DENVER, October 29, 2020: The Western Union Company (NYSE: WU), a global leader in cross-border, cross-currency money movement and payments, today reported third quarter financial results, and provided a financial outlook for 2020.
The Company’s third quarter revenue of $1.3 billion improved substantially from the previous quarter and declined 4% compared to the prior year period, or 1% on a constant currency basis that includes a 1% benefit from inflation in Argentina. The decline in revenue reflects the continuing macro-economic impact from COVID-19, offset by improving consumer money transfer fundamentals, including digital revenue growth of 45% to a new quarterly high of over $230 million.
GAAP earnings per share in the third quarter was $0.55 compared to $0.32 in the prior year period, which included $92 million of restructuring expenses. Adjusted earnings per share was $0.57 compared to $0.49 in the prior year period, benefitting from the Company’s productivity initiatives, additional cost savings related to the effect of the COVID-19 pandemic, and a lower effective tax rate and share count, partially offset by declines in revenue.
President and CEO Hikmet Ersek said, “Our solid third quarter performance highlights the value of our services and the resiliency of our customers in providing vital support for families, communities, and businesses around the world throughout this global crisis. In addition, our strategy, planning, and execution enabled us to adjust to changing market conditions, rebound quickly from the sharp downturn COVID-19 caused during the second quarter, and deliver strong profitability for shareholders.”
Ersek added, “Although macro-economic uncertainty remains elevated, our business continues to improve. The investments in platform and digital capabilities we have made over the years are paying off, as money transfer and payment customers increasingly turn to Western Union’s unmatched, omni-channel platform to meet evolving needs. I am enthusiastic about the market opportunity to further enhance the Company’s strong position and to expand the customer segments for cross-border financial transactions.”
CFO Raj Agrawal stated, “We are pleased with third quarter results, as Consumer-to-Consumer segment trends improved significantly with 6% transaction growth, including more than 95% digital transaction growth for the second consecutive quarter. The business also generated solid dollar and margin profitability, resulting from productivity savings, prudent management of initiatives, and the strong economics of our fast-growing digital business. We remain focused on pushing forward with our growth strategy and given improved visibility into our market and commercial trends we have reissued a financial outlook for the full year 2020.”
Q3 Business Highlights
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Consumer-to-Consumer (C2C) transactions increased 6% in the quarter, while revenues declined 1% on a reported basis and were flat on a constant currency basis. C2C revenues represented 88% of total Company revenue in the quarter. Within the C2C segment, cross- border money transfer revenues grew 2% and were offset by declines in domestic money transfers. Transaction growth was led by Europe and CIS, U.S. outbound, and the Middle East, partially offset by declines in U.S. domestic money transfer and Latin America and the Caribbean.
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Digital money transfer revenues increased 45% on a reported basis in the quarter, or 46% constant currency, and represented 21% and 31% of total C2C revenues and transactions, respectively. Westernunion.com revenue grew 33% on a reported basis and 32% constant currency, including cross-border revenue growth of 46%.
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Westernunion.com average monthly active customers for the third quarter increased 47% year-over-year. Westernunion.com was the most downloaded mobile app among peer money transfer companies during the third quarter, according to data provided by mobile app marketing firm Sensor Tower1. Westernunion.com service is available in over 75 countries, plus additional territories. Bank account payout is available in approximately 120 countries,
1 Data obtained from Sensor Tower App Install Market Share Report
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with real-time capabilities to select bank accounts and digital wallets in approximately 80 countries, and retail payout in over 200 countries and territories.
Western Union Business Solutions trends improved sequentially from the second quarter with revenues declining 11% on a reported basis, or 13% constant currency, primarily due to the ongoing macro-economic impact of COVID-19 on small and medium-sized enterprises, travel and tourism, and education. Other revenues, which consists of retail bill payments in Argentina and the U.S., as well as money orders, declined 33% primarily due to the depreciation of the Argentine peso and the impact of COVID-19. Business Solutions and Other represented 7% and 5%, respectively, of total Company revenue.
Additional Q3 Financial Highlights
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GAAP operating margin in the quarter was 22.7% compared to 15.1% in the prior year period, with the increase primarily attributable to lower restructuring costs in the current year. Adjusted operating margin was 23.5% compared to 22.3% in the prior year period. Margin expansion was primarily driven by productivity savings and additional cost savings related to the effect of the COVID-19 pandemic, partially offset by declines in revenue.
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The GAAP effective tax rate in the quarter was 12.4% compared to 16.8% in the prior year period, and the adjusted tax rate was 12.7% in the quarter compared to 18.0% in the prior year period. The decrease in the Company’s GAAP effective tax rate compared to the prior period was primarily due to a higher prior period domestic pre-tax income primarily due to the sales of the Speedpay and Paymap businesses offset by increased discrete expenses in the current period.
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Cash flow from operating activities was $586 million year-to-date compared to $665 million in the prior year period. The decrease in operating cash flow was primarily attributable to the timing of payments for restructuring and other activities, partially offset by lower income tax payments and an increase in operating income. The Company paid $92 million in dividends and did not repurchase shares during the third quarter.
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2020 Outlook
The Company has reinstituted a financial outlook for full year 2020, with the key assumptions of no material changes from the current macro-economic conditions and no significant worsening of the COVID-19 pandemic, as follows:
Revenue
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GAAP: High-single digit decline
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Adjusted constant currency: Mid-single digit decline, excluding any benefit related to
Argentina inflation
Operating Profit Margin
GAAP operating margin of approximately 20% and adjusted operating margin of
approximately 21%
Earnings per Share
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GAAP EPS in a range of $1.72 – $1.77
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Adjusted EPS in a range of $1.80 -$1.85
Adjustment Items
Adjusted constant currency revenue metrics for 2020 exclude revenues for the Speedpay and Paymap businesses in the prior year period, each of which was divested in May 2019. Adjusted operating profit, tax rate, and earnings per share metrics for 2020 periods exclude restructuring expenses and acquisition and divestiture costs, net of related taxes, as applicable.
Adjusted constant currency revenue metrics for 2019 exclude revenues for the Speedpay and Paymap businesses. Adjusted operating profit metrics for 2019 periods exclude restructuring expenses and acquisition and divestiture costs. Adjusted tax rate and earnings per share metrics for 2019 periods exclude the impact of the net gain on the Speedpay and Paymap divestitures, restructuring expenses, and acquisition and divestiture costs. Restructuring expenses are not included in operating segment results.
Although the Company has previously incurred and can reasonably be expected to incur restructuring costs in the future, these expenses are specific to the implementation of the Global Strategy initiative and the Company has therefore provided adjusted financial results that exclude these expenses.
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Additional Statistics
Additional key statistics for the quarter and historical trends can be found in the supplemental tables included with this press release.
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.
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 1019071.
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.