Strong digital growth
continuedOperating margin improvementOver $600
million returned to shareholders year-to-dateLaunching new
cross-border e-commerce payment option
The Western Union Company (NYSE: WU), a global leader in
cross-border, cross-currency money movement, today reported third
quarter financial results and an updated outlook for 2018.
In the third quarter, the Company generated revenue of $1.4
billion, which declined 1% compared to the prior year, or increased
3% on a constant currency basis. The strengthening of the dollar
against the Argentine peso reduced reported revenue growth by 3
percentage points in the quarter, while increases in revenue per
transaction in the Company’s Argentina-based businesses, primarily
resulting from the impacts of inflation on the local bill payments
business, increased reported and constant currency revenue growth
by approximately 1.7 percentage points.
Consumer money transfer revenues were flat in the quarter, or
increased 2% in constant currency, led by westernunion.com. The
Company’s operating profit margin improved to 21.8%.
“Third quarter results were solid, driven by continued
double-digit revenue growth from westernunion.com and strong
profitability,” said president and CEO Hikmet Ersek.
“Strategically, we made good progress on key initiatives, including
advancing our digital expansion efforts and adding new cross-border
payments opportunities.”
Ersek added, “Westernunion.com money transfer services are now
available in more than 50 countries and territories, with the
capability to send to agent locations and accounts around the
world. We are also pleased to open our unique global money movement
platform to new partners. Our collaboration with Amazon will allow
international e-commerce customers to shop global and pay local, as
they can use our network to pay in person for online purchases in
select countries.”
GAAP earnings per share in the quarter was $0.46 compared to
$0.51 in the prior year period. On an adjusted basis, earnings per
share was $0.52 compared to $0.53 in the prior year period. The
decrease in GAAP and adjusted earnings per share was primarily due
to higher tax rates in the current year period, partially offset by
the impact of increased operating profit margins.
Executive vice president and CFO Raj Agrawal stated, “Effective
cost management and our WU Way lean management programs contributed
to a strong increase in operating margins in the quarter. We also
continued our shareholder friendly capital allocation, with over
$600 million in dividends and share repurchases year-to-date.”
Q3 Business Unit
Highlights
- Consumer-to-Consumer (C2C) revenues,
which represented 80% of total Company revenue in the quarter, were
flat on a reported basis, or increased 2% constant currency, while
transactions grew 4%. Geographically, constant currency revenue
growth was led by sends originated in Latin America, Europe, and
North America, partially offset by declines in the Middle East,
Africa and Asia Pacific.Westernunion.com C2C revenues increased
19%, or 20% constant currency, and transactions increased 23%.
Westernunion.com is now in more than 50 countries and territories
and represented 12% of total C2C revenue in the quarter.
- Western Union Business Solutions
revenues increased 1%, or 3% on a constant currency basis. Business
Solutions represented 7% of total Company revenues in the
quarter.
- Other revenues, which primarily consist
of bill payments businesses in the U.S. and Argentina, declined 9%,
or increased 7% on a constant currency basis. The strengthening of
the dollar against the Argentine peso reduced Other reported
revenue growth by 16 percentage points in the quarter, while
increases in revenue per transaction in the Company’s
Argentina-based businesses, primarily resulting from the impacts of
inflation, increased Other reported and constant currency revenue
growth by approximately 9.6 percentage points. Other revenues
represented 13% of total Company revenues in the quarter.
Additional Q3 Financial
Highlights
- GAAP operating margin in the quarter
was 21.8%, which compares to 19.4% in the prior year period, or
20.7% in the prior year on an adjusted basis. GAAP operating profit
of $303 million compares to $272 million in the prior year, or $290
million in the prior year on an adjusted basis. The improvement in
GAAP operating margin and profit was partially driven by WU Way
related expenses and an accrual related to the Joint Settlement
Agreements incurred in the prior year period, while both GAAP and
adjusted margin and profit benefited from higher incentive
compensation related expenses in the prior year and timing of
marketing spending.
- The effective tax rate in the quarter
was 21.7% compared to 1.5% in the prior year period. On an adjusted
basis, the tax rate was 11.7% compared to 3.6% in the prior year
period. The increase in the GAAP effective tax rate was primarily
due to nonrecurring benefits in the prior year period and tax
expense related to changes in estimates for the provisional
accounting for United States tax reform legislation enacted in
December 2017 (the “Tax Act”) in the current period, while the
increase on an adjusted basis was primarily due to nonrecurring
benefits in the prior year period.
- The Company returned $184 million to
shareholders in the third quarter, consisting of $100 million in
share repurchases and $84 million of dividends, and returned $608
million year-to-date. Year-to-date cash flow from operating
activities was $518 million, including the impact of approximately
$120 million of tax payments related to the agreement with the U.S.
Internal Revenue Service announced in 2011, a $60 million first
quarter payment for the previously announced NYDFS settlement, and
approximately $30 million of outflows for prior year WU Way
expenses.
Adjustment Items
Adjusted metrics for the 2018 third quarter exclude the impact
of a $26.6 million tax expense related to changes in estimates for
the provisional accounting for the Tax Act.
Adjusted metrics for the 2017 third quarter exclude $10 million
of WU Way related expenses and an $8 million accrual related to the
Joint Settlement Agreements, both with associated tax benefits.
2018 Outlook
The Company updated its financial outlook for 2018, which was
previously reported on August 2. Revenue, operating margin, and
cash flow projections are unchanged from the prior outlook; the
GAAP earnings per share range has been narrowed; and the adjusted
earnings per share range has been increased, primarily to reflect a
lower expected tax rate.
Revenue
- Low single-digit GAAP revenue increase
and low to mid-single digit increase in constant currency
revenue
Operating Profit Margin
- Operating margin of approximately
20%
Tax Rate
- GAAP effective tax rate of
approximately 13% to 14% (unchanged) and adjusted tax rate of
approximately 12% (previously approximately 14% to 15%)
Earnings per Share
- GAAP EPS in a range of $1.85 to $1.92
(previously $1.82 to $1.92) and adjusted EPS in a range of $1.88 to
$1.95 (previously $1.80 to $1.90)
Cash Flow
- Cash flow from operating activities of
approximately $800 million, which includes approximately $200
million of outflows for the combination of tax payments related to
the agreement with the U.S. Internal Revenue Service announced in
2011, the NYDFS settlement payment, and WU Way payments related to
2017 expenses
Additional Statistics
Additional key statistics for the quarter and historical trends
can be found in the supplemental tables included with this press
release.
Expenses related to the Joint Settlement Agreements and the WU
Way business transformation are not included in operating segment
results, as they are excluded from the measurement of segment
operating income provided to the chief operating decision maker for
purposes of assessing segment performance and decision making with
respect to resource allocation. Expenses associated with the WU Way
business transformation initiative were effectively complete as of
December 31, 2017.
All amounts included in the supplemental tables to this press
release are rounded to the nearest tenth of a million, except as
otherwise noted. As a result, the percentage changes and margins
disclosed herein may not recalculate precisely using the rounded
amounts provided.
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. Constant
currency results assume foreign revenues 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.
These non-GAAP financial measures include consolidated revenue
change constant currency adjusted; Consumer-to-Consumer segment
revenue change constant currency adjusted; Consumer-to-Consumer
segment westernunion.com revenue change constant currency adjusted;
Business Solutions segment revenue change constant currency
adjusted; Other revenue change constant currency adjusted;
consolidated operating income, excluding the impact from Joint
Settlement Agreements and WU Way business transformation expenses;
consolidated operating margin, excluding Joint Settlement
Agreements and WU Way business transformation expenses; effective
tax rate excluding Joint Settlement Agreements, WU Way business
transformation expenses and Tax Act; earnings per share, excluding
Joint Settlement Agreements, WU Way business transformation
expenses and Tax Act; effective tax rate outlook, excluding Tax
Act; earnings per share outlook, excluding Tax Act; and additional
measures found in the supplemental tables included with this press
release. Although the expenses related to the WU Way business
transformation are specific to that initiative, the types of
expenses related to the WU Way business transformation are similar
to expenses that the Company has previously incurred and can
reasonably be expected to incur in the future.
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.
Investor and Analyst Conference Call
and Slide Presentation
The Company will host a conference call and webcast, including
slides, at 4:30 p.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 1785023.
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 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 "may," "will,"
"should," "would," "could," and "might" are intended to identify
such forward-looking statements. Readers of this press release of
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, 2017.
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: changes in general
economic conditions and economic conditions in the regions and
industries in which we operate, including global economic and trade
downturns, or significantly slower growth or declines in the money
transfer, payment service, and other markets in which we operate,
including downturns or declines related to interruptions in
migration patterns, or non-performance by our banks, lenders,
insurers, or other financial services providers; failure to compete
effectively in the money transfer and payment service industry,
including among other things, with respect to price, with global
and niche or corridor money transfer providers, banks and other
money transfer and payment service providers, including electronic,
mobile and Internet-based services, card associations, and
card-based payment providers, and with digital currencies and
related protocols, and other innovations in technology and business
models; political conditions and related actions in the United
States and abroad which may adversely affect our business and
economic conditions as a whole, including interruptions of United
States or other government relations with countries in which we
have or are implementing significant business relationships with
agents or clients; deterioration in customer confidence in our
business, or in money transfer and payment service providers
generally; our ability to adopt new technology and develop and gain
market acceptance of new and enhanced services in response to
changing industry and consumer needs or trends; 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; any material breach of
security, including cybersecurity, or safeguards of or
interruptions in any of our systems or those of our vendors or
other third parties; cessation of or defects in various services
provided to us by third-party vendors; mergers, acquisitions and
integration of acquired businesses and technologies into our
Company, and the failure to realize anticipated financial benefits
from these acquisitions, and events requiring us to write down our
goodwill; failure to manage credit and fraud risks presented by our
agents, clients and consumers; failure to maintain our agent
network and business relationships under terms consistent with or
more advantageous to us than those currently in place, including
due to increased costs or loss of business as a result of increased
compliance requirements or difficulty for us, our agents or their
subagents in establishing or maintaining relationships with banks
needed to conduct our services; decisions to change our business
mix; changes in tax laws, or their interpretation, including with
respect to United States tax reform legislation enacted in December
2017 (the "Tax Act") and potential related state income tax
impacts, and unfavorable resolution of tax contingencies; adverse
rating actions by credit rating agencies; our ability to realize
the anticipated benefits from business transformation, 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 and
to defend ourselves against potential intellectual property
infringement claims; our ability to attract and retain qualified
key employees and to manage our workforce successfully; material
changes in the market value or liquidity of securities that we
hold; restrictions imposed by our debt obligations; (ii) events
related to our regulatory and litigation environment, such as:
liabilities or loss of business resulting from a failure by us, our
agents or their subagents to comply with laws and regulations and
regulatory or judicial interpretations thereof, including laws and
regulations designed to protect consumers, or detect and prevent
money laundering, terrorist financing, fraud and other illicit
activity; increased costs or loss of business due to regulatory
initiatives and changes in laws, regulations and industry practices
and standards, including changes in interpretations in the United
States, the European Union and globally, affecting us, our agents
or their subagents, or the banks with which we or our agents
maintain bank accounts needed to provide our services, including
related to anti-money laundering regulations, anti-fraud measures,
our licensing arrangements, customer due diligence, agent and
subagent due diligence, registration and monitoring requirements,
consumer protection requirements, remittances, and immigration;
liabilities, increased costs or loss of business and unanticipated
developments resulting from governmental investigations and consent
agreements with or enforcement actions by regulators, including
those associated with the settlement agreements with the United
States Department of Justice, certain United States Attorney's
Offices, the United States Federal Trade Commission, the Financial
Crimes Enforcement Network of the United States Department of
Treasury, and various state attorneys general (the "Joint
Settlement Agreements"), and those associated with the January 4,
2018 consent order which resolved a matter with the New York State
Department of Financial Services (the "NYDFS Consent Order");
liabilities resulting from litigation, including class-action
lawsuits and similar matters, and regulatory actions, including
costs, expenses, settlements and judgments; failure to comply with
regulations and evolving industry standards regarding consumer
privacy and data use and security, including with respect to the
General Data Protection Regulation ("GDPR") approved by the
European Union ("EU"); the ongoing impact on our business from the
Dodd-Frank Wall Street Reform and Consumer Protection Act (the
"Dodd-Frank Act"), as well as regulations issued pursuant to it and
the actions of the Consumer Financial Protection Bureau and similar
legislation and regulations enacted by other governmental
authorities in the United States and abroad related to consumer
protection; effects of unclaimed property laws or their
interpretation or the enforcement thereof; failure to maintain
sufficient amounts or types of regulatory capital or other
restrictions on the use of our working capital to meet the changing
requirements of our regulators worldwide; changes in accounting
standards, rules and interpretations or industry standards
affecting our business; 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 (NYSE: WU) is a global leader in
cross-border, cross-currency money movement. Our omnichannel
platform connects the digital and physical worlds and makes it
possible for consumers and businesses to send and receive money and
make payments with speed, ease, and reliability. As of September
30, 2018, our network included over 550,000 retail agent locations
offering Western Union, Vigo or Orlandi Valuta branded services in
more than 200 countries and territories, with the capability to
send money to billions of accounts. Additionally, westernunion.com,
our fastest growing channel in 2017, is available in more than
50 countries and territories to move money around the world. In
2017, we moved over $300 billion in principal in nearly 130
currencies and processed 32 transactions every second across all
our services. With our global reach, Western Union moves money for
better, connecting family, friends and businesses to enable
financial inclusion and support economic growth. For more
information, visit www.westernunion.com.
WU-G
THE WESTERN UNION COMPANY KEY STATISTICS
(Unaudited)
Notes* 3Q17 4Q17 FY2017
1Q18 2Q18 3Q18 YTD 3Q18
Consolidated Metrics Consolidated revenues (GAAP) - YoY %
change 2 % 5 % 2 % 7 % 2 % (1 )% 3 % Consolidated revenues
(constant currency) - YoY % change a 3 % 4 % 3 % 5 % 3 % 3 % 4 %
Consolidated operating income/(loss) (GAAP) - YoY % change (2 )% 19
% (2 )% 10 % 32 % 11 % 17 % Consolidated operating income (constant
currency adjusted, excluding Goodwill impairment, NYDFS Consent
Order, Joint Settlement Agreements and WU Way business
transformation expenses) - YoY % change b 0 % 0 % 3 % 5 % (4 )% 7 %
2 % Consolidated operating margin (GAAP) jj 19.4 % (17.5 )% 8.6 %
19.1 % 20.1 % 21.8 % 20.3 % Consolidated operating margin
(excluding Goodwill impairment, NYDFS Consent Order, Joint
Settlement Agreements and WU Way business transformation expenses)
c 20.7 % 18.0 % 20.0 % 19.1 % 20.1 % 21.8 % 20.3 %
Consumer-to-Consumer (C2C) Segment Revenues (GAAP) - YoY %
change 1 % 5 % 1 % 7 % 4 % 0 % 4 % Revenues (constant currency) -
YoY % change g 1 % 4 % 2 % 5 % 3 % 2 % 3 % Operating margin jj 23.5
% 21.5 % 23.1 % 22.2 % 23.6 % 25.1 % 23.6 % Transactions (in
millions) 69.2 71.4 275.8 67.8 73.1 71.8 212.7 Transactions - YoY %
change 2 % 3 % 3 % 4 % 5 % 4 % 4 % Total principal ($ -
billions) $ 21.0 $ 21.3 $ 81.8 $ 20.8 $ 22.4 $ 22.1 $ 65.3
Principal per transaction ($ - dollars) $ 302 $ 300 $ 297 $ 307 $
306 $ 308 $ 307 Principal per transaction - YoY % change 1 % 3 % 0
% 5 % 5 % 2 % 4 % Principal per transaction (constant currency) -
YoY % change h 0 % 0 % (1 )% 2 % 3 % 4 % 3 % Cross-border
principal ($ - billions) $ 19.0 $ 19.5 $ 74.5 $ 18.9 $ 20.4 $ 20.1
$ 59.4 Cross-border principal - YoY % change 4 % 6 % 3 % 9 % 9 % 6
% 8 % Cross-border principal (constant currency) - YoY % change i 2
% 4 % 2 % 5 % 8 % 7 % 7 % NA region revenues (GAAP) - YoY %
change aa, bb 1 % 3 % 2 % 4 % 3 % 2 % 3 % NA region revenues
(constant currency) - YoY % change j, aa, bb 1 % 3 % 3 % 4 % 3 % 2
% 3 % NA region transactions - YoY % change aa, bb 2 % 1 % 3 % 1 %
2 % 1 % 2 % EU & CIS region revenues (GAAP) - YoY %
change aa, cc 2 % 6 % 1 % 14 % 9 % 3 % 9 % EU & CIS region
revenues (constant currency) - YoY % change k, aa, cc 1 % 2 % 2 % 5
% 4 % 4 % 4 % EU & CIS region transactions - YoY % change aa,
cc 7 % 7 % 7 % 8 % 9 % 8 % 8 % MEASA region revenues (GAAP)
- YoY % change aa, dd (8 )% 1 % (8 )% 0 % (4 )% (7 )% (4 )% MEASA
region revenues (constant currency) - YoY % change l, aa, dd (8 )%
0 % (7 )% (1 )% (5 )% (6 )% (4 )% MEASA region transactions - YoY %
change aa, dd (11 )% (2 )% (10 )% (2 )% (1 )% 2 % 0 % LACA
region revenues (GAAP) - YoY % change aa, ee 19 % 21 % 22 % 20 % 11
% 2 % 10 % LACA region revenues (constant currency) - YoY % change
m, aa, ee 22 % 23 % 23 % 25 % 20 % 16 % 20 % LACA region
transactions - YoY % change aa, ee 17 % 17 % 17 % 17 % 16 % 11 % 15
% APAC region revenues (GAAP) - YoY % change aa, ff (1 )% 0
% (2 )% 2 % (5 )% (10 )% (4 )% APAC region revenues (constant
currency) - YoY % change n, aa, ff 1 % 0 % 0 % 0 % (5 )% (9 )% (5
)% APAC region transactions - YoY % change aa, ff 0 % 3 % 0 % 1 % 0
% (2 )% 0 % International revenues - YoY % change gg 1 % 6 %
0 % 9 % 4 % (1 )% 4 % International transactions - YoY % change gg
3 % 6 % 3 % 6 % 7 % 6 % 6 % International revenues - % of C2C
segment revenues gg 67 % 67 % 66 % 67 % 66 % 67 % 67 %
United States originated revenues - YoY % change hh 1 % 3 % 3 % 4 %
3 % 1 % 3 % United States originated transactions - YoY % change hh
1 % 0 % 2 % 1 % 2 % 1 % 1 % United States originated revenues - %
of C2C segment revenues hh 33 % 33 % 34 % 33 % 34 % 33 % 33 %
westernunion.com revenues (GAAP) - YoY % change ii 23 % 22 %
23 % 23 % 22 % 19 % 21 % westernunion.com revenues (constant
currency) - YoY % change o, ii 23 % 22 % 24 % 20 % 21 % 20 % 20 %
westernunion.com transactions - YoY % change ii 24 % 22 % 24 % 24 %
26 % 23 % 24 %
% of Consumer-to-Consumer Revenue
Regional Revenues: NA region revenues aa, bb 36 % 37 % 37 % 36 % 37
% 37 % 37 % EU & CIS region revenues aa, cc 31 % 31 % 31 % 32 %
32 % 32 % 32 % MEASA region revenues aa, dd 16 % 16 % 16 % 16 % 15
% 15 % 15 % LACA region revenues aa, ee 9 % 9 % 8 % 9 % 9 % 9 % 9 %
APAC region revenues aa, ff 8 % 7 % 8 % 7 % 7 % 7 % 7 %
westernunion.com revenues ii 10 % 10 % 10 % 11 % 11 % 12 % 11 %
Business Solutions (B2B) Segment Revenues (GAAP) -
YoY % change 2 % (4 )% (3 )% 3 % (4 )% 1 % 0 % Revenues (constant
currency) - YoY % change p 1 % (8 )% (3 )% (2 )% (6 )% 3 % (2 )%
Operating margin 9.1 % (3.2 )% 3.6 % 2.9 % 1.2 % 14.2 % 6.3 %
Other (primarily bill payments businesses in United
States and Argentina) Revenues (GAAP) - YoY % change 9 % 11 % 9
% 4 % (2 )% (9 )% (2 )% Revenues (constant currency) - YoY % change
r 13 % 14 % 12 % 10 % 9 % 7 % 9 % Operating margin 10.5 % 7.9 %
10.7 % 10.1 % 8.5 % 5.9 % 8.3 %
% of Total Company
Revenue Consumer-to-Consumer segment revenues 79 % 80 % 79 % 79
% 80 % 80 % 79 % Business Solutions segment revenues 7 % 6 % 7 % 7
% 7 % 7 % 7 % Other revenues 14 % 14 % 14 % 14 % 13 % 13 % 14 % *
See the "Notes to Key Statistics" section of the press release for
the applicable Note references and the reconciliation of non-GAAP
financial measures.
THE WESTERN
UNION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (Unaudited) (in millions, except per share
amounts) Three Months Ended
September 30,
Nine Months Ended
September 30,
2018 2017 % Change 2018 2017
% Change Revenues $ 1,387.8 $ 1,404.7 (1 )% $ 4,188.3
$
4,086.0
3
%
Expenses: Cost of services (a) 812.4 840.5 (3 )% 2,467.0 2,482.7 (1
)% Selling, general and administrative 272.8
292.0 (7 )% 870.2 875.6 (1 )%
Total expenses (b) 1,085.2 1,132.5 (4
)% 3,337.2 3,358.3 (1 )% Operating
income 302.6 272.2 11
%
851.1 727.7 17
%
Other income/(expense): Interest income 1.6 1.3 26
%
3.6 3.8 (4 )% Interest expense (38.4 ) (37.2 ) 3
%
(111.4 ) (104.2 ) 7
%
Other income, net (a) 0.6 2.9 (84 )%
13.1 9.4 38
%
Total other expense, net (36.2 ) (33.0 ) 10
%
(94.7 ) (91.0 ) 4
%
Income before income taxes 266.4 239.2 11
%
756.4 636.7 19
%
Provision for income taxes 57.8 3.6
(c
)
116.6 72.9 60
%
Net income $ 208.6 $ 235.6 (11 )% $ 639.8 $
563.8 13
%
Earnings per share: Basic $ 0.47 $ 0.51 (8 )% $ 1.41 $ 1.20 18
%
Diluted $ 0.46 $ 0.51 (10 )% $ 1.40 $ 1.19 18
%
Weighted-average shares outstanding: Basic 446.8 462.8 454.8 470.6
Diluted 449.0 465.4 457.4 473.6 Cash dividends declared per common
share $ 0.19 $ 0.175 9
%
$ 0.57 $ 0.525 9
%
__________
(a)
On January 1, 2018, the Company adopted an accounting
pronouncement that requires the non-service costs of the defined
benefit pension plan to be presented outside a subtotal of income
from operations, with adoption retrospective for periods previously
presented. The adoption of this standard resulted in reductions to
"Cost of services" and "Other income, net" of $0.6 million and $1.8
million for the three and nine months ended September 30, 2017,
respectively, from the amounts previously reported.
(b)
For the three and nine months ended September 30, 2017, total WU
Way business transformation expenses were $9.9 million and $59.2
million, respectively, including $4.0 million and $27.7 million in
cost of services and $5.9 million and $31.5 million in selling,
general and administrative, respectively.
(c)
Calculation not meaningful.
THE WESTERN UNION COMPANY CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited) (in millions, except per share
amounts) September 30, December 31,
2018 2017 Assets Cash and cash equivalents $
767.6 $ 838.2 Settlement assets 4,018.8 4,188.9 Property and
equipment, net of accumulated depreciation of $685.8 and $635.7,
respectively 266.8 214.2 Goodwill 2,725.0 2,727.9 Other intangible
assets, net of accumulated amortization of $1,044.9 and $1,042.7,
respectively 604.5 586.3 Other assets 606.9
675.9 Total assets $ 8,989.6 $ 9,231.4
Liabilities and Stockholders' Deficit Liabilities: Accounts
payable and accrued liabilities $ 593.4 $ 718.5 Settlement
obligations 4,018.8 4,188.9 Income taxes payable 1,076.7 1,252.0
Deferred tax liability, net 156.3 173.0 Borrowings 3,295.0 3,033.6
Other liabilities 264.7 356.8 Total
liabilities 9,404.9 9,722.8 Stockholders' deficit: Preferred
stock, $1.00 par value; 10 shares authorized; no shares issued — —
Common stock, $0.01 par value; 2,000 shares authorized; 443.7
shares and 459.0 shares issued and outstanding as of September 30,
2018 and December 31, 2017, respectively 4.4 4.6 Capital surplus
743.7 697.8 Accumulated deficit (916.8 ) (965.9 ) Accumulated other
comprehensive loss (246.6 ) (227.9 ) Total
stockholders' deficit (415.3 ) (491.4 ) Total
liabilities and stockholders' deficit $ 8,989.6 $ 9,231.4
THE WESTERN UNION
COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in millions) Nine
Months Ended
September 30,
2018 2017 Cash flows from operating activities
Net income $ 639.8 $ 563.8
Adjustments to reconcile net income
to net cash provided by operating activities: Depreciation 57.0
57.5 Amortization 139.0 139.6 Other non-cash items, net 23.5 130.3
Increase/(decrease) in cash resulting from changes in: Other assets
(55.6 ) (35.6 ) Accounts payable and accrued liabilities (109.7 )
(538.4 ) Income taxes payable (172.8 ) 57.6 Other liabilities
(2.7 ) 48.3 Net cash provided by operating
activities 518.5 423.1
Cash flows from investing activities
Capitalization of contract costs (109.5 ) (46.2 ) Capitalization of
purchased and developed software (37.4 ) (27.4 ) Purchases of
property and equipment (101.2 ) (48.9 ) Purchases of non-settlement
related investments and other (6.9 ) (191.6 ) Proceeds from
maturity of non-settlement related investments and other 12.5 43.5
Purchases of held-to-maturity non-settlement related investments
(2.8 ) (42.7 ) Proceeds from held-to-maturity non-settlement
related investments 15.5 27.2 Net cash
used in investing activities (229.8 ) (286.1 )
Cash flows from
financing activities Cash dividends paid (257.8 ) (245.3 )
Common stock repurchased (360.6 ) (489.3 ) Net proceeds from
commercial paper 369.0 — Net proceeds from issuance of borrowings
297.5 746.4 Principal payments on borrowings (407.2 ) — Proceeds
from exercise of options 9.3 8.4 Other financing activities
(6.6 ) — Net cash (used in)/provided by financing
activities (356.4 ) 20.2 Net change in cash,
cash equivalents and restricted cash (67.7 ) 157.2 Cash, cash
equivalents and restricted cash at beginning of period 844.4
877.5 Cash, cash equivalents and restricted
cash at end of period (a) $ 776.7 $ 1,034.7
__________ (a) On January 1, 2018, the Company
retrospectively adopted an accounting pronouncement that requires
restricted cash, which is recorded in "Other assets" in the
Company's Condensed Consolidated Balance Sheets, to be included
with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period amounts shown on the
statements of cash flows. As of September 30, 2018, the Company had
$9.1 million of restricted cash.
THE WESTERN UNION
COMPANY SUMMARY SEGMENT DATA (Unaudited) (in
millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2018 2017 % Change 2018 2017
% Change Revenues: Consumer-to-Consumer $ 1,107.4 $ 1,107.7
0
%
$ 3,325.9 $ 3,210.0 4
%
Business Solutions 100.2 99.4 1
%
290.0 289.6 0
%
Other (a) 180.2 197.6 (9 )%
572.4 586.4 (2 )% Total consolidated revenues
$ 1,387.8 $ 1,404.7 (1 )% $ 4,188.3 $ 4,086.0
3
%
Operating income (b): Consumer-to-Consumer $ 277.8 $ 260.3 7
%
$ 785.7 $ 758.7 4
%
Business Solutions 14.3 9.1 57
%
18.2 16.8 8
%
Other (a) 10.5 20.7 (49 )% 47.2
68.4 (31 )% Total segment operating income (b)
302.6 290.1 4
%
851.1 843.9 1
%
NYDFS Consent Order (c) — —
(d
)
— (49.0 )
(d
)
Business transformation expenses (c) — (9.9 )
(d
)
— (59.2 )
(d
)
Joint Settlement Agreements (c) — (8.0 )
(d
)
— (8.0 )
(d
)
Total consolidated operating income (b) $ 302.6 $ 272.2
11
%
$ 851.1 $ 727.7 17
%
Operating income margin (b): Consumer-to-Consumer 25.1 % 23.5 % 1.6
%
23.6 % 23.6 % 0.0
%
Business Solutions 14.2 % 9.1 % 5.1
%
6.3 % 5.8 % 0.5
%
Other (a) 5.9 % 10.5 % (4.6 )% 8.3 % 11.7 % (3.4 )% Total
consolidated operating income margin (b) 21.8 % 19.4 % 2.4
%
20.3 % 17.8 % 2.5
%
(a) Consists primarily of the Company's bill payments
businesses in the United States and Argentina. (b) On January 1,
2018, the Company adopted an accounting pronouncement that requires
the non-service costs of a defined benefit pension plan to be
presented outside a subtotal of income from operations, with
adoption retrospective for periods previously presented. The
adoption of this standard resulted in an increase of $0.6 million
and $1.8 million to operating income for the three and nine months
ended September 30, 2017, respectively, from the amounts previously
reported, and this increase was allocated among the segments in a
method consistent with the original allocation of this expense. (c)
Expenses related to the NYDFS Consent Order, the WU Way business
transformation, and the Joint Settlement Agreements are excluded
from the measurement of segment operating income provided to the
chief operating decision maker for purposes of assessing segment
performance and decision making with respect to resource
allocation. (d) Calculation not meaningful.
THE WESTERN
UNION COMPANY NOTES TO KEY STATISTICS (in millions,
unless indicated otherwise) (Unaudited) Western
Union’s management believes the non-GAAP financial measures
presented provide meaningful supplemental information regarding our
operating results to assist management, investors, analysts, and
others in understanding our financial results and to better analyze
trends in our underlying business, because they provide consistency
and comparability to prior periods. A non-GAAP financial
measure should not be considered in isolation or as a substitute
for the most comparable GAAP financial measure. A non-GAAP
financial measure reflects an additional way of viewing aspects of
our operations that, when viewed with our GAAP results and the
reconciliation to the corresponding GAAP financial measure, provide
a more complete understanding of our business. Users of the
financial statements are encouraged to review our financial
statements and publicly-filed reports in their entirety and not to
rely on any single financial measure. A reconciliation of non-GAAP
financial measures to the most directly comparable GAAP financial
measures is included below. All adjusted year-over-year changes
were calculated using prior year amounts. Although the expenses
related to the WU Way are specific to that initiative, the types of
expenses related to the WU Way initiative are similar to expenses
that the Company has previously incurred and can reasonably be
expected to incur in the future.
3Q17 4Q17 FY2017 1Q18
2Q18 3Q18 YTD 3Q18
Consolidated Metrics
(a) Revenues, as reported (GAAP) $ 1,404.7 $ 1,438.3 $ 5,524.3 $
1,389.4 $ 1,411.1 $ 1,387.8 $ 4,188.3 Foreign currency translation
impact (s) 7.7 (5.5 ) 61.3
(18.9 ) 9.1 52.8 43.0
Revenues, constant currency adjusted $ 1,412.4 $
1,432.8 $ 5,585.6 $ 1,370.5 $ 1,420.2 $
1,440.6 $ 4,231.3 Prior year revenues, as reported
(GAAP) $ 1,377.8 $ 1,371.7 $ 5,422.9 $ 1,302.4 $ 1,378.9 $ 1,404.7
$ 4,086.0 Revenue change, as reported (GAAP) 2 % 5 % 2 % 7 % 2 % (1
)% 3 % Revenue change, constant currency adjusted 3 % 4 % 3 % 5 % 3
% 3 % 4 % (b) Operating income/(loss), as reported (GAAP)
(jj) $ 272.2 $ (251.9 ) $ 475.8 $ 264.9 $ 283.6 $ 302.6 $ 851.1
Foreign currency translation impact (s) 8.9 13.3 44.0 3.4 2.9 7.2
13.5 Goodwill impairment (t) N/A 464.0 464.0 N/A N/A N/A N/A NYDFS
Consent Order (u) — 11.0 60.0 N/A N/A N/A N/A Joint Settlement
Agreements (v) 8.0 — 8.0 N/A N/A N/A N/A WU Way business
transformation expenses (w) 9.9 35.2
94.4 N/A N/A N/A
N/A Operating income, constant currency
adjusted, excluding Goodwill impairment, NYDFS Consent Order, Joint
Settlement Agreements and WU Way business transformation expenses $
299.0 $ 271.6 $ 1,146.2 $ 268.3 $ 286.5
$ 309.8 $ 864.6 Prior year operating income,
excluding NYDFS Consent Order, Joint Settlement Agreements and WU
Way business transformation expenses $ 299.2 $ 271.5 $ 1,108.3 $
254.4 $ 299.4 $ 290.1 $ 843.9 Operating income change, as reported
(GAAP) (2 )% 19 % (2 )% 10 % 32 % 11 % 17 % Operating income
change, constant currency adjusted, excluding Goodwill impairment,
NYDFS Consent Order, Joint Settlement Agreements and WU Way
business transformation expenses 0 % 0 % 3 % 5 % (4 )% 7 % 2 %
(c) Operating income/(loss), as reported (GAAP) (jj) $ 272.2
$ (251.9 ) $ 475.8 $ 264.9 $ 283.6 $ 302.6 $ 851.1 Goodwill
impairment (t) N/A 464.0 464.0 N/A N/A N/A N/A NYDFS Consent Order
(u) — 11.0 60.0 N/A N/A N/A N/A Joint Settlement Agreements (v) 8.0
— 8.0 N/A N/A N/A N/A WU Way business transformation expenses (w)
9.9 35.2 94.4 N/A
N/A N/A N/A
Operating income, excluding Goodwill impairment, NYDFS Consent
Order, Joint Settlement Agreements and WU Way business
transformation expenses $ 290.1 $ 258.3 $ 1,102.2
$ 264.9 $ 283.6 $ 302.6 $ 851.1
Operating margin, as reported (GAAP) (jj) 19.4 % (17.5 )% 8.6 %
19.1 % 20.1 % 21.8 % 20.3 % Operating margin, excluding Goodwill
impairment, NYDFS Consent Order, Joint Settlement Agreements and WU
Way business transformation expenses 20.7 % 18.0 % 20.0 % 19.1 %
20.1 % 21.8 % 20.3 % (d) Operating income/(loss), as
reported (GAAP) (jj) $ 272.2 $ (251.9 ) $ 475.8 $ 264.9 $ 283.6 $
302.6 $ 851.1 Reversal of depreciation and amortization 65.5
65.8 262.9 66.7
65.7 63.6 196.0 EBITDA
(y) $ 337.7 $ (186.1 ) $ 738.7 $ 331.6 $ 349.3
$ 366.2 $ 1,047.1 Goodwill impairment (t) N/A
464.0 464.0 N/A N/A N/A N/A NYDFS Consent Order (u) — 11.0 60.0 N/A
N/A N/A N/A Joint Settlement Agreements (v) 8.0 — 8.0 N/A N/A N/A
N/A WU Way business transformation expenses (w) 9.9
35.2 94.4 N/A N/A
N/A N/A Adjusted EBITDA,
excluding Goodwill impairment, NYDFS Consent Order, Joint
Settlement Agreements and WU Way business transformation expenses $
355.6 $ 324.1 $ 1,365.1 $ 331.6 $ 349.3
$ 366.2 $ 1,047.1 Operating margin, as
reported (GAAP) (jj) 19.4 % (17.5 )% 8.6 % 19.1 % 20.1 % 21.8 %
20.3 % EBITDA margin 24.0 % (13.0 )% 13.4 % 23.9 % 24.7 % 26.4 %
25.0 % Adjusted EBITDA margin, excluding Goodwill impairment, NYDFS
Consent Order, Joint Settlement Agreements and WU Way business
transformation expenses 25.3 % 22.5 % 24.7 % 23.9 % 24.7 % 26.4 %
25.0 % (e) Net income/(loss), as reported (GAAP) $ 235.6 $
(1,120.9 ) $ (557.1 ) $ 213.6 $ 217.6 $ 208.6 $ 639.8 Goodwill
impairment (t) N/A 464.0 464.0 N/A N/A N/A N/A NYDFS Consent Order
(u) — 11.0 60.0 N/A N/A N/A N/A Joint Settlement Agreements (v) 8.0
— 8.0 N/A N/A N/A N/A WU Way business transformation expenses (w)
9.9 35.2 94.4 N/A N/A N/A N/A Income tax benefit from Goodwill
impairment (t) N/A (17.2
)
(17.2 ) N/A N/A N/A N/A Income tax benefit from Joint Settlement
Agreements (v) (2.9 ) — (2.9 ) N/A N/A N/A N/A Income tax benefit
from WU Way business transformation expenses (w) (2.7 ) (11.1 )
(31.1 ) N/A N/A N/A N/A Income tax expense/(benefit) from Tax Act
(x) N/A 828.3 828.3
(6.0 ) (6.2 ) 26.6 14.4
Goodwill impairment, NYDFS Consent Order, Joint Settlement
Agreements and WU Way business transformation expenses, net of
income tax expense/(benefit) and Tax Act 12.3
1,310.2 1,403.5 (6.0 ) (6.2 )
26.6 14.4 Net income, excluding
Goodwill impairment, NYDFS Consent Order, Joint Settlement
Agreements, WU Way business transformation expenses and Tax Act $
247.9 $ 189.3 $ 846.4 $ 207.6 $ 211.4
$ 235.2 $ 654.2 Diluted earnings/(loss) per
share ("EPS"), as reported (GAAP) ($ - dollars) $ 0.51 $ (2.44 ) $
(1.19 ) $ 0.46 $ 0.47 $ 0.46 $ 1.40 EPS impact as a result of
Goodwill impairment ($ - dollars) (t) N/A $ 1.01 $ 1.00 N/A N/A N/A
N/A EPS impact as a result of NYDFS Consent Order ($ - dollars) (u)
$ — $ 0.02 $ 0.13 N/A N/A N/A N/A EPS impact as a result of Joint
Settlement Agreements ($ - dollars) (v) $ 0.02 $ — $ 0.02 N/A N/A
N/A N/A EPS impact as a result of WU Way business transformation
expenses ($ - dollars) (w) $ 0.02 $ 0.08 $ 0.20 N/A N/A N/A N/A EPS
impact from income tax benefit from Goodwill impairment ($ -
dollars) (t) N/A $ (0.04 ) $ (0.04 ) N/A N/A N/A N/A EPS impact
from income tax benefit from Joint Settlement Agreements ($ -
dollars) (v) $ (0.01 ) $ — $ (0.01 ) N/A N/A N/A N/A EPS impact
from income tax benefit from WU Way business transformation
expenses ($ - dollars) (w) $ (0.01 ) $ (0.02 ) $ (0.07 ) N/A N/A
N/A N/A EPS impact as a result of Tax Act ($ - dollars) (x)
N/A $ 1.80 $ 1.76 $ (0.01
)
$ (0.01 ) $ 0.06 $ 0.03 EPS impact as a result of
Goodwill impairment, NYDFS Consent Order, Joint Settlement
Agreements and WU Way business transformation expenses, net of
income tax expense/(benefit) and Tax Act ($ - dollars) $ 0.02
$ 2.85 $ 2.99 $ (0.01 ) $ (0.01 ) $ 0.06
$ 0.03 Diluted EPS, excluding Goodwill impairment,
NYDFS Consent Order, Joint Settlement Agreements, WU Way business
transformation expenses and Tax Act ($ - dollars) $ 0.53 $
0.41 $ 1.80 $ 0.45 $ 0.46 $ 0.52
$ 1.43 Diluted weighted-average shares outstanding (z) 465.4
462.9 470.9 463.6 459.6 449.0 457.4 (f) Effective tax rate,
as reported (GAAP) 2 % (288 )% 260 % 9 % 15 % 22 % 15 % Impact from
Goodwill impairment (t) N/A 773 % (146 )% N/A N/A N/A N/A Impact
from NYDFS Consent Order (u) 0 % (29 )% (8 )% N/A N/A N/A N/A
Impact from Joint Settlement Agreements (v) 1 % 0 % (1 )% N/A N/A
N/A N/A Impact from WU Way business transformation expenses (w) 1 %
(67 )% (7 )% N/A N/A N/A N/A Impact from Tax Act (x) N/A
(375 )% (85 )% 2 % 2 %
(10 )% (1 )% Effective tax rate, excluding Goodwill
impairment, NYDFS Consent Order, Joint Settlement Agreements, WU
Way business transformation expenses and Tax Act 4 %
14 % 13 % 11 % 17 % 12 % 14 %
Consumer-to-Consumer Segment (g) Revenues, as
reported (GAAP) $ 1,107.7 $ 1,144.5 $ 4,354.5 $ 1,091.0 $ 1,127.5 $
1,107.4 $ 3,325.9 Foreign currency translation impact (s)
1.8 (9.0 ) 37.7 (26.4 )
(9.6 ) 18.7 (17.3 ) Revenues, constant
currency adjusted $ 1,109.5 $ 1,135.5 $ 4,392.2
$ 1,064.6 $ 1,117.9 $ 1,126.1 $ 3,308.6
Prior year revenues, as reported (GAAP) $ 1,098.9 $ 1,092.5
$ 4,304.6 $ 1,015.0 $ 1,087.3 $ 1,107.7 $ 3,210.0 Revenue change,
as reported (GAAP) 1 % 5 % 1 % 7 % 4 % 0 % 4 % Revenue change,
constant currency adjusted 1 % 4 % 2 % 5 % 3 % 2 % 3 % (h)
Principal per transaction, as reported ($ - dollars) $ 302 $ 300 $
297 $ 307 $ 306 $ 308 $ 307 Foreign currency translation impact ($
- dollars) (s) (2 ) (6 ) (1 ) (10 )
(4 ) 5 (3 ) Principal per transaction,
constant currency adjusted ($ - dollars) $ 300 $ 294
$ 296 $ 297 $ 302 $ 313 $ 304
Prior year principal per transaction, as reported ($ - dollars) $
300 $ 292 $ 298 $ 292 $ 293 $ 302 $ 296 Principal per transaction
change, as reported 1 % 3 % 0 % 5 % 5 % 2 % 4 % Principal per
transaction change, constant currency adjusted 0 % 0 % (1 )% 2 % 3
% 4 % 3 % (i) Cross-border principal, as reported ($ -
billions) $ 19.0 $ 19.5 $ 74.5 $ 18.9 $ 20.4 $ 20.1 $ 59.4 Foreign
currency translation impact ($ - billions) (s) (0.2 )
(0.4 ) (0.2 ) (0.7 ) (0.2 ) 0.3
(0.6 ) Cross-border principal, constant currency adjusted ($
- billions) $ 18.8 $ 19.1 $ 74.3 $ 18.2
$ 20.2 $ 20.4 $ 58.8 Prior year cross-border
principal, as reported ($ - billions) $ 18.4 $ 18.3 $ 72.5 $ 17.3 $
18.7 $ 19.0 $ 55.0 Cross-border principal change, as reported 4 % 6
% 3 % 9 % 9 % 6 % 8 % Cross-border principal change, constant
currency adjusted 2 % 4 % 2 % 5 % 8 % 7 % 7 % (j) NA region
revenue change, as reported (GAAP) 1 % 3 % 2 % 4 % 3 % 2 % 3 % NA
region foreign currency translation impact (s) 0 % 0
% 1 % 0 % 0 % 0 % 0 % NA region
revenue change, constant currency adjusted 1 %
3
% 3 % 4 % 3 % 2 % 3 % (k)
EU & CIS region revenue change, as reported (GAAP) 2 % 6 % 1 %
14 % 9 % 3 % 9 % EU & CIS region foreign currency translation
impact (s) (1 )% (4 )% 1 % (9 )%
(5 )% 1 % (5 )% EU & CIS region revenue change,
constant currency adjusted 1 % 2 % 2 %
5 % 4 % 4 % 4 % (l) MEASA region
revenue change, as reported (GAAP) (8 )% 1 % (8 )% 0 % (4 )% (7 )%
(4 )% MEASA region foreign currency translation impact (s) 0
% (1 )% 1 % (1 )% (1 )% 1 %
0 % MEASA region revenue change, constant currency adjusted
(8 )% 0 % (7 )% (1 )% (5 )%
(6 )% (4 )% (m ) LACA region revenue change,
as reported (GAAP) 19 % 21 % 22 % 20 % 11 % 2 % 10 % LACA region
foreign currency translation impact (s) 3 % 2 %
1 % 5 % 9 % 14 % 10 % LACA
region revenue change, constant currency adjusted 22 %
23 % 23 % 25 % 20 % 16 %
20 % (n) APAC region revenue change, as reported (GAAP) (1
)% 0 % (2 )% 2 % (5 )% (10 )% (4 )% APAC region foreign currency
translation impact (s) 2 % 0 % 2 % (2
)% 0 % 1 % (1 )% APAC region revenue change,
constant currency adjusted 1 % 0 % 0 %
0 % (5 )% (9 )% (5 )% (o)
westernunion.com revenue change, as reported (GAAP) 23 % 22 % 23 %
23 % 22 % 19 % 21 % westernunion.com foreign currency translation
impact (s) 0 % 0 % 1 % (3 )% (1
)% 1 % (1 )% westernunion.com revenue change,
constant currency adjusted 23 % 22 % 24 %
20 % 21 % 20 % 20 %
Business
Solutions Segment (p) Revenues, as reported (GAAP) $ 99.4 $
94.3 $ 383.9 $ 96.7 $ 93.1 $ 100.2 $ 290.0 Foreign currency
translation impact (s) (1.2 ) (3.0 ) 1.8
(4.8 ) (2.7 ) 2.3 (5.2 )
Revenues, constant currency adjusted $ 98.2 $ 91.3 $
385.7 $ 91.9 $ 90.4 $ 102.5 $ 284.8
Prior year revenues, as reported (GAAP) $ 97.2 $ 98.8 $
396.0 $ 93.6 $ 96.6 $ 99.4 $ 289.6 Revenue change, as reported
(GAAP) 2 % (4 )% (3 )% 3 % (4 )% 1 % 0 % Revenue change, constant
currency adjusted 1 % (8 )% (3 )% (2 )% (6 )% 3 % (2 )% (q)
Operating income/(loss), as reported (GAAP) (jj) $ 9.1 $ (3.0 ) $
13.8 $ 2.8 $ 1.1 $ 14.3 $ 18.2 Reversal of depreciation and
amortization 10.6 10.7 42.5
10.6 10.5 10.4
31.5 EBITDA (y) $ 19.7 $ 7.7 $ 56.3
$ 13.4 $ 11.6 $ 24.7 $ 49.7
Operating income margin, as reported (GAAP) (jj) 9.1 % (3.2 )% 3.6
% 2.9 % 1.2 % 14.2 % 6.3 % EBITDA margin 19.8 % 8.1 % 14.7 % 13.8 %
12.6 % 24.6 % 17.1 % (r)
Other (primarily bill payments
businesses in United States and Argentina) Revenues, as
reported (GAAP) $ 197.6 $ 199.5 $ 785.9 $ 201.7 $ 190.5 $ 180.2 $
572.4 Foreign currency translation impact (s) 7.1
6.5 21.8 12.3 21.4
31.8 65.5 Revenues, constant
currency adjusted $ 204.7 $ 206.0 $ 807.7 $
214.0 $ 211.9 $ 212.0 $ 637.9 Prior
year revenues, as reported (GAAP) $ 181.7 $ 180.4 $ 722.3 $ 193.8 $
195.0 $ 197.6 $ 586.4 Revenue change, as reported (GAAP) 9 % 11 % 9
% 4 % (2 )% (9 )% (2 )% Revenue change, constant currency adjusted
13 % 14 % 12 % 10 % 9 % 7 % 9 %
2018 Consolidated Outlook
Metrics Range Earnings per share (GAAP) ($ - dollars) $ 1.85 $
1.92 Impact as a result of Tax Act ($ - dollars) (x) 0.03
0.03 Earnings per share excluding Tax Act ($ -
dollars) $ 1.88 $ 1.95 Effective tax
rate (GAAP) 13 % 14 % Impact from Tax Act (x) (1 )%
(2 )% Effective tax rate excluding Tax Act 12 % 12 %
Non-GAAP related
notes:
(s) Represents the impact from the fluctuation in exchange
rates between all foreign currency denominated amounts and the
United States dollar. Constant currency results exclude any benefit
or loss caused by foreign exchange fluctuations between foreign
currencies and the United States dollar, net of foreign currency
hedges, which would not have occurred if there had been a constant
exchange rate. We believe that this measure provides management and
investors with information about operating results and trends that
eliminates currency volatility and provides greater clarity
regarding, and increases the comparability of, our underlying
results and trends. (t) Represents a non-cash goodwill
impairment charge related to our Business Solutions reporting unit.
The impairment primarily resulted from a decrease in projected
revenue growth rates and EBITDA margins. These projections were
reevaluated due to the declines in revenues and operating results
recognized in the fourth quarter of 2017, which were significantly
below management’s expectations. Additionally, as disclosed in
prior Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q, the total estimated fair value of the Business Solutions
reporting unit previously included value derived from strategies to
optimize United States cash flow management and global liquidity by
utilizing international cash balances (including balances generated
by other operating segments) to initially fund global principal
payouts for Business Solutions transactions initiated in the United
States that would have been available to certain market
participants. However, the December 2017 enactment of tax reform
into United States law ("Tax Act") eliminated any fair value
associated with these cash management strategies. This charge has
been excluded from segment operating income, as this charge has
been excluded from the measurement of segment operating income
provided to the chief operating decision maker for purposes of
assessing segment performance and decision making with respect to
resource allocation. We believe that, by excluding the effects of
significant charges associated with non-cash impairment charges
that can impact operating trends, management and investors are
provided with a measure that increases the comparability of our
underlying operating results. (u) Represents the impact from
an accrual for a consent order with the New York State Department
of Financial Services ("NYDFS") related to matters identified as
part of the Joint Settlement Agreements (referred to above as the
"NYDFS Consent Order" or the "NYDFS Settlement"), as described in
our Form 8-K filed with the Securities and Exchange Commission on
January 4, 2018. Amounts related to the NYDFS Consent Order were
recognized in the second and fourth quarters of 2017, and the
expenses had no related income tax benefit. These expenses have
been excluded from segment operating income, as these expenses are
excluded from the measurement of segment operating income provided
to the chief operating decision maker for purposes of assessing
segment performance and decision making with respect to resource
allocation. We believe that, by excluding the effects of
significant charges associated with the settlement of litigation
that can impact operating trends, management and investors are
provided with a measure that increases the comparability of our
underlying operating results. (v) Represents the impact from
the settlement agreements related to (1) a Deferred Prosecution
Agreement with the United States Department of Justice, and the
United States Attorney’s Offices for the Eastern and Middle
Districts of Pennsylvania, the Central District of California, and
the Southern District of Florida, (2) a Stipulated Order for
Permanent Injunction and Final Judgment with the United States
Federal Trade Commission ("FTC"), and (3) a Consent to the
Assessment of Civil Money Penalty with the Financial Crimes
Enforcement Network of the United States Department of Treasury
(referred to above, collectively, as the “Joint Settlement
Agreements”), to resolve the respective investigations of those
agencies, as described in our Form 8-K filed with the Securities
and Exchange Commission on January 20, 2017, and related matters.
Amounts related to these matters were recognized in the second,
third, and fourth quarters of 2016 and the full year 2016 results.
Additionally, in the third quarter of 2017, we recorded an
additional accrual in the amount of $8 million related to an
independent compliance auditor, pursuant to the terms of the Joint
Settlement Agreements. These expenses have been excluded from our
segment operating income, as these expenses are excluded from the
measurement of segment operating income provided to the chief
operating decision maker for purposes of assessing segment
performance and decision making with respect to resource
allocation. Additionally, income tax benefit was adjusted in the
fourth quarter of 2016 to reflect the revised determination, based
on final agreement terms. We believe that, by excluding the effects
of significant charges associated with the settlement of litigation
that can impact operating trends, management and investors are
provided with a measure that increases the comparability of our
underlying operating results. (w) Represents the expenses
incurred to transform our operating model, focusing on technology
transformation, network productivity, customer and agent process
optimization, and organizational redesign to better drive
efficiencies and growth initiatives ("WU Way business
transformation expenses"). Amounts related to the WU Way business
transformation expenses were recognized beginning in the second
quarter of 2016, and each subsequent quarter in 2017. As of
December 31, 2017, expenses associated with the WU Way initiative
were effectively complete. These expenses have been excluded from
our segment operating income, as these expenses are excluded from
the measurement of segment operating income provided to the chief
operating decision maker for purposes of assessing segment
performance and decision making with respect to resource
allocation. We believe that, by excluding the effects of
significant charges associated with the transformation of our
operating model that can impact operating trends, management and
investors are provided with a measure that increases the
comparability of our other underlying operating results. Although
the expenses related to the WU Way are specific to that initiative,
the types of expenses related to the WU Way initiative are similar
to expenses that the Company has previously incurred and can
reasonably be expected to incur in the future. (x)
Represents the estimated impact to our provision for income taxes
related to the Tax Act, primarily due to a tax on previously
undistributed earnings of certain foreign subsidiaries, partially
offset by the remeasurement of deferred tax assets and liabilities
and other tax balances to reflect the lower federal income tax
rate, among other effects. Certain of the Tax Act's impacts have
been provisionally estimated and may need to be adjusted in 2018 as
we complete our accounting for these matters, in accordance with a
recent staff accounting bulletin issued by the SEC. (y)
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. (z) For the three months and twelve months ended
December 31, 2017, non-GAAP diluted weighted-average shares
outstanding includes 3.3 million and 3.0 million shares,
respectively. These shares are excluded from the Company's GAAP
diluted weighted-average shares outstanding, as they are
anti-dilutive due to the Company's GAAP net losses for the
respective periods.
Other
notes:
(aa) Geographic split for transactions and revenue,
including transactions initiated through westernunion.com, is
determined entirely based upon the region where the money transfer
is initiated. (bb) Represents the North America (United
States and Canada) ("NA") region of our Consumer-to-Consumer
segment. (cc) Represents the Europe and the
Russia/Commonwealth of Independent States ("EU & CIS") region
of our Consumer-to-Consumer segment. (dd) Represents the
Middle East, Africa, and South Asia ("MEASA") region of our
Consumer-to-Consumer segment, including India and certain South
Asian countries, which consist of Bangladesh, Bhutan, Maldives,
Nepal, and Sri Lanka. (ee) Represents the Latin America and
the Caribbean ("LACA") region of our Consumer-to-Consumer segment,
including Mexico. (ff) Represents the East Asia and Oceania
("APAC") region of our Consumer-to-Consumer segment. (gg)
Represents transactions, including westernunion.com transactions
initiated outside the United States, between and within foreign
countries (including Canada and Mexico). Excludes all transactions
originated in the United States. (hh) Represents
transactions originated in the United States, including
intra-country transactions and westernunion.com transactions
initiated from the United States. (ii) Represents
transactions conducted and funded through Western Union branded
websites and mobile apps (referred to throughout as
"westernunion.com"). (jj) On January 1, 2018, the Company
adopted an accounting pronouncement that requires the non-service
costs of a defined benefit pension plan to be presented outside a
subtotal of income from operations, with adoption retrospective for
periods previously presented. The adoption of this standard
resulted in increases to operating income in the amount of $0.6
million for each quarter of 2017, $2.4 million for the year ended
December 31, 2017, $0.8 million for each of the first, second, and
fourth quarters of 2016, $0.9 million for the third quarter of
2016, and $3.3 million for the year ended December 31, 2016.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181101005975/en/
Western UnionMedia Relations:Jennifer Pakradooni+1
(720) 332-0516jennifer.pakradooni@wu.comorInvestor
Relations:Mike Salop+1(720)
332-8276mike.salop@westernunion.com
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