Slide 1: Fourth Quarter 2010 Earnings Webcast & Conference Call
Western Union Fourth Quarter 2010 Earnings Webcast & Conference Call February 1, 2011
Slide 2: Mike Salop, SVP Investor Relations
Mike Salop Senior Vice President, Investor Relations
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: Hikmet Ersek, President & CEO
Hikmet Ersek President & Chief Executive Officer
Slide 5: Q4 Highlights: Strong Finish to 2010
Q4 Highlights y Total revenue increased 3%, or 5% constant currency y C2C revenue grew 5% constant currency y Revenue growth rates improved in each region y Domestic money transfer revenue increased 7% y Bill Payments revenue decline moderated y Business Solutions revenue grew to $30 million Strong
Slide 6: Expectations for 2011
Expectations for 2011 y Constant currency revenue growth range 3% to 4% Share gains in cross border remittances y Strong growth in Electronic Channels Revenue declines to moderate in Bill Payments Mid-teens revenue growth in Business Solutions y Operating margin expansion y Strong cash flow ge
Slide 7: Strategic Priorities
Strategic Priorities 1 Grow Retail Channels 2 Expand Electronic Channels 3 Develop Product Portfolio 4 Improve Process and Productivity Strategy in place Focused on execution 7
Slide 8: Strategic Priorities: Grow Retail Channels
Strategic Priorities Grow Retail Channels y Long-term, demographic data suggest growth in new migrant flows y Cash-to-cash share of market has been increasing y WU network expansion can drive incremental growth y New consumer opportunities exist 8
Slide 9: Strategic Priorities: Expand Electronic Channels
Strategic Priorities Expand Electronic Channels y Leverage retail network, brand, compliance, infrastructure y More choice for consumers y New consumers y Coordinated offerings, strategies 9
Slide 10: Strategic Priorities: Develop Product Portfolio
Strategic Priorities Develop Product Portfolio y Prepaid y Fast-growing, global market y Additional service to new and existing consumers y Business Solutions y Large, fragmented market y Serving the underserved small and medium sized enterprises 10
Slide 11: Strategic Priorities: Improve Processes and Productivity
Strategic Priorities Improve Processes and Productivity y Faster decision making, closer to consumers and agents y More efficient organization y Margin focus through constant improvement 11
Slide 12: Scott Scheirman, EVP & CFO
Scott Scheirman Executive Vice President & Chief Financial Officer
Slide 13: Q4 Revenue
Q4 Revenue ($ in millions) $1,314 $1,357 $26 $31 y Consolidated revenue up 3%, $250 $268 or up 5% constant currency adjusted y Transaction fees increased 2% $1,038 $1,058 y Foreign exchange revenue increased 7% Q4 2009 Q4 2010 Transaction Fee Foreign Exchange Other Note: See appendix for reconciliat
Slide 14: C2C Remittance Trends
C2C Remittance Trends C2C Transactions (millions) y C2C Revenue growth 3%, or 5% constant currency +9% y Total Q4 Western Union cross- 56 51 border principal of $18 billion y Increased 6% on reported basis y Increased 7% constant currency y Principal per transaction y Declined 3% on reported basis y
Slide 15: Consumer-to-Consumer: EMEASA
Consumer-to-Consumer Q4 2010 Revenue Transactions Europe, Middle East, Africa, S. Asia (1)% 6% y 44% of Western Union revenue y EMEASA constant currency revenue increased y Continued constant currency revenue growth in U.K., Germany and Russia y Gulf States returned to positive transaction and reven
Slide 16: Consumer-to-Consumer: Americas
Consumer-to-Consumer Q4 2010 Revenue Transactions Americas 7% 11% y 32% of Western Union revenue y U.S. Domestic repositioning driving new business y Domestic money transfer revenue growth 7% and transaction growth 29% y Continued solid U.S. Outbound performance y Mexico 3% transaction and revenue g
Slide 17: Consumer-to-Consumer: Asia Pacific
Consumer-to-Consumer Q4 2010 Revenue Transactions Asia Pacific 14% 14% y 9% of Western Union revenue y China grew transactions 7% and revenue 6% y Philippines & Australia performing well 17
Slide 18: C2C Transaction and Revenue Growth
C2C Transaction and Revenue Growth Q4 2010 Note: See appendix for reconciliation of Non-GAAP to GAAP measures. 18
Slide 19: Global Business Payments
Global Business Payments Q4 2010 Revenue Transactions Global Business Payments 0% 6% y 13% of Western Union revenue y $30 million Business Solutions (Custom House) revenue y Continued challenges in U.S. bill payments 19
Slide 20: Electronic Channels & Prepaid Q4 Highlights
Electronic Channels & Prepaid Q4 Highlights y Westernunion.com y 50% transaction growth in international markets y Added transaction sites in Denmark, Finland and Poland y Account-based money transfer y Over 40% transaction growth y 40 banks globally y Mobile y 12 agreements in place y Over 80,000 l
Slide 21: Operating Margin – Q4
Operating Margin – Q4 24.2% 24.2% 24.5% 23.7% y Operating margin excluding restructuring, +30 basis points GAAP Excluding Restructuring (1) Q4 2010 consolidated operating margin excludes restructuring charges Note: See appendix for reconciliation of Non-GAAP to GAAP measures 21
Slide 22: Operating Margin – Full Year
Operating Margin – Full Year 26.6% 26.2% 25.2% 25.0% y Operating margin excluding restructuring and settlement accrual • (40) basis points • Increased investment • Acquisition amortization • Lower marketing spend • Operating efficiencies GAAP Excluding Items (1) FY 2009 consolidated operating margin
Slide 23: Q4 EPS
Q4 EPS y Reserve International Liquidity Fund - $6 million benefit to other income/expense y Tax rate benefit from cumulative adjustments y Q4 EPS $0.37 or $0.38 excluding restructuring expenses Note: See appendix for reconciliation of Non-GAAP to GAAP measures 23
Slide 24: C2C Operating Margin
C2C Operating Margin 28.4% y C2C 84% of total company 27.0% 27.3% 25.7% revenue for full year 2010 Operating Margin y Q4 10, +130 basis points YoY • Revenue growth • Lower marketing spend y FY 2010, +110 basis points YoY • Lower marketing spend 24
Slide 25: Global Business Payments Operating Margin
Global Business Payments Operating Margin 25.5% 21.0% 19.6% y GBP 14% of total company revenue for full year 2010 Q4 13.3% y Operating margin declined YoY 2009 2010 2009 2010 y Revenue declines and mix Excluding shifts in U.S. bill payments GAAP Business Solutions y Higher Business Solutions investm
Slide 26: Financial Strength
Financial Strength Full Year Cash Flow from Operations Excluding Tax Deposit $1.2 billion Refundable IRS Tax Deposit ($250) million GAAP Cash Flow from Operations $994 million Capital Expenditures $114 million Stock Repurchases $584 million Dividends Paid $165 million Cash Balance, December 31, 2010
Slide 27: 2011 Outlook
2011 Outlook y Key Revenue Drivers y Stronger C2C revenue growth y Moderating Bill Payments declines y Mid-teens revenue growth from Business Solutions y Operating Income Margins expected to expand y Pre-tax Restructuring: y Expenses approximately $50 million y Savings approximately $50 million y Ta
Slide 28: 2011 Outlook
2011 Outlook y Constant currency revenue in the range of 3% to 4% y GAAP revenue growth similar to constant currency y GAAP operating margin of approximately 26% y Operating margin of approximately 27%, excluding restructuring expenses y GAAP EPS of $1.41 to $1.46 y EPS excluding restructuring charg
Slide 29: Questions & Answers
Questions & Answers
Slide 30: Appendix
Appendix Fourth Quarter 2011 Earnings Webcast & Conference Call February 1, 2011 30
Slide 31: Non-GAAP Measures
Non-GAAP Measures Western Union's management believes the non-GAAP measures presented provide meaningful supplemental information regarding our operating results to assist management, investors, analysts, and others in understanding our financial results and to better analyze trends in our underlyin
Slide 32: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 32
Slide 33: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 33
Slide 34: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 34
Slide 35: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 35
Slide 36: Footnote explanations
Footnote explanations (a) Represents the impact from the fluctuation in exchange rates between all foreign currency denominated amounts and the United States dollar. Constant currency results exclude any benefit or loss caused by foreign exchange fluctuations between foreign currencies and the Unite