, but that would just be helpful.
Devin McGranahan — President and Chief Executive Officer
Yeah. Thanks for the question. One of the things that I was pleasantly surprised on is the strength of our digital acquisition engine and to date, our ability to cost-effectively acquire clients. It is one of the reasons that I believe there is room for us to continue to expand our marketing acquisition efforts and to be able to do so in a value-creating manner. So I’m excited about the prospect. I think it’s something that we are going to be looking towards as an area to help drive our digital growth. Raj, I don’t…
Raj Agrawal — Chief Financial Officer
Yeah. I think you covered it, Devin, that it’s an opportunity for us and that’s the key area of opportunity to keep investing in.
Joel Fishbein — Truist Securities — Analyst
Thanks a lot.
Raj Agrawal — Chief Financial Officer
Operator, do we have any other questions?
Operator
There are no additional questions at this time.
Raj Agrawal — Chief Financial Officer
Great. Well, thank you, everyone, for joining.
Operator
[Operator Closing Remarks]