Western Union : Press Release (PDF 440 KB)

FOR IMMEDIATE RELEASE

Western Union Reports Second Quarter 2022 Results

Second quarter GAAP earnings per share (EPS) of $0.50, adjusted EPS of $0.51; 23.2%

GAAP operating margin, 23.3% adjusted operating margin

Company to provide update on global long-term strategy at investor day on October 20, 2022

2022 financial outlook revised

DENVER, August 3, 2022: The Western Union Company (NYSE: WU), a global leader in cross-border,cross-currency money movement and payments, today reported second quarter 2022 financial results and updated its full year financial outlook.

The Company's second quarter revenue of $1.1 billion declined 12% on a reported basis, or 4% on a constant currency basis excluding the contribution from Business Solutions, compared to the prior year period. The suspension of operations in Russia and Belarus negatively impacted revenue by approximately three percentage points, while Argentina inflation benefited revenue by approximately one percentage point. Second quarter revenue was impacted by continued softness in retail money transfer.

GAAP EPS in the second quarter was $0.50, compared to $0.54 in the prior year period. The year-over-year decrease in GAAP EPS was primarily due to a gain on investment sale recognized in the prior year period.

Adjusted EPS in the second quarter was $0.51, compared to $0.48 in the prior year period. Year- over-year growth in adjusted EPS was driven by lower share count and higher operating margin, partially offset by a higher effective tax rate. For a full reconciliation between GAAP and Adjusted EPS, please see the "Adjustment Items" section of this press release.

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"Having spent the last six months with my senior leadership team reviewing all aspects of our business, I believe the long-term prospects for the Company remain strong," said Devin McGranahan, President and Chief Executive Officer of Western Union. "We have identified new business opportunities and operational performance improvements, as well as started to create an organizational structure that can drive execution. We are beginning to see the effects of certain operational improvements in second quarter margin results, and I look forward to sharing additional details at our upcoming Investor Day in October."

McGranahan added, "Despite elevated macroeconomic stress and heightened geopolitical uncertainty, revenue growth, while below long-term aspirations, largely performed in-line with expectations during second quarter. We expect that the macroeconomic environment will continue to slow as the year progresses in-line with the current prevailing forecasts. Historically, remittances have been resilient in periods of economic contraction due to their largely nondiscretionary nature; however, portions of our core customer segment may be vulnerable."

CFO Raj Agrawal stated, "I was pleased with our expense management in the quarter, creating capacity, as we begin to shift focus to investing ahead of our updated long-term strategy. We expect to increase investment levels in the second half of the year, which is reflected in our revised adjusted operating margin outlook of between 20% to 21% for 2022, higher than our previous outlook."

Q2 Business Highlights

• Consumer-to-Consumer(C2C) revenues declined 9% on a reported basis, or 6% constant currency, while transactions declined 13% compared to the prior year period. As expected, the suspension of operations in Russia and Belarus negatively impacted C2C revenue and transactions, decreasing C2C reported and constant currency revenue by three percentage points and decreasing C2C transactions by eight percentage points in the quarter. Regionally, transaction declines in Europe and CIS, North America, APAC, and MEASA were partially offset by transaction growth in LACA.
• Digital money transfer revenues declined 6% on a reported basis, or 3% constant currency, and represented 25% and 33% of total C2C revenues and transactions, respectively. As expected, the suspension of operations in Russia and Belarus negatively impacted digital money transfer revenue and transactions, decreasing reported and constant currency revenue by six percentage points and decreasing transactions by 19 percentage points.

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• Westernunion.com revenue declined 1% on a reported basis, or grew 1% on a constant currency basis, including cross-border revenue growth of 1%. As expected, the suspension of operations in Russia and Belarus negatively impacted Westernunion.com revenue and transactions, decreasing reported revenue, constant currency revenue, and transactions by two percentage points.

Q2 Financial Highlights

• GAAP operating margin in the quarter was 23.2%, compared to 19.8% in the prior year period. The adjusted operating margin was 23.3% compared to 20.2% in the prior year period, with the prior year negatively impacted by 60 basis points from the inclusion of Business Solutions. The increase in adjusted operating margin was primarily due to changes in foreign currency, lower compensation-related expenses, and product mix. For a detailed reconciliation between GAAP and Adjusted operating margin, please see the "Adjustment Items" section of this press release.
• The GAAP effective tax rate in the quarter was 17.9%, compared to 14.5% in the prior year period, and the increase was primarily due to the sale of Business Solutions and the Company's decision to suspend its operations in Russia and Belarus. The adjusted effective tax rate was 16.9% in the quarter, compared to 14.2% in the prior year period, primarily due to an increase in the proportion of higher taxed earnings and the effects of changes in U.S. tax rules.
• Cash flow from operating activities was $307 million year-to-date, which includes a transition tax payment of $64 million paid in the second quarter. These transition tax payments resulted from United States tax reform legislation enacted in 2017 and stop after 2025. The Company returned $112 million to shareholders in the second quarter, consisting of $91 million in dividends and $21 million of share repurchases.

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2022 Outlook

Today, the Company revised its full year 2022 financial outlook, lowering its revenue outlook and raising its operating profit margin outlook for the year based on the timing of expenses, better than expected cost management year-to-date, as well as a softer environment for topline trends. The revised revenue outlook includes a partial year impact related to a key retail agent exiting the category in the Europe and CIS region in the fourth quarter of 2022. A second key retail agent in Europe and CIS will exit the category beginning in the second quarter of 2023. The GAAP revenue outlook was also adjusted to reflect changes in exchange rates. The revised outlook assumes that macroeconomic conditions will continue to soften as the year progresses.

GAAP figures reflect an expected partial year of Business Solutions ownership, including contractual payments to the buyers, representing profits between the first and second closings, associated divestiture and acquisition costs, exit costs, and an estimated pre-tax gain of approximately $270 million for the full year, of which $151 million was recognized year-to-date. The second closing is expected to be completed in the fourth quarter of 2022, subject to regulatory approvals, at which time the remainder of the gain will be recognized subject to regulatory capital adjustments.

Adjusted revenue growth and operating margin exclude contributions from Business Solutions. In addition, adjusted operating margin excludes associated divestiture and acquisition costs, Business Solutions exit costs, and costs related to the exit from Russia and Belarus. The adjusted effective tax rate and EPS exclude the expected gain on sale, divestiture and acquisition costs, Business Solutions exit costs, and exit costs from Russia and Belarus.

Revenue

GAAP: approximately -11% to -13% (previously approximately - 9% to -11%)

Adjusted (constant currency, excluding the impact of Argentina

inflation and proforma for the planned sale of Business

Solutions): mid-single digit decline (previously low-single digit

decline)

Operating Profit Margin

GAAP and Adjusted: a range of 20% to 21% (previously approximately 20%)

Effective Tax Rate

GAAP: approximately 20% (previously approximately 21%)

Adjusted: mid-teens range

EPS

GAAP: $2.18 - $2.28 (previously $2.13 - $2.23)

Adjusted: $1.75 - $1.85

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Adjustment Items

Adjusted constant currency revenue growth metrics for 2022 exclude contributions from Business Solutions as the Company entered into an agreement to sell the business in 2021 and the first of two closings occurred on March 1, 2022. Adjusted operating profit metrics for 2022 exclude contributions from Business Solutions, acquisition and divestitures costs, Russia and Belarus exit costs, and Business Solutions exit costs. Adjusted tax rate and earnings per share metrics for 2022 periods exclude the following items and the related taxes, as applicable: acquisition and divestiture costs, Russia and Belarus exit costs, Business Solutions exit costs, and gain on the sale of Business Solutions.

Adjusted constant currency revenue growth metrics for 2021 exclude contributions from Business Solutions. Adjusted operating profit metrics for 2021 periods exclude acquisition and divestiture costs. Adjusted tax rate and earnings per share metrics for 2021 periods exclude the following items and the related taxes, as applicable: acquisition and divestiture costs (all quarters), the impact from the gain on an investment sale (second quarter), debt retirement expenses (second quarter), Business Solutions change in permanent reinvestment tax assertion (third quarter), and non-cash expenses associated with the termination of the Company's pension plan (fourth quarter).

Additional Statistics

Additional key statistics for the quarter and historical trends can be found in the supplemental tables included with this press release.

All amounts included in the supplemental tables to this press release are rounded to the nearest tenth of a million, except as otherwise noted. As a result, the percentage changes and margins disclosed herein may not recalculate precisely using the rounded amounts provided.

Non-GAAP Measures

Western Union presents a number of non-GAAP financial measures because management believes that these metrics provide meaningful supplemental information in addition to the GAAP metrics and provide comparability and consistency to prior periods. Constant currency results assume foreign revenues are translated from foreign currencies to the U.S. dollar, net of the effect of foreign currency hedges, at rates consistent with those in the prior year.

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