DENVER–(BUSINESS WIRE)– The Western Union Company (NYSE: WU), a global leader in cross-border, cross-currency money movement and payments, today reported fourth quarter and full year financial results for 2020 and provided a financial outlook for 2021.
The Company’s fourth quarter revenue of $1.3 billion declined 3% compared to the prior year period, or 1% on a constant currency basis that includes a 1% benefit from inflation in Argentina. The decline in revenue reflected the ongoing macro-economic impact from COVID-19, partially offset by strength in digital money transfer which grew 36% to a new quarterly high of $240 million.
GAAP earnings per share in the fourth quarter was $0.43 compared to $0.32 in the prior year period. Adjusted earnings per share was $0.45 compared to $0.38 in the prior year period, with declines in revenue more than offset by a lower effective tax rate, productivity and cost savings, and lower share count.
The Company increased its quarterly dividend by 4% to $0.235 per common share, payable March 31, 2021 to shareholders of record at the close of business on March 17, 2021.
President and CEO Hikmet Ersek said, “2020 was an unprecedented year for the global community and Western Union, and I am proud of how we responded to a range of COVID-19 challenges and ensured our services were available for customers to provide critical economic support to loved ones and communities around the world. We applaud the heroic efforts of our customers, many of whom have worked on the front lines in essential services of host communities during this crisis, while selflessly contributing to improved quality of life in home nations.”
Ersek added, “The strong underlying fundamentals of our business really stood out this year, as we quickly began to rebound from an early, historic economic shock, finished with solid fourth quarter momentum, and still generated strong full year margins and cash flow. Despite the disruption from the pandemic, we remained highly focused on our growth strategy, driving exceptional results in our digital business and building the foundation for our future. As we begin 2021, uncertainty remains elevated but we are optimistic that business will continue to improve gradually, with expectations that our digital revenues will reach approximately $1 billion in 2021. In addition, we have a compelling strategic agenda that should position us to expand our offerings and markets to drive profitable, long-term growth that we believe will create value for shareholders.”
CFO Raj Agrawal stated, “We delivered solid results again in the fourth quarter, which contributed to full year 2020 results that met or exceeded the financial outlook we reinstituted with third quarter results in October. I am pleased to say that the resilience of our business, coupled with prudent management of costs and capital, enabled us to achieve the 21% adjusted margin we initially targeted for 2020, generate $878 million of operating cash flow, return $587 million of cash to shareholders, and continue to invest to drive our strategy forward. In summary, we had very strong financial performance despite a historic economic disruption. Assuming no further macro-economic setbacks, we expect the business will continue to improve in 2021 and are issuing a full year financial outlook that includes mid-single digit constant currency revenue growth and EPS in a range of $2.00 to $2.10.”
Q4 Business Highlights
- Consumer-to-Consumer (C2C) transactions increased 6% in the quarter, while revenues were flat on both a reported and constant currency basis. C2C revenues represented 88% of total Company revenue in the quarter. Within the C2C segment, cross-border money transfer revenues grew 2% and were offset by declines in domestic money transfers. Transaction growth was led by Europe and CIS, U.S. outbound, and the Middle East, partially offset by declines in U.S. domestic money transfer and Latin America and the Caribbean.
- Digital money transfer revenues increased 36% on a reported basis in the quarter, or 35% constant currency, and represented 21% and 32% of total C2C revenues and transactions, respectively. Digital money transfer reached new quarterly highs for transactions, principal, and revenues in the current year period. Westernunion.com revenue grew 27% on a reported basis and 26% constant currency, including cross-border revenue growth of 38%.
- Westernunion.com average monthly active customers for the fourth quarter increased 49% year-over-year. Westernunion.com was the most downloaded mobile app among peer money transfer companies during the fourth quarter, according to data provided by mobile app marketing firm Sensor Tower1. Westernunion.com service is available in over 75 countries and territories. Account payout is available in approximately 120 countries, with real-time capabilities to select bank accounts and digital wallets in approximately 100 countries, and retail payout in over 200 countries and territories.
- Western Union Business Solutions revenues declined 8% on a reported basis, or 11% constant currency, primarily due to the ongoing macro-economic impact of COVID-19 on travel and tourism, small and medium-sized enterprises, and education, along with decreased cross-border trade more broadly. Other revenues, which consists primarily of retail bill payments in the U.S. and Argentina, as well as money orders, declined 29% primarily due to the impact of COVID-19 and the depreciation of the Argentine peso. Business Solutions and Other represented 7% and 5%, respectively, of total Company revenue.
1Data obtained from Sensor Tower App Install Market Share Report
Additional Q4 Financial Highlights
- GAAP operating margin in the quarter was 17.9% compared to 17.3% in the prior year period, with the increase primarily driven by productivity and cost savings, the timing of marketing investments, partially offset by declines in revenue. Adjusted operating margin was 18.8% compared to 18.7% in the prior year period with the increase driven by the same factors noted above and adjusted for restructuring expenses and acquisition and divestiture costs.
- The GAAP effective tax rate in the quarter was 11.0% compared to 31.4% in the prior year period, and the adjusted tax rate was 11.6% in the quarter compared to 24.5% in the prior year period. The decreases in the Company’s GAAP and adjusted effective tax rates compared to the prior year period were primarily due to higher prior period domestic pre-tax income associated with the sales of the Speedpay and Paymap businesses, prior period one-time settlements in certain geographies, and discrete tax benefits in the current period.
- The Company paid $93 million in dividends and did not repurchase shares during the fourth quarter. The Company has resumed share repurchases in the first quarter of 2021.
2020 Full Year Financial Highlights
- The Company’s full year revenue of $4.8 billion declined 9% compared to the prior year, or 3% on an adjusted constant currency basis that includes a 1% benefit from inflation in Argentina. The decline in reported revenue was largely driven by the macro-economic impact of COVID-19, changes in foreign currency exchange rates, and the divestitures of Speedpay and Paymap, partially offset by strength in digital money transfer revenue which grew 38% compared to the prior year and surpassed $850 million. The decline in adjusted constant currency revenue was largely driven by the macro-economic impact of COVID-19, partially offset by strength in digital money transfer.
- GAAP operating margin was 20.0% compared to 17.6% in the prior year. The increase in GAAP operating margin was attributable to productivity and cost savings and lower restructuring expenses, partially offset by lower revenues. Adjusted operating margin was 20.8% compared to 20.1% in the prior year with margin expansion driven by the same factors noted above and adjusted for restructuring expenses and acquisition and divestiture costs.
- The GAAP effective tax rate for the year was 12.9% compared to 19.9% in the prior year, and the adjusted tax rate was 13.0% compared to 19.7% in 2019. The decreases in the GAAP and adjusted effective tax rates were primarily due to higher prior period domestic pre-tax income associated with the sales of the Speedpay and Paymap businesses, prior period one-time settlements in certain geographies, and discrete tax benefits in the current year.
- GAAP earnings per share was $1.79 compared to $2.46 in 2019. The decrease in earnings per share was primarily due to the gain on the sale of the Speedpay business in 2019 and declines in revenue in 2020, partially offset by productivity and cost savings, a lower effective tax rate, and lower restructuring expenses.
- Adjusted earnings per share was $1.87 compared to $1.73 in 2019. The increase in adjusted earnings per share was primarily due to productivity and cost savings, a lower effective tax rate, and fewer shares outstanding, partially offset by lower revenues.
- GAAP cash flow from operating activities for the year was $878 million. The Company returned $587 million to shareholders in dividends and share repurchases for the full year.
The Company expects the following financial outlook for full year 2021, which assumes no material worsening in macro-economic conditions or the COVID-19 pandemic. While we expect solid full-year results, we anticipate quarterly variability in year-over-year growth rates as we cycle through the impact that COVID-19 had on the business last year:
Adjusted constant currency revenue metrics for 2020 exclude revenues for the Speedpay and Paymap businesses in the prior year period, each of which was divested in May 2019. Adjusted operating profit, tax rate, and earnings per share metrics for 2020 periods exclude restructuring expenses and acquisition and divestiture costs, net of related taxes, as applicable.
Adjusted constant currency revenue metrics for 2019 exclude revenues for the Speedpay and Paymap businesses. Adjusted operating profit metrics for 2019 periods exclude restructuring expenses and acquisition and divestiture costs. Adjusted tax rate and earnings per share metrics for 2019 periods exclude the impact of the net gain on the Speedpay and Paymap divestitures, restructuring expenses, and acquisition and divestiture costs. Restructuring expenses are not included in operating segment results.
Although the Company has previously incurred and can reasonably be expected to incur restructuring costs in the future, these expenses are specific to the implementation of the Global Strategy initiative and the Company has therefore provided adjusted financial results that exclude these expenses.
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.
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.
Investor and Analyst Conference Call and Slide Presentation
The Company will host a conference call and webcast, including slides, at 4:30 p.m. Eastern Time today. To listen to the conference call via telephone, dial +1 (888) 317-6003 (U.S.) or +1 (412) 317-6061 (outside the U.S.) ten minutes prior to the start of the call. The pass code is 3185377.
The conference call and accompanying slides will be available via webcast at https://ir.westernunion.com. Registration for the event is required, so please register at least five minutes prior to the scheduled start time.
A webcast replay will be available at https://ir.westernunion.com.
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 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, 2019. 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, or 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, 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 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, 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; 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; 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; changes in tax laws or their interpretation, 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 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; 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 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 over 130 currencies. We connect businesses, financial institutions, governments, and consumers through one of the world’s widest reaching networks, accessing billions of bank accounts, millions of digital wallets and cards, and over half a million-retail locations. Western Union connects the world to bring boundless possibilities within reach. For more information, visit www.westernunion.com.
Pia De Lima
Source: The Western Union Company