Western Union Company (the) · NYSE:WU
Western Union Company (the) — 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 Exhibit 99.2
Slide 2: Gary Kohn, Vice President Investor Relations
Gary Kohn Vice President Investor Relations Earnings Webcast & Conference Call February 5, 2009
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: Christina Gold, President & Chief Executive Officer
Christina Gold President & Chief Executive Officer Earnings Webcast & Conference Call February 5, 2009
Slide 5: Delivered EPS and strong margin
Delivered EPS and strong margin Financial Results – Q4 Financial Results – Q4 Revenue $1.3B down 1% Note: See appendix for reconciliation of Non-GAAP to GAAP measures. EPS $0.34 up 6% EPS excluding restructuring $0.37 up 16% Operating margin excluding restructuring 28% Operating margin 26%
Slide 6: $1.25 billion cash flow from operations
$1.25 billion cash flow from operations Financial Results – Financial Results – Revenue $5.3B up 8% Note: See appendix for reconciliation of Non-GAAP to GAAP measures. EPS $1.24 up 12% EPS excluding restructuring $1.31 up 16% Operating margin excluding restructuring 27% Operating margin 26%
Slide 7: Strategy 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 120 basis points of market sh
Slide 8: Geographically Diverse Portfolio: EMEASA
2008 EMEASA margin improved to 28% Geographically Diverse Portfolio Geographically Diverse Portfolio Revenue Transactions Q4 08 1% 16% Europe, Middle East, Africa, S. Asia • 44% of Western Union revenue • Directing investments to best market opportunities • Payment Services Directive opportunity • P
Slide 9: Geographically Diverse Portfolio: Americas
2008 Americas margin down to 27% Geographically Diverse Portfolio Geographically Diverse Portfolio Revenue Transactions Q4 08 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 organizat
Slide 10: Geographically Diverse Portfolio: Asia Pacific
2008 APAC margin improved to 25% Geographically Diverse Portfolio Geographically Diverse Portfolio Revenue Transactions Q4 08 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 regio
Slide 11: Expand the C2B Business
2008 C2B margin down to 28% Revenue Transactions Q4 08 C2B (5%) flat • Nearly 90% of revenue is U.S. derived • International expansion is key • Targeting acquisitions to broaden product offerings Expand the C2B Business Expand the C2B Business Western Union® Payment Services
Slide 12: Well Positioned
Continue to gain market share Well Positioned Well Positioned • 375,000 agent locations • Diverse portfolio across 200 countries and territories • Ability to shift investments in 15,000 corridors
Slide 13: Scott Scheirman, Chief Financial Officer
Scott Scheirman Executive Vice President & Chief Financial Officer Earnings Webcast & Conference Call February 5, 2009
Slide 14: Financial Results
Q4 Revenue 1.3B $ down 1% Financial Results Financial Results 2008 Revenue 5.3B $ up 8% Reported: Note: See appendix for reconciliation of Non-GAAP to GAAP measures. Q4 Revenue – euro adjusted Flat 2008 Revenue – euro adjusted up 6%
Slide 15: Components of Revenue
Down 2% Flat Transaction Fee Components of Revenue Components of Revenue $ in millions Q4 07 Q4 08 Foreign Exchange Q4 07 Q4 08 $1,059 $1,040 $216 $215
Slide 16: Consumer-to-Consumer
85% of revenue Consumer-to-Consumer Consumer-to-Consumer Q4 2008 Change (millions) Transactions 9% Revenue $1,094 (1%) Revenue – euro adjusted Flat Note: See appendix for reconciliation of Non-GAAP to GAAP measures. Operating Income 4% Operating Margin 140 bp 28.9% $316
Slide 17: C2C Transaction and Revenue Growth
14% 6% 9% 7% 12% 9% 3% 9% Transaction Growth Mix Price Reductions Constant Currency Revenue Growth Currency Impact Reported Revenue Growth Transaction Growth Mix Price Reductions Constant Currency Revenue Growth Currency Impact Reported Revenue Growth C2C Transaction and Revenue Growth C2C Transacti
Slide 18: Strong C2C Operating Margin
Up 140 bp Up 50 bp Strong C2C Operating Margin Strong C2C Operating Margin Q4 07 Q4 08 27.5% 28.9% Note: See appendix for reconciliation of Non-GAAP to GAAP measures. Fourth Quarter Full Year 26.8% * 27.3% * Excludes stock compensation charge. GAAP C2C Margin = 26.3%
Slide 19: Consumer-to-Business
13% of revenue Consumer-to-Business Consumer-to-Business Q4 2008 Change (millions) Transactions flat Revenue $174 (5%) Operating Income $47 (16%) Operating Margin 27% (350 bp)
Slide 20: Cost of Services (as a % of Revenue)
Cost of Services (as a % of Revenue) Cost of Services (as a % of Revenue) Note: See appendix for reconciliation of Non-GAAP to GAAP measures. 57.5% 58.0% 56.5% 57.3% 57.1% 58.6% 57.4% Reported Reported Excl. Restructuring Reported Excl. Stock Comp Reported Excl. Restructuring Fourth Quarter Full Yea
Slide 21: SG&A (as a % of Revenue)
SG&A (as a % of Revenue) SG&A (as a % of Revenue) Note: See appendix for reconciliation of Non-GAAP to GAAP measures. 14.7% 16.1% 15.1% 15.7% 15.4% 15.8% 15.4% Reported Reported Excl. Restructuring Reported Excl. Stock Comp Reported Excl. Restructuring Fourth Quarter Full Year
Slide 22: Strong Operating Margin
27.9% 25.9% 28.4% 27.0% 27.4% 25.7% 27.2% Reported Reported Excl. Restructuring Reported Excl. Stock Comp Reported Excl. Restructuring Strong Operating Margin Strong Operating Margin Note: See appendix for reconciliation of Non-GAAP to GAAP measures. Fourth Quarter Full Year
Slide 23: Tax Rates
Tax Rates Tax Rates Note: See appendix for reconciliation of Non-GAAP to GAAP measures. Fourth Quarter Full Year 27.4% 21.5% 22.8% 25.8% 26.6% 29.9% Reported Reported Excl. Restructuring Reported Reported Excl. Restructuring
Slide 24: Cash Generation and Position
Liquidity is a distinct advantage Cash Generation and Position Cash Generation and Position Cash Flows From Operations $1,254 Cash Balance, December 31, 2008 $1,296 Debt Balance, December 31, 2008 $3,144 $ in millions Capital Expenditures $154
Slide 25: 2009 Outlook
2009 Outlook Earnings Webcast & Conference Call February 5, 2009
Slide 26: 2009 Outlook: Goal is to continue to gain market share
Goal is to continue to gain market share 2009 Outlook 2009 Outlook Note: See appendix for reconciliation of Non-GAAP to GAAP measures. – Global cross border principal market will slow in 2009 – Western Union expects – Single-digit remitted principal growth – Mid- to high-single digit C2C transaction
Slide 27: 2009 Outlook: EPS assumptions
2009 Outlook 2009 Outlook Note: See appendix for reconciliation of Non-GAAP to GAAP measures. – 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 • C
Slide 28: 2009 Outlook: Margin expansion as revenue reaccelerates
Margin expansion as revenue reaccelerates 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 addit
Slide 29: 2009 Outlook: Liquidity is key
Liquidity is key in 2009 2009 Outlook 2009 Outlook • Cash Flow from Operations to exceed $1.1 billion • Capital Expenditures of less than $150 million
Slide 30: Christina Gold, President & Chief Executive Officer
Christina Gold President & Chief Executive Officer Earnings Webcast & Conference Call February 5, 2009
Slide 31: Creating shareholder value
Creating shareholder value 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
Slide 32: Strong Get Stronger
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
Slide 33: Growing Share of $400+ billion Remittance Market
Growing Share of $400+ billion Remittance Market Growing Share of $400+ billion Remittance Market 14.0% 15.5% 16.7% • Proven business model • Long-term, migrants will continue to seek employment opportunities • Western Union uniquely positioned to meet current money transfer and other consumer finan
Slide 34: Global Leader
Well positioned for long-term growth 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
Slide 35: Appendix
Fourth Quarter 2008 Earnings Webcast & Conference Call February 5, 2009 Appendix
Slide 36: Non-GAAP Measures
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 restructuring and related stock-based
Slide 37: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) Year ended December 31, Consolidated Consumer-to- Consumer segment International Consumer-to- Consumer International Consumer-to- Consumer excluding United States originated transactions Consolidated 2008 Revenue
Slide 38: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) Consumer-to Consumer Consolidated Consumer-to Consumer Consolidated 2008 Revenues, as reported (GAAP) $ 1,094.3 $ 1,291.6 $ 4,471.6 $ 5,282.0 Reversal of revenue impact from translation of foreign currency denomi
Slide 39: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) Year Ended December 31, 2007 Consumer-to-Consumer Revenues, as reported (GAAP) $ 4,093.1 Reversal of revenue impact from translation of foreign currency denominated revenues into United States dollars (b) (126.4)
Slide 40: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) 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 Cost of services 749.4 (19.8) 729.6 3,093.0 (62.8) 3,030.2 Selling,
Slide 41: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) Revenues $ 1,291.6 $ 1,309.1 $ 5,282.0 $ 4,900.2 $ 749.4 $ 752.7 $ 3,093.0 $ 2,808.4 Restructuring and related expenses (c) (19.8) - (62.8) - Accelerated non-cash stock compensation vesting charge (d) - - - (8.0)
Slide 42: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) Revenues $ 1,291.6 $ 1,309.1 $ 5,282.0 $ 4,900.2 $ 207.9 $ 191.8 $ 834.0 $ 769.8 Restructuring and related expenses (c) (12.8) - (20.1) - Accelerated non-cash stock compensation vesting charge (d) - - - (14.3) $
Slide 43: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) $ 239.6 $ 243.3 $ 919.0 $ 857.3 Restructuring and related expenses, net of income tax benefit of $11.3 million and $31.3 million for the three months and year ended, respectively (c) 21.3 - 51.6 - Accelerated non
Slide 44: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) Revenues $ 1,291.6 $ 1,309.1 $ 5,282.0 $ 4,900.2 $ 334.3 $ 364.6 $ 1,355.0 $ 1,322.0 Restructuring and related expenses (c) 32.6 - 82.9 - Accelerated non-cash stock compensation vesting charge (d) - - - 22.3 $ 36
Slide 45: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) Europe, Middle East, Africa, South Asia Americas Asia Pacific Operating income margin, as reported (GAAP) 26% 28% 20% Adjustment: Accelerated non-cash stock compensation vesting charge (d) 1% 0% 1% Operating inco
Slide 46: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) 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 vesting charge (d) 18.9 Consumer-
Slide 47: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) Three Months Ended December 31, Year Ended December 31, Year Ended December 31, Income before income taxes, as reported (GAAP) $ 305.2 $ 1,238.7 1,222.4 $ Adjustments: Restructuring and related expenses (c) 32.6
Slide 48: Reconciliation of Non-GAAP Measures
(unaudited) THE WESTERN UNION COMPANY RECONCILIATION OF NON-GAAP MEASURES (in millions) 2009 Revenue Outlook Revenue declines GAAP basis (5)% (8)% Adjustments: Reversal of estimated impact of translation of foreign currency denominated revenues into United States dollars (e) 3% 3% Adjusted estimated
Slide 49: Reconciliation of Non-GAAP Measures: Footnotes
THE WESTERN UNION COMPANY 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
Slide 50: Use of Material
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