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Western Union Company: Western Union Reports Fourth Quarter And Full Year Results

The following excerpt is from the company's SEC filing.

Full Year Revenue $5.5 Billion; Constant Currency Revenue Increases 4%

GAAP EPS $1.62; EPS (excluding prior charge) Increases 5% to $1.67

Dividend Increased 3%

_________________________________________________________

- The Western Union Company (NYSE: WU) today reported financial results for the 2015 fourth quarter and full year, and its financial outlook for 2016.

For the 2015 full year, the Company’s revenue increased 4% on a constant currency basis compared to the prior year period, while reported revenues declined 2% due to the imp act of the stronger U.S. dollar. The strengthening of the U.S. dollar, net of hedge benefits, negatively impacted revenue by $323 million.

Operating margin, excluding the second quarter settlement charge related to our Paymap subsidiary, improved to 20.9% for the year, compared to 20.3% in 2014. The improvement was driven by cost savings initiatives benefits and foreign currency hedge gains, which more than offset the negative impact of currency translation on margins. GAAP operating margin in 2015 was 20.2%.

Earnings per share excluding the charge increased 5% to $1.67, compared to $1.59 in the prior year, while GAAP earnings per share increased 2% to $1.62. Cash flow from operating activities was approximately $1.1 billion, and the Company returned $817 million to shareholders through dividends and share repurchases.

“I am pleased with our fourth quarter and 2015 results,” said

President and Chief Executive Officer Hikmet Ersek

. “We again delivered a good quarter despite global economic and geopolitical challenges, which demonstrates the resiliency of our consumers and business.”

added, “We are also advancing our long-term strategy. Westernunion.com grew full year money transfer revenues by 26% in constant currency terms and increased penetration to 34 countries, and we introduced WU

Connect

, which enables leading third party digital platforms to offer our money transfer services to their users. Our network now connects online and mobile channels with over 500,000 agent locations and more than 100,000 ATMs and kiosks, and provides the capability to send money to over 1 billion accounts.”

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.16 per common share, which represents a 3% increase over the previous quarterly dividend. The dividend is payable March 31, 2016 to shareholders of record at the close of business on March 17, 2016.

Fourth Quarter 2015 Results

In the fourth quarter, revenues increased 3% on a constant currency basis compared to the prior year period, while reported revenues declined 2% due to the impact of the stronger U.S. dollar. The strengthening of the U.S. dollar, net of hedge benefits, negatively impacted revenue by $74 million.

Consumer-to-Consumer (C2C) revenues increased 2% constant currency, and reported revenues declined 3%. C2C transactions increased 3% in the quarter. Constant currency revenue growth was driven by strong performance from westernunion.com and solid growth from U.S. outbound. Westernunion.com C2C revenue increased 21%, or 25% constant currency, on transaction growth of 28%. Electronic channels revenue, which includes westernunion.com, account based money transfer through banks, and mobile money transfer, represented 7% of total Company revenues in the quarter.

Consumer-to-Business (C2B) revenues grew 4% in the quarter, or 9% constant currency, driven by the Argentina walk-in and the U.S. electronic bill payments businesses.

Western Union Business Solutions revenues increased 1%, or 8% on a constant currency basis. Constant currency revenue growth was driven by Europe.

Operating margin was 20.4% in the quarter, which compares to 19.6% in the fourth quarter of 2014. The operating margin improvement primarily resulted from lower expenses related to cost savings initiatives and benefits from foreign exchange hedges, partially offset by increased technology spending.

The effective tax rate was 10.4%, which compares to 6.1% in the prior year quarter.

Earnings per share of $0.42 was flat with the prior year period, as increased operating profit and fewer diluted shares outstanding were offset by a higher effective tax rate.

In the fourth quarter, the Company returned $147 million to shareholders through $69 million of share repurchases and $78 million of dividends.

Executive Vice President and Chief Financial Officer Raj Agrawal

stated, “Our solid earnings performance was supported by cost management actions, which helped us overcome the negative impact of foreign exchange. Strong cash flow generation allowed us to return over $800 million to our shareholders in 2015, while we also continued to invest in our technology platforms and compliance capabilities.”

2016 Full Year Outlook

The Company expects to continue to deliver solid constant currency revenue growth. Reported results are expected to be negatively impacted by the stronger U.S. dollar relative to 2015 rates, and the outlook also includes incremental investment in technology and tight management of other expenses.

Foreign currency translation and reduced hedge benefits are anticipated to negatively impact 2016 revenues by approximately $250 million and operating profit by approximately $100 million, compared to the prior year. As a result, the Company’s 2016 earnings per share outlook of $1.58 to $1.70 includes an approximately $0.15 negative impact from currency.

Operating margins are expected to decline from 20.9% in 2015 (excluding the impact of the Paymap charge) to approximately 20% in 2016 due to the impact of foreign exchange, including reduced hedge benefits. Excluding all currency impacts, the outlook for operating margins in 2016 would be similar to 2015.

The tax rate is expected to increase from 11.8% in 2015 (excluding the impact of the charge) to a mid-teens level in 2016.

Ersek

added, “We remain confident in our long-term strategies to drive new areas of growth in cross-border money movement. We believe our business will continue to generate constant currency revenue growth and solid earnings and cash flow in 2016, despite macro challenges.”

The Company expects the following outlook for 2016:

Low to mid-single digit constant currency revenue increase

GAAP revenue change approximately 400 basis points lower than constant currency

Operating Profit Margin

Operating margin of approximately 20%

Earnings per Share

EPS in a range of $1.58 to $1.70, which includes an approximately $0.15 negative impact from changes in foreign exchange rates and reduced hedge benefits

Cash Flow

Cash flow from operating activities of approximately $1 billion. The cash flow outlook excludes approximately $100 million of anticipated final tax payments relating to the

agreement announced with the U.S. Internal Revenue Service in December 2011. Some or all of these payments may occur in 2016.

Additional Statistics

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

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.

These non-GAAP financial measures include revenue change constant currency adjusted; Consumer-to-Consumer segment revenue change constant currency adjusted; Consumer-to-Consumer segment westernunion.com region revenue change constant currency adjusted; Consumer-to-Business segment revenue change constant currency adjusted; Business Solutions segment revenue change constant currency adjusted; 2015 operating income margin, excluding Paymap settlement agreement; 2015 diluted earnings per share, excluding Paymap settlement agreement, net of income tax benefit; 2015 effective tax rate, excluding Paymap settlement agreement; and additional measures found in the supplemental tables included with this press release.

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

http://ir.westernunion.com

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 0357678.

The conference call and accompanying slides will be available via webcast at

. Registration for the event is required, so please register at least five minutes prior to the scheduled start time.

A replay of the call will be available approximately one hour after the call ends through

February 23, 2016, at 1 (877) 344-7529 (U.S.) or +1 (412) 317-0088 (outside the U.S.). The pass code is 10078859. A webcast replay will be available at

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...


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