Western Union 1Q/10 Sees 3% Revenue Growth Y/Y

The Western Union Company, a leader in the money transfer segment of global payments, has reported financial results for the 2010 first quarter.

Financial highlights for the quarter included:

Revenue of $1.2 billion, an increase of 3% compared to last year’s first quarter
Constant currency adjusted revenue increase of 1%
GAAP operating income margin of 26%, compared to 28% in last year’s first quarter
GAAP and constant currency EPS of $0.30, compared to $0.32 in last year’s first quarter
Cash provided by operating activities of $74 million, including the impact of a $250 million refundable tax deposit
Operational highlights for the quarter included:

Generated 8% global consumer-to-consumer (C2C) transaction growth, a 300 basis point improvement compared to the fourth quarter, led by the Americas region and continued strong performance in Europe and Asia
Continued U.S. turnaround in domestic money transfer business, which delivered 18% transaction growth in the quarter
Advanced strategic initiatives, including more than doubling the number of prepaid cards-in-force and further developing the Custom House business-to-business growth infrastructure
Signed several key new agents, including the Martin McColl convenience stores in the U.K. and the Giant Eagle supermarket chain in the U.S.
Grew agent locations to more than 420,000
Completed $200 million in share repurchases and paid $41 million in quarterly dividends
Western Union President and Chief Executive Officer Christina A. Gold said, “We are pleased with our global performance as we begin 2010. Our Americas business is gaining momentum with strong transaction growth in domestic money transfer, improving trends in Mexico, and stronger growth in U.S. Outbound.”

Gold continued, “Europe and Asia also remained strong. Although there are still challenges in some parts of the world, we are experiencing improving trends in many markets and believe we continue to gain market share. In addition, we made further progress in strategic areas such as prepaid cards and business-to-business payments.”

Separately, the Company stated this morning that President and CEO Christina Gold, 62, announced her intention to retire on September 1, 2010. The Board of Directors has named Chief Operating Officer Hikmet Ersek, 49, to succeed Ms. Gold as President and Chief Executive Officer on that date. The Board also elected Ersek to the Board of Directors effective April 26, 2010.

Additional Statistics

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

Consolidated Results

First quarter consolidated revenue of $1.2 billion increased 3% from the prior year. Constant currency revenue growth of 1% improved approximately 200 basis points compared to the fourth quarter, led by stronger consumer-to-consumer trends in the Americas region.

Operating income margin was 26%, compared to 28% in last year’s first quarter, as the Company continued to make incremental investments in strategic initiatives. Sequentially, operating income margin increased 140 basis points from the fourth quarter of 2009. GAAP and constant currency EPS were $0.30, compared to $0.32 in the same period last year.

Consumer-to-Consumer Segment Results

The consumer-to-consumer segment represented 84% of Western Union’s revenue at $1.0 billion in the quarter, an increase of 3% from the prior year or consistent with the prior year on a constant currency basis. Operating income margin was 27%, which compared to 29% in the first quarter of 2009. Western Union handled 50 million C2C transactions, an 8% increase over last year’s first quarter.

For the international portion of C2C, revenue increased 6%, or 3% constant currency adjusted, on transaction growth of 8%. Revenue from the subset of the international business, those transactions that originate outside the U.S., increased 7%, or 4% constant currency adjusted, on transaction growth of 8%.

The Europe, Middle East, Africa and South Asia (EMEASA) region increased revenue 5% and transactions 6% compared to last year’s first quarter. Continued solid transaction growth in much of Europe was partially offset by relatively flat results in the Gulf States. India recorded increases in revenue of 7% and transactions of 6% in the quarter, as moderating trends in the Gulf States affected the country’s results.

The Americas region reported a revenue decline of 3% and a transaction increase of 8%. The rate of decline in revenue was the lowest since the third quarter of 2008. The region’s transaction improvement was driven by strong growth in U.S. domestic money transfer following the fourth quarter 2009 repositioning of the business. Domestic transactions increased 18%, while revenue declined 13%. The repositioning has contributed to significant increases in transactions, and domestic revenue growth is expected to follow later in the year. Mexico recorded declines of 7% in revenue and 3% in transactions, which were significant improvements relative to 2009 trends.

The Asia Pacific (APAC) region increased revenues by 14% on transaction growth of 15%. China recorded revenue growth of 21% and transaction growth of 8% in the quarter.

Global Business Payments Segment Results

The Global Business Payments segment represented 15% of Western Union’s revenue in the quarter. Revenue was $182 million, an increase of 4% compared to the same period in 2009. Custom House, which was acquired in September of 2009, contributed $26 million of revenue in the quarter, an increase from the fourth quarter. The Company continues to invest for future growth in the Custom House business. Excluding Custom House, segment revenue decreased 10% due to declines in the U.S. bill payment business. Operating income margin was 21%, or 26% excluding Custom House, compared to 29% in the first quarter of the prior year.

Electronic Channel Initiatives

The Company continued to make progress on its strategic initiative to develop electronic channels. The international portion of westernunion.com experienced transaction growth above 60% in the quarter, while account-to-cash transactions increased over 65%. Additional banks have also recently agreed to offer the account-to-cash service, which will raise the total to 15 banks. The Company increased its prepaid cards-in-force, or enrolled, to over 365,000, and began retail distribution at the end of the first quarter. In mobile, over 19,000 agent locations in 10 countries have now been enabled through technology upgrades to provide cash to mobile service. Electronic channels, which are included in the C2C and Other reporting segments, represented 2% of total company revenue in the quarter.

Capital Deployment & Liquidity

Western Union’s first quarter cash flow from operations was $74 million, including the negative impact of a $250 million refundable tax deposit with the IRS. The tax deposit, which was disclosed in the Company’s fourth quarter earnings release, relates to potential tax liabilities, including those arising from the Company’s 2003 international restructuring. The deposit limits further accrual of interest related to such potential tax liabilities, which have been previously accrued in the Company’s financial statements.

First quarter capital expenditures were $15 million. The Company repurchased 12.4 million of its shares for $200 million, at an average price of $16.17 per share, and paid $41 million in quarterly dividends. As of March 31, 2010, the Company had $800 million remaining under its current stock repurchase authorization. On March 30, the Company completed a debt exchange, issuing $325 million par value 5.25% notes due 2020 and retiring $304 million of 5.40% notes due 2011.

Outlook

The Company affirms its full year GAAP outlook provided on February 3, 2010, including a revenue range of -1% to +2% and EPS of $1.29 to $1.34. Based on current foreign exchange rates, the Company expects GAAP and constant currency revenues to be similar. GAAP and constant currency EPS are also expected to be similar.

Non-GAAP Measures

Western Union presents a number of non-GAAP measurements because management believes that these metrics provide meaningful supplemental information in addition to the GAAP metrics and provide comparability and consistency to prior periods. These non-GAAP measurements include revenue change constant currency adjusted, earnings per share constant currency adjusted, consumer-to-consumer segment revenue change constant currency adjusted, international consumer-to-consumer revenue change constant currency adjusted, international consumer-to-consumer excluding United States originated transactions revenue change constant currency adjusted, Global Business Payments revenue change excluding Custom House, Global Business Payments operating margin excluding Custom House, and additional measures found in the supplemental schedule 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 www.westernunion.com.

Currency

Constant currency results assume foreign revenues and expenses 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. Constant currency results also assume any benefit or loss caused by foreign exchange fluctuations between foreign currencies and the U.S. dollar, net of the effect of foreign currency hedges, would have been consistent with the prior year. Additionally, the measurement assumes the impact of fluctuations in foreign currency derivatives not designated as hedges and the portion of fair value that is excluded from the measure of effectiveness for those contracts designated as hedges is consistent with the prior year.

Investor and Analyst Conference Call and Slide Presentation

Western Union President and Chief Executive Officer Christina A. Gold will host a conference call and webcast, including slides, at 8:00 a.m. Eastern Time today. Joining Christina on the call will be Hikmet Ersek, Chief Operating Officer, and Scott Scheirman, Executive Vice President and Chief Financial Officer. To listen to the conference call live via telephone, dial 800-901-5231 (U.S.) or +1-617-786-2961 (outside the U.S.) ten minutes prior to the start of the call. The pass code is 46442200.

The conference call and accompanying slides will be available via webcast at http://ir.westernunion.com/investor. 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 one hour after the call ends through May 4, 2010, at 888-286-8010 (U.S.) or +1-617-801-6888 (outside the U.S.). The pass code is 11450371. A webcast replay will be available at http://ir.westernunion.com/investor for the same time period.

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.

About Western Union

The Western Union Company (NYSE: WU) is a leader in global payment services. Together with its Vigo, Orlandi Valuta, Pago Facil and Custom House branded payment services, Western Union provides consumers and businesses with fast, reliable and convenient ways to send and receive money around the world, as well as send payments and purchase money orders. The Western Union, Vigo and Orlandi Valuta branded services are offered through a combined network of more than 420,000 agent locations in 200 countries and territories. In 2009, The Western Union Company completed 196 million consumer-to-consumer transactions worldwide, moving $71 billion of principal between consumers, and 415 million business payments. For more information, visit www.westernunion.com.