Western Union Reports Second Quarter Results

Western Union Reports Second Quarter Results

Revenue $1.4 Billion, Earnings per Share $0.36
Consumer Money Transfer Transaction Trends Accelerate
2013 Full Year Financial Outlook Affirmed


ENGLEWOOD, Colo.--(BUSINESS WIRE)-- The Western Union Company (NYS: WU) today reported financial results for the 2013 second quarter. The Company also affirmed its full year financial outlook provided on April 30, 2013.

"The strategy we laid out at the beginning of the year is working," said President and Chief Executive Officer Hikmet Ersek. "We have confidence in the strength of our business model, and I am pleased with the second quarter results. Business trends improved, and we continued to make good progress toward our 2013 strategies to strengthen consumer money transfer, increase customers and usage in business-to-business, and generate and deploy strong cash flow for our shareholders."

Ersek added, "Consumer money transfer transaction growth rates accelerated, with the Western Union brand increasing 7%, driven by strategic pricing investments and strong performance in electronic channels. Business Solutions delivered another quarter of steady growth, and year-to-date we have returned over $450 million to shareholders through dividends and share repurchases. We affirmed our financial outlook for the full year, and believe we are on target to return to revenue and profit growth in 2014."

As expected, second quarter revenues declined 3% compared to the prior year, or 2% on a constant currency basis, primarily due to pricing investments in the Consumer-to-Consumer (C2C) segment. C2C revenues declined 4%, or 3% constant currency, including a negative 1% impact from the Vigo and Orlandi Valuta brands.

C2C pricing investments in key corridors are meeting the Company's transaction objectives and contributing to the second quarter acceleration in transaction growth compared to the first quarter. Western Union branded C2C transactions increased 7% in the second quarter, compared to a 2% increase in the first quarter. Total C2C transactions increased 3% in the second quarter, compared to a 2% decline in the first quarter. Total transaction growth continued to be negatively impacted by compliance related changes, including actions implemented in the third quarter of 2012 which affected the Vigo and Orlandi Valuta brands.

Consumer-to-Business (C2B) revenues increased 2%, or 7% constant currency, and Western Union Business Solutions revenues increased 6%, or 8% constant currency.

GAAP operating margin was 20.0%, which compares to 24.3% in the second quarter of 2012. Earnings per share of $0.36 compares to $0.44 in the prior year period. As previously disclosed, the Company expects 2013 to be a transitional year as it implements key strategic actions, with a return to profit and revenue growth expected in 2014.

Progress on 2013 Key Strategies

Strengthen consumer money transfer
The pricing investments intended to regain customer momentum are driving increased transaction volumes and usage. C2C transactions increased 17% in the second quarter in the corridors in which pricing investments had been implemented prior to the beginning of the quarter. Excluding digital, C2C transactions in these priced corridors increased 11%. By the end of the quarter substantially all of the planned pricing investments for the year had been implemented.

Pricing investments in Mexico are delivering strong results. Western Union branded transactions in Mexico increased 22% in the second quarter, which compares to 9% growth in the first quarter.

Electronic channels continued to expand, with revenue growth of 26% in the quarter. Westernunion.com online money transfer transactions increased 68%, and transactions from account based money transfer through banks increased 51%.

The Company continues to add new channel options for consumers, including direct-to-bank transfer services to India, which were initiated in July. These services are available from the U.S. and the U.K. through both westernunion.com and participating agent locations. Western Union money transfer services are also now available at approximately 115,000 ATMs around the world.

Increase customers and usage in business-to-business
Western Union Business Solutions delivered a second consecutive quarter of solid growth, as revenue increased 8% constant currency compared to the prior year quarter. Strategic progress in the quarter included the launch of an international payments service for small and medium sized businesses that utilize the online MasterCard Business Network, expansion of payments services in India and Japan, and the initiation of business-to-business offerings in a 32nd country, Colombia.

Generate and deploy strong cash flow for shareholders
Year-to-date cash flow from operating activities totaled $478 million. The Company returned $194 million to shareholders in the quarter, consisting of $125 million of share repurchases and $69 million of dividends, and has returned $454 million year-to-date through June. In July, the Western Union board of directors declared a quarterly cash dividend of $0.125 per common share, payable September 30, 2013 to stockholders of record at the close of business on September 16, 2013. Full year share repurchases and dividends are expected to total approximately $700 million, which represents approximately 7% of current market capitalization.

2013 Full Year Outlook

The Company affirms its full year outlook for 2013 provided on April 30, 2013:

Revenue and C2C Transactions

  • Low single digit constant currency revenue declines
  • Consumer money transfer pricing investments of approximately $300 million, or 5% of total Company revenue, are reflected in the outlook
  • Mid to high single digit Western Union brand C2C transaction increases
  • Overall C2C transaction growth approximately 2 percentage points lower than the Western Union brand due to declines from Vigo and Orlandi Valuta resulting from compliance related actions

Operating Margins

  • GAAP operating margin of approximately 20%
  • EBITDA margin of approximately 24.5%

Tax Rate

  • Effective tax rate of approximately 15%

Earnings per Share

  • GAAP EPS in a range of $1.33 to $1.43

Cash Flow

  • Cash flow from operating activities of approximately $900 million, or approximately $1 billion excluding anticipated final tax payments relating to the agreement announced with the U.S. Internal Revenue Service in December 2011. Approximately $100 million of tax payments related to the agreement are included in the 2013 cash flow outlook, although it is possible some of the payments may not occur until 2014.

Additional Statistics

Additional key statistics for the quarter and historical trends can be found in the supplemental tables included with this press release.

Non-GAAP Measures

Western Union presents a number of non-GAAP financial measures because management believes that these metrics provide meaningful supplemental information in addition to the GAAP metrics and provide comparability and consistency to prior periods. These non-GAAP financial measures include revenue change constant currency adjusted; Consumer-to-Consumer segment revenue change constant currency adjusted; Consumer-to-Business segment revenue change constant currency adjusted; Business Solutions segment revenue change constant currency adjusted; 2013 EBITDA margin outlook; 2013 operating cash flow outlook IRS Agreement adjusted; and additional measures found in the supplemental schedule included with this press release.

Reconciliations of non-GAAP to comparable GAAP measures are available in the accompanying schedules and in the "Investor Relations" section of the Company's website at http://ir.westernunion.com.

EBITDA

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) results from taking operating income and adjusting for depreciation and amortization expenses. EBITDA results provide an additional performance measurement calculation which helps neutralize the operating income effect of assets acquired in prior periods.

Currency

Constant currency results assume foreign revenues and expenses are translated from foreign currencies to the U.S. dollar, net of the effect of foreign currency hedges, at rates consistent with those in the prior year. Constant currency results also assume any benefit or loss caused by foreign exchange fluctuations between foreign currencies and the U.S. dollar, net of the effect of foreign currency hedges, would have been consistent with the prior year. Additionally, the measurement assumes the impact of fluctuations in foreign currency derivatives not designated as hedges and the portion of fair value that is excluded from the measure of effectiveness for those contracts designated as hedges is consistent with the prior year.

Investor and Analyst Conference Call and Slide Presentation

The Company will host a conference call and webcast, including slides, at 8:30 a.m. Eastern Time today. To listen to the conference call via telephone, dial 1 (888) 317-6003 (U.S.) or +1 (412) 317-6061 (outside the U.S.) ten minutes prior to the start of the call. The pass code is 5643880.

The conference call and accompanying slides will be available via webcast at http://ir.westernunion.com. Registration for the event is required, so please register at least five minutes prior to the scheduled start time.

A replay of the call will be available approximately one hour after the call ends through August 13, 2013, at 1 (877) 344-7529 (U.S.) or +1 (412) 317-0088 (outside the U.S.). The pass code is 5643880. A webcast replay will be available at http://ir.westernunion.com.

Please note: All statements made by Western Union officers on this call are the property of Western Union 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.

Safe Harbor Compliance Statement for Forward-Looking Statements

This press release contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as "expects," "intends," "anticipates," "believes," "estimates," "guides," "provides guidance," "provides outlook" and other similar expressions or future or conditional verbs such as "will," "should," "would" and "could" are intended to identify such forward-looking statements. Readers of this press release by The Western Union Company (the "Company," "Western Union," "we," "our" or "us") should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed in the "Risk Factors" section and throughout the Annual Report on Form 10-K for the year ended December 31, 2012. The statements are only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement.

Possible events or factors that could cause results or performance to differ materially from those expressed in our forward-looking statements include the following: (i) events related to our business and industry, such as: deterioration in consumers' and clients' confidence in our business, or in money transfer and payment service providers generally; changes in general economic conditions and economic conditions in the regions and industries in which we operate, including global economic and trade downturns and financial market disruptions; political conditions and related actions in the United States and abroad which may adversely affect our business and economic conditions as a whole; failure to compete effectively in the money transfer and payment service industry with respect to global and niche or corridor money transfer providers, banks and other money transfer and payment service providers, including telecommunications providers, card associations, card-based payment providers and electronic and Internet providers; the pricing of our services and any pricing reductions, and their impact on our consumers and our financial results; our ability to adapt technology in response to changing industry and consumer needs or trends; our failure to develop and introduce new services and enhancements, and gain market acceptance of such services; changes in, and failure to manage effectively, exposure to foreign exchange rates, including the impact of the regulation of foreign exchange spreads on money transfers and payment transactions; interruptions of United States government relations with countries in which we have or are implementing significant business relationships with agents or clients; changes in immigration laws, interruptions in immigration patterns and other factors related to migrants; mergers, acquisitions and integration of acquired businesses and technologies into our Company, including Travelex Global Business Payments, and the realization of anticipated financial benefits from these acquisitions, and events requiring us to write down our goodwill; decisions to change our business mix; failure to manage credit and fraud risks presented by our agents, clients and consumers or non-performance by our banks, lenders, other financial services providers or insurers; adverse movements and volatility in capital markets and other events which affect our liquidity, the liquidity of our agents or clients, or the value of, or our ability to recover our investments or amounts payable to us; any material breach of security or safeguards of or interruptions in any of our systems; our ability to attract and retain qualified key employees and to manage our workforce successfully; our ability to maintain our agent network and business relationships under terms consistent with or more advantageous to us than those currently in place; adverse rating actions by credit rating agencies; our ability to realize the anticipated benefits from productivity and cost-savings and other related initiatives, which may include decisions to downsize or to transition operating activities from one location to another, and to minimize any disruptions in our workforce that may result from those initiatives; our ability to protect our brands and our other intellectual property rights; our failure to manage the potential both for patent protection and patent liability in the context of a rapidly developing legal framework for intellectual property protection; changes in tax laws and unfavorable resolution of tax contingencies; cessation of or defects in various services provided to us by third-party vendors; material changes in the market value or liquidity of securities that we hold; restrictions imposed by our debt obligations; significantly slower growth or declines in the money transfer, payment service, and other markets in which we operate; and changes in industry standards affecting our business; (ii) events related to our regulatory and litigation environment, such as: the failure by us, our agents or their subagents to comply with laws and regulations, including regulatory or judicial interpretations thereof, designed to detect and prevent money laundering, terrorist financing, fraud and other illicit activity, and increased costs or loss of business associated with compliance with those laws and regulations; changes in United States or foreign laws, rules and regulations including the Internal Revenue Code, governmental or judicial interpretations thereof and industry practices and standards, including the impact of the Foreign Account Tax Compliance provisions of the Hiring Incentives to Restore Employment Act; liabilities resulting from a failure of our agents or their subagents to comply with laws and regulations; increased costs or loss of business due to regulatory initiatives and changes in laws, regulations and industry practices and standards affecting us, our agents, or their subagents; liabilities and unanticipated developments resulting from governmental investigations and consent agreements with, or enforcement actions by, regulators, including those associated with compliance with, failure to comply with, or extension of, the settlement agreement with the State of Arizona; the impact on our business from the Dodd-Frank Wall Street Reform and Consumer Protection Act, the rules promulgated there-under, and the actions of the Consumer Financial Protection Bureau; liabilities resulting from litigation, including class-action lawsuits and similar matters, including costs, expenses, settlements and judgments; failure to comply with regulations regarding consumer privacy and data use and security; effects of unclaimed property laws; failure to maintain sufficient amounts or types of regulatory capital to meet the changing requirements of our regulators worldwide; and changes in accounting standards, rules and interpretations; and (iii) other events, such as: adverse tax consequences from our spin-off from First Data Corporation; catastrophic events; and management's ability to identify and manage these and other risks.

About Western Union

The Western Union Company (NYS: WU) is a leader in global payment services. Together with its Vigo, Orlandi Valuta, Pago Facil and Western Union Business Solutions branded payment services, Western Union provides consumers and businesses with fast, reliable and convenient ways to send and receive money around the world, to send payments and to purchase money orders. As of June 30, 2013, the Western Union, Vigo and Orlandi Valuta branded services were offered through a combined network of approximately 520,000 agent locations in 200 countries and territories and approximately 115,000 ATMs. In 2012, The Western Union Company completed 231 million consumer-to-consumer transactions worldwide, moving $79 billion of principal between consumers, and 432 million business payments. For more information, visit www.westernunion.com.

WU-F, WU-G

 
THE WESTERN UNION COMPANY
KEY STATISTICS
(Unaudited)
        
Notes*2Q123Q124Q12FY20121Q132Q13YTD 2Q13
 
Consolidated Metrics
Consolidated revenues (GAAP) - YoY % change4%1%0%3%

(5)

%

(3)

%

(4)

%

Consolidated revenues (constant currency) - YoY % changea7%3%0%5%

(4)

%

(2)

%

(3)

%

Agent locations510,000510,000510,000510,000515,000520,000520,000
 
Consumer-to-Consumer (C2C) Segment
Revenues (GAAP) - YoY % change0%

(4)

%

(2)

%

(1)

%

(7)

%

(4)

%

(5)

%

Revenues (constant currency) - YoY % changec3%

(1)

%

(2)

%

1%

(6)

%

(3)

%

(5)

%

Operating margin28.5%29.4%25.0%27.6%25.4%23.2%24.3%
 

Transactions (in millions)

58.4957.4758.65230.9855.4460.26115.70

Transactions - YoY% change

4%0%

(1)

%

2%

(2)

%

3%1%
 
Total principal ($ - billions)20.119.720.079.318.920.539.4
Principal per transaction ($ - dollars)344342341343341340340
Principal per transaction - YoY % change

(6)

%

(6)

%

(2)

%

(5)

%

(1)

%

(1)

%

(1)

%

Principal per transaction (constant currency) - YoY % changed

(3)

%

(3)

%

(2)

%

(3)

%

(1)

%

(1)

%

(1)

%

 
Cross-border principal ($ - billions)18.217.618.071.316.918.535.4
Cross-border principal - YoY % change

(2)

%

(7)

%

(3)

%

(3)

%

(3)

%

2%

(1)

%

Cross-border principal (constant currency) - YoY % changee1%

(4)

%

(2)

%

0%

(3)

%

2%

0

%

 
Europe and CIS region revenues - YoY % changel, m

(8)

%

(9)

%

(5)

%

(6)

%

(6)

%

(4)

%

(5)

%

Europe and CIS region transactions - YoY % changel, m

(2)

%

(3)

%

0%

(1)

%

(1)

%

3%1%
 
North America region revenues - YoY % changel, n0%

(8)

%

(9)

%

(3)

%

(15)

%

(12)

%

(13)

%

North America region transactions - YoY % changel, n2%

(5)

%

(6)

%

(1)

%

(7)

%

(2)

%

(4)

%

 
Middle East and Africa region revenues - YoY % changel, o3%0%3%3%0%0%0%
Middle East and Africa region transactions - YoY % changel, o9%4%6%7%4%6%5%
 
APAC region revenues - YoY % changel, p Read Full Story

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