Western Union Company (the) · NYSE:WU
Western Union Company (the) — Investor Presentation (September 2006)
41 slides from Western Union Company (the)'s investor presentation, Sep 18, 2006
Slide 1: Investor Presentation
Investor Presentation September 18, 2006 Exhibit 99.1
Slide 2: Safe Harbor
2 Safe Harbor Historical Financial Results This presentation contains historical financial information presented to reflect the spin-off of Western Union from First Data Corp. as of the date reflected herein. Audited financial statements are available for Western Union in its Form 10 Registration St
Slide 3: Transaction Summary
3 Transaction Summary NYSE: WU 1 : 1 765 million Listing: Dividend Ratio: Est. Shares Outstanding (post-distribution): Distribution Timeline: Record Date Distribution Date September 22 September 29
Slide 4: Business Overview
Business Overview Christina A. Gold, Chief Executive Officer, Western Union
Slide 5: The Global Leader in Money Transfer
5 The Global Leader in Money Transfer • Providing high-value consumer services for over 150 years • Vast distribution network of over 270,000 agent locations in more than 200 countries and territories • Established brands, including Western Union, Orlandi Valuta and Vigo • Strong financial performan
Slide 6: We Operate in Two Segments
6 We Operate in Two Segments 114M 145M 179M 193M 215M 2001 2002 2003 2004 2005 • Primarily U.S. business, exploring international opportunities Consumer-to-Business (C2B) ’05 Revenue = $600 million ’05 EBIT = $220 million • Strong, consistent growth Consumer-to-Consumer (C2C) ’05 Revenue = $3.3 bill
Slide 7: Proven Track Record
7 CAGR 12% CAGR 12% CAGR 12% $4.0 $3.5 $3.2 2003 2004 2005 Revenue Operating Profit $1.3 $1.1 $1.0 2003 2004 2005 Cash Flow From Operating Activities Proven Track Record $1.0 $0.9 $0.8 2003 2004 2005 $ in billions
Slide 8: We Are Uniquely Positioned in an Attractive Industry
8 We Are Uniquely Positioned in an Attractive Industry 2. Unmatched distribution network and brand 1. Compelling long-term market opportunity 3. Operational excellence 4. World class Management Team and Board
Slide 9: Favorable Trends In Global Migration
9 Favorable Trends In Global Migration • The global migrant population is expected to grow from 191 million in 2005 to more than 280 million in 2050 (1) • Major emigration countries include China, India, Mexico, Philippines, where Western Union is well positioned Global Migration (1) United Nations
Slide 10: Capturing the Opportunity – Outperforming the Market
10 CAGR 8% Capturing the Opportunity – Outperforming the Market Western Union Percent of Cross-Border Remittance Principal Cross-Border Remittance Principal Market Source: Aite Group, LLC, January 2005 2005 includes Vigo $249B $213B 2003 2005 15% 10% 2003 2005 1. MA R K E T O P P O R T U N I T Y Pri
Slide 11: An Unmatched Global Distribution Network
11 An Unmatched Global Distribution Network • Over 270,000 agent locations; 15,000 plus Global Corridors • 80% of agent locations outside of the US Western Union Locations (In thousands) 270 + 2001 2Q06 United States, Canada Latin America, Caribbean Europe, Mid-East Africa, S. Asia Asia Pacific Glob
Slide 12: Long-Standing Agent Relationships
12 A NGELO C OSTA An Unmatched Global Distribution Network • 600+ Super Agents • Long-term contracts average 5 years – Top 40 agents have average tenure of more than 12 years • Local knowledge and market expertise 2. U N M A T C H E D D I S T R I B U T I O N , B R A N D Long-Standing Agent Relations
Slide 13: Connecting with customers everyday, everywhere
13 Connecting with customers everyday, everywhere World Leading Brand 2. U N M A T C H E D D I S T R I B U T I O N , B R A N D
Slide 14: Consistent Service and Brand Message
14 Consistent Service and Brand Message 81% spontaneous brand awareness among money transfer users in Western Europe Research International, July 2005 2. U N M A T C H E D D I S T R I B U T I O N , B R A N D
Slide 15: Money anywhere in the world in minutes
15 Money anywhere in the world in minutes Operational Excellence Delivered • Handling on average one million transactions daily, or 12 per second • Ability to pay money transfers in over 120 currencies • Flexible system operates within agent’s existing computer environment – Settlement and reconcili
Slide 16: Extensive and Growing Compliance Effort
16 Extensive and Growing Compliance Effort • Senior management committed to deliver best-in-class compliance – 2006 investment will exceed $35 million – 250 dedicated employees in 2006, regionally located – Proprietary monitoring, analysis, and reporting systems – Ongoing enhancements • Three pillar
Slide 17: Strong Corporate Leadership
17 Strong Corporate Leadership Seasoned Management Team Hikmet Ersek EVP and Managing Director Europe/Middle East/Africa/South Asia 7 years with WU David Schlapbach General Counsel and Secretary 10 years with WU Ian Marsh EVP and Managing Director, Asia Pacific Region 2 years with WU William Thomas
Slide 18: Growth Strategies
Growth Strategies
Slide 19: Well Defined Growth Strategy
19 Well Defined Growth Strategy • Build our brands and enhance our consumer’s experience – Invest approximately 7% of revenue annually in marketing – Strategic C2C pricing investment of approximately 3% of annual revenue – Expand customer relationship management (Gold Card and database) • Develop co
Slide 20: Delivering on Our Growth Strategies
20 Delivering on Our Growth Strategies • Customer Relationship – Customer database – Gold Card • 6.5 million active cards; available in 58 countries • Gold Card used in 39% of C2C transactions in the U.S., up from 26% a year ago • Continuity of Income - COI • Intra-Country Transfers – Philippines –
Slide 21: Delivering on Our Growth Strategies
21 Delivering on Our Growth Strategies • Consumer-to-business – New channels • Cross border payments • Catalog payments • Government payments – Highly attractive international opportunity • Strategy includes acquisitions • Western Union Bank – 9 company owned locations – Powers Western Union Prepaid
Slide 22: Market Dynamics and Challenges
Market Dynamics and Challenges
Slide 23: Mexico and Domestic Performance
23 Mexico and Domestic Performance 3% 10% 24% 24% 23% 2004 2005 Q1 '06 Q2 '06 Q3 Through WU Branded US to Mexico (YoY Transaction growth) Domestic* (YoY Transaction growth) 4% 5% 8% 1% -4% 2004 2005 Q1 '06 Q2 '06 *Excludes Vigo. Q3 Through
Slide 24: Short-Term U.S. Challenges
24 Short-Term U.S. Challenges Western Union’s Priorities • Consumer outreach and education • Target promotions • Cross-sell Domestic Service to outbound senders • Agent recruitment Challenges • Uncertainty about immigration reform – Increased government scrutiny – Resulting job uncertainty – Increas
Slide 25: C2C Transaction Trends
25 C2C Transaction Trends* (YoY growth %) Overall and International Performance 20% 21% 19% 15% 2004 2005 Jun '06 YTD Q3 Through International Transaction Trends* (YoY growth %) 26% 26% 24% 23% 2004 2005 Jun '06 YTD Q3 Through *Excludes Vigo
Slide 26: C2C Geographic Diversity Mitigates Risk
26 Outside the U.S. & Mexico, no single country represents >10% of revenue 27% 52% 44% 36% U.S., Canada = 8% L. America & C. America = 11% Europe, Mid-East, Africa, S. Asia = 29% Asia Pacific = 49% 2000 – 2005 CAGR by Region C2C Geographic Diversity Mitigates Risk Consumer-to-Consumer Revenue 2000 $
Slide 27: We Are Uniquely Positioned in an Attractive Industry
27 We Are Uniquely Positioned in an Attractive Industry 2. Unmatched distribution network and brand 1. Compelling long-term market opportunity 3. Operational excellence 4. World class Management Team and Board
Slide 28: Financial Performance
Financial Performance
Slide 29: Strong Financial Model
29 Strong Financial Model Consistent revenue growth • 12% CAGR in revenues since 2003 Highly profitable • 12% CAGR in operating profit since 2003 Strong cash flows • Over $1 billion in operating cash flow in 2005
Slide 30: Proven Track Record
30 CAGR 12% CAGR 12% CAGR 12% CAGR 1% CAGR 16% Proven Track Record Revenue Operating Profit $1.3B $1.1B $1.0B 2003 2004 2005 Cash Flow From Operations $0.6B $0.6B $0.6B 2003 2004 2005 C2B Revenue $2.5B $2.9B $3.3B 2003 2004 2005 C2C Revenue $4.0B $3.5B $3.2B 2003 2004 2005 $1.0B $0.9B $0.8B 2003 200
Slide 31: Financial Update
31 Financial Update • Key Operating Assumptions for Second Half 2006 and 2007: – Strong international business growth – Continued near-term challenges in US market in 2006 – 2007 assumes improvement from trends since Q2 2006 in the US market, but not returning to 2005 trends – Higher spending in 200
Slide 32: 2006 Financial Guidance
32 2006 Financial Guidance $1,320M - $1,340M (D) 4% - 6% $641M (B) 5% Operating Income, excluding spin expenses (C): non-recurring and ongoing Growth $4.4B - $4.5B 11% - 12% $2.2B (A) 13% Total Revenue Growth FY 2006 6 Months June 30, 2006 (A) Includes $68 million of revenue related to the acquisiti
Slide 33: 2007 Growth Outlook
33 2007 Growth Outlook Operating Income Total Revenue 10% - 12% 6% - 9% Excluding spin expenses Non-recurring and ongoing (A) (A) Spin expenses represent estimated incremental expenses associated with operating as a stand-alone company. Ongoing spin expenses relate to staffing additions and related
Slide 34: Long Term Growth Objectives
34 Long Term Growth Objectives Operating Income Revenue 10% - 12% EPS 10% - 12% 12% - 14% Note: Revenue and operating income guidance exclude any potential impact form future acquisitions.
Slide 35: Key Financial Assumptions
35 Key Financial Assumptions Assumptions FY 2007 FY 2006 Six Months June 30, 2006 2007 adversely impacted by spin expenses, interest expense, and changes in working capital ~ $0.9B ~ $1.0B $0.5B Cash Flow from Operating Activities Investments in the business $200M - $250M $200M - $225M $114M Capital
Slide 36: 2007 Guidance Policy
36 2007 Guidance Policy • Provide annual guidance and long-term outlook – metrics to best communicate outlook for the business • Update guidance when outlook is meaningfully different from current guidance • Set guidance at reasonable and achievable goals • Communicate with investors in a balanced a
Slide 37: Financial Policies – Cash Priorities
37 Financial Policies – Cash Priorities • Paying down debt to achieve optimal levels – Target long-term ratios to support A rating – 2007 pay down up to $500 million • Investing for future growth – Investments in core business – Acquiring closely related businesses • Returning capital to shareholder
Slide 38: We Are Uniquely Positioned in an Attractive Industry
38 We Are Uniquely Positioned in an Attractive Industry 2. Unmatched distribution network and brand 1. Compelling long-term market opportunity 3. Operational excellence 4. World class Management Team and Board
Slide 39: Appendix
Appendix
Slide 40: Reg G Reconciliation
40 Reg G Reconciliation Management believes the following measures provide meaningful information to assist investors and analysts in understanding our financial results and to better analyze trends in our underlying business. The non-GAAP financial measures should not be considered in isolation or
Slide 41: Reg G Reconciliation – Operating Income
41 Reg G Reconciliation – Operating Income (in millions) Operating Income excluding spin expenses: non-recurring and ongoing has been displayed to allow the financial reader improved comparability on financial performance between 2006. However the financial reader should be aware that ongoing spin e
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