Details Various Strategic Initiatives to Drive Revenue Growth
and Profitability
- Margin Growth: Targets approximately 23% operating margin by
2022
- EPS Growth: Targets low double-digit EPS CAGR over the next 3
years
- Revenue Growth: Opens cross-border platform to drive
longer-term revenue opportunities
The Western Union Company (NYSE: WU), a global leader in
cross-border, cross-currency money movement and payment services,
will host a meeting with investors and analysts today where it will
provide an update on the Company’s platform strategy, present a new
three-year financial outlook, and detail plans for how it will
serve as a money movement and global payments engine for a wider
set of consumers and businesses.
The Company’s new strategy is designed to capitalize on Western
Union’s unique cross-border strengths, to meet increasing demand
from global consumers and businesses for fast and reliable
cross-border money transfer and payment solutions. This strategy is
enabled by Western Union’s continued investment in key capabilities
such as digital, real-time account payout, compliance, and
artificial intelligence, which have positioned the Company to
operate one of the most holistic and versatile payment engines in
the world.
As part of the new strategy, the Company will aim to grow its
core consumer-to-consumer business as well as other payment
segments where global organizations can leverage Western Union’s
cross-border solutions to expand into new markets or better serve
existing customers. At its Investor Day, the Company will detail
existing partnerships in each of these areas and strategies to
further accelerate growth in the future.
“Our resilient business gave us the opportunity to develop the
long-term vision and three-year financial targets we’re unveiling
today,” said Western Union CEO Hikmet Ersek. “Going forward, we
expect to drive additional profitable growth for shareholders and
more value to customers through new products, expanded service
offerings and partnerships that leverage our industry leading
capabilities, powered by a unique cross-border platform of
unmatched global scale.”
Financial Outlook
At Investor Day, Western Union will provide three-year financial
targets, including an approximately 23% operating margin by 2022
and a low double-digit EPS CAGR through 2022, compared to the
Company’s 2019 adjusted EPS.
The operating margin and EPS targets are based on an assumed
2020-2022 revenue CAGR of 2% to 3%, compared to the 2019 revenue
base excluding divestitures (2019 GAAP revenue includes
approximately $130 million related to the Speedpay and Paymap
divested businesses). The assumed revenue CAGR reflects 2% to 3%
growth in consumer money transfer, driven by westernunion.com and
other third-party digital services, and mid-single digit growth
from Business Solutions.
The operating profit margin and EPS targets also reflect $150
million in total annual savings expected by 2022, including $100
million from the restructuring announced on August 1, 2019. In
addition to the restructuring, the Company expects to achieve
further operating efficiencies from initiatives aimed at optimizing
commissions and reducing third-party spending. These initiatives
are expected to contribute $50 million in annual savings to
operating profit by 2022, which is net of reinvestment in the
business.
“The targets we have announced today build on our proven strong
foundation and financial profile,” said CFO Raj Agrawal. “This
foundation gives us the power to invest in our cross-border
platform capabilities while continuing to return significant levels
of capital to shareholders.”
Over 2020-2022, the Company expects to generate more than $3
billion of operating cash flow and return approximately $2.5
billion to $3 billion to shareholders through dividends and share
repurchases.
The Company also affirmed its full-year financial outlook for
2019, which was previously provided on August 1, 2019.
Long-Term Revenue Acceleration
Opportunities
In addition to its three-year financial targets, the Company has
embarked on a platform strategy designed to more fully leverage the
Company’s assets, commercializing them further with third parties
across multiple sectors. The Company expects to achieve this
through:
- Partnerships where it provides customized
payments solutions to organizations such as e-Commerce businesses
expanding into emerging markets
- End-to-end cross-border solutions to
third-party organizations to solve their consumer money transfer
needs
- Cross-border services, such as foreign
exchange and cash management, for institutions
- Additional financial products for
consumers
The Company sees incremental opportunity over the long term from
such services as it transitions its platform strategy from a
proof-of-concept to a scale-up phase.
The Investor Day event will be webcast and the full investor
presentation is available at http://ir.westernunion.com.
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.
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," "targets," "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, 2018. 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 downturns
and trade disruptions, 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, including trade restrictions and government sanctions, 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
the integration of acquired businesses and technologies into our
Company, divestitures, and the failure to realize anticipated
financial benefits from these transactions, and events requiring us
to write down our goodwill; decisions to change our business mix;
failure to manage credit and fraud risks presented by our agents,
clients and consumers; 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; changes in tax laws, or their
interpretation, including with respect to United States tax reform
legislation enacted in December 2017 (the "Tax Act"), any
subsequent regulation, 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 and abroad, affecting us, our agents or their subagents, or
the banks with which we or our agents maintain bank accounts needed
to provide our services, including related to anti-money laundering
regulations, anti-fraud measures, our licensing arrangements,
customer due diligence, agent and subagent due diligence,
registration and monitoring requirements, consumer protection
requirements, remittances, and immigration; liabilities, increased
costs or loss of business and unanticipated developments resulting
from governmental investigations and consent agreements with or
enforcement actions by regulators, including those associated with
the settlement agreements with the United States Department of
Justice, certain United States Attorney's Offices, the United
States Federal Trade Commission, the Financial Crimes Enforcement
Network of the United States Department of Treasury, and various
state attorneys general (the "Joint Settlement Agreements"), and
those associated with the January 4, 2018 consent order which
resolved a matter with the New York State Department of Financial
Services (the "NYDFS Consent Order"); liabilities resulting from
litigation, including class-action lawsuits and similar matters,
and regulatory enforcement actions, including costs, expenses,
settlements and judgments; failure to comply with regulations and
evolving industry standards regarding consumer privacy and data use
and security, including with respect to the General Data Protection
Regulation ("GDPR") approved by the European Union ("EU"); failure
to comply with the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the "Dodd-Frank Act"), as well as regulations
issued pursuant to it and the actions of the Consumer Financial
Protection Bureau and similar legislation and regulations enacted
by other governmental authorities in the United States and abroad
related to consumer protection and derivative transactions; 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: catastrophic events; and management's
ability to identify and manage these and other risks.
About Western Union
The Western Union Company (NYSE: WU) is a global leader in
cross-border, cross-currency money movement. Our omnichannel
platform connects the digital and physical worlds and makes it
possible for consumers and businesses to send and receive money and
make payments with speed, ease, and reliability. As of June 30,
2019, our network included over 550,000 retail agent locations
offering our branded services in more than 200 countries and
territories, with the capability to send money to billions of
accounts. Additionally, westernunion.com, our fastest growing
channel in 2018, is available in more than 70 countries, plus
additional territories, to move money around the world. With our
global reach, Western Union moves money for better, connecting
family, friends and businesses to enable financial inclusion and
support economic growth. For more information, visit
www.westernunion.com.
WU-G
THE WESTERN UNION COMPANY NON-GAAP FINANCIAL
MEASURES (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.
These non-GAAP financial measures include the following: (1)
Operating cash flow, adjusted, excluding cash outflows for IRS
agreement, NYDFS Consent Order, and WU Way business transformation
payments, (2) Operating income, adjusted, excluding acquisition and
divestiture costs, goodwill impairment, NYDFS Consent Order, Joint
Settlement Agreements, and WU Way business transformation expenses,
(3) Operating margin, adjusted, excluding acquisition and
divestiture costs, goodwill impairment, NYDFS Consent Order, Joint
Settlement Agreements, and WU Way business transformation expenses,
(4) Operating margin outlook, adjusted, excluding
restructuring-related expenses and acquisition and divestiture
costs, (5) Earnings per share outlook, adjusted, excluding
restructuring-related expenses, acquisition and divestiture costs,
and net gain on sales of Speedpay and Paymap, and (6) Operating
cash flow outlook, adjusted, excluding estimated cash payments
related to restructuring-related expenses, acquisition and
divestiture costs, and impact from tax payments related to net gain
on Speedpay and Paymap divestitures, net of related reductions to
tax payments.
2019 Investor Day Reconciliation of Non-GAAP to GAAP Financial
Measures
FY 2018
Operating cash flow, as reported (GAAP) ($- ten millions)
$
820
IRS agreement (a)
120
NYDFS Consent Order (b)
60
WU Way business transformation payments (c)
30
Operating cash flow, adjusted, excluding cash outflows for IRS
agreement, NYDFS Consent Order, and WU Way business transformation
payments
$
1,030
FY 2018
FY 2017
Operating income, as reported (GAAP) ($- millions)
$
1,122.1
$
475.8
Acquisition and divestiture costs (d)
14.9
0.8
Goodwill impairment (e)
N/A
464.0
NYDFS Consent Order (b)
N/A
60.0
Joint Settlement Agreements (f)
N/A
8.0
WU Way business transformation expenses (c)
N/A
94.4
Operating income, adjusted, excluding acquisition and divestiture
costs, goodwill impairment, NYDFS Consent Order, Joint Settlement
Agreements, and WU Way business transformation expenses
$
1,137.0
$
1,103.0
Operating margin, as reported (GAAP)
20.1
%
8.6
%
Operating margin, adjusted, excluding acquisition and divestiture
costs, goodwill impairment, NYDFS Consent Order, Joint Settlement
Agreements, and WU Way business transformation expenses
20.3
%
20.0
%
2019 Investor Day Reconciliation of Non-GAAP to GAAP
Financial Measures - 2019 Outlook
FY 2019 Outlook
Operating margin (GAAP)
18
%
Impact from restructuring-related expenses and acquisition and
divestiture costs (d) (h)
2
%
Operating margin, adjusted, excluding restructuring-related
expenses and acquisition and divestiture costs
20
%
FY 2019 Outlook
Range
Earnings per share (GAAP) ($- dollars)
$
2.47
$
2.57
Impact from restructuring-related expenses and acquisition and
divestiture costs (d) (h)
0.23
0.23
Impact from net gain on sales of Speedpay and Paymap ($- dollars)
(g)
(1.00
)
(1.00
)
Earnings per share, adjusted, excluding restructuring-related
expenses, acquisition and divestiture costs, and net gain on sales
of Speedpay and Paymap ($- dollars)
$
1.70
$
1.80
FY 2019 Outlook
Operating cash flow (GAAP) ($- millions)
$
800
Impact from estimated cash payments related to
restructuring-related expenses and acquisition and divestiture
costs ($- millions) (d) (h)
60
Impact from tax payments related to net gain on Speedpay and Paymap
divestitures, net of related reductions to tax payments ($-
millions) (g)
90
Operating cash flow, adjusted, excluding estimated cash payments
related to restructuring-related expenses, acquisition and
divestiture costs, and impact from tax payments related to net gain
on Speedpay and Paymap divestitures, net of related reductions to
tax payments ($- millions)
$
950
THE WESTERN UNION COMPANY NOTES TO NON-GAAP
AND GAAP FINANCIAL MEASURES (Unaudited)
Non-GAAP related notes:
(a)
Represents tax payments,
including accrued interest, net of related tax benefits made to the
Internal Revenue Service ("IRS") in connection with the
restructuring of our international operations in 2003, as further
described in our 2018 Annual Report on Form 10-K.
(b)
Represents the impact from an
accrual for a consent order with the New York State Department of
Financial Services (“NYDFS”), as described in our Form 8-K filed
with the Securities and Exchange Commission on January 4, 2018
(referred to as the “NYDFS Consent Order”). 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. 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.
(c)
Represents amounts related to
transforming 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”). Amounts related to the WU Way business
transformation were recognized beginning in the second quarter of
2016, and each subsequent quarter in 2017. 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.
(d)
Represents the impact from
expenses incurred in connection with our acquisition and
divestiture activity, including the Speedpay and Paymap
divestitures. We believe that, by excluding the effects of these
charges that can impact operating trends, management and investors
are provided with a measure that increases the comparability of our
underlying operating results.
(e)
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 eliminated any fair value associated with
these cash management strategies. 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.
(f)
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, 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. 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.
(g)
On May 9, 2019, we completed the
sale of our United States electronic bill payments business known
as “Speedpay” to ACI Worldwide Corp. and ACW Worldwide, Inc. for
approximately $750 million in cash. In addition, on May 6, 2019, we
completed the sale of Paymap Inc. ("Paymap"), which provides
electronic mortgage bill payment services, for contingent
consideration and immaterial cash proceeds received at closing.
Earnings per share has been adjusted to exclude the gain on the
sales of Speedpay and Paymap and the income taxes on the gain,
including the elimination of previously forecasted annual
base-erosion anti-abuse taxes, has also been removed. Additionally,
cash flows from operating activities outlook has been adjusted to
exclude taxes paid on the gain from Speedpay and Paymap
divestitures, net of related reductions to previously expected
base-erosion anti-abuse tax payments. We have included this
information because management believes that presenting these
measures as adjusted to exclude divestitures will provide investors
with a more meaningful comparison of results within the periods
presented.
(h)
Represents impact from expenses
incurred in connection with an overall restructuring plan, approved
by the Company's Board of Directors on August 1, 2019, to improve
the Company’s business processes and cost structure by reducing the
Company’s headcount and consolidating various facilities. While
these expenses are specific to this initiative, the types of
expenses related to this initiative are similar to expenses that
the Company has previously incurred and can reasonably be expected
to incur in the future. We believe that, by excluding the effects
of these charges that can impact operating trends, management and
investors are provided with a measure that increases the
comparability of our underlying operating results.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190924005280/en/
Media Relations: Pia De Lima +1 (786) 857-5050
Pia.DeLima@westernunion.com Investor Relations: Brad Windbigler +1
(720) 332-2510 brad.windbigler@westernunion.com
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