Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2010 Western Union Earnings Conference Call. My name is Melanie, and I'll be your coordinator today. [Operator Instructions] I would now like to turn the call over to Mr. Mike Salop, Senior Vice President of Investor Relations. Please proceed.

Thank you, and good afternoon, everyone. On today's call, we'll have comments from Hikmet Ersek, our President and Chief Executive Officer; and Scott Scheirman, Executive Vice President and Chief Financial Officer. 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 a supplemental table with our press release. As a reminder, 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 2009 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've reconciled those items to the most comparable GAAP measures on our website, westernunion.com, under the Investor Relations section. All statements made by Western Union officers on this call are the property of the Western Union Company and subject to copyright protection. Other than the replay, Western Union has not authorized and disclaims responsibility for any recording, replay or distribution of any transcription of this call. I'd now like to turn the call over to Hikmet Ersek.

Thank you, Mike, and welcome to everyone on the call. We are pleased to share with you today our fourth quarter results and our outlook for 2011. As we enter the new year, our focus remains on our key strategic priorities of growing retail channels, expanding electronic channels, developing our product portfolio and improving process and productivity. We had a strong finish to 2010, not only with our business trends and financial results, but also with advances on our key strategic priorities. For the year, we delivered earnings per share of $1.42, excluding restructuring expenses, and generated $1 billion of cash flow from operations. We also grew our retail net agent network to 445,000 locations and believe we continue to gain cross-border market share. In the fourth quarter, revenue increased 3%, with constant currency revenue growing 5%. Constant currency revenue growth in our Consumer-to-Consumer business improved for the fifth quarter in a row accelerating to a 5% increase. The progress was widespread as revenue growth rates improved in all of our regions compared to the prior quarter. Asia Pacific led the way with 14% revenue growth, but our biggest change came from the Americas. This region delivered 7% revenue growth for the quarter and 2% for the year, following three straight years of declines. Contributing to the growth in the Americas was the turnaround in the U.S. domestic businesses. As we expected, the repositioning, which roll high transaction increases throughout 2010 led the revenue growth in the fourth quarter. In the quarter, domestic money transfer revenue increased a strong 7%. Our strategy has been very successful, and we believe we have created new demand and attracted new consumers to our brands. In Global Business Payments, the bill payment revenue declined moderated slightly compared to the third quarter. We continue to…

Thank you, Hikmet. As I review 2010 revenue results, I will primarily focus on the fourth quarter. The similar information for the full year can be found in our press release and the attached financial schedules. Overall, for the quarter, we reported consolidated revenue growth of 3% or 5% on a constant currency basis. Total Western Union transaction fee revenue represented 78% of total company revenue for the quarter and increased 2% from the prior year. Foreign exchange revenue represented 20% of total company revenue and increased 7% from the prior year. Our Consumer-to-Consumer segment revenue growth rate accelerated from prior quarters, posting an increase of 3% or 5% on a constant currency basis. Each region contributed to improved trends although currency translation continued to negatively affect Europe. Transaction growth in our C2C segment for the quarter was 9%. Trends in the international C2C business improved from the third quarter as revenue grew 3% or 5% on constant currency basis on transaction growth of 8%. The company's C2C cross-border principal increased 6% in the quarter or 7% on a constant currency basis. C2C principal per transaction decreased 3% year-over-year or declined 1% on a constant currency basis. Turning to our regions. Our C2C business in the Europe, Middle East, Africa and South Asia region grew transactions of 6%, up from the 5% growth in the third quarter. Revenue declined 1% and was again negatively impacted by currency translation. On a constant currency basis, EMEASA revenue increased in the quarter. Large markets such as the U.K., Germany and Russia continue to deliver solid constant currency revenue growth, but the real change came from some improvements in areas that were challenged the last few quarters such as the Gulf States. After a couple of quarters of declines, the Gulf States returned to…

Thanks, Scott. Once again, in order to maximize the number of people we can get on the call and still finish within an hour, we would ask you to limit yourself to one question per person. Melanie, we're ready for the first question.

Our first question comes from Adam Frisch with Morgan Stanley.

I wanted to focus on C2C for a second and the operating margin that you guys are targeting for C2C in 2011 and also provide some detail on the contributions from revenue growth and what went into those assumptions? I know it's about 84% or so of total revs, so your guidance there was kind of in-line with consensus. I just want to see what your assumptions were there to gauge how conservative that may prove and then the expense reduction as well?

Sure, Adam, good afternoon. This is Scott. We're pleased with the C2C business. As you mentioned, it's about 85% of our revenue, and in 2011, we expect our margins to expand consolidated from -- roughly by a little bit less than 100 basis points, excluding the restructuring charges. A fair amount of that will come from the C2C business. We expect the revenue to grow quicker in 2011 than 2010 in the C2C business, and we see strength in various pockets around the globe, some challenges in some other areas, but overall, we expect both the margin for the company and the margin for C2C to expand in 2011.

Our next question comes from the line of Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang - JP Morgan Chase & Co: I'm glad to see the margin expansion. I'll ask about revenue. I was curious about the Gulf States or the Middle East, given all the turmoil there in Egypt. Can you share with us your revenue exposure to Egypt and what your 2011 outlook assumes and if it contemplates a pretty bad case in the region if that plays out?

It's Hikmet. As everybody, we are also worried with what happens in Middle East, but if you look at our portfolio in 200 countries and none of the countries are outside the U.S., we are bigger than 6% of our revenue, no country is bigger than that. And particularly in Egypt, it's less than 1% of our revenue. So being in 200 countries and territories gives us the opportunity to have the right balance against the risks and opportunities. We are of course watching it, the Middle East, very carefully currently and about our transaction, we are pleased with our transaction growth in Q4 within the Gulf States. We see slight improvements there, and that has also impacted the South Asia corridors. So currently we are watching Egypt, as I said, and as I said, it's less than 1% of our revenues. So that's the case currently.

Our next question comes from the line of Bryan Keane with Credit Suisse. Bryan Keane - Crédit Suisse AG: I guess my question is on constant currency revenue growth. For the quarter, I think it was 5%, but you guys are guiding to 3% to 4% for the year. Is that just you guys being conservative? And if I can sneak in a second one, just on Bill Payment margins. Obviously, that still seems to be impacted. What's the outlook there to rightsizing that business to fix the Bill Payment margins?

Bryan, it's Hikmet. Maybe I'll start and Scott take it probably. If you look at our business in 2010, Bryan, we had a good quarter in 2010 fourth quarter. But overall, constant currency x Custom House, we had a 1% revenue growth. And coming to 3% to 4% overall 2011 revenue growth, I believe it's a good revenue growth, and we are quite confident that we have forecasted a good revenue growth here. And the transactions are coming, so we are cautiously optimistic on the economic environment, but I believe that 3% to 4% for 2011 is a good revenue growth. Do you want to add something Scott?

No, I'd just comment, to the second part of your question on the Global Business Payment segments, things that will be helpful to improve those margins as we move in into 2011 is that the Business Solutions, which was formerly Custom House business, we expect that revenue to grow in midteens. We'll see nice top line growth there and that business will no longer be dilutive, so that will be helpful to the margin profile. In addition, the U.S. Bill Payment business we expect the revenue declines to moderate, and then we've got a number of process improvement or productivity initiatives. So our objective with the Global Business Payments is to really if you will stay below those margins and really look towards slightly improving those margins compared to the fourth quarter levels as we move forward, but we're very focused -- Hikmet and I and the team are very focused on that business and making improvements to that segment, in particular the U.S. Bill Payment business.

Our next question comes from the line of James Kissane with BAML.[BofA Merrill Lynch]

Scott, can you review the change in the pricing definition? Maybe give us a little more color on pricing across the different corridors? And should we assume pricing is flat in the United States in 2011?

Sure, Jim. Pricing, as we think about forward-looking, we're somewhere in that range of 2% to 3%. If I compare that back to 2010, clearly, one of the bigger pricing actions we did was with domestic Money Transfer, really, if you will, throw that pricing impact to 4%, but we're really pleased with that because we've got 7% revenue growth in the fourth quarter, and that's a business that's got 30% plus margins. As we thought about how to best articulate and communicate pricing with our investors, we think one of the key things is a better measurement as we look forward is to really take any change in revenue per transaction because of pricing and really compare that to the prior year volumes compared to the current year volumes just to better offset or better balance what the pricing impact is in the mix. But as we look forward in 2011, we do think the pricing will be in the range of 2% to 3%, a little bit less than we saw in 2010. And then in the U.S., we think we are well positioned there, never say never but don't contemplate any pricing changes there of any significance, and then we do manage 16,000 corridors, so we'll look corridor by corridor, and as it makes sense, we may make some pricing adjustments all in the effort to drive long-term revenue growth and market share.

Our next question comes from the line of Darrin Peller with Barclays Capital.

A quick question on some of the emerging payments trends. On prepaid debit cards first, you reached 890,000 by year end, and I think you talked about 1% of revenue being from Prepaid, so what kind of growth in cards is that in '11? What is the expected margin on that? And then also, around the mobile money transfer side, your discussions have been more around a lot of the international operations and some successes there. Have you been in any discussions around the U.S. mobile money launching platforms that we've heard discussed?

Darrin, it's Hikmet. Let me start with the Prepaid side and then a little bit on the mobile. On the Prepaid side, it's in early stages. We are pretty pleased with our expansion on that 890,000 cards-in-force. We have 9,600 active locations. We start selling the direct marketing on that also to issue new cards. We recently signed an income agreement with an income, which gives us the capability to expands the number of locations to sell the cards. It will take some time to expand. We are looking also on the expansion out of the U.S. I believe that's a huge opportunity also given our brand, global brand, global network, agent relationship. We believe that we have also learnings from the U.S. can expand and launch in new countries. But it will take some times on that part. We believe that with the top-up, we assume that the additional incremental 1% of the revenue will come from the Prepaid. And on the mobile side, it's really also long-term opportunity as the emerging part of our business, but we have about 80,000 locations activated globally to send money from 48 countries, and we have agreement with 14 mobile operators. I think we are in a very good position here also. The big advantage we have despite the others is that that we have one brand one global network, which connects the dots, and we have the cash availability to pay in 450,000 locations and pay out in 450,000 locations. So I think we are very well positioned to get that. We also look, of course, also the possibility to expand our mobile opportunities on the U.S.

Our next question comes from the line of David Togut with Evercore Partners.

Hikmet and Scott. Based on your cash flow forecast and 2% to 3% of revenue being CapEx and dividend is somewhere about $188 million. It looks like you'll have free cash flow somewhere between $862 million and $1.01 billion. So what do you intend to do with all that cash?

David, a couple of things. First is to invest in the business. As you summarized, CapEx will be $100 million, $150 million. Our second priority is to really invest in the business through mergers and acquisitions. We announced the Angelo Costa deal about a month ago that will be a good use of our international cash. All the time we're looking at other things out there so we want to look to acquire companies but that kind of go well with our strategy and have the right cash-on-cash economic return. And then from there, really returning cash to our shareholders. As we announced today, another $1 billion of stock buybacks. We've got about $1.4 billion through the end of 2012. Back in December, we moved to a more balanced payout on our dividend. Our Board increased that by 17%, and so as we look forward, we'll prioritize our cash that way. Probably one important thing to remind everyone too is that about half of our cash flows are U.S. About half of our cash flows are international, so we'll prioritize those as we need to move forward. But we're in the fortunate position of generating $1.2 billion to $1.3 billion of cash. Then they really allow us to drive and execute our strategies and return the capital to shareholders.

Maybe I'll just add on that, David, is also our M&A strategy or using the cash for M&A is aligned with our strategy. I mean as you heard recently from the Costa acquisition, it's supporting our core business but we are also looking on the merging side, merging new opportunities on the M&A side. So I think we have the fortunate position to have the cash to be active on the market also, but it has to be aligned, as Scott said, with our business and it has to be closer to our business.

Our next question comes from the line of Julio Quinteros with Goldman Sachs.

I just wanted to circle back on the target margins for the Global Business Payments. So when you talked a lot about the initiatives and the things that you're doing to try and sort out the improvements in the Global Business segments, but when it's all said and done, from the 13% level or so that we're looking at coming out of this quarter, where do you guys actually expect that margin to sort of shake out? What levels do you think it can actually get back to as we go forward from here?

Yes, this is Scott. For sure, we expect it to be a much better than the 13% that we reported in the fourth quarter. Custom House not being dilutive will be helpful as we implement our productivity initiatives that those will be helpful. So I would say we're very focused on that business getting the revenue to go north, improving those margins but I'd say just going back to the overall consolidated business of portfolio of products and services and channels that we want to improve the margins by a little bit less than 100 basis points in 2011. So it'll be a combination of all those things both the U.S. Bill Payment and the C2C business to drive that margin expansion but at the same time making sure we got the right investments in the business.

Our next question comes from the line of Kartik Mehta with Northcoast Research.

Hikmet and Scott, in the past you've talked about PSD having a positive impact on revenue growth, and I'm wondering if you could discuss maybe what impact do you anticipate it having on 2011, and if it hasn't yet, when you might expect that impact to continue? And just to follow on to Europe is, maybe where in Europe you might be seeing pricing pressure as transactions grew faster than obviously revenue?

Well, first of all, let me start with the PSD part. I think we are pleased with the team and I'm pleased with the development of the PSD sector. We have about activated 2,000 locations in Europe with the PSD. A good thing also is that half of that is about independent locations, like ethnic locations we in the past had a limited access in Europe with that. So that gives us the opportunity. If you target the flat 1% incremental revenue coming into 2011 by PSD initiatives to incremental to total revenue generated by the PSD. So we are pretty well underway on the PSD and we have a kind of list to activate -- we signed some agreement to activate the location. It takes some time to activate the locations. As you can recall, there are some big retailers. There are some big service chains to activate them, to connect them and activate the point of sale. It can take some time. On the second question was...

Kartik, on your second question, the transaction revenue spread within Europe and so forth, one thing I'd point out is that the Euro currency continues to negatively impact revenue out of Europe. So if you exclude the impact of currency, the revenue growth in Europe in that division was actually positive in the fourth quarter.

Our next question comes from the line of Ashwin Shirvaikar with Citigroup.

So my question is on margin improvement for 2011. Is it possible to break out sort of the impact of scale versus restructuring versus other things that you're doing on the margin? And then second question is how much of the buyback is assumed in guidance? Should we sort of do it creatively and say $700 million per year?

Yes, I think we are very focused on margin expense. As I mentioned at about a few months ago at our Investors Relationship Meeting we had in New York, our priorities are process and productivity. What we put is kind of a strategic process and productivity priority here. We have a methods to go after the margin expansion and optimizing our processes and very focus on productivity. Besides that, I believe also we have the right tools on the market. We have the right agent agreement, which helps our margin expansion.

What I would add to the margin expansion, just to bring out the specifics, Ashwin, but it is driven from a combination of several things, which is good, which means it's diverse, but revenue growth will be helpful. We'll continue to optimize our commissions, as Hikmet mentioned, improvements in process and productivity and somewhat offsetting that are some investments in the business that are important for the long-term growth and health of the business. On the stock buyback, yes, our outlook does assume some level of stock buyback. I don't necessarily have a specific target I want to share, and the reason is it's important to have flexibility. As the year goes by, we'll prioritize our cash flows accordingly to have the best return to our investors of how we invest or utilize those cash flows. But I will say that we plan to be active. We were active in 2010. We bought back nearly $600 million of stock, and we have a $1.4 billion authorization for the roughly for the next two years.

Our next question comes from the line of Craig Maurer with CLSA. Craig Maurer - Credit Agricole Securities (USA) Inc.: If we go back, and I know it seems like forever ago but before the recession, you guys had discussed global price stabilization, and I was wondering if you think there's a chance we might see that again over the next few years or we are in a terminal price decline of 2% to 3% per year basically for the foreseeable future?

Craig, this is Hikmet. If we look at your business with the global expansion, we are reaching our 16,000 corridors. We are in 200 countries, and we are really managing our pricing based on the voice of the customers. We have 16,000 corridors. We have 200 countries. Within the corridors, we have different brands, which we manage the pricing. So I think the 2% to 3% of pricing decline wasn't traditional where we forecast for 2011, and the biggest price investment we had was last year in the U.S. with our DMT turnaround. And as you know that it has been a very successful action year and promotion that we gained, not only turned around the business, but we also gained new customers with our $5 for $50 attracting new band. So I think we see the pricing investments more from promotional marketing idea and to getting new customers, winning on the corridors. And if you look at our strategy, obviously, the customers are reacting pretty well. We are gaining market share. We believe that we gained again market share in 2010 and we expand our business. So on the pricing, I would say that's our strategy and it works pretty well.

Our next question comes from the line of James Friedman with Susquehanna.

I wanted to ask about -- as we try and project your margins in 2011 and potentially beyond, I wanted to ask what was new in your commentary regarding the savings? And you said $8 million in 2010, $50 million in 2011. I don't recall what you had said previously if anything about 2012. Is that $70 million a new number as we try and project your margins going forward?

Yes, James. That is a new number. Our prior communication was we expected roughly about $50 million in 2012. In the last month or so, we've identified some additional opportunities to streamline the organization, further leverage our global operating centers, and because of that, we now expect about $70 million of savings in 2012 up from the $50 million that we talked about, about 90 days ago.

[Operator Instructions] Our next question comes from the line of Chris Mammone with Deutsche Bank.

So it looks like normalizing for the tax issue in 2010 that your capital guidance is flat for 2011. So I was just wondering if you could provide sort of bridge that out for us and just provide some of like the puts and takes to get from '10 to '11? And then as a follow-up, just back to the Egypt issue. I think the Gulf States in general was enough, was big enough for you to call it out as a detriment to 2010 guidance. I'm just wondering as we look at that region in general, if unrest in Egypt sort of spreads region-wide? Would that be enough to cause the 2011 revenue outlook to be at risk?

Look, let me first start on the cash flow. For 2011, we're estimating $1.2 billion to $1.3 billion, and again, that's a range. As we look forward, we think that the top line revenue growth of 3% to 4% will be helpful with that. There may be some changes in working capital. So overall, we feel good about $1.2 billion to $1.3 billion, and we'll see where that goes as the year progresses, but we think that's very solid, very steady very consistent from that standpoint. On the Gulf States and potential challenges there, it's hard to predict the future for sure. As Hikmet mentioned, Egypt is less than 1% of our revenue. The Gulf States in general, we saw improvement in the fourth quarter versus the first three quarters of the year, but I'll also say as part of our 2011 outlook we've got very moderate expectations for the Gulf States. We'll have to see how all that plays out, but the beauty of our business model is being in 200 countries. There is no one country outside the U.S. that's more than 6% of our revenue, so diversification is very helpful being in 200 countries.

Our next question comes from the line of Tim Willi with Wells Fargo.

I was wondering if you could just talk a bit about the M&A environment. You made a comment that seems to indicate it's a little bit more of a priority than maybe I would've thought versus prior quarter's commentary. Is it most likely still to be in money transfer-related entities? Or do you see more and more opportunities to do things around mobile or prepaid, some international platforms that may be for sale, those kinds of sort of electronic channel opportunities or what are they again, just to be back to sort of the traditional super agent or money transfer base properties?

This is Hikmet. If you look at our M&A side, which is aligned with our general strategy, right, I mean if you look at offline, that our Investors Day and several times in the past, I think if we look with our cash flow what we have, we looked at on the market exactly the things what we are focused on. Is it just a core business? Is it in the electronic channels? Is it in the Prepaid structure? The beauty of our business is generating a lot of cash, and with that, we also have the opportunity to be an active in the M&A targets. So I think we will continue to look at our adapting our -- this time, we are continuing to look at the market.

Our next question comes from the line of David Parker with Lazard Capital Management.

I was hoping if you could talk about maybe the regulatory environment. Is there anything that you're paying close attention to both domestically and internationally? And then also just specifically that you address the formation of the Consumer Financial Protection Bureau in the U.S. and do you anticipate any new regulation in your core Remittance business or in your Prepaid business from that entity?

David, it's Hikmet. As you know, that's operating in a very related environment, obviously, we are watching in every country, 200 countries and territories where we are active, we are watching the regulatory environment very close. So if you have experienced here how we operate, and I think we are very well positioned to respond to the regulatory needs. One of the things which are coming constantly the questions in especially the U.S. is a consumer side how transparent we are, and we believe that the way of how we operate is very transparent. You know that we have this fixed money transfer that we inform the sender immediately how much he has to pay, what's the transfer and the fees and on the effect. And so if the sender can quote also the receiver talking about the fees and the FX rates. So from that side, I believe we are well positioned to respond to the questions and to the needs of the regulatory environment.

So it's just about the bottom of the hour, so we're going to close the call. I want to thank everybody for joining us today. There's a reply of the call available. The call-in information is on our press release, on our website as well. So again, thanks for joining us and have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.