Western Union Company (the) · NYSE:WU
Western Union Company (the) — The Western Union Company — Q4 2008 Earnings Presentation
50 slides from Western Union Company (the)'s earnings presentation, Feb 5, 2009
Slide 1: Fourth Quarter 2008 Earnings Webcast & Conference Call
Fourth Quarter 2008 Earnings Webcast & Conference Call February 5, 2009 1
Slide 2: Gary Kohn, Vice President Investor Relations
Gary Kohn Vice President Investor Relations Earnings Webcast & Conference Call February 5, 2009 2
Slide 3: Safe Harbor
Safe Harbor This presentation 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 pred
Slide 4: Christina Gold, President & Chief Executive Officer
Christina Gold President & Chief Executive Officer Earnings Webcast & Conference Call February 5, 2009 4
Slide 5: Financial Results – Q4
Financial Results – Q4 Revenue $1.3B down 1% EPS $0.34 up 6% EPS excluding restructuring $0.37 up 16% Operating margin 26% Operating margin excluding restructuring 28% Delivered EPS and strong margin 5 Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
Slide 6: Financial Results – 2008
Financial Results – 2008 Revenue $5.3B up 8% EPS $1.24 up 12% EPS excluding restructuring $1.31 up 16% Operating margin 26% Operating margin excluding restructuring 27% $1.25 billion cash flow from operations 6 Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
Slide 7: Strategy for Long-term Growth
Strategy for Long-term Growth Accelerate profitable Expand 1 growth in the global cash money transfer business 2 and globalize the C2B payments business Improve profitability Innovate new products 3 and services for our target customers 4 by leveraging scale, reducing costs and effectively utilizing
Slide 8: Geographically Diverse Portfolio
Geographically Diverse Portfolio Q4 08 Revenue Transactions Europe, Middle East, Africa, S. Asia 1% 16% • 44% of Western Union revenue • Directing investments to best market opportunities • Payment Services Directive opportunity • Pending agent acquisition 2008 EMEASA margin improved to 28% 8
Slide 9: Geographically Diverse Portfolio
Geographically Diverse Portfolio Q4 08 Revenue Transactions Americas (5%) flat • 34% of Western Union revenue • Domestic business remains a challenge into 2009 • New “Go-to-Market” strategy – Combined U.S. and Latin American organizations – New structure in place and added several senior leaders 200
Slide 10: Geographically Diverse Portfolio
Geographically Diverse Portfolio Q4 08 Revenue Transactions Asia Pacific 7% 30% • 7% of Western Union revenue • China slowed sequentially due to fewer enterprise transfers • Gaining market share in the Philippines • Asia Pacific region represents significant long-term opportunity 2008 APAC margin im
Slide 11: Expand the C2B Business
Expand the C2B Business Q4 08 Revenue Transactions C2B (5%) flat • Nearly 90% of revenue is U.S. derived • International expansion is key • Targeting acquisitions to broaden product offerings Western Union® Payment Services 2008 C2B margin down to 28% 11
Slide 12: Well Positioned
Well Positioned • 375,000 agent locations • Diverse portfolio across 200 countries and territories • Ability to shift investments in 15,000 corridors Continue to gain market share 12
Slide 13: Scott Scheirman, Executive Vice President & CFO
Scott Scheirman Executive Vice President & Chief Financial Officer Earnings Webcast & Conference Call February 5, 2009 13
Slide 14: Financial Results
Financial Results Reported: Q4 Revenue $ 1.3B down 1% Q4 Revenue – euro adjusted Flat 2008 Revenue $ 5.3B up 8% 2008 Revenue – euro adjusted up 6% 14 Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
Slide 15: Components of Revenue
Components of Revenue $ in millions Transaction Fee Foreign Exchange Down 2% $1,059 $1,040 Flat $216 $215 Q4 07 Q4 08 Q4 07 Q4 08 15
Slide 16: Consumer-to-Consumer
Consumer-to-Consumer (millions) Q4 2008 Change Transactions 49 9% Revenue $1,094 (1%) Revenue – euro adjusted Flat Operating Income $316 4% Operating Margin 28.9% 140 bp 85% of revenue 16 Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
Slide 17: C2C Transaction and Revenue Growth
C2C Transaction and Revenue Growth 2008 2007 14% 12% 9% 9% 7% 6% Transaction Mix Price Constant Currency Impact Reported Transaction Mix Price Constant Currency Impact Reported Growth Reductions Currency Revenue Growth Growth Reductions Currency Revenue Growth Revenue Growth Revenue Growth Q42008 Q4
Slide 18: Strong C2C Operating Margin
Strong C2C Operating Margin Fourth Quarter Full Year Up 140 bp Up 50 bp 28.9% 27.5% 27.3% 26.8% * Q4 07 Q4 08 2007 2008 * Excludes stock compensation charge. GAAP C2C Margin = 26.3% 18 Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
Slide 19: Consumer-to-Business
Consumer-to-Business (millions) Q4 2008 Change Transactions 104 flat Revenue $174 (5%) Operating Income $47 (16%) Operating Margin 27% (350 bp) 13% of revenue 19
Slide 20: Cost of Services (as a % of Revenue)
Cost of Services (as a % of Revenue) Fourth Quarter Full Year 58.6% 57.5% 58.0% 57.3% 57.1% 57.4% 56.5% 2007 2008 2008 2007 2007 2008 2008 Reported Reported Excl. Reported Excl. Reported Excl. Restructuring Stock Restructuring Comp Note: See appendix for reconciliation of Non-GAAP to GAAP measures.
Slide 21: SG&A (as a % of Revenue)
SG&A (as a % of Revenue) Fourth Quarter Full Year 16.1% 15.7% 15.8% 15.4% 15.4% 15.1% 14.7% 2007 2008 2008 2007 2007 2008 2008 Reported Reported Excl. Reported Excl. Reported Excl. Restructuring Stock Restructuring Comp Note: See appendix for reconciliation of Non-GAAP to GAAP measures. 21
Slide 22: Strong Operating Margin
Strong Operating Margin Fourth Quarter Full Year 27.9% 28.4% 27.0% 27.4% 27.2% 25.9% 25.7% 2007 2008 2008 2007 2007 2008 2008 Reported Reported Excl. Reported Excl. Reported Excl. Restructuring Stock Restructuring Comp Note: See appendix for reconciliation of Non-GAAP to GAAP measures. 22
Slide 23: Tax Rates
Tax Rates Fourth Quarter Full Year 29.9% 27.4% 26.6% 25.8% 22.8% 21.5% 2007 2008 2008 2007 2008 2008 Reported Reported Excl. Reported Reported Excl. Restructuring Restructuring Note: See appendix for reconciliation of Non-GAAP to GAAP measures. 23
Slide 24: Cash Generation and Position
Cash Generation and Position $ in millions Cash Flows From Operations $1,254 Capital Expenditures $154 Cash Balance, December 31, 2008 $1,296 Debt Balance, December 31, 2008 $3,144 Liquidity is a distinct advantage 24
Slide 25: 2009 Outlook
2009 Outlook Earnings Webcast & Conference Call February 5, 2009 25
Slide 26: 2009 Outlook
2009 Outlook • Constant Currency Revenue to be down 2% to 5% • Reported Revenue to be down 5% to 8% – Global cross border principal market will slow in 2009 – Western Union expects – Single-digit remitted principal growth – Mid- to high-single digit C2C transaction growth – C2C principal per transac
Slide 27: 2009 Outlook
2009 Outlook • Constant Currency EPS of $1.16 to $1.26 • Reported EPS of $1.18 to $1.28 – Other EPS Assumptions: – $0.02 dilution from agent acquisition – Net other expense of $150 million vs. $116 million in 2008 ($0.03 EPS impact) – Tax rate of approximately 26% – Buyback of $400 million 27 Note:
Slide 28: 2009 Outlook
2009 Outlook • Actions taken to improve profitability in 2008 • Relocated call center operations • Eliminated positions • Reduced agent commission selectively • In 2009 • About 65% of costs are variable • Closely manage expenses • Identify additional opportunities Margin expansion as revenue reaccel
Slide 29: 2009 Outlook
2009 Outlook • Cash Flow from Operations to exceed $1.1 billion • Capital Expenditures of less than $150 million Liquidity is key in 2009 29
Slide 30: Christina Gold, President & Chief Executive Officer
Christina Gold President & Chief Executive Officer Earnings Webcast & Conference Call February 5, 2009 30
Slide 31: Strong Get Stronger
Strong Get Stronger • Leader in the money transfer space • Opportunity to increase our 17% share • 400,000 agent locations by year end • Strong business model • High cash flow generation with modest capital needs • Variable cost model Creating shareholder value 31
Slide 32: Strong Get Stronger
Strong Get Stronger • Invest in the core business and our most important assets – Brand, network, technology and people • Acquisitions – Strengthen money transfer, diversify offerings • Return capital to shareholders 32
Slide 33: Growing Share of $400+ billion Remittance Market
Growing Share of $400+ billion Remittance Market • Proven business Western Union Estimated Share of Cross Border Remittance Market model 16.7% • Long-term, migrants 15.5% will continue to seek 14.0% employment opportunities • Western Union uniquely positioned to meet current money transfer and other
Slide 34: Global Leader
Global Leader • Leadership position in growing market • 375,000 agent locations • Well-known brand • Geographically diverse revenue stream • Scalable infrastructure • Industry-leading compliance capabilities • Solid financial position Well positioned for long-term growth 34
Slide 35: Appendix
Fourth Quarter 2008 Earnings Webcast & Conference Call February 5, 2009 Appendix 35
Slide 36: Non-GAAP Measures
Non-GAAP Measures Western Union's management has presented: (1) Cost of services growth, selling, general and administrative ("SG&A) growth, net income growth, earnings per share, earnings per share growth and operating income margin, excluding 2008 restructuring and related stock-based compensation
Slide 37: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Year ended Three Months Ended December 31, December 31, International Consumer-to- Consumer excluding Consumer-to- International United States Consumer Consumer-to- originated Consolidated segment Consumer transa
Slide 38: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Three Months Ended December 31, Year Ended December 31, Consumer-to Consumer-to Consumer Consolidated Consumer Consolidated 2008 Revenues, as reported (GAAP) $ 1,094.3 $ 1,291.6 $ 4,471.6 $ 5,282.0 Adjustments: R
Slide 39: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Year Ended December 31, 2007 Consumer-to-Consumer Revenues, as reported (GAAP) $ 4,093.1 Adjustments: Reversal of revenue impact from translation of foreign currency denominated revenues into United States dollar
Slide 40: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Three Months Ended December 31, 2008 Year Ended December 31, 2008 As reported As reported (GAAP) Adjustments (c) Adjusted (GAAP) Adjustments (c) Adjusted Revenues $ 1,291.6 $ - $ 1,291.6 $ 5,282.0 $ - $ 5,282.0 C
Slide 41: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Three Months Ended Year Ended December 31, December 31, 2008 2007 2008 2007 Revenues $ 1,291.6 $ 1,309.1 $ 5,282.0 $ 4,900.2 Cost of services, as reported (GAAP) $ 749.4 $ 752.7 $ 3,093.0 $ 2,808.4 Adjustments: R
Slide 42: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Three Months Ended Year Ended December 31, December 31, 2008 2007 2008 2007 Revenues $ 1,291.6 $ 1,309.1 $ 5,282.0 $ 4,900.2 Selling, general and administrative, as reported (GAAP) $ 207.9 $ 191.8 $ 834.0 $ 769.8
Slide 43: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Three Months Ended Year Ended December 31, December 31, 2008 2007 2008 2007 Net income, as reported (GAAP) $ 239.6 $ 243.3 $ 919.0 $ 857.3 Adjustment: Restructuring and related expenses, net of income tax benefit
Slide 44: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Three Months Ended Year Ended December 31, December 31, 2008 2007 2008 2007 Revenues $ 1,291.6 $ 1,309.1 $ 5,282.0 $ 4,900.2 Operating income, as reported (GAAP) $ 334.3 $ 364.6 $ 1,355.0 $ 1,322.0 Adjustments: R
Slide 45: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Operating income margin by region Year ended December 31, 2007 Europe, Middle East, Africa, South Asia Americas Asia Pacific Operating income margin, as reported (GAAP) 26% 28% 20% Adjustment: Accelerated non-cas
Slide 46: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Year Ended December 31, 2007 Consumer-to-Consumer revenue, as reported (GAAP) $ 4,093.1 Consumer-to-Consumer operating income, as reported (GAAP) $ 1,078.3 Adjustment: Accelerated non-cash stock compensation vest
Slide 47: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) Three Months Year Ended Year Ended Ended December 31, December 31, December 31, 2008 2008 2007 Income before income taxes, as reported (GAAP) $ 305.2 $ 1,238.7 $ 1,222.4 Adjustments: Restructuring and related exp
Slide 48: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) (unaudited) 2009 Revenue Outlook Range Revenue declines GAAP basis (5)% (8)% Adjustments: Reversal of estimated impact of translation of 3% 3% foreign currency denominated revenues into United States dollars (e) Adjusted est
Slide 49: Reconciliation of Non-GAAP Measures
THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (a) Represents the increase or decrease to revenue from the fluctuation in the exchange rate between the euro and the United States dollar. Euro results exclude any benefit or loss caused by foreign exchange fluctuations between foreign c
Slide 50: Use of Material
Use of Material The information contained in this presentation is being provided for your convenience and information only. This information is accurate as of the date of its initial presentation, February 5, 2009. If you plan to use this information for any purpose, verification of its continued ac
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