Western Union Reports Fourth Quarter and Full Year 2022 Results

• Q4 GAAP revenue of $1.1 billion, down 15% on a reported basis, or 6% on an adjusted basis
• GAAP EPS of $0.65, an increase of 55% year-over-year; Adjusted EPS of $0.32, a decrease of 50% year-over-year
• Over $700 million of cash returned to shareholders in 2022; Board of Directors approves Q1 quarterly dividend of $0.235
• New U.S. outbound branded digital customers grew 30% during the fourth quarter

The Western Union Company (the “Company”) (NYSE: WU) today reported fourth quarter and full year 2022 results.

The Company’s fourth 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.

GAAP EPS in the fourth quarter was $0.65 compared to $0.42 in the prior year period. The year-over-year increase in GAAP EPS was primarily due to a non-cash charge related to the termination of the Company’s pension plan in the prior year period, while the current year period was impacted by the gain on sale of the United Kingdom Business Solutions business, a lower GAAP effective tax rate due to the reversal of significant uncertain tax positions, and lower share count, partially offset by lower operating profit.

Adjusted EPS in the fourth quarter was $0.32 compared to $0.64 in the prior year period. The year-over-year decline in adjusted EPS was driven by lower operating profit, a negative impact from currency, and a higher adjusted effective tax rate, partially offset by lower share count. In the prior year period, Business Solutions contributed approximately $0.08 to EPS, while operations in Russia and Belarus contributed approximately $0.06 to EPS.

“Fourth quarter and full year 2022 results were in-line with our expectations and our adjusted full year 2022 financial outlook. In October, we launched our ‘Evolve 2025’ strategy to be the leading provider of branded accessible financial services to the aspiring populations of the world. Developing and delivering products that drive financial inclusion and enable our customers to move up the ladder of financial well-being is central to our strategy,” said Devin McGranahan, President and Chief Executive Officer of Western Union.

McGranahan added, “While we are still early in our journey, we are making progress against the goals we shared at our 2022 Investor Day. In the fourth quarter we saw a return to transaction growth in our branded digital business, completed the launch of our digital bank in Italy, and in 2022 opened over 60 owned and concept stores. Each of these marks progress against the four pillars of our strategy.”

The Board of Directors approved the quarterly dividend of $0.235 per common share, payable March 31, 2023, to shareholders of record at the close of business on March 17, 2023.

_________________________

For a full reconciliation between GAAP and non-GAAP metrics, please see the “Non-GAAP Measures” section of this press release.

Q4 Business Results

• C2C revenues declined 11% on a reported basis, or 9% 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 three percentage points and nine percentage points, respectively. Regionally, transaction declines in Europe and CIS, North America, MEASA, and APAC were partially offset by transaction growth in LACA.
• Branded Digital revenue declined 8% on a reported basis, or 6% constant currency. Transactions grew 2% in the quarter driven by the Company’s revised marketing strategy. The Company expects that revenue will be adversely impacted in the near term related to its revised marketing strategy, which includes promotional pricing activities. The suspension of operations in Russia and Belarus negatively impacted both Branded Digital revenue and transactions by 2 percentage points in the quarter.

Q4 Financial Results

• GAAP operating margin in the quarter was 13.9%, compared to 24.7% in the prior year period. The adjusted operating margin was 15.8% compared to 24.9% in the prior year period, with the prior year positively impacted by 60 basis points from the inclusion of Business Solutions. The decrease in the adjusted operating margin was primarily due to lower revenue and higher investments in technology and marketing.
• The GAAP effective tax rate in the quarter was (15.2%), compared to 6.7% in the prior year period with the decrease primarily due to the reversal of significant uncertain tax positions, partially offset by discrete benefits in the prior year period. The adjusted effective tax rate was 14.7% in the quarter, compared to 12.1% in the prior year period, primarily due to discrete benefits in the prior year period.
• The Company returned $263 million to shareholders in the fourth quarter, consisting of $88 million in dividends and $175 million of share repurchases.

2022 Full Year Financial Results

• The Company’s full year 2022 revenue of $4.5 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. The suspension of operations in Russia and Belarus negatively impacted revenue by approximately two percentage points, while Argentina inflation benefited revenue by approximately one percentage point.
• GAAP operating margin was 19.8%, compared to 22.1% in the prior year. The adjusted operating margin was 20.4% compared to 22.5% in the prior year, with the prior year positively impacted by 20 basis points from the inclusion of Business Solutions. The decrease in the adjusted operating margin was primarily due to lower revenue and investments in the Company’s “Evolve 2025” strategy, including technology and marketing.
• The GAAP effective tax rate for 2022 was 9.7% compared to 13.9% in the prior year with the decrease due to the reversal of significant uncertain tax positions, partially offset by the sale of the Company's Business Solutions business. The adjusted effective tax rate was 15.0% compared to 12.7% in 2021. The increase in the adjusted effective tax rate was primarily due to an increase in the proportion of higher taxed earnings, the effects of changes in U.S. tax rules, and discrete benefits in the prior year.
• GAAP EPS was $2.34, compared to $1.97 in 2021, while adjusted EPS was $1.76, compared to $2.19 in 2021. The increase in GAAP earnings per share was primarily due to the partial gain on sale of the Business Solutions business, a non-cash charge related to the termination of the Company’s pension plan in the prior year, lower share count, and a lower GAAP effective tax rate, partially offset by lower operating profit. The decline in adjusted EPS was due to lower operating profit and a higher adjusted effective tax rate, partially offset by lower share count. In 2021, Business Solutions and operations in Russia and Belarus contributed $0.44 to EPS and in 2022, Business Solutions and operations in Russia and Belarus contributed $0.09 to EPS.
• GAAP cash flow from operating activities for the year was $582 million. The Company returned approximately $713 million to shareholders in dividends and share repurchases for the full year.
• During 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC. The sale is expected to be completed in three closings, the first of which occurred on March 1, 2022, with the entirety of the cash consideration collected at that time. The first closing excluded the operations in the European Union and the United Kingdom and resulted in a gain of $151 million. The second closing, which included the United Kingdom operations, occurred on December 31, 2022, and resulted in a gain of $97 million. The third closing, which includes the European Union operations, is currently expected to occur in the second quarter of 2023, pending regulatory approvals, at which time an estimated pre-tax gain of approximately $22 million will be recognized, subject to regulatory capital adjustments.

2023 Outlook

Today, the Company reaffirmed its 2023 adjusted full year financial outlook provided on October 20, 2022. The outlook assumes no material changes in macroeconomic conditions, including changes in foreign currencies.

The 2023 outlook is as follows:

¹ Adjusted revenue is constant currency and proforma for the planned sale of Business Solutions

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.

GAAP figures (2023 and 2022 only) reflect an expected partial year of Business Solutions ownership, including contractual payments to the buyers, representing profits between the first and third closings. Adjusted constant currency revenue growth metrics exclude contributions from Business Solutions. Adjusted operating profit metrics exclude contributions from Business Solutions (2023 and 2022 only), expenses related to the Company’s operating expense redeployment program, acquisition and divestiture costs, Russia and Belarus exit costs, and Business Solutions exit costs, as applicable. Adjusted effective tax rate and earnings per share metrics exclude the following items and the related taxes, as applicable: the gain on sale of Business Solutions, expenses related to the Company’s operating expense redeployment program, acquisition and divestiture costs, Russia and Belarus exit costs, Business Solutions exit costs, the reversal of significant uncertain tax positions, 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 (719) 359-4580 or +1 (253) 215-8782 fifteen minutes prior to the start of the call, followed by the meeting ID, which is 938 8956 6219 and the passcode, which is 275521. 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 938 8956 6219 and the passcode, which is 275521.

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 or 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 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; our ability to attract and retain qualified key employees and to manage our workforce successfully; 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; 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, immigration, and sustainability reporting including climate-related reporting; 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.

WU-G