Western Union Company (the) · NYSE:WU
Western Union Company (the) — Investor Day (June 2008)
105 slides from Western Union Company (the)'s investor day presentation, Jun 20, 2008
Slide 1: 2008 Investor's Meeting
2008 Investor’s Meeting June 20, 2008 Exhibit 99.2
Slide 2: Gary Kohn
Gary Kohn Vice President Investor Relations
Slide 3: Safe Harbor
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 diffi
Slide 4: Introduction – Executive Committee
Introduction – Executive Committee Introduction – Executive Committee Gail Galuppo EVP and Chief Marketing Officer Robin Heller EVP, Operations and IT Hikmet Ersek EVP and Managing Director, Europe/Middle East/Africa/South Asia Royal Cole EVP and General Manager, Payment Services Guy Battista EVP an
Slide 5: Regional Vice Presidents
Regional Vice Presidents Regional Vice Presidents • Patricia Riingen Philippines & Indo China • Andrew Ong North Asia • Anil Kapur South Asia • Odilon Almeida South America • J.C. Farah Middle East, Pakistan & Afghanistan
Slide 6: Christina Gold
Christina Gold President & CEO
Slide 7: Accomplishments
Accomplishments Accomplishments • Successful spin-off from First Data • Solid financial results in light of difficult U.S. market • Strides on innovation • Cost structure improvement
Slide 8: Accomplishments
Accomplishments Accomplishments • Stabilized domestic C2C business • Future growth in U.S. from – Investing in brand awareness – Customer acquisition – Gold Card – Vigo domestic and mobile money transfers – westernunion.com • Outpacing market in Mexico – Positive revenue growth in 2008
Slide 9: Worldwide Opportunity
Worldwide Opportunity Worldwide Opportunity Existing worldwide boundaries are clearly fading, creating greater economic opportunities
Slide 10: Leading the Global Money Transfer Marketplace
Long-term EPS growth objective: 15%-18% Leading the Global Money Transfer Marketplace Leading the Global Money Transfer Marketplace • 345,000 agent locations • Well-known brand • Globally diverse revenue stream • Scalable infrastructure • Industry-leading compliance capabilities • Solid financial po
Slide 11: Western Union Strategy: 4 key pillars for long-term growth
Improve profitability by leveraging scale, reducing costs and effectively utilizing capital Accelerate profitable growth in the global cash money transfer business Expand and globalize the C2B payments business Innovate new products and services for our target customers Western Union Strategy Wester
Slide 12: Accelerate profitable growth in the global cash money transfer business
Accelerate profitable growth in the global cash money transfer business Western Union Strategy Western Union Strategy • 2008 remittance market estimated at $400 billion and continues to grow 8%* • Our remitted principal consistently growing at 20% • Need for cash transfer • Well positioned to attrac
Slide 13: Western Union Strategy
Western Union Strategy Western Union Strategy • Global migration trends are becoming more diverse • Complex regulatory environment • Customers’ needs are expanding • Growing our core business means adapting to an evolving money transfer industry
Slide 14: Evolving our distribution network
• Evolving our distribution network – Network growth and maximization – Enhancing the customer experience – Improving economics of our agent relationships Western Union Strategy Western Union Strategy
Slide 15: Open non-traditional distribution channels
• Open non-traditional distribution channels • Provide our service to on-line bank customers Western Union Strategy Western Union Strategy
Slide 16: Expansion of our Vigo Brand
• Expansion of our Vigo Brand – Differentiated product offering – More competitive to broader range of consumers – Build out “send side” throughout Western Europe Western Union Strategy Western Union Strategy
Slide 17: Consistent brand messaging
• Consistent brand messaging – Building on the essence of our brand Western Union Strategy Western Union Strategy
Slide 18: Expand and globalize the C2B payments business
Expand and globalize the C2B payments business Western Union Strategy Western Union Strategy • One of the biggest long-term opportunities • Primarily only in two countries today • Goal is to double Payments revenue • Growth to be organic and from acquisitions
Slide 19: Real-time, bill payment posting
• Real-time, bill payment posting • Immediate bill payment through existing on-line banking platforms • Potential to reach new customers Western Union Strategy Western Union Strategy
Slide 20: Enabling convenient payment options
• Enabling convenient payment options Western Union Strategy Western Union Strategy
Slide 21: Expansion beyond traditional U.S. core
• Expansion beyond traditional U.S. core – Build on successful Pago Fácil acquisition – Match our resources to needs of consumers and billers Western Union Strategy Western Union Strategy
Slide 22: Introduce Vigo bill payment offerings
• Introduce Vigo bill payment offerings • Extend Vigo brand to new C2B customer • Vigo can sit “side-by-side” with competitors Western Union Strategy Western Union Strategy
Slide 23: Innovate new products and services for our target customers
Innovate new products and services for our target customers Western Union Strategy Western Union Strategy • Dedicated resources to capture the opportunity • Well positioned to identify industry trends • Leading innovation • Attract new customers and sell more to existing customers
Slide 24: Mobile money transfer
• Mobile money transfer • Conducting active market tests Western Union Strategy Western Union Strategy
Slide 25: Micro lending
• Micro lending – Example: PrimeCredit in Hong Kong Western Union Strategy Western Union Strategy
Slide 26: Improve profitability by leveraging scale, reducing costs and utilizing capital
Improve profitability by leveraging scale, reducing costs and effectively utilizing capital Western Union Strategy Western Union Strategy • Expand margins and improve profitability • Leverage scale • Reduce expenses
Slide 27: Efforts to expand margins
• Efforts to expand margins – Operating center closings and relocations – Renegotiating agent commissions • Relationship stability with “win/win” agreements Western Union Strategy Western Union Strategy
Slide 28: Slide 28
Slide 29: Case Study – South America
• South America was a $200M revenue business – Predominantly inbound from the U.S. – No meaningful bill payment revenue • Doubled revenue since 2002 Case Study – South America Case Study – South America
Slide 30: Slide 30
Slide 31: Slide 31
Slide 32: Slide 32
Slide 33: Slide 33
Slide 34: Case Study – South America
Case Study – South America Case Study – South America • Acquisition of Pago Fácil made us the bill payment leader in Argentina – More than 5,000 locations countrywide
Slide 35: Slide 35
Slide 36: Slide 36
Slide 37: Slide 37
Slide 38: Summary
Summary Summary • Execution of our growth strategy will result in business that is… – Larger – Diversified – Profitable – Customer focused
Slide 39: Hikmet Ersek
Hikmet Ersek Executive Vice President & Managing Director Europe, Middle East, Africa, South Asia
Slide 40: Opportunities for Growth
• External factors • Internal capabilities • Growing the business while expanding margins Opportunities for Growth Opportunities for Growth
Slide 41: Opportunities for Growth: External factors
Opportunities for Growth Opportunities for Growth External factors • Remittances more stable than private capital flows* • Favorable migration patterns and economic trends • Cash is needed at both ends of the transaction *Source: Migration Policy Institute
Slide 42: Opportunities for Growth: Internal factors
Opportunities for Growth Opportunities for Growth Internal factors • Monitor 15,000 corridors • Global view • Most extensive remittance network
Slide 43: Growing the business while expanding margins
Opportunities for Growth Opportunities for Growth Growing the business while expanding margins • Our proven formula for growth – Recognizing money transfer corridors – Building agent network – Invest to raise brand awareness • C2C is our fastest-growing business • More than half of our total revenue
Slide 44: Growing the business while expanding margins
Opportunities for Growth Opportunities for Growth Growing the business while expanding margins • Outbound growth – By offering services to individuals who have relocated to new markets with strengthening economies • Russia
Slide 45: Growing the business while expanding margins
Opportunities for Growth Opportunities for Growth Growing the business while expanding margins • Intra growth • Alternative distribution channels • westernunion.com
Slide 46: Growing the business while expanding margins
Opportunities for Growth Opportunities for Growth Growing the business while expanding margins • Vigo test in Italy – Attracts new customer – “Side-by-side” offering with competitors • Expansion plans for Europe
Slide 47: Growing the business while expanding margins
Opportunities for Growth Opportunities for Growth Growing the business while expanding margins • Agent commission rates – Lower rates for new agents – Renegotiate rates with existing agents – “Win / Win” agreements
Slide 48: Case Study – Philippines, India and China
Opportunities for Growth Opportunities for Growth Case Study – Philippines, India and China (PIC) • Represents a $70B market* • Approximately 20% of global remittances • 2002-2007 revenue CAGR of 47% • Margins expanded to 24% in 2007 from 2% in 2002 • 85,000 agent locations • High brand awareness *S
Slide 49: Case Study: India
Opportunities for Growth Opportunities for Growth Case Study • India has explosive growth potential – World’s largest receive market – Remittances estimated to be $27B in 2007, nearly doubled since 2002* *Source: World Bank
Slide 50: Case Study: India growth leader
Opportunities for Growth Opportunities for Growth Case Study • Western Union is positioned to be the growth leader in India – More than 50,000 agent locations – 80% brand awareness – 50 employees working in 8 offices – Innovation potential - mobile
Slide 51: India has robust growth potential
Opportunities for Growth Opportunities for Growth India has robust growth potential • From 2002-2007, revenue grew at a compound annual rate of 46% • Operating margin widened to 25% in 2007, up from 11% in 2002
Slide 52: Accelerate profitable growth in C2C
Accelerate profitable growth in C2C Aligning Our Resources Aligning Our Resources • Western Union brand • Extensive network • Innovation • Expertise
Slide 53: Royal Cole
Royal Cole Executive Vice President & General Manager Payment Services
Slide 54: C2B – Payments Business
C2B – Payments Business C2B – Payments Business • Overview – Represents $720M revenue (15% of our total revenue) – Revenue primarily from U.S. and Argentina – Goal is to double C2B revenue in the next 5 years • Organic growth • Acquisitions
Slide 55: Payments Growth Strategy
Payments Growth Strategy Payments Growth Strategy 1) Expanding Our Product Offerings – Using our core assets to meet the evolving consumer and client demands 2) Active Global Expansion
Slide 56: Payments Growth Strategy
Payments Growth Strategy Payments Growth Strategy 1) Expanding Our Product Offerings • Building On Our Strengths – 6,100 biller relationships – Cash and electronic payments • Real-time payment posting capabilities • Numerous payment options – Global brand, distribution network and expertise
Slide 57: Payments Growth Strategy
Payments Growth Strategy Payments Growth Strategy 1) Expanding Our Product Offerings • Premium delivery for immediate payments • Payment posting in real time • New revenue stream
Slide 58: Payments Growth Strategy
Payments Growth Strategy Payments Growth Strategy 1) Expanding Our Product Offerings Google • Payments to AdSense publishers in 10 countries • Additional countries and offerings Global Business Payments • Payment options for small business
Slide 59: Payments Growth Strategy
Payments Growth Strategy Payments Growth Strategy 1) Expanding Our Product Offerings Vigo • Cross-sell opportunity by making bill payment service available to Vigo customers • Will also be available in competitive locations
Slide 60: We have a competitive edge
We have a competitive edge Payments Growth Strategy Payments Growth Strategy 2) Active Global Expansion • Global reach • Agent network • Operating platform
Slide 61: Payments Growth Strategy: Pago Fácil
Payments Growth Strategy Payments Growth Strategy 2) Active Global Expansion Pago Fácil • Largest processor of public services cash payments in Argentina • Connects 1,800 billers to more than 8 million users per month • More than 5,000 locations • Bill payment revenue is 1.5 times C2C
Slide 62: Payments Growth Strategy
Payments Growth Strategy Payments Growth Strategy 2) Active Global Expansion • Brand, network, infrastructure and experience – Peru in third quarter – Panama to follow – Brazil opportunity – Pursuing opportunities in Europe, South Asia and Asia Pacific
Slide 63: Expand and globalize C2B payments business
Expand and globalize C2B payments business Summary Summary Payments Growth Plan is Ambitious and Realistic • Leverage our unique capabilities • Expand globally • Evolve our products
Slide 64: Gail Galuppo
Gail Galuppo Executive Vice President & Chief Marketing Officer
Slide 65: Our Brand is Our Most Powerful Asset
People around the world have an emotional connection to the brand Our Brand is Our Most Powerful Asset Our Brand is Our Most Powerful Asset A trusted brand for more than 150 years
Slide 66: Our Brand
Our Brand Our Brand Affinity Trust Knowledge
Slide 67: Our Brand
Our Brand Our Brand Western Union is a financial lifeline…
Slide 68: Our Brand
Our Brand Our Brand • Top-of-mind awareness exceeds 80% in many markets • Emotional commitment builds loyalty • Customer loyalty drives long-term growth
Slide 69: Our Rich Data is a Competitive Advantage
Our Rich Data is a Competitive Advantage Our Rich Data is a Competitive Advantage Gold Card and Loyalty Programs • Customers save time and money • Efficient customer service • Customer satisfaction • Valuable database
Slide 70: New Brand Campaign
New Brand Campaign New Brand Campaign Coming Q4 2008
Slide 71: Mobile Money Transfer Addresses Customer Needs
Mobile Money Transfer Addresses Customer Needs Mobile Money Transfer Addresses Customer Needs • The mobile phone is the ideal device to move cash quickly… – 3.3 billion people have cell phones* – New channel, new customers *Source: Wireless Intelligence
Slide 72: Slide 72
Slide 73: Slide 73
Slide 74: Slide 74
Slide 75: Summary
Summary Summary • Strong brand • Loyal customers • Innovation pipeline
Slide 76: Scott Scheirman
Scott Scheirman Executive Vice President & Chief Financial Officer
Slide 77: Long-Term Financial Drivers
Creating long-term shareholder value Long-Term Financial Drivers Long-Term Financial Drivers • Strong revenue growth performance • Solid margins today and opportunities to expand • Large cash balances, solid credit ratings, ample liquidity • Superior cash flow for growth and shareholder return
Slide 78: Strong Revenue Growth Performance
Positioned well for global growth 12% CAGR $2.7 Strong Revenue Growth Performance Strong Revenue Growth Performance • Huge market opportunity • Proven strategies • Powerful brand • Unmatched distribution network In Billions $4.9
Slide 79: Operating Income Margin Challenges
Implemented initiatives to expand margins Operating Income Margin Challenges Operating Income Margin Challenges • Business mix shift – C2C geographic shift – C2B product shift • Acquisitions • Public company expenses
Slide 80: Operating Income Margin Expansion Initiatives
Long-term objective: margin expansion 2009 up to 50 basis points expansion Operating Income Margin Expansion Initiatives Operating Income Margin Expansion Initiatives • Leverage global scale • Reduce distribution costs • Reduce operating expenses • Optimize global investments
Slide 81: Leverage Global Scale
Global scale provides margin expansion opportunities Leverage Global Scale Leverage Global Scale • Global infrastructure established – Invested ahead of growth – Scale we can leverage – Generating margin expansion • Leveraging Vigo worldwide – International expansion – Expand product offerings
Slide 82: Reduce Distribution Costs
Minimize impact of C2C geographic mix shift Reduce Distribution Costs Reduce Distribution Costs • Leverage brand to reduce distribution costs • Sign new agents at more favorable commission rates
Slide 83: Reduce Operating Expenses
Continue programs to reduce operating expenses Reduce Operating Expenses Reduce Operating Expenses • Expense reduction programs in place – Approximately $35 million in annual savings • Continue expense reduction programs • Long-term operating structure and expense objectives
Slide 84: Optimize Global Investments
Maximize return on investments Optimize Global Investments Optimize Global Investments • Prioritized with a global perspective • Disciplined approach in investment decisions • Fund growth and drive innovation
Slide 85: Globally Diversified Business
65% 11% 15% 2% 7% 6% 2% 15% 40% 37% Reported View Globally Diversified Business Globally Diversified Business Percent of 2007 Revenue International Mexico C2B Other Domestic Regional View Americas Asia Pacific C2B Other Europe, Middle East, Africa & South Asia
Slide 86: Consumer-to-Consumer
15% CAGR Consumer-to-Consumer Consumer-to-Consumer • Strong revenue growth driven by international business • Margin impacted by business mix, Vigo and public company expenses • Objective is to expand margins annually $4,093 $2,075 Revenue in Millions 26% 27% Operating Income Margin
Slide 87: Americas
7% CAGR Americas Americas • Challenging immigration and economic environment • Vigo acquisition drove revenue growth at lower margins • Objective is to improve revenue and margin trends $1,792 $1,273 28% 33% Revenue in Millions Operating Income Margin
Slide 88: Europe, Middle East, Africa, South Asia
22% CAGR Europe, Middle East, Africa, South Asia Europe, Middle East, Africa, South Asia • Strong revenue growth driven by distribution and corridor expansion • Leveraging scale and brand • Objective is to expand margins $750 26% 19% Revenue in Millions Operating Income Margin $1,986
Slide 89: Asia Pacific
43% CAGR Asia Pacific Asia Pacific • Strong revenue growth driven by network and corridor expansion • Invest ahead of growth in brand and operations • Leveraging scale and brand • Objective is to replicate EMEA / SA margin expansion $315 $53 20% 1% Revenue in Millions Operating Income Margin
Slide 90: Regional View Key Takeaways
Regional View Key Takeaways Regional View Key Takeaways • Geographically balanced business • Improving international margins • Investing ahead of growth – Margin expands as business scales
Slide 91: Financial Strength
Significant financial strength and flexibility Financial Strength Financial Strength • Cash $1.9 billion as of March 31 • “A -” credit rating • Excellent liquidity – $1.5 billion credit line – Modest working capital needs • Disciplined risk management
Slide 92: Superior Cash Flow
Invest for growth and return cash to shareholders 13% CAGR Superior Cash Flow Superior Cash Flow • Strong and consistent cash flows • Investment flexibility $1.2 $0.6 $1.1 In Billions 2008 E Cash Flow from Operations
Slide 93: Tax Rate Reduction
Expected lower tax rate = real cash benefit Tax Rate Reduction Tax Rate Reduction • International tax rates are significantly below the U.S. rate of 38% • More international profit means lower overall tax rate 29% 34% 30% 2008 E Effective Tax Rate
Slide 94: Cash Priorities
Fund growth + return value to shareholders Cash Priorities Cash Priorities • Invest in business – Expected 2008 Cap Ex less than $200 million • Acquire companies – Use cash flows and cash on balance sheet • Return value to shareholders – Stock buyback – Dividends
Slide 95: Return Value to Shareholders
Objective in 2008 and 2009: return > 100% of net income to shareholders Return Value to Shareholders Return Value to Shareholders • $1.3 billion repurchased since becoming public • Board authorized additional $1 billion stock buyback • $1.7 billion available for stock buyback 2008 E 2009 E 88% > 100
Slide 96: 2008 Financial Guidance
Likely to be closer to the higher end of guidance 2008 Financial Guidance 2008 Financial Guidance • Revenue growth 9% to 11% • Non-GAAP EPS $1.25 to $1.29 – Excluding $0.07 of restructuring expenses and including $0.01 in cost savings • GAAP EPS: $1.18 to $1.22 – Includes $80 million in restructurin
Slide 97: Summary
Creating long-term shareholder value Summary Summary • Robust revenue growth performance • Financial strength • Superior cash flow • Commitment to expand margin
Slide 98: 2008 Investor's Meeting
2008 Investor’s Meeting June 20, 2008
Slide 99: Right Company, Right Time
Right Company, Right Time Right Company, Right Time • Execution of our growth strategy will drive long-term results • Continue our leadership position and drive financial objectives • Long-term financial objectives – Revenue growth of 10% to 12% – EPS growth of 15% to 18%
Slide 100: Leading the Global Money Transfer Marketplace
Long-term EPS growth objective: 15%-18% Leading the Global Money Transfer Marketplace Leading the Global Money Transfer Marketplace • 345,000 agent locations • Well-known brand • Globally diverse revenue stream • Scalable infrastructure • Industry-leading compliance capabilities • Solid financial po
Slide 101: Appendix
Appendix June 20, 2008
Slide 102: Basis of presentation of financial information
The financial information for the periods presented prior to September 29, 2006 are presented on a combined basis and represent those entities that were ultimately transferred to The Western Union Company ("Western Union") as part of its spin-off from First Data Corporation ("First Data") and does n
Slide 103: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Reconciliation of Non-GAAP Measures Western Union's management has presented earnings per share guidance, excluding restructuring and related expenses. Western Union's management believes this non-GAAP measure provides meaningful supplemental information regarding
Slide 104: Reconciliation of Non-GAAP Measures (continued)
Reconciliation of Non-GAAP Measures (continued) Reconciliation of Non-GAAP Measures (continued) (a) Projected 2008 restructuring and related expenses of $79 million relate to severance, outplacement and other employee related benefits; facility closure and migration of our IT infrastructure; other e
Slide 105: Globally Diversified Business
6% 2% 15% 40% 37% 65% 11% 15% 2% 7% Reported View Regional View Globally Diversified Business Globally Diversified Business Percent of 2007 Revenue International (2002: 49%) Mexico (2002: 6%) C2B (2002: 20%) Other (2002: 5%) Domestic (2002: 20%) Americas (2002: 46%) Asia Pacific (2002: 2%) C2B (2002