Western Union reports revenue of $1.3 billion for Q1 2017
The Western Union Company (NYSE: WU) today reported first quarter financial results and affirmed its outlook for 2017, which was previously provided on February 9, 2017.
In the first quarter the Company generated revenue of $1.3 billion, which was flat compared to the prior year, or increased 3% on a constant currency basis.
Earnings per share of $0.33 includes a ($0.02) impact from expenses associated with the WU Way business transformation program. Excluding the WU Way related expenses, earnings per share of $0.35 compares to $0.37 in the same period last year. The decline in earnings per share in the current quarter primarily resulted from the tax impact of changes in the internal ownership structure of certain of the Company’s international subsidiaries. These changes are expected to result in lower taxes of a comparable amount for the remainder of the year.
“We are pleased with the start to the year, as our money transfer business delivered solid performance, led by digital,” said President and Chief Executive Officer Hikmet Ersek. “Westernunion.com money transfer transactions increased 27 percent, and our consumer bill payments business produced very good growth.”
“We also further expanded our digital network. We now have online transaction sites in 40 countries, including across the European Union, and mobile apps in 18 markets, allowing consumers to send to over 200 countries and territories around the world,” Ersek added.
Executive Vice President and Chief Financial Officer Raj Agrawal stated, “The first quarter results have us on track to deliver our full year financial outlook. We are executing our business plans, while continuing to implement the WU Way business transformation program. We also returned more than $300 million to our shareholders in the quarter through share repurchases and dividends.”
The WU Way program is intended to transform the Company’s operating model to better enable innovation, improve the customer experience, and drive cost efficiencies. The program includes implementation of lean management techniques, organizational redesign, and other initiatives.
Q1 Business Unit Highlights
- Consumer-to-Consumer (C2C) revenues were flat, or increased 2% on a constant currency basis. Transactions grew 2%, driven by strong increases from westernunion.com. Geographically, constant currency revenue growth was led by transactions originated in the Latin America and Caribbean, North America, and Europe and CIS regions, which was partially offset by declines from oil producing countries in the Middle East, Africa, and South Asia region. Westernunion.com C2C revenues increased 26%, or 28% on a constant currency basis, on transaction growth of 27%. Westernunion.com represented 9% of total C2C revenue in the quarter.
- Consumer-to-Business (C2B) revenues increased 8% in the quarter, or 10% on a constant currency basis. The growth was driven by the Argentina walk-in and U.S. electronic bill payments businesses.
- Western Union Business Solutions revenues declined 6%, or decreased 3% on a constant currency basis. Revenue was impacted by the termination of a partner contract and reductions in sales of hedging products.
Additional Q1 Financial Highlights
- GAAP operating margin in the quarter was 18.4%. Excluding the impact of the WU Way related expenses, adjusted operating margin was 19.5%, which compares to 19.9% in the prior year period. The decline compared to prior year was primarily due to the negative impact of foreign exchange and unfavorable customer and funding mix in C2B, partially offset by timing of marketing spend.
- GAAP operating profit in the quarter was $240 million. Excluding the $14 million of WU Way related expenses, adjusted operating income of $254 million compared to $259 million in the prior year period. The current quarter operating income reflects a negative impact of approximately $15 million from changes in foreign exchange rates.
- The effective tax rate in the quarter was 24.1%, or 24.8% excluding the impact of the WU Way related expenses, which compares to 14.6% in the prior year period. The increase was due to the discrete items mentioned above, and the Company’s full year outlook for the effective tax rate remains at 11% GAAP, and 13% adjusted for WU Way related expenses.
- Cash flow from operating activities totaled $86 million, which includes $151 million of payments related to the settlement with federal and state governments announced in January 2017, and approximately $19 million of WU Way related payments. Excluding these items, cash flow from operating activities was $256 million in the quarter.
- The Company returned $308 million to shareholders in the first quarter, consisting of $225 million of share repurchases and $83 million of dividends.
The Company affirmed its full year outlook for 2017, which was previously reported on February 9:
- Flat to low single digit decrease in GAAP revenues, or a low single digit increase constant currency.
Operating Profit Margin
- GAAP operating margin of approximately 18% and adjusted operating margin of approximately 20%. Adjusted operating margins exclude approximately $100 million of expected WU Way related expenses.
Earnings per Share
- GAAP EPS in a range of $1.48 to $1.60 and adjusted EPS in a range of $1.63 to $1.75. Adjusted EPS excludes the impact of the WU Way related expenses.
- GAAP cash flow from operating activities of approximately $200 million, which includes $591 million of payments related to the settlement with federal and state governments announced in January 2017, approximately $100 million of anticipated final tax payments relating to the agreement announced with the U.S. Internal Revenue Service in December 2011, and WU Way related payments. Excluding these items, expected cash flow from operating activities would be approximately $1 billion.
Source: Western Union