Western Union Reports Third Quarter Results

Total Company GAAP revenues grow to $1.3 billion; GAAP earnings per share (EPS) of $0.57, adjusted EPS of $0.63

Digital money transfer revenues continue double-digit growth achieving quarterly highs for transactions and principal

Advances ecosystem strategy with the launch of WU Shop and an upcoming pilot of digital banking services in select countries

Continued strong cash flow generation, with over $510 million returned to shareholders year-to-date

The Western Union Company (NYSE: WU), a global leader in cross-border, cross-currency money movement and payments, today reported third quarter financial results and updated its 2021 full year financial outlook.

The Company’s third quarter revenue of $1.3 billion increased 2% on a reported and constant currency basis. Third quarter growth was led by digital money transfer, which continued to deliver double-digit growth, and the Business Solutions segment, partially offset by retail money transfer due to the slow pace of economic recovery.

GAAP EPS in the third quarter was $0.57 compared to $0.55 in the prior year period. The year-over-year increase in GAAP EPS resulted from revenue growth and lower planned marketing investment, partially offset by a higher tax rate due to deferred taxes recorded on the pending sale of Business Solutions and higher technology investment.

Adjusted EPS in the third quarter was $0.63 compared to $0.57 in the prior year period. Year-over-year growth in adjusted EPS was driven by similar factors as above, excluding certain items. For a full reconciliation between GAAP and Adjusted EPS, please see the “Adjustment Items” section of this press release.

President and CEO Hikmet Ersek said, “While economic conditions and industry trends have not fully recovered, third quarter results highlight the resilience of our millions of customers around the world, who continue to provide much needed support to loved ones back home. Our digital business continues to generate strong revenue growth with $266 million generated in the quarter, maintaining the record-high level that we achieved in the second quarter and putting us well on pace to exceed $1 billion in revenue this year.

Ersek continued, “I am also excited to announce the continued progress of our ecosystem strategy with the upcoming digital banking pilot in Germany and Romania, which is on track to launch by year-end. Additionally, in select countries, we recently launched WU Shop, a shopping and cash back rewards program, initially targeting Western Union MyWU loyalty members.”

CFO Raj Agrawal stated, “Year-to-date, we have generated strong operating cash flow of more than $680 million and have returned more than $510 million to shareholders through a combination of dividends and share repurchases.”

Q3 Business Highlights

• Consumer-to-Consumer (C2C) revenues were flat on a reported basis, or declined 1% constant currency, while transactions declined 1% during the quarter. Within the C2C segment, cross-border money transfer revenues grew 1%. Regionally, transaction growth in Europe and CIS, LACA, and MEASA was offset by declines in North America and APAC.

• Digital money transfer revenues increased 15% on a reported basis, or 14% constant currency, and represented 24% and 37% of total C2C revenues and transactions, respectively. Digital money transfer reached new quarterly highs for transactions and principal. Westernunion.com revenue grew 12% on a reported basis, or 11% constant currency, including cross-border revenue growth of 16%. Westernunion.com growth moderated in the quarter, as expected, given the significant digital demand the Company experienced in 2020.

• Westernunion.com average monthly active users for the third quarter increased 8% year-over-year and the Western Union mobile app was again the most downloaded mobile app among peer money transfer companies during the third quarter, according to data provided by mobile app marketing firm Sensor Tower¹.

• Western Union Business Solutions revenues increased 31% on a reported basis, or 28% constant currency, primarily driven by increased payment services activity and the education vertical as the business grew over the impact of COVID-19. Other revenues, which consists primarily of retail bill payments in the U.S. and Argentina and money orders, increased 3%.

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¹ Data obtained from Sensor Tower App Install Market Share Report

Q3 Financial Highlights

• GAAP operating margin in the quarter was 24.8% compared to 22.7% in the prior year period. The adjusted operating margin in the quarter was 25.2% compared to 23.5% in the prior year period. The increase in the Company’s GAAP and adjusted operating margins was driven by revenue growth in the Business Solutions segment and lower planned marketing investment, partially offset by higher technology investment, while the GAAP operating margin also increased as a result of restructuring costs in the prior year period. For a detailed reconciliation between GAAP and Adjusted operating margin, please see the “Adjustment Items” section of this press release.

• The GAAP effective tax rate in the quarter was 20.2% compared to 12.4% in the prior year period, and the adjusted effective tax rate was 13.7% in the quarter compared to 12.7% in the prior year period. The increase in the Company’s GAAP effective tax rate was due to deferred taxes recorded on the pending sale of Business Solutions.

• Cash flow from operating activities was $686 million year-to-date. The Company returned $170 million to shareholders in the third quarter consisting of $95 million in dividends and $75 million of share repurchases.

2021 Outlook

The Company updated its financial outlook for 2021, which was previously reported on August 4. GAAP and constant currency revenue were revised to reflect recent business trends and macroeconomic conditions. Additionally, EPS ranges were narrowed with adjusted EPS revised to the higher end of the range, while GAAP EPS was revised slightly downward to reflect the recorded deferred taxes related to the pending sale of Business Solutions.

The outlook provided today assumes the macroeconomic environment in the fourth quarter will be similar to the third quarter:

Adjustment Items

Adjusted operating profit metrics for 2021 periods exclude acquisition and divestiture costs. Adjusted tax rate and earnings per share metrics for 2021 periods exclude the following items net of related taxes, as applicable: acquisition and divestiture costs, the impact from the gain on an investment sale (second quarter), debt retirement expenses (second quarter), Business Solutions change in permanent reinvestment tax assertion (third quarter), and non-cash expenses associated with the planned termination of the Company’s pension plan (expected in the fourth quarter).

Adjusted operating profit, tax rate, and earnings per share metrics for 2020 periods exclude restructuring expenses and acquisition and divestiture costs, net of related taxes, as applicable.

Although the Company has previously incurred and can reasonably be expected to incur restructuring costs in the future, these expenses were specific to the implementation of a global strategy initiative and the Company has therefore provided adjusted financial results that exclude these expenses.

Additional Statistics

Additional key statistics for the quarter and historical trends can be found in the supplemental tables included with this press release.

All amounts included in the supplemental tables to this press release are rounded to the nearest tenth of a million, except as otherwise noted. As a result, the percentage changes and margins disclosed herein may not recalculate precisely using the rounded amounts provided.

Non-GAAP Measures

Western Union presents a number of non-GAAP financial measures because management believes that these metrics provide meaningful supplemental information in addition to the GAAP metrics and provide comparability and consistency to prior periods. Constant currency results assume foreign revenues are translated from foreign currencies to the U.S. dollar, net of the effect of foreign currency hedges, at rates consistent with those in the prior year.

Reconciliations of non-GAAP to comparable GAAP measures are available in the accompanying schedules and in the “Investor Relations” section of the Company’s website at https://ir.westernunion.com.

Environmental, Social, and Governance (ESG)

Western Union is committed to making a positive impact. For more details on how Western Union is addressing some of the most pressing issues facing society, our shared environment, and our Company, please view our latest ESG report: https://corporate.westernunion.com/esg.

Investor and Analyst Conference Call and Slide Presentation

The Company will host a conference call and webcast, including slides, at 4:30 p.m. Eastern Time today. To listen to the conference call via telephone, dial +1 (888) 317-6003 (U.S.) or +1 (412) 317-6061 (outside the U.S.) ten minutes prior to the start of the call. The pass code is 1830095.

The conference call and accompanying slides will be available via webcast at https://ir.westernunion.com. Registration for the event is required, so please register at least five minutes prior to the scheduled start time.

A webcast replay will be available at https://ir.westernunion.com.

Please note: All statements made by Western Union officers on this call are the property of Western Union and subject to copyright protection. Other than the replay, Western Union has not authorized, and disclaims responsibility for, any recording, replay or distribution of any transcription of this call.

Safe Harbor Compliance Statement for Forward-Looking Statements

This press release 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 predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as "expects," "intends," "targets," "anticipates," "believes," "estimates," "guides," "provides guidance," "provides outlook," and other similar expressions or future or conditional verbs such as "may," "will," "should," "would," "could," and "might" are intended to identify such forward-looking statements. Readers of this press release of The Western Union Company (the "Company," "Western Union," "we," "our," or "us") should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed in the Risk Factors section and throughout the Annual Report on Form 10-K for the year ended December 31, 2020. The statements are only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement.

Possible events or factors that could cause results or performance to differ materially from those expressed in our forward-looking statements include the following: (i) events related to our business and industry, such as: changes in general economic conditions and economic conditions in the regions and industries in which we operate, including global economic downturns and trade disruptions, or significantly slower growth or declines in the money transfer, payment service, and other markets in which we operate, including downturns or declines related to interruptions in migration patterns or other events, such as public health emergencies, epidemics, or pandemics such as COVID-19, civil unrest, war, terrorism, or natural disasters, or non-performance by our banks, lenders, insurers, or other financial services providers; failure to compete effectively in the money transfer and payment service industry, including among other things, with respect to price, with global and niche or corridor money transfer providers, banks and other money transfer and payment service providers, including digital, mobile and internet-based services, card associations, and card-based payment providers, and with digital currencies and related protocols, and other innovations in technology and business models; political conditions and related actions, including trade restrictions and government sanctions, in the United States and abroad, which may adversely affect our business and economic conditions as a whole, including interruptions of United States or other government relations with countries in which we have or are implementing significant business relationships with agents, clients, or other partners; deterioration in customer confidence in our business, or in money transfer and payment service providers generally; failure to maintain our agent network and business relationships under terms consistent with or more advantageous to us than those currently in place; our ability to adopt new technology and develop and gain market acceptance of new and enhanced services in response to changing industry and consumer needs or trends; changes in, and failure to manage effectively, exposure to foreign exchange rates, including the impact of the regulation of foreign exchange spreads on money transfers and payment transactions; any material breach of security, including cybersecurity, or safeguards of or interruptions in any of our systems or those of our vendors or other third parties; cessation of or defects in various services provided to us by third-party vendors; mergers, acquisitions, and the integration of acquired businesses and technologies into our Company, divestitures, and the failure to realize anticipated financial benefits from these transactions, and events requiring us to write down our goodwill; decisions to change our business mix; our ability to realize the anticipated benefits from restructuring-related initiatives, which may include decisions to downsize or to transition operating activities from one location to another, and to minimize any disruptions in our workforce that may result from those initiatives; failure to manage credit and fraud risks presented by our agents, clients, and consumers; changes in tax laws or their interpretation, any subsequent regulation, and potential related state income tax impacts, and unfavorable resolution of tax contingencies; adverse rating actions by credit rating agencies; our ability to protect our trademarks, patents, copyrights, and other intellectual property rights and to defend ourselves against potential intellectual property infringement claims; our ability to attract and retain qualified key employees and to manage our workforce successfully; material changes in the market value or liquidity of securities that we hold; restrictions imposed by our debt obligations; (ii) events related to our regulatory and litigation environment, such as: liabilities or loss of business resulting from a failure by us, our agents, or their subagents to comply with laws and regulations and regulatory or judicial interpretations thereof, including laws and regulations designed to protect consumers, or detect and prevent money laundering, terrorist financing, fraud, and other illicit activity; increased costs, operational burden or loss of business due to regulatory initiatives and changes in laws, including changes in interpretations, resulting in increasing regulations and industry practices and standards in the United States and abroad, affecting us, our agents, or their subagents, our external business partners such as financial institutions, or the banks with which we or our agents maintain bank accounts needed to provide our services, including related to anti-money laundering regulations, anti-fraud measures, our licensing arrangements, customer due diligence, agent and subagent due diligence, registration and monitoring requirements, consumer protection requirements, remittances, and immigration; liabilities, increased costs or loss of business and unanticipated developments resulting from governmental investigations and consent agreements with or enforcement actions by regulators; liabilities resulting from litigation, including class-action lawsuits and similar matters, and regulatory enforcement actions, including costs, expenses, settlements, and judgments; failure to comply with regulations and evolving industry standards regarding consumer privacy, data use, the transfer of personal data between jurisdictions, and information security, including with respect to the General Data Protection Regulation in the European Union and the California Consumer Privacy Act; failure to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as regulations issued pursuant to it and the actions of the Consumer Financial Protection Bureau and similar legislation and regulations enacted by other governmental authorities in the United States and abroad related to consumer protection and derivative transactions; effects of unclaimed property laws or their interpretation or the enforcement thereof; failure to maintain sufficient amounts or types of regulatory capital or other restrictions on the use of our working capital to meet the changing requirements of our regulators worldwide; changes in accounting standards, rules and interpretations, or industry standards affecting our business; and (iii) other events, such as: catastrophic events; and management’s ability to identify and manage these and other risks.

About Western Union

The Western Union Company (NYSE: WU) is a global leader in cross-border, cross-currency money movement and payments. Western Union’s platform provides seamless cross-border flows and its leading global financial network bridges more than 200 countries and territories and over 130 currencies. We connect businesses, financial institutions, governments, and consumers through one of the world’s widest reaching networks, accessing billions of bank accounts, millions of digital wallets and cards, and approximately 600,000 retail locations. Western Union connects the world to bring boundless possibilities within reach. For more information, visit www.westernunion.com.

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