Western Union Reports Third Quarter 2022 Results

Third quarter GAAP earnings per share (EPS) of $0.45, adjusted EPS of $0.42; 21.3% GAAP operating margin, 20.6% adjusted operating margin

“Evolve 2025” strategy starts to take root: new digital U.S. outbound customer growth accelerates 26% in September

Reaffirms 2022 Financial Outlook

The Western Union Company (NYSE: WU) today reported third quarter 2022 financial results and reaffirmed its full year financial outlook.

The Company’s third quarter revenue of $1.1 billion declined 15% on a reported basis, or 6% 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.

GAAP EPS in the third quarter was $0.45, compared to $0.57 in the prior year period. The year-over-year decrease in GAAP EPS was primarily due to lower operating profit, partially offset by a lower effective GAAP tax rate and lower share count.

Adjusted EPS in the third quarter was $0.42, compared to $0.63 in the prior year period. The year-over-year decline in adjusted EPS was driven by lower operating profit and a higher adjusted effective tax rate, partially offset by lower share count. For a full reconciliation between GAAP and Adjusted metrics, please see the “Non-GAAP Measures” section of this press release.

In the prior year period, Business Solutions contributed approximately $0.09 to GAAP and adjusted EPS, while operations in Russia and Belarus contributed approximately $0.06 to GAAP and adjusted EPS.

“While third quarter performance was in-line with our prior outlook, it remains below our expectations for longer term results. We remain on track to meet our full year financial outlook,” said Devin McGranahan, President and Chief Executive Officer of Western Union.

McGranahan added, “As a company, we remain focused on execution of our ‘Evolve 2025’ strategy that we shared at Investor Day. While our digital business slowed and performed below our longer-term expectations in the quarter, we were pleased with early positive results of our revised marketing strategy as U.S. outbound new digital customer acquisition accelerated to double-digit growth in the month of September.”

Interim Chief Financial Officer Matt Cagwin stated, “Europe and CIS continued to be the largest drag on results as the epicenter of the conflict in Ukraine. In North America, we saw quarterly sequential improvement in transactions and new customers driven by our enhanced marketing program, while our business in Latin America and Caribbean continued to perform solidly in the quarter.”

Q3 Business Highlights

• C2C revenues declined 11% on a reported basis, or 8% constant currency, while transactions declined 12% compared to the prior year period. The suspension of operations in Russia and Belarus negatively impacted C2C revenue and transactions by 3% and 9%, respectively. 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 12% on a reported basis, or 9% constant currency, while transactions declined 20%. Digital money transfer represented 24% and 34% of total C2C revenues and transactions, respectively. The suspension of operations in Russia and Belarus negatively impacted digital money transfer revenue and transactions by 7% and 22%, respectively.

• Branded Digital revenue declined 8% on a reported basis, or 5% constant currency on transaction declines of 1%. The suspension of operations in Russia and Belarus negatively impacted both Branded Digital revenue and transactions by 2% in the quarter.

Q3 Financial Highlights

• GAAP operating margin in the quarter was 21.3%, compared to 24.8% in the prior year period. The adjusted operating margin was 20.6% compared to 25.2% in the prior year period, with the prior year positively impacted by 90 basis points from the inclusion of Business Solutions. The decrease in the adjusted operating margin in the quarter was primarily due to lower revenue and increased strategic investments in technology and marketing.

• The GAAP effective tax rate in the quarter was 10.2%, compared to 20.2% in the prior year period, and the decrease was primarily due to changes in discrete tax items offset by the sale of Business Solutions and the Company's decision to suspend its operations in Russia and Belarus. The adjusted effective tax rate was 15.5% in the quarter, compared to 13.7% 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 $522 million year-to-date. The Company returned $450 million to shareholders year-to-date, consisting of $273 million in dividends and $177 million of share repurchases.

2022 Outlook

Today, the Company reaffirmed its full year 2022 financial outlook provided on August 3, 2022. The outlook assumes current macroeconomic conditions will continue for the remainder of the year.

During the third quarter, the Company agreed with Goldfinch Partners LLC and The Baupost Group LLC to complete the divestiture of Business Solutions in three closings instead of two, the first of which occurred on March 1, 2022. GAAP figures reflect an expected partial year of Business Solutions ownership, including contractual payments to the buyers, representing profits between the first and third closings, associated divestiture and acquisition costs, exit costs, and an estimated pre-tax gain of approximately $274 million of which $151 million was recognized year-to-date. The second closing, which includes the United Kingdom operations, is currently expected to occur in December 2022, pending required regulatory approvals, and which will result in a pre-tax gain of approximately $93 million, subject to regulatory capital adjustments. The third closing, which includes the European Union operations, is currently expected to occur in the first quarter of 2023, pending required 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 of Business Solutions, acquisition and divestiture costs, Business Solutions exit costs, exit costs from Russia and Belarus, and the reversal of uncertain tax positions.

The 2022 outlook is as follows:

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.

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 https://ir.westernunion.com.

Adjusted constant currency revenue growth metrics for 2022 exclude contributions from Business Solutions. Adjusted operating profit metrics for 2022 exclude contributions from Business Solutions, acquisition and divestiture costs, Russia and Belarus exit costs, and Business Solutions exit costs. The adjusted effective tax rate and EPS metrics for 2022 exclude the expected gain on sale of Business Solutions, acquisition and divestiture costs, Business Solutions exit costs, exit costs from Russia and Belarus, and the reversal of uncertain tax positions.

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, the impact from the gain on an investment sale, debt retirement expenses, Business Solutions change in permanent reinvestment tax assertion, and non-cash expenses associated with the termination of the Company’s pension plan.

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.

Environmental, Social, and Governance (ESG)

Western Union is committed to making a positive impact. For more details on how Western Union is addressing some of the most pressing issues facing society, our shared environment, and our Company, please view our latest ESG report: https://corporate.westernunion.com/esg.

Investor and Analyst Conference Call and Presentation

The Company will host a conference call and webcast at 4:30 p.m. ET today.

To listen to the conference call via telephone in the U.S., dial +1 (669) 900-6833 or +1 (253) 215-8782 fifteen minutes prior to the start of the call, followed by the meeting ID, which is 989 1814 1385 and the passcode, which is 686785. To listen to the conference call via telephone outside the U.S., dial the country number from the international directory, followed by the meeting ID, which is 989 1814 1385 and the passcode, which is 686785.

The webcast and presentation will be available at https://ir.westernunion.com. Registration for the event is required, so please register at least fifteen minutes prior to the scheduled start time. A webcast replay will be available shortly after the event.

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," "projects," "designed to," 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, 2021. 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 other events, such as public health emergencies, epidemics, or pandemics, such as COVID-19, civil unrest, war, terrorism, natural disasters, 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 and customer experience, with global and niche or corridor money transfer providers, banks and other money transfer and payment service providers, including digital, mobile and internet-based services, card associations, and card-based payment providers, and with digital currencies and related exchanges and protocols, and other innovations in technology and business models; geopolitical tensions, political conditions and related actions, including trade restrictions and government sanctions, 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, clients, or other partners; deterioration in customer confidence in our business, or in money transfer and payment service providers generally; failure to maintain our agent network and business relationships under terms consistent with or more advantageous to us than those currently in place; 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; 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; 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; changes in tax laws, or their interpretation, any subsequent regulation, and potential related state income tax impacts, and unfavorable resolution of tax contingencies; 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; our ability to realize the anticipated benefits from restructuring-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; failure to manage credit and fraud risks presented by our agents, clients, and consumers; adverse rating actions by credit rating agencies; our ability to protect our trademarks, patents, copyrights, and 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; 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, data use, the transfer of personal data between jurisdictions, and information security, including with respect to the General Data Protection Regulation in the European Union and the California Consumer Privacy Act; failure to comply with 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 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; (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 and payments. Western Union’s platform provides seamless cross-border flows and its leading global financial network bridges more than 200 countries and territories and approximately 130 currencies. We connect consumers, businesses, financial institutions, and governments through one of the world’s widest reaching networks, accessing billions of bank accounts, millions of digital wallets and cards, and a substantial global network of retail locations. Western Union connects the world to bring boundless possibilities within reach. For more information, visit www.westernunion.com.

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