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Oct 23, 2006
Western Union Announces Third Quarter Results
Revenue up 12%, EPS of $0.34
ENGLEWOOD, Colo., Oct 23, 2006 (BUSINESS WIRE) -- The Western Union Company (NYSE:WU) today reported financial results for the third quarter of 2006.
Highlights for the quarter include:
-- Revenue of $1.1 billion, increased 12%
-- Operating income of $337 million
-- Net income was $258 million
-- Earnings per share of $0.34
-- Operating margin of 29.6%
-- Cash flow from operations of more than $750 million for first nine months of 2006
-- Key agent signings and renewals
Western Union President and CEO Christina Gold commented, "We delivered third quarter results that were in line with the targets we communicated on September 18. During the quarter we saw strong, consistent growth in our international markets, which represent 60% of total Western Union revenue. This strong international performance offset softness in our domestic and Mexico businesses. Our overall performance highlights the importance of having the most geographically diverse portfolio in the industry.
"In addition, we successfully completed our separation from First Data and made progress against a number of our strategic goals including the expansion of our agent network. We operate through an agent network in more than 200 countries and territories, which now totals approximately 285,000 locations. A key element of our success is the ability to extend and add to our agent relationships. On that front, we recently renewed our relationships with Publix Super Markets, one of our largest U.S. agents, and Banamex, one of our super agents in Mexico, and we added a fifth country to our Standard Chartered Bank network. Additionally, we established many new relationships around the world -- Harris Teeter in the U.S.; The Banco De La Nacion Argentina, the largest bank in Argentina; UralSib Bank, the second largest bank in Russia; and Barclays Bank in Ghana.
"I remain confident that our brand, our distribution network and our leadership position in the rapidly growing money transfer business will fuel long-term growth for the company."
Third Quarter Results
Revenue for the third quarter increased 12% to $1.1 billion from $1.0 billion a year ago. This increase was driven by 14% revenue growth in the consumer-to-consumer segment and 4% growth in the consumer-to-business segment. Vigo, which was acquired October 21, 2005, contributed $37 million of revenue in the quarter. Revenue growth excluding Vigo was 8%.
The consumer-to-consumer segment achieved transaction growth of 24%, or 15% excluding Vigo. The international business posted transaction growth of 30%, or 23% excluding Vigo.
In the third quarter, domestic money transfer transactions declined 5%. The weakness in the domestic business was primarily attributable to softness in demand among Western Union's Hispanic consumers as a result of the controversy surrounding immigration.
Western Union branded transactions from the U.S. to Mexico, which were also impacted by the immigration controversy, increased 4%. This contrasts with higher growth rates in Western Union's U.S. to Mexico corridor during 2004 and 2005.
Operating margin for the company was 29.6% for the third quarter, a 400 basis point decrease from third quarter 2005. Operating margin in the third quarter 2006 was impacted by:
-- Ongoing mix shift from the more profitable domestic and Mexico businesses to the faster growing, lower margin, international business
-- $14 million of expenses related to the spin-off from First Data -- primarily increased stock option costs related to the grants at the time of the spin; employee recruitment and relocation costs; workforce reorganization; and costs incurred in preparation for operating as a stand-alone company
-- Vigo delivered $37 million of revenue and was break even on profits
Third quarter pre-tax income included $5.4 million in net derivative gains and $14.2 million of positive currency impact on net notes receivable from First Data Corporation affiliates.
Outlook
Gold noted, "We are extremely focused on performance within the Mexico and domestic businesses and are confident that the steps we are taking will deliver improved results over time. Meanwhile, our international business continues to grow as we expand our network and build the Western Union brand around the world. Total consumer-to-consumer transaction growth during the first three weeks of October is consistent with growth in the third quarter."
Western Union is on plan to deliver its previously stated guidance. Full-year 2006 revenue growth is expected to be in the range of 11% to 12% with operating income growth, excluding the impact of expenses related to its spin-off from First Data, of 4% to 6%.
For 2007, Western Union expects to deliver revenue growth in the range of 10% to 12%, excluding acquisitions, and operating income growth of 6% to 9%, excluding the impact of expenses related to its spin-off from First Data.
Non-GAAP Measures
Western Union's management uses operating income growth excluding the impact of expenses related to the spin-off from First Data, which is a non-GAAP measure, as it provides a more meaningful year-over-year comparison. On a GAAP basis, operating profit growth is projected to be in the range of 1% to 2% in 2006, and 3% to 6% for 2007.
Reconciliations of non-GAAP to comparable GAAP measures are available in the accompanying schedules and in the "Investor Relations" section of the company's web site at www.westernunion.com.
Investor and Analyst Conference
Western Union will hold an investor and analyst conference call tomorrow, October 24, at 10:00 a.m. Eastern Time. Christina Gold, CEO, will host the call. To listen to the broadcast, please log on to http://www.westernunion.com at least 15 minutes prior to the start of the call. To participate in the call, dial 866-510-0711 (U.S.) or +1-617-597-5379 (outside the U.S.) ten minutes prior to the start of the call. The pass code is 15045493. A replay of the call will be available one hour after the call ends through November 7, 2006 at 5:00 p.m. Eastern Time at 888-286-8010 (U.S.) or +1-617-801-6888 (outside the U.S.). The pass code is 54846672. A webcast replay will be available at www.westernunion.com for the same time period.
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 forward-looking statements regarding projected future results. Forward-looking statements include all statements that do not relate solely to historical or current facts, and generally can be identified by the use of words such as "may," "believe," "will," "expect," "project," "estimate," "anticipate," "plan," "could," "would," "likely," "intend" or "continue". All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties which could cause actual events or results to differ materially from those projected. These factors include, but are not limited to: the impact of our spin-off from First Data Corporation; changes in immigration laws, patterns and other factors related to immigrants; the integration of significant businesses and technologies we acquire and realization of anticipated synergies from these acquisitions; technological changes, particularly with respect to e-commerce; our ability to attract and retain qualified key employees; changes in laws, regulations or industry standards affecting our businesses; changes in foreign exchange spreads on money transfer transactions; changes in the political or economic climate in countries in which we operate; continued growth in the consumer money transfer market and other markets in which we operate at rates approximating recent levels; our ability to compete effectively in the money transfer industry with respect to global and niche or corridor money transfer providers, United States and international banks, card associations, card-based payments providers and a number of other types of competitive service providers; our ability to maintain our agent network; implementation of Western Union agent agreements with governmental entities according to schedule and no interruption of relations with countries in which Western Union has or is implementing material agent agreements; successfully managing the potential both for patent protection and patent liability in the context of rapidly developing legal framework for expansive software patent protection; successfully managing credit and fraud risks from our agents and from consumers; unanticipated developments relating to lawsuits, investigations or similar matters; catastrophic events; and any material breach of security of any of our systems. For more information on important factors upon which these forward-looking statements are premised, please refer to the information statement contained in The Western Union Company Form 10, declared effective by the Securities and Exchange Commission.
About Western Union
Western Union, together with its affiliates Orlandi Valuta and Vigo, is a leader in global money transfer, providing people with fast, reliable and convenient ways to send money around the world, pay bills and purchase money orders through a network of approximately 285,000 agent locations in more than 200 countries and territories. For more information, visit www.westernunion.com.
THE WESTERN UNION COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in millions, except per share amounts)
Three Months Nine Months
Ended September 30, Ended September 30,
2006 2005 Change 2006 2005 Change
Revenues:
Transaction fees $940.1 $853.9 10% $2,731.7 $2,458.1 11%
Foreign exchange
revenue 169.0 137.4 23% 478.6 386.0 24%
Commission and other
revenues 31.3 28.0 12% 86.7 75.6 15%
------------------------ ------------------------
Total revenues 1,140.4 1,019.3 12% 3,297.0 2,919.7 13%
Expenses:
Cost of services 626.0 528.5 18% 1,779.4 1,523.8 17%
Selling, general and
administrative 177.3 148.1 20% 541.4 440.6 23%
------------------------ ------------------------
Total expenses 803.3 676.6 19% 2,320.8 1,964.4 18%
Operating income 337.1 342.7 -2% 976.2 955.3 2%
Derivative
gains/(losses), net 5.4 1.8 (a) (21.8) 38.6 (a)
Foreign exchange
effect on notes
receivable from First
Data, net 14.2 (0.8) (a) 10.1 (10.6) (a)
Interest income from
First Data, net 12.2 5.1 (a) 35.7 14.3 (a)
Interest Expense (1.1) - (a) (1.1) - (a)
Other income, net 12.1 2.5 (a) 29.5 8.3 (a)
------------------------ ------------------------
Income before income
taxes 379.9 351.3 8% 1,028.6 1,005.9 2%
Provision for income
taxes 121.8 109.4 11% 331.8 312.4 6%
------------------------ ------------------------
Net income $258.1 $241.9 7% $696.8 $693.5 0%
======================== ========================
Weighted-average
shares outstanding:
Basic 763.9 763.9 0% 763.9 763.9 0%
Diluted 764.0 763.9 0% 763.9 763.9 0%
Earnings per share:
Basic $0.34 $0.32 6% $0.91 $0.91 0%
Diluted $0.34 $0.32 6% $0.91 $0.91 0%
(a) Calculation not meaningful
THE WESTERN UNION COMPANY
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
September 30, 2006 December 31, 2005
(unaudited)
Assets
Cash and cash equivalents $1,327.6 $510.2
Settlement assets 1,218.3 929.1
Receivables from First Data, net - 192.8
Notes receivable from First Data - 751.5
Property and equipment, net of
accumulated depreciation of
$206.2 and $183.6, respectively 157.8 82.4
Goodwill 1,600.7 1,618.0
Other intangible assets, net of
accumulated amortization of
$191.0 and $155.6, respectively 260.3 180.4
Other assets 473.9 342.0
------------------ ------------------
Total assets $5,038.6 $4,606.4
================== ==================
Liabilities and Stockholders'
(Deficiency)/Net Investment in
The Western Union Company
Liabilities:
Accounts payable and accrued
liabilities 418.6 238.6
Settlement obligations 1,216.5 926.7
Pension obligations 70.1 69.8
Deferred tax liability, net 268.8 248.1
Notes payable to First Data - 163.5
Borrowings 3,499.6 -
Other liabilities 139.6 147.9
------------------ ------------------
Total liabilities $5,613.2 $1,794.6
Stockholders' (Deficiency)/Net
Investment in The Western Union
Company:
Preferred stock, $1.00 par
value; 10 shares authorized;
no shares issued and
outstanding - -
Common stock, $0.01 par value;
2,000 shares authorized;
766.5 shares issued and
outstanding 7.7 -
Capital deficiency (525.4) -
Net investment in The Western
Union Company - 2,873.9
Retained earnings/(deficit) (1.5) -
Accumulated other
comprehensive loss (55.4) (62.1)
------------------ ------------------
Total Stockholders'
(Deficiency)/Net Investment
in The Western Union Company (574.6) 2,811.8
------------------ ------------------
Total Liabilities and
Stockholders' (Deficiency)/ Net
Investment in The Western Union
Company $5,038.6 $4,606.4
================== ==================
THE WESTERN UNION COMPANY
SUMMARY SEGMENT DATA
(Unaudited)
(in millions)
Three Months Nine Months
Ended September 30, Ended September 30,
2006 2005 Change 2006 2005 Change
Revenues:
Consumer-to-
Consumer:
External revenue
Transaction fees $783.6 $695.8 13% $2,253.0 $1,985.8 13%
Foreign exchange
revenue 168.6 137.0 23% 477.5 385.0 24%
Other revenues 9.0 8.3 8% 24.5 19.6 25%
----------------------- -------------------------
Total Consumer-to-
Consumer: 961.2 841.1 14% 2,755.0 2,390.4 15%
Consumer-to-
Business:
External revenue
Transaction fees 146.8 143.0 3% 444.5 422.8 5%
Other revenues 11.0 9.1 21% 29.6 25.6 16%
----------------------- -------------------------
Total Consumer-to-
Business: 157.8 152.1 4% 474.1 448.4 6%
Other:
External revenue 21.4 26.1 -18% 67.9 80.9 -16%
Internal revenue - 1.2 -100% 0.9 3.9 -77%
----------------------- -------------------------
Total Other: 21.4 27.3 -22% 68.8 84.8 -19%
Eliminations - (1.2) -100% (0.9) (3.9) -77%
----------------------- -------------------------
Total revenues 1,140.4 1,019.3 12% 3,297.0 2,919.7 13%
Operating income:
Consumer-to-
Consumer 280.2 283.1 -1% 796.8 778.1 2%
Consumer-to-
Business 53.8 56.6 -5% 166.0 168.6 -2%
Other 3.1 3.0 3% 13.4 8.6 56%
----------------------- -------------------------
Total operating
income $337.1 $342.7 -2% $976.2 $955.3 2%
======================= =========================
Operating profit
margin:
Consumer-to-
Consumer 29.2% 33.7% -5 pts 28.9% 32.6% -4 pts
Consumer-to-
Business 34.1% 37.2% -3 pts 35.0% 37.6% -3 pts
Other 14.5% 11.0% 4 pts 19.5% 10.1% 9 pts
----------------------- -------------------------
Total operating
profit margin 29.6% 33.6% -4 pts 29.6% 32.7% -3 pts
Depreciation and
Amortization:
Consumer-to-
Consumer 20.2 12.6 60% 57.9 38.3 51%
Consumer-to-
Business 4.5 5.0 -10% 13.7 15.1 -9%
Other 1.4 1.3 8% 3.6 4.5 -20%
----------------------- -------------------------
Total depreciation
and amortization 26.1 18.9 38% 75.2 57.9 30%
THE WESTERN UNION COMPANY
QUARTERLY INCOME STATEMENT
(Unaudited)
(in millions, except per share amounts)
Q1 2005 Q2 2005 Q3 2005 Q4 2005 2005
Revenues:
Transaction fees $778.1 $826.1 $853.9 $896.7 $3,354.8
Foreign exchange revenue 118.0 130.6 137.4 145.0 531.0
Commission and other
revenues 23.5 24.1 28.0 26.5 102.1
---------------------------------------------
Total revenues 919.6 980.8 1,019.3 1,068.2 3,987.9
Expenses:
Cost of services 483.6 511.7 528.5 595.1 2,118.9
Selling, general and
administrative 140.4 152.1 148.1 159.2 599.8
---------------------------------------------
Total expenses 624.0 663.8 676.6 754.3 2,718.7
Operating income 295.6 317.0 342.7 313.9 1,269.2
Income before income
taxes 315.7 338.9 351.3 338.2 1,344.1
Provision for income
taxes 97.9 105.1 109.4 104.3 416.7
---------------------------------------------
Net income $217.8 $233.8 $241.9 $233.9 $927.4
Diluted Earnings Per
Share $0.29 $0.31 $0.32 $0.31 $1.21
Q1 2006 Q2 2006 Q3 2006
Revenues:
Transaction fees $869.9 $921.7 $940.1
Foreign exchange revenue 144.5 165.1 169.0
Commission and other
revenues 28.6 26.8 31.3
---------------------------
Total revenues 1,043.0 1,113.6 1,140.4
Expenses:
Cost of services 557.8 595.6 626.0
Selling, general and
administrative 172.5 191.6 177.3
---------------------------
Total expenses 730.3 787.2 803.3
Operating income 312.7 326.4 337.1
Income before income
taxes 324.9 323.8 379.9
Provision for income
taxes 105.1 104.9 121.8
---------------------------
Net income $219.8 $218.9 $258.1
Diluted Earnings Per
Share $0.29 $0.29 $0.34
THE WESTERN UNION COMPANY
QUARTERLY SEGMENT DATA
(Unaudited)
(in millions)
Q1 2005 Q2 2005 Q3 2005 Q4 2005 2005
Revenues:
Consumer-to-Consumer 742.0 807.3 841.1 888.8 3,279.2
Consumer-to-Business 150.8 145.5 152.1 151.8 600.2
Other 28.2 29.3 27.3 28.9 113.7
Eliminations (1.4) (1.3) (1.2) (1.3) (5.2)
---------------------------------------------
Total revenues 919.6 980.8 1,019.3 1,068.2 3,987.9
Operating income:
Consumer-to-Consumer 236.0 259.0 283.1 269.8 1,047.9
Consumer-to-Business 57.2 54.8 56.6 51.8 220.4
Other 2.4 3.2 3.0 (7.7) 0.9
---------------------------------------------
Total operating income $295.6 $317.0 $342.7 $313.9 $1,269.2
Depreciation and
Amortization:
Consumer-to-Consumer 12.9 12.8 12.6 15.7 54.0
Consumer-to-Business 5.2 4.9 5.0 4.7 19.8
Other 1.7 1.5 1.3 1.2 5.7
---------------------------------------------
Total depreciation and
amortization 19.8 19.2 18.9 21.6 79.5
Q1 2006 Q2 2006 Q3 2006
Revenues:
Consumer-to-Consumer 856.8 937.0 961.2
Consumer-to-Business 161.8 154.5 157.8
Other 25.3 22.1 21.4
Eliminations (0.9) - -
---------------------------
Total revenues 1,043.0 1,113.6 1,140.4
Operating income:
Consumer-to-Consumer 247.1 269.5 280.2
Consumer-to-Business 58.7 53.5 53.8
Other 6.9 3.4 3.1
---------------------------
Total operating income $312.7 $326.4 $337.1
Depreciation and
Amortization:
Consumer-to-Consumer 18.8 18.9 20.2
Consumer-to-Business 4.6 4.6 4.5
Other 1.2 1.0 1.4
---------------------------
Total depreciation and
amortization 24.6 24.5 26.1
THE WESTERN UNION COMPANY
KEY INDICATORS
(Unaudited)
(in millions)
Three Months Nine Months
Ended September 30, Ended September 30,
2006 2005 Change 2006 2005 Change
Transactions
Consumer-to-
Consumer 37.6 30.3 24% 107.5 84.4 27%
Consumer-to-
Business 59.4 54.9 8% 180.1 157.2 15%
Revenue
Consumer-to-
Consumer 961.2 841.1 14% 2,755.0 2,390.4 15%
Consumer-to-
Business 157.8 152.1 4% 474.1 448.4 6%
Three Months Nine Months
Ended September 30, 2006 Ended September 30, 2006
Including Excluding Including Excluding
Vigo Vigo Vigo Vigo
Consumer-to-
Consumer
Transaction
Growth
International
(a) 30% 23% 32% 25%
Domestic (b) -5% -5% 0% 0%
Mexico (c) 38% 2% 45% 8%
Consumer-to-
Consumer 24% 15% 27% 18%
Consumer-to-
Consumer Revenue
Growth
International
(a) 18% 16% 17% 14%
Domestic (b) -6% -7% -1% -1%
Mexico (c) 29% -1% 39% 10%
Consumer-to-
Consumer 14% 10% 15% 11%
(a) Represents transactions between and within foreign countries
(excluding Canada and Mexico), transactions originated in the United
States or Canada destined for foreign countries and foreign country
transactions destined for the United States or Canada. Excludes all
transactions between or within the United States and Canada and all
transactions to and from Mexico as reflected in (b) and (c) below.
(b) Represents all transactions between and within the United States
and Canada.
(c) Represents all transactions to and from Mexico.
THE WESTERN UNION COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
(in millions)
Western Union believes the following measures provide meaningful
information to assist management, investors, analysts, and others in
understanding our financial results and to better analyze trends in
our underlying business by removing the incremental expenses, as a
result of the spin-off from First Data, that have resulted in
comparability issues to years where such incremental expenses were
not incurred. 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.
Full Year 2006
-------------------------------------
Operating income, $ 1,320 to $ 1,340
excluding spin expenses: 4% 6%
non-recurring and ongoing
Less spin expenses
Non-recurring spin expenses (a) 15 15
Ongoing spin expenses (b) 25 25
-------------- --------------
40 40
Operating income (GAAP) $ 1,280 to $ 1,300
============== ==============
1% 2%
Full Year 2007
-------------------------------------
Operating income growth, 6% to 9%
excluding spin expenses:
non-recurring and ongoing
Less spin expenses 3% 3%
-------------- --------------
Operating income growth (GAAP) 3% to 6%
============== ==============
(a) Non-recurring spin expenses relate to recruiting and relocation
expenses associated with hiring key management positions new to our
company, other employee compensation expenses and temporary labor
used to develop ongoing processes.
(b) Ongoing spin expenses relate to staffing additions and related
costs to replace First Data support, corporate governance,
information technology, corporate branding and global affairs,
benefits and payroll administration, procurement, workforce
reorganization, stock compensation, and other expenses related to
being a stand-alone company.
SOURCE: The Western Union Company
The Western Union Company Media Sherry Johnson, 720-332-4750 sherry.l.johnson@westernunion.com or Investors Gary Kohn, 720-332-8276 gary.kohn@westernunion.com
Copyright Business Wire 2006
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