Solid fourth quarter business performance
with strong digital growth
Revenue increases 5%; Net income impacted by
U.S. tax reform and goodwill impairment
Company expects solid business performance
in 2018; Quarterly dividend increased 9%
The Western Union Company (NYSE: WU) today reported financial
results for the 2017 fourth quarter and full year, and provided its
financial outlook for 2018.
In the fourth quarter, the Company generated revenue of $1.4
billion, which increased 5% compared to the prior year, or 4% on a
constant currency basis. Improved trends in the Company’s consumer
money transfer business and continued strong growth in the bill
payments businesses drove the revenue growth.
GAAP earnings per share in the quarter was negatively impacted
by United States tax reform legislation enacted in December 2017
(the “Tax Act”) and a non-cash goodwill impairment charge related
to the Business Solutions reporting unit. GAAP earnings / (loss)
per share of ($2.44) compared to ($0.73) in the prior year period,
while adjusted earnings per share of $0.41 compared to $0.47 in the
same period last year.
“Our consumer money transfer revenue growth accelerated in the
fourth quarter, and our business continued to demonstrate
resilience,” said president and chief executive officer Hikmet
Ersek. “Solid business performance was again led by our digital
channel, as westernunion.com money transfer delivered a 22% revenue
increase and represented 10% of our total consumer-to-consumer
business in the quarter.”
Ersek added, “We remain focused on leveraging our cross-border
capabilities to drive more global funds and transactions through
our platform in 2018.”
Executive Vice President and Chief Financial Officer Raj Agrawal
stated, “We generated strong cash flow and allocation to
shareholders in 2017, returning more than $800 million through
share repurchases and dividends. Our WU Way business transformation
initiatives also delivered solid results and should continue to
fuel operating efficiencies and growth initiatives.”
The new quarterly cash dividend of $0.19 per common share, which
represents a 9% increase over the previous dividend of $0.175, is
payable March 30, 2018 to shareholders of record at the close of
business on March 16, 2018.
Q4 Business Unit and Financial
Highlights
- Consumer-to-Consumer (C2C) revenues,
which represented 80% of total Company revenues in the quarter,
increased 5% on a reported basis, or 4% constant currency.
Transactions grew 3%, driven by growth in westernunion.com.
Geographically, revenue growth was led by transactions originated
in Latin America and North America.Westernunion.com C2C revenues
increased 22% on both a reported and constant currency basis, on
transaction growth of 22%. Westernunion.com represented 10% of
total C2C revenue in the quarter.
- Western Union Business Solutions
revenues declined 4%, or 8% on a constant currency basis, primarily
due to declines in Europe. Business Solutions represented 6% of
total Company revenues in the quarter.
- Other revenues, which primarily consist
of bill payments businesses in the U.S. and Argentina and
represented 14% of the quarter’s revenues, increased 11%, or 14% on
a constant currency basis. Growth in the quarter was driven by the
Speedpay U.S. electronic and Pago Facil Argentina walk-in bill
payments businesses.
- GAAP operating loss in the quarter was
($253) million, which compares to ($314) million in the prior year
period, while adjusted operating income of $258 million compares to
$271 million in the prior year period. GAAP operating losses
include a $464 million non-cash goodwill impairment charge in the
current quarter and a $571 million expense related to the Joint
Settlement Agreements (as defined below) with federal and state
governments in the prior year period.The non-cash goodwill
impairment charge is related to our Business Solutions reporting
unit, as the estimated fair value of the reporting unit declined
below its carrying value. The reduction in estimated fair value
primarily resulted from a decrease in projected revenue growth
rates and EBITDA margins and the impact of the Tax Act. The
financial projections were reevaluated due to the declines in
revenues and operating results recognized in the fourth quarter of
2017, which were below management’s expectations. The December 2017
enactment of the Tax Act also effectively eliminated contributions
to Business Solutions fair value previously derived from cash
management strategies that optimized the Company’s U.S. cash flow
management utilizing principal payouts for Business Solutions
transactions.GAAP operating margin was (17.6%), which compares to
(22.9%) in the prior year period. Adjusted operating margin of
17.9% in the quarter compares to 19.7% in the prior year period,
with the decrease primarily due to timing of expenses, including
incremental marketing spending to drive revenue growth, and the
negative impact of foreign exchange.
- Tax expense in the quarter includes an
estimated incremental expense of $828 million related to the Tax
Act, primarily due to taxes on certain of the Company’s previously
undistributed foreign earnings, partially offset by benefits from
remeasurement of U.S. deferred tax assets and liabilities and other
tax balances. The Company’s 2017 U.S. federal tax cash liability,
including the effects of the Tax Act and other Company income and
tax attributes, is estimated at $780 million and will be payable
over the next eight years, with 8% payable in each of years one
through five, 15% in year six, 20% in year seven, and 25% in year
eight. Due to the complexities and uncertain interpretations of
many aspects of the Tax Act, certain of the 2017 impacts have been
provisionally estimated and additional effects may be recorded in
2018.
- The Company returned $92 million to
shareholders in the fourth quarter, consisting of $12 million of
share repurchases and $80 million of dividends.
2017 Full Year Results
The Company’s full year revenue increased 2%, or increased 3% on
a constant currency basis, compared to the prior year period.
Foreign currency translation, net of hedge benefits, negatively
impacted revenue by $61 million.
GAAP operating margin of 8.6% compares to 8.9% in the prior
year. Adjusted operating margin was 19.9%, which compares to 20.4%
in 2016. The adjusted margin decline from 2016 was primarily
attributable to the impact of foreign exchange.
The full year tax expense was $905 million, which compares to
$88 million in the prior year. Excluding the impact of the Tax Act
and other adjustment items, the adjusted tax rate of 13% for the
full year compares to 11% in 2016.
GAAP earnings / (loss) per share of ($1.19) compares to $0.51 in
the prior year, while adjusted earnings per share of $1.80 compares
to $1.75 in 2016.
GAAP cash flow from operating activities for the year was $736
million, which includes the impact of approximately $600 million of
outflows related to the Joint Settlement Agreements and $77 million
of WU Way spending, partially offset by associated tax benefits.
The Company returned $813 million to shareholders through dividends
and share repurchases during the year.
2016 and 2017 Income Statement
Adjustment Items
Adjusted metrics in 2017 exclude the impact of the Tax Act
(estimated $828 million for Q4 and full year), the non-cash
goodwill impairment charge ($464 million for Q4 and full year),
expenses related to the WU Way business transformation ($35 million
for Q4 and $94 million for full year), an accrual related to a
settlement with the New York Department of Financial Services
announced in January 2018 (“NYDFS Settlement,” $11 million for Q4
and $60 million for full year), additional expenses for an
independent compliance auditor as required by the Joint Settlement
Agreements ($8 million for full year), and related tax impacts.
Adjusted metrics in the prior year period exclude expenses related
to the Joint Settlement Agreements ($571 million for Q4 and $601
million full year) expenses related to the WU Way business
transformation ($13 million for Q4 and $20 million full year), and
related tax impacts.
2018 Outlook
The Company expects solid business performance in 2018, as it
continues to execute its long-term growth strategies focusing on
cross-border money movement and digital channel expansion. The
impact of foreign exchange on 2018 results is expected to be
minimal compared to the prior year.
The Company expects the following outlook for 2018:
Revenue
- Low to mid-single digit increase in
GAAP and constant currency revenue
Operating Profit Margin
- Operating margin of approximately
20%
Tax Rate
- Effective tax rate of approximately 15%
to 16%
Earnings per Share
- EPS in a range of $1.78 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 anticipated final 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. As discussed in the Company’s Form 8-K filed with the SEC
on April 27, 2017, beginning in the first quarter of 2017 the
Company implemented a new region structure in its
Consumer-to-Consumer operating segment, due to leadership and
organizational structure changes within the Company.
Also beginning January 1, 2017, the determination of the
geographic split for transactions and revenue in the C2C segment,
including transactions initiated through westernunion.com, is based
entirely upon the region where the money transfer is initiated.
Prior to January 1, 2017, for transactions originated and paid in
different regions, the Company split the transaction count and
revenue between the two regions, with each region receiving
50%.
Beginning April 1, 2017, the Company implemented a new segment
structure due to leadership and organizational structure changes.
The new structure shifted all businesses previously in the
historical Consumer-to-Business segment into Other.
Regional and segment results for the prior periods presented
within this press release have been adjusted for the new region and
segment structure and geographic split methodology.
Expenses related to the goodwill impairment, NYDFS Settlement,
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.
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/(loss), excluding the impact from
goodwill impairment, NYDFS Settlement, the settlement with federal
and state governments announced in January 2017 ("Joint Settlement
Agreements") and WU Way business transformation expenses;
consolidated operating margin, excluding goodwill impairment, NYDFS
Settlement, Joint Settlement Agreements and WU Way business
transformation expenses; effective tax rate excluding the goodwill
impairment, NYDFS Settlement, Joint Settlement Agreements, WU Way
business transformation expenses and Tax Act; earnings/(loss) per
share, excluding the goodwill impairment, NYDFS Settlement, Joint
Settlement Agreements, WU Way business transformation expenses and
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 0783050.
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, 2016.
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 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, and those associated with the
January 4, 2018 consent order which resolved a matter with the New
York State Department of Financial Services; 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 approved by the European Union; the ongoing impact on
our business from the Dodd-Frank Wall Street Reform and Consumer
Protection 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 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
December 31, 2017, the Western Union, Vigo and Orlandi Valuta
branded services were offered through a combined network of over
550,000 agent locations in 200 countries and territories and over
150,000 ATMs and kiosks, and included the capability to send money
to billions of accounts. In 2017, The Western Union Company
completed 276 million consumer-to-consumer transactions worldwide,
moving $82 billion of principal between consumers, and 547 million
business payments. For more information, visit
www.westernunion.com.
WU-G
THE WESTERN UNION COMPANY KEY
STATISTICS (Unaudited)
Notes* 4Q16 FY2016
1Q17 2Q17 3Q17 4Q17 FY2017
Consolidated Metrics Consolidated revenues (GAAP) -
YoY % change (1 )% (1 )% 0 % 0 % 2 % 5 % 2 % Consolidated revenues
(constant currency) - YoY % change a 4 % 3 % 3 % 2 % 3 % 4 % 3 %
Consolidated operating income/(loss) (GAAP) - YoY % change (211 )%
(56 )% (7 )% (18 )% (2 )% 19 % (2 )%
Consolidated operating income (constant
currency adjusted, excluding Goodwill impairment, NYDFS Consent
Order, Joint Settlement Agreements, WU Way business transformation
expenses and 2015 Paymap Settlement Agreement) - YoY % change
b 6 % 4 % 4 % 10 % 0 % 0 % 4 % Consolidated operating margin (GAAP)
(22.9 )% 8.9 % 18.4 % 15.6 % 19.3 % (17.6 )% 8.6 % Consolidated
operating margin (excluding Goodwill impairment, NYDFS Consent
Order, Joint Settlement Agreements and WU Way business
transformation expenses) c 19.7 % 20.4 % 19.5 % 21.7 % 20.6 % 17.9
% 19.9 %
Consumer-to-Consumer (C2C) Segment Revenues
(GAAP) - YoY % change 0 % (1 )% 0 % (1 )% 1 % 5 % 1 % Revenues
(constant currency) - YoY % change g 3 % 2 % 2 % 1 % 1 % 4 % 2 %
Operating margin 22.8 % 23.4 % 22.4 % 24.8 % 23.5 % 21.4 % 23.0 %
Transactions (in millions) 69.1 268.3 65.3 69.9 69.2 71.4
275.8 Transactions - YoY % change 2 % 3 % 2 % 3 % 2 % 3 % 3 %
Total principal ($ - billions) $ 20.2 $ 80.0 $ 19.1 $ 20.4 $
21.0 $ 21.3 $ 81.8 Principal per transaction ($ - dollars) $ 292 $
298 $ 292 $ 293 $ 302 $ 300 $ 297 Principal per transaction - YoY %
change (3 )% (5 )% (2 )% (3 )% 1 % 3 % 0 % Principal per
transaction (constant currency) - YoY % change h (2 )% (3 )% (1 )%
(2 )% 0 % 0 % (1 )% Cross-border principal ($ - billions) $
18.3 $ 72.5 $ 17.3 $ 18.7 $ 19.0 $ 19.5 $ 74.5 Cross-border
principal - YoY % change (1 )% (2 )% 1 % 1 % 4 % 6 % 3 %
Cross-border principal (constant currency) - YoY % change i 1 % 0 %
2 % 2 % 2 % 4 % 2 % NA region revenues (GAAP) - YoY % change
bb, cc 8 % 6 % 3 % 3 % 1 % 3 % 2 % NA region revenues (constant
currency) - YoY % change j, bb, cc 8 % 7 % 4 % 3 % 1 % 3 % 3 % NA
region transactions - YoY % change bb, cc 8 % 7 % 5 % 4 % 2 % 1 % 3
% EU & CIS region revenues (GAAP) - YoY % change bb, dd
(2 )% (2 )% (1 )% (2 )% 2 % 6 % 1 % EU & CIS region revenues
(constant currency) - YoY % change k, bb, dd 4 % 1 % 4 % 2 % 1 % 2
% 2 % EU & CIS region transactions - YoY % change bb, dd 5 % 4
% 8 % 7 % 7 % 7 % 7 % MEASA region revenues (GAAP) - YoY %
change bb, ee (14 )% (10 )% (13 )% (12 )% (8 )% 1 % (8 )% MEASA
region revenues (constant currency) - YoY % change l, bb, ee (12 )%
(8 )% (10 )% (11 )% (8 )% 0 % (7 )% MEASA region transactions - YoY
% change bb, ee (17 )% (11 )% (15 )% (10 )% (11 )% (2 )% (10 )%
LACA region revenues (GAAP) - YoY % change bb, ff 11 % (3 )%
26 % 21 % 19 % 21 % 22 % LACA region revenues (constant currency) -
YoY % change m, bb, ff 20 % 7 % 25 % 22 % 22 % 23 % 23 % LACA
region transactions - YoY % change bb, ff 18 % 13 % 17 % 16 % 17 %
17 % 17 % APAC region revenues (GAAP) - YoY % change bb, gg
(2 )% (2 )% (2 )% (4 )% (1 )% 0 % (2 )% APAC region revenues
(constant currency) - YoY % change n, bb, gg (1 )% 0 % (1 )% (2 )%
1 % 0 % 0 % APAC region transactions - YoY % change bb, gg (6 )% (6
)% (2 )% (1 )% 0 % 3 % 0 % International revenues - YoY %
change hh (4 )% (4 )% (2 )% (3 )% 1 % 6 % 0 % International
transactions - YoY % change hh (1 )% (1 )% 1 % 2 % 3 % 6 % 3 %
International revenues - % of C2C segment revenues hh 66 % 67 % 66
% 66 % 67 % 67 % 66 % United States originated revenues -
YoY % change ii 8 % 7 % 4 % 3 % 1 % 3 % 3 % United States
originated transactions - YoY % change ii 8 % 8 % 4 % 4 % 1 % 0 % 2
% United States originated revenues - % of C2C segment revenues ii
34 % 33 % 34 % 34 % 33 % 33 % 34 % westernunion.com revenues
(GAAP) - YoY % change jj 27 % 22 % 26 % 21 % 23 % 22 % 23 %
westernunion.com revenues (constant currency) - YoY % change o, jj
30 % 24 % 28 % 23 % 23 % 22 % 24 % westernunion.com transactions -
YoY % change jj 28 % 27 % 27 % 25 % 24 % 22 % 24 %
% of
Consumer-to-Consumer Revenue Regional Revenues: NA region
revenues bb, cc 37 % 36 % 37 % 37 % 36 % 37 % 37 % EU & CIS
region revenues bb, dd 31 % 31 % 30 % 31 % 31 % 31 % 31 % MEASA
region revenues bb, ee 16 % 18 % 17 % 16 % 16 % 16 % 16 % LACA
region revenues bb, ff 8 % 7 % 8 % 8 % 9 % 9 % 8 % APAC region
revenues bb, gg 8 % 8 % 8 % 8 % 8 % 7 % 8 % westernunion.com
revenues jj 9 % 8 % 9 % 9 % 10 % 10 % 10 %
Business
Solutions (B2B) Segment Revenues (GAAP) - YoY % change (3 )% (1
)% (6 )% (4 )% 2 % (4 )% (3 )% Revenues (constant currency) - YoY %
change p 1 % 3 % (3 )% (1 )% 1 % (8 )% (3 )% Operating margin 9.7 %
5.3 % 2.5 % 5.5 % 9.1 % (3.2 )% 3.5 %
Other (primarily
bill payments businesses in United States and Argentina)
Revenues (GAAP) - YoY % change (4 )% (3 )% 7 % 9 % 9 % 11 % 9 %
Revenues (constant currency) - YoY % change r 8 % 10 % 9 % 12 % 13
% 14 % 12 % Operating margin 6.6 % 10.4 % 12.3 % 12.1 % 10.5 % 7.8
% 10.7 %
% of Total Company Revenue
Consumer-to-Consumer segment revenues 80 % 79 % 78 % 79 % 79 % 80 %
79 % Business Solutions segment revenues 7 % 7 % 7 % 7 % 7 % 6 % 7
% Other revenues 13 % 14 % 15 % 14 % 14 % 14 % 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 CONSOLIDATED
STATEMENTS OF INCOME/(LOSS) (Unaudited) (in millions,
except per share amounts)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016 % Change 2017
2016 % Change Revenues $ 1,438.3 $
1,371.7 5 % $ 5,524.3 $ 5,422.9 2 % Expenses: Cost of services
870.9 845.8 3 % 3,355.4 3,270.0 3 % Selling, general and
administrative (a) 355.9 839.4
(58)
%
1,231.5 1,669.2
(26)
%
Goodwill impairment charge 464.0 — (d)
464.0 — (d) Total expenses (b)
1,690.8 1,685.2 0 % 5,050.9
4,939.2 2 % Operating income/(loss) (252.5 ) (313.5 )
19 % 473.4 483.7
(2)
%
Other income/(expense): Interest income 1.1 0.8 37 % 4.9 3.5 41 %
Interest expense (37.9 ) (29.6 ) 28 % (142.1 ) (152.5 )
(7)
%
Derivative gains, net 0.3 2.3
(89)
%
7.1 4.5 56 %
Other income/(expense), net
(0.2 ) 1.7 (d) 4.2 2.5
77 % Total other expense, net (36.7 ) (24.8 )
48 % (125.9 ) (142.0 )
(11)
%
Income/(loss) before income taxes (289.2 ) (338.3 )
(15)
%
347.5 341.7 2 % Provision for income taxes (c) 831.7
16.7 (d) 904.6 88.5 (d)
Net income/(loss) $ (1,120.9 ) $ (355.0 ) (d) $ (557.1 ) $ 253.2
(d) Earnings/(loss) per share: Basic $ (2.44 ) $ (0.73 ) (d)
$ (1.19 ) $ 0.52 (d) Diluted $ (2.44 ) $ (0.73 ) (d) $ (1.19 ) $
0.51 (d) Weighted-average shares outstanding: Basic 459.6 483.6
467.9 490.2 Diluted 459.6 483.6 467.9 493.5 Cash dividends declared
per common share $ 0.175 $ 0.16 9 % $ 0.70 $ 0.64 9 %
__________
(a) For the three and twelve months ended December 31, 2017,
selling, general and administrative expenses included $11.0 million
and $60.0 million, respectively, 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 (as defined below), as described in our Form
8-K filed with the Securities and Exchange Commission on January 4,
2018. For the three and twelve months ended December 31, 2016,
selling, general and administrative expenses included $571.0
million and $601.0 million, respectively, 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, (3) a Consent to the Assessment of Civil
Money Penalty with the Financial Crimes Enforcement Network of the
United States Department of Treasury (collectively, 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. (b) For the three and twelve months ended December
31, 2017, total WU Way business transformation expenses were $35.2
million and $94.4 million, respectively, including $8.0 million and
$35.7 million in cost of services and $27.2 million and $58.7
million in selling, general and administrative, respectively. For
the three and twelve months ended December 31, 2016, total WU Way
business transformation expenses were $13.2 million and $20.3
million, respectively, including $2.5 million for both periods in
cost of services and $10.7 million and $17.8 million in selling,
general and administrative, respectively. (c) For both the
three and twelve months ended December 31, 2017, provision for
income taxes includes an estimated $828.3 million related to the
December 2017 enactment of United States tax reform, 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. (d)
Calculation not meaningful.
THE WESTERN UNION
COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except per share amounts)
December 31, 2017 2016
Assets Cash and cash
equivalents (a) $ 838.2 $ 877.5 Settlement assets 4,188.9 3,749.1
Property and equipment, net of accumulated
depreciation of $635.7 and $600.0, respectively
214.2 220.5 Goodwill 2,727.9 3,162.0
Other intangible assets, net of
accumulated amortization of $1,042.7 and $958.2,
respectively
586.3 664.2 Other assets 675.9 746.3
Total assets $ 9,231.4 $ 9,419.6
Liabilities and
Stockholders' Equity/(Deficit) Liabilities: Accounts payable
and accrued liabilities $ 718.5 $ 1,129.6 Settlement obligations
4,188.9 3,749.1 Income taxes payable 1,252.0 407.3 Deferred tax
liability, net 173.0 85.9 Borrowings 3,033.6 2,786.1 Other
liabilities 356.8 359.4 Total
liabilities 9,722.8 8,517.4 Stockholders' equity/(deficit):
Preferred stock, $1.00 par value; 10
shares authorized; no shares issued
— —
Common stock, $0.01 par value; 2,000
shares authorized; 459.0 shares and 481.5 shares issued and
outstanding as of December 31, 2017 and December 31, 2016,
respectively
4.6 4.8 Capital surplus 697.8 640.9 Retained earnings/(accumulated
deficit) (965.9 ) 419.3 Accumulated other comprehensive loss
(227.9 ) (162.8 ) Total stockholders' equity/(deficit)
(491.4 ) 902.2 Total liabilities and
stockholders' equity/(deficit) $ 9,231.4 $ 9,419.6
__________
(a) Approximately $650 million and $700 million was held by
entities outside of the United States as of December 31, 2017 and
December 31, 2016, respectively.
THE WESTERN UNION
COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in millions)
Year Ended December 31, 2017 2016
Cash
Flows From Operating Activities Net income/(loss) $ (557.1 ) $
253.2
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities: Depreciation 77.1 74.2
Amortization 185.8 189.0 Goodwill impairment charge 464.0 —
Deferred income tax
provision/(benefit)
69.5 (174.2 ) Other non-cash items, net 124.2 98.3
Increase/(decrease) in cash, excluding the effects of acquisitions,
resulting from changes in: Other assets (68.7 ) (71.4 ) Accounts
payable and accrued liabilities (417.6 ) 522.8 Income taxes payable
850.4 190.9 Other liabilities 8.2 (40.9 ) Net
cash provided by operating activities (a) 735.8 1,041.9
Cash
Flows From Investing Activities Capitalization of contract
costs (74.8 ) (107.3 ) Capitalization of purchased and developed
software (33.2 ) (53.7 ) Purchases of property and equipment (69.1
) (68.8 ) Purchases of non-settlement related investments and other
(192.1 ) (64.7 ) Proceeds from maturity of non-settlement related
investments and other 203.8 53.2 Purchases of held-to-maturity
non-settlement related investments (42.7 ) (39.7 ) Proceeds from
held-to-maturity non-settlement related investments 28.4 9.9
Acquisition of businesses, net (24.9 ) — Net
cash used in investing activities (204.6 ) (271.1 )
Cash Flows
From Financing Activities Cash dividends paid (325.6 ) (312.2 )
Common stock repurchased (502.8 ) (501.6 ) Net proceeds from
issuance of borrowings 746.2 575.0 Principal payments on borrowings
(500.0 ) (1,005.4 ) Proceeds from exercise of options and other
11.7 35.0 Net cash used in financing
activities (570.5 ) (1,209.2 ) Net change in cash and
cash equivalents (39.3 ) (438.4 )
Cash and cash equivalents at beginning of
year
877.5 1,315.9
Cash and cash equivalents at end of
year
$ 838.2 $ 877.5
__________
(a) The decrease in cash flow from operations for the year
ended December 31, 2017 compared to the prior year was primarily
due to cash payments made related to the Joint Settlement
Agreements.
THE WESTERN UNION COMPANY
SUMMARY SEGMENT DATA (Unaudited) (in millions)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016 % Change 2017 2016 % Change
Revenues: Consumer-to-Consumer $ 1,144.5 $ 1,092.5 5 % $ 4,354.5 $
4,304.6 1 % Business Solutions 94.3 98.8
(4)
%
383.9 396.0
(3)
%
Other (a) 199.5 180.4 11 % 785.9
722.3 9 % Total consolidated revenues $
1,438.3 $ 1,371.7 5 % $ 5,524.3 $ 5,422.9
2 % Operating income/(loss): Consumer-to-Consumer $ 245.1 $
249.3
(2)
%
$ 1,002.4 $ 1,008.7
(1)
%
Business Solutions (3.0 ) 9.6 (c) 13.6 21.1
(36)
%
Other 15.6 11.8 32 % 83.8
75.2 11 % Total segment operating income 257.7 270.7
(5)
%
1,099.8 1,105.0 0 % Goodwill impairment (b) (464.0 ) — (c) (464.0 )
— (c) NYDFS Consent Order (b) (11.0 ) — (c) (60.0 ) — (c) Joint
Settlement Agreements (b) — (571.0 ) (c) (8.0 ) (601.0 )
(99)
%
Business transformation expenses (b) (35.2 ) (13.2 )
(c) (94.4 ) (20.3 ) (c) Total consolidated operating
income/(loss) $ (252.5 ) $ (313.5 ) 19 % $ 473.4 $ 483.7
(2)
%
Operating income/(loss) margin: Consumer-to-Consumer 21.4 % 22.8 %
(1.4)
%
23.0 % 23.4 %
(0.4)
%
Business Solutions (3.2 )% 9.7 %
(12.9)
%
3.5 % 5.3 %
(1.8)
%
Other 7.8 % 6.6 % 1.2 % 10.7 % 10.4 % 0.3 % Total consolidated
operating income/(loss) margin (17.6 )% (22.9 )% 5.3 % 8.6 % 8.9 %
(0.3)
%
__________
(a) Consists primarily of the Company's bill payments
businesses in the United States and Argentina. (b) Expenses
related to the Goodwill impairment, NYDFS Consent Order, Joint
Settlement Agreements and the WU Way business transformation 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. (c) Calculation not meaningful.
THE WESTERN UNION COMPANYNOTES 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, which have been
adjusted for changes in our reporting segments and geographic
regions, as described earlier. 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.
4Q16 FY2016
1Q17 2Q17 3Q17
4Q17 FY2017 Consolidated Metrics (a)
Revenues, as reported (GAAP) $ 1,371.7 $ 5,422.9 $ 1,302.4 $
1,378.9 $ 1,404.7 $ 1,438.3 $ 5,524.3 Foreign currency translation
impact (s) 58.7 217.1 30.1
29.0 7.7 (5.5 )
61.3 Revenues, constant currency adjusted $ 1,430.4 $
5,640.0 $ 1,332.5 $ 1,407.9 $ 1,412.4 $
1,432.8 $ 5,585.6 Prior year revenues, as reported
(GAAP) $ 1,380.0 $ 5,483.7 $ 1,297.7 $ 1,375.7 $ 1,377.8 $ 1,371.7
$ 5,422.9 Revenue change, as reported (GAAP) (1 )% (1 )% 0 % 0 % 2
% 5 % 2 % Revenue change, constant currency adjusted 4 % 3 % 3 % 2
% 3 % 4 % 3 % (b) Operating income/(loss), as reported
(GAAP) $ (313.5 ) $ 483.7 $ 239.5 $ 214.8 $ 271.6 $ (252.5 ) $
473.4 Foreign currency translation impact (s) 28.0 90.2 15.0 6.8
8.9 13.3 44.0 Goodwill impairment (t) N/A N/A N/A N/A N/A 464.0
464.0 NYDFS Consent Order (u) N/A N/A N/A 49.0 — 11.0 60.0 Joint
Settlement Agreements (w) 571.0 601.0 — — 8.0 — 8.0 WU Way business
transformation expenses (x) 13.2 20.3
14.3 35.0 9.9 35.2
94.4 Operating income, constant currency
adjusted, excluding Goodwill impairment, NYDFS Consent Order, Joint
Settlement Agreements and WU Way business transformation expenses $
298.7 $ 1,195.2 $ 268.8 $ 305.6 $ 298.4
$ 271.0 $ 1,143.8
Prior year operating income, excluding
Joint Settlement Agreements, WU Way business transformation
expenses and 2015 Paymap Settlement Agreement (v)
$ 281.8 $ 1,144.7 $ 258.6 $ 277.4 $ 298.3 $ 270.7 $ 1,105.0
Operating income change, as reported (GAAP) (211 )% (56 )% (7 )%
(18 )% (2 )% 19 % (2 )%
Operating income change, constant currency
adjusted, excluding Goodwill impairment, NYDFS Consent Order, Joint
Settlement Agreements, WU Way business transformation expenses and
2015 Paymap Settlement Agreement
6 % 4 % 4 % 10 % 0 % 0 % 4 % (c) Operating income/(loss), as
reported (GAAP) $ (313.5 ) $ 483.7 $ 239.5 $ 214.8 $ 271.6 $ (252.5
) $ 473.4 Goodwill impairment (t) N/A N/A N/A N/A N/A 464.0 464.0
NYDFS Consent Order (u) N/A N/A N/A 49.0 — 11.0 60.0 Joint
Settlement Agreements (w) 571.0 601.0 — — 8.0 — 8.0 WU Way business
transformation expenses (x) 13.2 20.3
14.3 35.0 9.9 35.2
94.4 Operating income, excluding Goodwill
impairment, NYDFS Consent Order, Joint Settlement Agreements and WU
Way business transformation expenses $ 270.7 $ 1,105.0
$ 253.8 $ 298.8 $ 289.5 $ 257.7
$ 1,099.8 Operating margin, as reported (GAAP) (22.9 )% 8.9
% 18.4 % 15.6 % 19.3 % (17.6 )% 8.6 % Operating margin, excluding
Goodwill impairment, NYDFS Consent Order, Joint Settlement
Agreements and WU Way business transformation expenses 19.7 % 20.4
% 19.5 % 21.7 % 20.6 % 17.9 % 19.9 % (d) Operating
income/(loss), as reported (GAAP) $ (313.5 ) $ 483.7 $ 239.5 $
214.8 $ 271.6 $ (252.5 ) $ 473.4 Reversal of depreciation and
amortization 65.3 263.2 66.4
65.2 65.5 65.8
262.9 EBITDA (z) $ (248.2 ) $ 746.9 $ 305.9
$ 280.0 $ 337.1 $ (186.7 ) $ 736.3
Goodwill impairment (t) N/A N/A N/A N/A N/A 464.0 464.0 NYDFS
Consent Order (u) N/A N/A N/A 49.0 — 11.0 60.0 Joint Settlement
Agreements (w) 571.0 601.0 — — 8.0 — 8.0 WU Way business
transformation expenses (x) 13.2 20.3
14.3 35.0 9.9 35.2
94.4 Adjusted EBITDA, excluding Goodwill
impairment, NYDFS Consent Order, Joint Settlement Agreements and WU
Way business transformation expenses $ 336.0 $ 1,368.2
$ 320.2 $ 364.0 $ 355.0 $ 323.5
$ 1,362.7 Operating margin, as reported (GAAP) (22.9 )% 8.9
% 18.4 % 15.6 % 19.3 % (17.6 )% 8.6 % EBITDA margin (18.1 )% 13.8 %
23.5 % 20.3 % 24.0 % (13.0 )% 13.3 % Adjusted EBITDA margin,
excluding Goodwill impairment, NYDFS Consent Order, Joint
Settlement Agreements and WU Way business transformation expenses
24.5 % 25.2 % 24.6 % 26.4 % 25.3 % 22.5 % 24.7 % (e) Net
income/(loss), as reported (GAAP) $ (355.0 ) $ 253.2 $ 161.7 $
166.5 $ 235.6 $ (1,120.9 ) $ (557.1 ) Goodwill impairment (t) N/A
N/A N/A N/A N/A 464.0 464.0 NYDFS Consent Order (u) N/A N/A N/A
49.0 — 11.0 60.0 Joint Settlement Agreements (w) 571.0 601.0 — —
8.0 — 8.0 WU Way business transformation expenses (x) 13.2 20.3
14.3 35.0 9.9 35.2 94.4 Income tax benefit from Goodwill impairment
(t) N/A N/A N/A N/A N/A (17.2 ) (17.2 ) Income tax
expense/(benefit) from Joint Settlement Agreements (w) 5.5 (5.4 ) —
— (2.9 ) — (2.9 ) Income tax benefit from WU Way business
transformation expenses (x) (4.8 ) (7.4 ) (5.0 ) (12.3 ) (2.7 )
(11.1 ) (31.1 ) Income tax expense from Tax Act (y) N/A
N/A N/A N/A
N/A 828.3 828.3
Goodwill impairment, NYDFS Consent Order,
Joint Settlement Agreements and WU Way business transformation
expenses, net of income tax expense/(benefit) and Tax Act
584.9 608.5 9.3
71.7 12.3 1,310.2 1,403.5
Net income, excluding Goodwill impairment, NYDFS Consent
Order, Joint Settlement Agreements, WU Way business transformation
expenses and Tax Act $ 229.9 $ 861.7 $ 171.0 $
238.2 $ 247.9 $ 189.3 $ 846.4 Diluted
earnings/(loss) per share ("EPS"), as reported (GAAP) ($ - dollars)
$ (0.73 ) $ 0.51 $ 0.33 $ 0.35 $ 0.51 $ (2.44 ) $ (1.19 ) EPS
impact as a result of Goodwill impairment ($ - dollars) (t) N/A N/A
N/A N/A N/A $ 1.01 $ 1.00 EPS impact as a result of NYDFS Consent
Order ($ - dollars) (u) N/A N/A N/A $ 0.10 $ — $ 0.02 $ 0.13 EPS
impact as a result of Joint Settlement Agreements ($ - dollars) (w)
$ 1.17 $ 1.22 $ — $ — $ 0.02 $ — $ 0.02 EPS impact as a result of
WU Way business transformation expenses ($ - dollars) (x) $ 0.03 $
0.04 $ 0.03 $ 0.07 $ 0.02 $ 0.08 $ 0.20 EPS impact from income tax
benefit from Goodwill impairment ($ - dollars) (t) N/A N/A N/A N/A
N/A $ (0.04 ) $ (0.04 ) EPS impact from income tax
expense/(benefit) from Joint Settlement Agreements ($ - dollars)
(w) $ 0.01 $ (0.01 ) $ — $ — $ (0.01 ) $ — $ (0.01 ) EPS impact
from income tax benefit from WU Way business transformation
expenses ($ - dollars) (x) $ (0.01 ) $ (0.01 ) $ (0.01 ) $ (0.02 )
$ (0.01 ) $ (0.02 ) $ (0.07 ) EPS impact as a result of Tax Act ($
- dollars) (y) N/A N/A N/A
N/A N/A $ 1.80 $ 1.76
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)
$ 1.20 $ 1.24 $ 0.02 $ 0.15 $ 0.02
$ 2.85 $ 2.99 Diluted EPS, excluding Goodwill
impairment, NYDFS Consent Order, Joint Settlement Agreements, WU
Way business transformation expenses and Tax Act ($ - dollars) $
0.47 $ 1.75 $ 0.35 $ 0.50 $ 0.53
$ 0.41 $ 1.80 Diluted weighted-average shares
outstanding (aa) 483.6 493.5 483.4 472.0 465.4 462.9 470.9
(f) Effective tax rate, as reported (GAAP) (5 )% 26 % 24 % 10 % 2 %
(288 )% 260 % Impact from Goodwill impairment (t) N/A N/A N/A N/A
N/A 773 % (146 )% Impact from NYDFS Consent Order (u) N/A N/A N/A
(2 )% 0 % (29 )% (8 )% Impact from Joint Settlement Agreements (w)
10 % (16 )% 0 % 0 % 1 % 0 % (1 )% Impact from WU Way business
transformation expenses (x) 2 % 1 % 1 % 3 % 1 % (67 )% (7 )% Impact
from Tax Act (y) N/A N/A N/A
N/A N/A (375 )%
(85 )% Effective tax rate, excluding Goodwill impairment, NYDFS
Consent Order, Joint Settlement Agreements, WU Way business
transformation expenses and Tax Act 7 % 11 %
25 % 11 % 4 % 14 % 13 %
Consumer-to-Consumer Segment (g) Revenues, as reported
(GAAP) $ 1,092.5 $ 4,304.6 $ 1,015.0 $ 1,087.3 $ 1,107.7 $ 1,144.5
$ 4,354.5 Foreign currency translation impact (s) 33.4
112.2 24.1 20.8
1.8 (9.0 ) 37.7 Revenues,
constant currency adjusted $ 1,125.9 $ 4,416.8 $
1,039.1 $ 1,108.1 $ 1,109.5 $ 1,135.5 $
4,392.2 Prior year revenues, as reported (GAAP) $ 1,091.2 $
4,343.9 $ 1,017.4 $ 1,095.8 $ 1,098.9 $ 1,092.5 $ 4,304.6 Revenue
change, as reported (GAAP) 0 % (1 )% 0 % (1 )% 1 % 5 % 1 % Revenue
change, constant currency adjusted 3 % 2 % 2 % 1 % 1 % 4 % 2 % (h)
Principal per transaction, as reported ($ - dollars) $ 292 $ 298 $
292 $ 293 $ 302 $ 300 $ 297 Foreign currency translation impact ($
- dollars) (s) 4 4 3
3 (2 ) (6 ) (1 ) Principal per
transaction, constant currency adjusted ($ - dollars) $ 296
$ 302 $ 295 $ 296 $ 300 $ 294 $
296 Prior year principal per transaction, as reported ($ -
dollars) $ 303 $ 312 $ 299 $ 301 $ 300 $ 292 $ 298 Principal per
transaction change, as reported (3 )% (5 )% (2 )% (3 )% 1 % 3 % 0 %
Principal per transaction change, constant currency adjusted (2 )%
(3 )% (1 )% (2 )% 0 % 0 % (1 )% (i) Cross-border principal, as
reported ($ - billions) $ 18.3 $ 72.5 $ 17.3 $ 18.7 $ 19.0 $ 19.5 $
74.5 Foreign currency translation impact ($ - billions) (s)
0.2 1.0 0.2 0.2
(0.2 ) (0.4 ) (0.2 ) Cross-border principal,
constant currency adjusted ($ - billions) $ 18.5 $ 73.5
$ 17.5 $ 18.9 $ 18.8 $ 19.1 $
74.3 Prior year cross-border principal, as reported ($ -
billions) $ 18.4 $ 73.6 $ 17.3 $ 18.5 $ 18.4 $ 18.3 $ 72.5
Cross-border principal change, as reported (1 )% (2 )% 1 % 1 % 4 %
6 % 3 % Cross-border principal change, constant currency adjusted 1
% 0 % 2 % 2 % 2 % 4 % 2 % (j) NA region revenue change, as
reported (GAAP) 8 % 6 % 3 % 3 % 1 % 3 % 2 % NA region foreign
currency translation impact (s) 0 % 1 % 1 %
0 % 0 % 0 % 1 % NA region revenue
change, constant currency adjusted 8 % 7 % 4 %
3 % 1 % 3 % 3 % (k) EU & CIS region
revenue change, as reported (GAAP) (2 )% (2 )% (1 )% (2 )% 2 % 6 %
1 % EU & CIS region foreign currency translation impact (s)
6 % 3 % 5 % 4 % (1 )% (4
)% 1 % EU & CIS region revenue change, constant currency
adjusted 4 % 1 % 4 % 2 % 1 %
2 % 2 % (l) MEASA region revenue change, as reported
(GAAP) (14 )% (10 )% (13 )% (12 )% (8 )% 1 % (8 )% MEASA region
foreign currency translation impact (s) 2 % 2 %
3 % 1 % 0 % (1 )% 1 % MEASA
region revenue change, constant currency adjusted (12 )%
(8 )% (10 )% (11 )% (8 )% 0 %
(7 )% (m ) LACA region revenue change, as reported (GAAP) 11
% (3 )% 26 % 21 % 19 % 21 % 22 % LACA region foreign currency
translation impact (s) 9 % 10 % (1 )% 1
% 3 % 2 % 1 % LACA region revenue change,
constant currency adjusted 20 % 7 % 25 %
22 % 22 % 23 % 23 % (n) APAC region
revenue change, as reported (GAAP) (2 )% (2 )% (2 )% (4 )% (1 )% 0
% (2 )% APAC region foreign currency translation impact (s)
1 % 2 % 1 % 2 % 2 % 0 % 2
% APAC region revenue change, constant currency adjusted (1
)% 0 % (1 )% (2 )% 1 % 0 %
0 % (o) westernunion.com revenue change, as reported (GAAP)
27 % 22 % 26 % 21 % 23 % 22 % 23 % westernunion.com foreign
currency translation impact (s) 3 % 2 % 2 %
2 % 0 % 0 % 1 % westernunion.com
revenue change, constant currency adjusted 30 % 24 %
28 % 23 % 23 % 22 % 24 %
Business Solutions Segment
(p)
Revenues, as reported (GAAP) $ 98.8 $ 396.0 $ 93.6 $ 96.6 $ 99.4 $
94.3 $ 383.9 Foreign currency translation impact (s) 3.9
15.0 2.8 3.2
(1.2 ) (3.0 ) 1.8 Revenues, constant
currency adjusted $ 102.7 $ 411.0 $ 96.4 $
99.8 $ 98.2 $ 91.3 $ 385.7 Prior year
revenues, as reported (GAAP) $ 101.9 $ 398.7 $ 99.2 $ 100.8 $ 97.2
$ 98.8 $ 396.0 Revenue change, as reported (GAAP) (3 )% (1 )% (6 )%
(4 )% 2 % (4 )% (3 )% Revenue change, constant currency adjusted 1
% 3 % (3 )% (1 )% 1 % (8 )% (3 )% (q) Operating income, as reported
(GAAP) $ 9.6 $ 21.1 $ 2.3 $ 5.3 $ 9.0 $ (3.0 ) $ 13.6 Reversal of
depreciation and amortization 11.9 50.8
10.6 10.6 10.6
10.7 42.5 EBITDA (z) $ 21.5 $ 71.9
$ 12.9 $ 15.9 $ 19.6 $ 7.7 $
56.1 Operating income margin, as reported (GAAP) 9.7 % 5.3 %
2.5 % 5.5 % 9.1 % (3.2 )% 3.5 % EBITDA margin 21.8 % 18.1 % 13.7 %
16.6 % 19.7 % 8.0 % 14.6 % (r)
Other (primarily bill
payments businesses in United States and Argentina) Revenues,
as reported (GAAP) $ 180.4 $ 722.3 $ 193.8 $ 195.0 $ 197.6 $ 199.5
$ 785.9 Foreign currency translation impact (s) 21.6
89.9 3.2 5.0 7.1
6.5 21.8 Revenues, constant
currency adjusted $ 202.0 $ 812.2 $ 197.0 $
200.0 $ 204.7 $ 206.0 $ 807.7 Prior
year revenues, as reported (GAAP) $ 186.9 $ 741.1 $ 181.1 $ 179.1 $
181.7 $ 180.4 $ 722.3 Revenue change, as reported (GAAP) (4 )% (3
)% 7 % 9 % 9 % 11 % 9 % Revenue change, constant currency adjusted
8 % 10 % 9 % 12 % 13 % 14 % 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. 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 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 a settlement
agreement reached with the Consumer Financial Protection Bureau
regarding the Equity Accelerator service of Paymap, Inc., a
subsidiary of the Company (the "Paymap Settlement Agreement"),
included in full year 2015 results. 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. See below for
reconciliation of prior year operating income, excluding Paymap
Settlement Agreement.
4Q15 FY2015
Operating income, as reported (GAAP) $ 281.8 $ 1,109.4 Paymap
Settlement Agreement N/A 35.3 Operating income, excluding
Paymap Settlement Agreement $ 281.8 $ 1,144.7 (w)
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.
(x)
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. 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.
(y)
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 will likely be
adjusted in future periods as we complete our accounting for these
matters in 2018, in accordance with a recent staff accounting
bulletin issued by the SEC.
(z)
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.
(aa)
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:
(bb)
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. Prior to January 1, 2017, for transactions
originated and paid in different regions, we split the transaction
count and revenue between the two regions, with each region
receiving 50%. Therefore, regional results for all periods
previously presented have also been adjusted to attribute the
transactions and revenue entirely to the region where the
transaction was initiated.
(cc)
Represents the North America (United
States and Canada) ("NA") region of our Consumer-to-Consumer
segment.
(dd)
Represents the Europe and the
Russia/Commonwealth of Independent States ("EU & CIS") region
of our Consumer-to-Consumer segment.
(ee)
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.
(ff)
Represents the Latin America and the
Caribbean ("LACA") region of our Consumer-to-Consumer segment,
including Mexico.
(gg)
Represents the East Asia and Oceania
("APAC") region of our Consumer-to-Consumer segment.
(hh)
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.
(ii)
Represents transactions originated in the
United States, including intra-country transactions and
westernunion.com transactions initiated from the United States.
(jj)
Represents transactions initiated on
westernunion.com.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180213006403/en/
The Western Union CompanyMediaJennifer Pakradooni,
720-332-0516jennifer.pakradooni@westernunion.comorInvestorsMike
Salop, 720-332-8276mike.salop@westernunion.com
Western Union (NYSE:WU)
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