Attached files
| file | filename |
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| 8-K - FORM 8-K - Western Union CO | d8k.htm |
| EX-99.1 - PRESS RELEASE OF THE WESTERN UNION COMPANY DATED FEBRUARY 1, 2011 - Western Union CO | dex991.htm |
 Western Union
Fourth Quarter 2010
Earnings Webcast & Conference Call
February 1, 2011
Exhibit 99.2 |
 Mike
Salop Senior Vice President, Investor Relations
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 Safe
Harbor This presentation contains certain statements that are
forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Actual
outcomes
and
results
may
differ
materially
from
those
expressed
in,
or
implied
by,
our
forward-looking
statements.
Words
such
as
“expects,”
“intends,”
“anticipates,”
“believes,”
“estimates,”
“guides,”
“provides guidance,”
“provides outlook”
and other similar expressions or future or conditional verbs such
as
“will,”
“should,”
“would”
and
“could”
are
intended
to
identify
such
forward-looking
statements.
Readers
of
this
press
release
by
The
Western
Union
Company (the “Company,”
“Western Union,”
“we,”
“our”
or “us”) should not rely solely on the forward-looking statements
and should consider all uncertainties and risks discussed in the Risk
Factors section and throughout the Annual Report on Form 10-K for the year ended December 31, 2009.
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: changes in immigration laws, patterns and other factors related to
migrants; our ability to adapt technology in response to changing industry
and consumer needs or trends; our failure to develop and introduce new products, services and enhancements, and gain market acceptance of
such products; the failure by us, our agents or subagents to comply with our
business and technology standards and contract requirements or applicable
laws and regulations, especially laws designed to prevent money laundering,
terrorist financing and anti-competitive behavior, and/or changing
regulatory
or
enforcement
interpretations
of
those
laws;
failure
to
comply
with
the
settlement
agreement
with
the
State
of
Arizona;
the
impact
on
our
business of the Dodd-Frank Wall Street Reform and Consumer Protection Act and
the rules promulgated there-under; changes in United States or foreign
laws, rules and regulations including the Internal Revenue Code of 1986, as amended, and governmental or judicial interpretations thereof;
changes in general economic conditions and economic conditions in the regions and
industries in which we operate; adverse movements and volatility in capital
markets and other events which affect our liquidity, the liquidity of our agents or clients, or the value of, or our ability to recover our investments
or amounts payable to us; political conditions and related actions in the United
States and abroad which may adversely affect our businesses and economic
conditions as a whole; interruptions of United States government relations with countries in which we have or are implementing material agent
contracts; our ability to resolve tax matters with the Internal Revenue Service and
other tax authorities consistent with our reserves; mergers, acquisitions
and integration of acquired businesses and technologies into our company, and the realization of anticipated financial benefits from these
acquisitions; 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; failure to maintain sufficient amounts or types of regulatory capital to meet the
changing requirements of our regulators worldwide; our ability to maintain our
agent network and business relationships under terms consistent with or
more
advantageous
to
us
than
those
currently
in
place;
failure
to
implement
agent
contracts
according
to
schedule;
deterioration
in
consumers’
and
clients’
confidence
in
our
business,
or
in
money
transfer
providers
generally;
failure
to
manage
credit
and
fraud
risks
presented
by
our
agents,
clients
and consumers or non-performance by our banks, lenders, other financial
services providers or insurers; any material breach of security of or
interruptions in any of our systems; adverse rating actions by credit rating
agencies; liabilities and unanticipated developments resulting from litigation
and regulatory investigations and similar matters, including costs, expenses,
settlements and judgments; failure to compete effectively in the money
transfer
industry
with
respect
to
global
and
niche
or
corridor
money
transfer
providers,
banks
and
other
money
transfer
services
providers,
including
telecommunications providers, card associations, card-based payment providers
and electronic and internet providers; our ability to protect our brands and
our other intellectual property rights; our failure to manage the potential both for patent protection and patent liability in the context of a rapidly
developing
legal
framework
for
intellectual
property
protection;
cessation
of
various
services
provided
to
us
by
third-party
vendors;
changes
in
industry
standards affecting our business; changes in accounting standards, rules and
interpretations; our ability to attract and retain qualified key employees
and
to
manage
our
workforce
successfully;
significantly
slower
growth
or
declines
in
the
money
transfer
market
and
other
markets
in
which
we
operate;
adverse consequences from our spin-off from First Data Corporation; decisions
to downsize, sell or close units, or to transition operating activities from
one location to another or to third parties, particularly transitions from the
United States to other countries; decisions to change our business mix;
catastrophic events; and management’s ability to identify and manage these and
other risks. 3 |
 Hikmet
Ersek
President
& Chief Executive Officer
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 Q4
Highlights Total revenue increased 3%, or 5% constant currency
C2C revenue grew 5% constant currency
Revenue growth rates improved in each region
Domestic money transfer revenue increased 7%
Bill Payments revenue decline moderated
Business Solutions revenue grew to $30 million
5
Strong Finish to 2010
Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
|
 6
Expectations for 2011
Constant currency revenue growth range 3% to 4%
Share gains in cross border remittances
Strong growth in Electronic Channels
Revenue declines to moderate in Bill Payments
Mid-teens revenue growth in Business Solutions
Operating margin expansion
Strong cash flow generation and deployment
Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
|
 Strategic Priorities
7
Strategy in place
Focused on execution |
 8
Strategic Priorities
Long-term, demographic data suggest
growth in new migrant flows
Cash-to-cash share of market has
been increasing
WU network expansion can drive
incremental growth
New consumer opportunities exist
Grow
Retail
Channels |
 9
Strategic Priorities
Leverage retail network, brand,
compliance, infrastructure
More choice for consumers
New consumers
Coordinated offerings, strategies
Expand Electronic Channels |
 10
Strategic Priorities
Develop Product Portfolio
Prepaid
Fast-growing, global market
Additional service to new and existing consumers
Business Solutions
Large, fragmented market
Serving the underserved small and medium sized
enterprises |
 11
Strategic Priorities
Improve Processes and Productivity
Faster decision making, closer to consumers and agents
More efficient organization
Margin focus through constant improvement |
 Scott Scheirman
Executive Vice President
& Chief Financial Officer
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 Q4
Revenue 13
Consolidated revenue up 3%,
or up 5% constant currency
adjusted
Transaction fees increased
2%
Foreign exchange revenue
increased 7%
Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
|
 C2C
Remittance Trends C2C Revenue growth 3%, or 5%
constant currency
Total Q4 Western Union cross-
border principal of $18 billion
Increased 6% on reported basis
Increased 7% constant currency
Principal per transaction
Declined 3% on reported basis
Declined 1% constant currency
14
+9%
C2C Transactions
(millions)
Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
|
 Consumer-to-Consumer
15
Revenue
Transactions
Q4 2010
(1)%
6%
Europe, Middle East, Africa, S. Asia
44% of Western Union revenue
EMEASA constant currency revenue increased
Continued constant currency revenue growth in U.K., Germany and
Russia
Gulf States returned to positive transaction and revenue growth
|
 16
Revenue
Transactions
Americas
7%
11%
32% of Western Union revenue
U.S. Domestic repositioning driving new business
Domestic
money
transfer
revenue
growth
7%
and
transaction
growth
29%
Continued solid U.S. Outbound performance
Mexico 3% transaction and revenue growth
Q4 2010
Consumer-to-Consumer |
 17
Revenue
Transactions
Asia Pacific
14%
14%
9% of Western Union revenue
China grew transactions 7% and revenue 6%
Philippines & Australia performing well
Q4 2010
Consumer-to-Consumer |
 C2C
Transaction and Revenue Growth 18
Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
9%
5%
3%
Transaction
Growth
Price Reductions
Mix
Constant
Currency
Revenue Growth
Currency Impact
Reported
Revenue Growth
Q4 2010 |
 Global Business Payments
19
Revenue
Transactions
Global Business Payments
0%
6%
13% of Western Union revenue
$30 million Business Solutions (Custom House) revenue
Continued challenges in U.S. bill payments
Q4 2010 |
 Electronic Channels & Prepaid Q4 Highlights
Westernunion.com
50% transaction growth in international markets
Added transaction sites in Denmark, Finland and Poland
Account-based money transfer
Over 40% transaction growth
40 banks globally
Mobile
12 agreements in place
Over 80,000 locations enabled for cash-to-mobile in 48 countries
Prepaid
Over 890,000 prepaid cards-in-force at year-end
Full year, $350 million principal loaded through 1.5 million loads
20 |
 21
Operating Margin –
Q4
Operating margin excluding
restructuring, +30 basis points
Note: See appendix for reconciliation of Non-GAAP to GAAP measures
GAAP
Excluding
Restructuring
(1)
Q4 2010 consolidated operating margin excludes restructuring charges
|
 22
Operating Margin –
Full Year
Note: See appendix for reconciliation of Non-GAAP to GAAP measures
GAAP
Excluding
Items
(1)
FY 2009 consolidated operating margin excludes settlement accrual
(2)
FY 2010 consolidated operating margin excludes restructuring charges
Operating margin excluding
restructuring and settlement
accrual
•
(40) basis points
•
Increased investment
•
Acquisition amortization
•
Lower marketing spend
•
Operating efficiencies |
 Q4
EPS 23
Reserve International Liquidity Fund -
$6 million benefit to other
income/expense
Tax rate benefit from cumulative adjustments
Q4 EPS $0.37 or $0.38 excluding restructuring expenses
Note: See appendix for reconciliation of Non-GAAP to GAAP measures
|
 24
C2C Operating Margin
C2C 84% of total company
revenue for full year 2010
Operating Margin
Q4 10, +130 basis points YoY
•
Revenue growth
•
Lower marketing spend
FY 2010, +110 basis points YoY
•
Lower marketing spend |
 25
Global Business Payments
Operating Margin
Note: See appendix for reconciliation of Non-GAAP to GAAP measures
GBP 14% of total company
revenue for full year 2010
Operating margin declined YoY
Revenue declines and mix
shifts
in
U.S.
bill
payments
Higher Business Solutions
investments
Full year of Business Solutions
amortization |
 26
Financial Strength
Full Year
Cash Flow from Operations Excluding Tax Deposit
$1.2 billion
Refundable IRS Tax Deposit
($250) million
GAAP Cash Flow from Operations
$994 million
Capital Expenditures
$114 million
Stock Repurchases
$584 million
Dividends Paid
$165 million
Cash Balance, December 31, 2010
$2.2 billion
Debt Outstanding, December 31, 2010
$3.3 billion
Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
|
 2011
Outlook 27
Key Revenue Drivers
Stronger C2C revenue growth
Moderating Bill Payments declines
Mid-teens revenue growth from Business Solutions
Operating Income Margins expected to expand
Pre-tax Restructuring:
Expenses approximately $50 million
Savings approximately $50 million
Tax rate of approximately 24% to 25% |
 2011
Outlook 28
Constant currency revenue in the range of 3% to 4%
GAAP revenue growth similar to constant currency
GAAP operating margin of approximately 26%
Operating margin of approximately 27%, excluding restructuring
expenses
GAAP EPS of $1.41 to $1.46
EPS excluding restructuring charges of $1.47 to $1.52
GAAP cash flows from operating activities of $1.2 billion to $1.3 billion
Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
|
 Questions & Answers
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 Appendix
Fourth Quarter 2011 Earnings
Webcast & Conference Call
February 1, 2011
30 |
 Western Union's management believes the non-GAAP 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. These non-GAAP
measurements include revenue change constant currency adjusted, revenue change
constant currency adjusted excluding Western Union Business Solutions,
operating income margin and earnings per share excluding restructuring
expenses, 2009 operating income margin and earnings per share excluding the
settlement accrual, 2010 cash flow from operations excluding the
refundable tax deposit, consumer-to-
consumer segment revenue change constant currency adjusted,
consumer-to-consumer segment principal per transaction change constant
currency adjusted, consumer-to- consumer cross-border principal
change constant currency adjusted, Global Business Payments operating income
margin excluding Western Union Business Solutions, 2011 earnings per share
outlook excluding restructuring expenses, and 2011 operating income
margin outlook excluding restructuring expenses.
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
measures to the most directly comparable GAAP financial measures is included
below. Non-GAAP Measures
31 |
  Reconciliation of Non-GAAP Measures
32
4Q09
FY2009
1Q10
2Q10
3Q10
4Q10
FY2010
Consolidated Metrics
Revenues, as reported (GAAP)
1,314.0
$
5,083.6
$
1,232.7
$
1,273.4
$
1,329.6
$
1,357.0
$
5,192.7
$
Foreign currency translation impact (a)
(32.4)
119.5
(20.0)
16.1
22.2
18.5
36.8
Revenues, constant currency adjusted
1,281.6
$
5,203.1
$
1,212.7
$
1,289.5
$
1,351.8
$
1,375.5
$
5,229.5
$
Reversal of Western Union Business Solutions revenues, including foreign
currency translation impacts (b) (22.9)
(30.8)
(25.6)
(28.5)
(26.8)
(29.4)
(110.3)
Revenues, constant currency adjusted, excluding Western Union
Business Solutions 1,258.7
$
5,172.3
$
1,187.1
$
1,261.0
$
1,325.0
$
1,346.1
$
5,119.2
$
Prior year revenues, as reported (GAAP)
1,291.6
$
5,282.0
$
1,201.2
$
1,254.3
$
1,314.1
$
1,314.0
$
5,083.6
$
Prior year revenues, excluding Western Union Business Solutions
N/A
N/A
N/A
N/A
1,306.2
$
1,291.1
$
5,052.8
$
Revenue change, as reported (GAAP)
2
%
(4)%
3
%
2
%
1
%
3
%
2
%
Revenue change, constant currency adjusted
(1)%
(1)%
1
%
3
%
3
%
5
%
3
%
Revenue change, constant currency adjusted, excluding Western Union
Business Solutions (3)%
(2)%
(1)%
1
%
1
%
4
%
1
%
Operating income, as reported (GAAP)
318.6
$
1,282.7
$
315.8
$
311.0
$
351.2
$
322.1
$
1,300.1
$
Reversal of settlement accrual (c)
N/A
71.0
N/A
N/A
N/A
N/A
N/A
Reversal of restructuring and related expenses (d)
N/A
N/A
N/A
34.5
14.0
11.0
59.5
Operating income, excluding settlement accrual and
restructuring 318.6
$
1,353.7
$
315.8
$
345.5
$
365.2
$
333.1
$
1,359.6
$
Operating income margin, as reported (GAAP)
24.2
%
25.2
%
25.6
%
24.4
%
26.4
%
23.7
%
25.0
%
Operating income margin, excluding settlement accrual and
restructuring N/A
26.6
%
N/A
27.1
%
27.5
%
24.5
%
26.2
%
Net income, as reported (GAAP)
223.7
$
848.8
$
207.9
$
221.0
$
238.4
$
242.6
$
909.9
$
Reversal of settlement accrual, net of income tax benefit (c)
N/A
53.9
N/A
N/A
N/A
N/A
N/A
Reversal of restructuring and related expenses, net of income tax
benefit (d) N/A
N/A
N/A
22.4
9.5
7.4
39.3
Net income, settlement accrual, and restructuring
adjusted 223.7
$
902.7
$
207.9
$
243.4
$
247.9
$
250.0
$
949.2
$
Diluted earnings per share ("EPS"), as reported (GAAP) ($ -
dollars) 0.32
$
1.21
$
0.30
$
0.33
$
0.36
$
0.37
$
1.36
$
Impact from restructuring and related expenses, net of
income tax benefit (d) ($ - dollars) N/A
N/A
N/A
0.03
0.01
0.01
0.06
Diluted EPS, restructuring adjusted ($ - dollars)
0.32
$
1.21
$
0.30
$
0.36
$
0.37
$
0.38
$
1.42
$
Impact from settlement accrual, net of tax benefit (c) ($
- dollars) N/A
0.08
N/A
N/A
N/A
N/A
N/A
Diluted EPS, settlement accrual adjusted ($ - dollars)
0.32
$
1.29
$
0.30
$
0.36
$
0.37
$
0.38
$
1.42
$
Diluted weighted-average shares outstanding
693.2
701.0
684.2
671.6
661.3
658.4
668.9
Cash flow from operations, as reported (GAAP)
260.1
$
1,218.1
$
74.4
$
251.7
$
383.8
$
284.5
$
994.4
$
Reversal of refundable IRS tax deposit (e)
N/A
N/A
250.0
N/A
N/A
N/A
250.0
Cash flow from operations, tax deposit adjusted
260.1
$
1,218.1
$
324.4
$
251.7
$
383.8
$
284.5
$
1,244.4
$
|
 Reconciliation of Non-GAAP Measures
33
4Q09
FY2009
1Q10
2Q10
3Q10
4Q10
FY2010
Consumer-to-Consumer Segment
Revenues, as reported (GAAP)
1,113.7
$
4,300.7
$
1,030.2
$
1,073.1
$
1,128.3
$
1,151.8
$
4,383.4
$
Foreign currency translation impact (a)
(36.2)
101.3
(21.9)
15.0
21.2
18.0
32.3
Revenues, constant currency adjusted
1,077.5
$
4,402.0
$
1,008.3
$
1,088.1
$
1,149.5
$
1,169.8
$
4,415.7
$
Prior year revenues, as reported (GAAP)
1,094.3
$
4,471.6
$
1,003.7
$
1,065.5
$
1,117.8
$
1,113.7
$
4,300.7
$
Revenue change, as reported (GAAP)
2
%
(4)%
3
%
1
%
1
%
3
%
2
%
Revenue change, constant currency adjusted
(2)%
(2)%
0
%
2
%
3
%
5
%
3
%
Principal per transaction, as reported ($ - dollars)
365
$
363
$
357
$
351
$
355
$
356
$
355
$
Foreign currency translation impact (a) ($ -
dollars) (14)
12
(11)
2
7
5
1
Principal per transaction, constant currency adjusted ($ -
dollars) 351
$
375
$
346
$
353
$
362
$
361
$
356
$
Prior year principal per transaction, as
reported ($ - dollars) 372
$
392
$
358
$
358
$
371
$
365
$
363
$
Principal per transaction change, as reported
(2)%
(7)%
0
%
(2)%
(4)%
(3)%
(2)%
Principal per transaction change, constant currency adjusted
(6)%
(5)%
(3)%
(2)%
(3)%
(1)%
(2)%
Cross-border principal, as reported ($ - billions)
17.1
$
65.0
$
16.1
$
16.8
$
17.6
$
18.1
$
68.6
$
Foreign currency translation impact (a) ($ -
billions) (0.7)
2.0
(0.5)
0.1
0.4
0.3
0.3
Cross-border principal,
constant currency adjusted ($ - billions) 16.4
$
67.0
$
15.6
$
16.9
$
18.0
$
18.4
$
68.9
$
Prior year cross-border principal, as reported ($
- billions) 16.6
$
67.1
$
15.0
$
15.9
$
17.0
$
17.1
$
65.0
$
Cross-border principal change, as reported
3
%
(3)%
7
%
6
%
4
%
6
%
6
%
Cross-border principal change, constant currency adjusted
(1)%
0 %
4
%
7
%
6
%
7
%
6
% |
 Reconciliation of Non-GAAP Measures
34
4Q09
FY2009
1Q10
2Q10
3Q10
4Q10
FY2010
Global Business Payments Segment
Operating income, as reported (GAAP)
35.7
$
171.9
$
37.6
$
33.8
$
27.0
$
24.1
$
122.5
$
Reversal of Western Union Business Solutions operating loss (b)
4.9
6.2
3.1
4.6
8.3
7.7
23.7
Operating income, excluding Western Union
Business Solutions 40.6
$
178.1
$
40.7
$
38.4
$
35.3
$
31.8
$
146.2
$
Operating income margin, as reported (GAAP)
19.6
%
24.9
%
20.7
%
18.9
%
15.1
%
13.3
%
17.0
%
Operating income margin, excluding Western Union Business
Solutions 25.5
%
26.9
%
26.1
%
25.5
%
23.2
%
21.0
%
23.9
% |
 Reconciliation of Non-GAAP Measures
35
2011 EPS Outlook
EPS
guidance
(GAAP)
($
-
dollars)
1.41
$
1.46
$
Impact
from
restructuring
and
related
expenses,
net
of
income
tax
benefit
(d)
($
-
dollars)
0.06
0.06
EPS
guidance,
restructuring
adjusted
($
-
dollars)
1.47
$
1.52
$
2011 Operating Income Margin Outlook
Operating income margin (GAAP)
26.0
%
Impact from restructuring and related expenses (d)
1.0
%
Operating income margin, restructuring adjusted
27.0
%
Range |
 Footnote explanations
36
(a)
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. In addition, to
compute constant currency earnings per share, the Company assumes the impact of fluctuations in foreign currency
derivatives not designated as hedges and the portion of fair value that is excluded
from the measure of effectiveness for those contracts designated as hedges
was consistent with the prior year. (b)
Represents the incremental impact including the impact from fluctuations in
exchange rates, when applicable, of Western Union Business Solutions on
consolidated revenue. Also, represents the incremental impact of Western Union Business Solutions on Global
Business Payments segment operating income.
(c)
Accrual for an agreement to resolve the Company's disputes with the State of
Arizona and certain other states and to fund a multi-state
not-for-profit organization focused on border safety and security
("settlement accrual"). This item has been included in the selling,
general and administrative expense line of the consolidated statements of income,
and was not allocated to the segments. (d)
Restructuring
and
related
expenses
consist
of
direct
and
incremental
expenses
including
the
impact
from
fluctuations
in
exchange
rates
associated
with
restructuring
and
related
activities,
consisting
of
severance,
outplacement
and
other
employee
related
benefits;
facility
closure and migration of the Company's IT infrastructure; and other expenses
related to the relocation of various operations to new or existing
Company
facilities
and
third-party
providers,
including
hiring,
training,
relocation,
travel,
and
professional
fees.
Also
included
in
the facility closure expenses are non-cash expenses related to fixed asset and
leasehold improvement write-offs and the acceleration of depreciation.
Restructuring and related expenses were not allocated to the segments.
(e)
The Company made a $250 million refundable tax deposit with the IRS in first
quarter 2010. |