transition taxtit
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, |
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Commission File Number: 001-32903
THE WESTERN UNION COMPANY
(Exact name of registrant as specified in its charter)
Delaware | 20-4531180 | |
7001 EAST BELLEVIEW AVENUE |
Registrant’s telephone number, including area code: (866) 405-5012
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which registered |
Common Stock, $0.01 Par Value | WU | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b‑2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer☐ Non-accelerated filer ☐
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒
As of October 27, 2022,20, 2023, 386,170,808364,359,008 shares of the registrant’s common stock were outstanding.
THE WESTERN UNION COMPANY
INDEX
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in millions, except per share amounts)
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Revenues |
| $ | 1,089.6 |
|
| $ | 1,286.3 |
|
| $ | 3,383.6 |
|
| $ | 3,786.0 |
|
| $ | 1,097.8 |
|
| $ | 1,089.6 |
|
| $ | 3,304.7 |
|
| $ | 3,383.6 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Cost of services |
|
| 637.3 |
|
|
| 720.1 |
|
|
| 1,945.4 |
|
|
| 2,181.1 |
|
|
| 687.2 |
|
|
| 637.3 |
|
|
| 2,015.6 |
|
|
| 1,945.4 |
|
Selling, general, and administrative |
|
| 220.5 |
|
|
| 247.6 |
|
|
| 704.9 |
|
|
| 798.6 |
|
|
| 199.7 |
|
|
| 220.5 |
|
|
| 630.9 |
|
|
| 704.9 |
|
Total expenses |
|
| 857.8 |
|
|
| 967.7 |
|
|
| 2,650.3 |
|
|
| 2,979.7 |
|
|
| 886.9 |
|
|
| 857.8 |
|
|
| 2,646.5 |
|
|
| 2,650.3 |
|
Operating income |
|
| 231.8 |
|
|
| 318.6 |
|
|
| 733.3 |
|
|
| 806.3 |
|
|
| 210.9 |
|
|
| 231.8 |
|
|
| 658.2 |
|
|
| 733.3 |
|
Other income/(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Gain on divestiture of business (Note 4) |
|
| — |
|
|
| — |
|
|
| 151.4 |
|
|
| — |
|
|
| 18.0 |
|
|
| — |
|
|
| 18.0 |
|
|
| 151.4 |
|
Interest income |
|
| 4.9 |
|
|
| 0.4 |
|
|
| 7.3 |
|
|
| 1.1 |
|
|
| 3.6 |
|
|
| 4.9 |
|
|
| 11.0 |
|
|
| 7.3 |
|
Interest expense |
|
| (25.2 | ) |
|
| (25.7 | ) |
|
| (74.8 | ) |
|
| (79.7 | ) |
|
| (27.0 | ) |
|
| (25.2 | ) |
|
| (79.0 | ) |
|
| (74.8 | ) |
Other income/(expense), net |
|
| (17.8 | ) |
|
| (1.8 | ) |
|
| (25.1 | ) |
|
| 26.8 |
| ||||||||||||||||
Other expense, net |
|
| (1.2 | ) |
|
| (17.8 | ) |
|
| (6.5 | ) |
|
| (25.1 | ) | ||||||||||||||||
Total other income/(expense), net |
|
| (38.1 | ) |
|
| (27.1 | ) |
|
| 58.8 |
|
|
| (51.8 | ) |
|
| (6.6 | ) |
|
| (38.1 | ) |
|
| (56.5 | ) |
|
| 58.8 |
|
Income before income taxes |
|
| 193.7 |
|
|
| 291.5 |
|
|
| 792.1 |
|
|
| 754.5 |
|
|
| 204.3 |
|
|
| 193.7 |
|
|
| 601.7 |
|
|
| 792.1 |
|
Provision for income taxes |
|
| 19.8 |
|
|
| 58.8 |
|
|
| 130.9 |
|
|
| 117.5 |
|
|
| 33.3 |
|
|
| 19.8 |
|
|
| 102.7 |
|
|
| 130.9 |
|
Net income |
| $ | 173.9 |
|
| $ | 232.7 |
|
| $ | 661.2 |
|
| $ | 637.0 |
|
| $ | 171.0 |
|
| $ | 173.9 |
|
| $ | 499.0 |
|
| $ | 661.2 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Basic |
| $ | 0.45 |
|
| $ | 0.57 |
|
| $ | 1.70 |
|
| $ | 1.56 |
|
| $ | 0.46 |
|
| $ | 0.45 |
|
| $ | 1.33 |
|
| $ | 1.70 |
|
Diluted |
| $ | 0.45 |
|
| $ | 0.57 |
|
| $ | 1.70 |
|
| $ | 1.55 |
|
| $ | 0.46 |
|
| $ | 0.45 |
|
| $ | 1.33 |
|
| $ | 1.70 |
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Basic |
|
| 386.5 |
|
|
| 406.3 |
|
|
| 388.8 |
|
|
| 409.1 |
|
|
| 373.9 |
|
|
| 386.5 |
|
|
| 374.5 |
|
|
| 388.8 |
|
Diluted |
|
| 387.6 |
|
|
| 408.0 |
|
|
| 389.9 |
|
|
| 411.3 |
|
|
| 375.0 |
|
|
| 387.6 |
|
|
| 375.4 |
|
|
| 389.9 |
|
See Notes to Condensed Consolidated Financial Statements.
3
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in millions)
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Net income |
| $ | 173.9 |
|
| $ | 232.7 |
|
| $ | 661.2 |
|
| $ | 637.0 |
|
| $ | 171.0 |
|
| $ | 173.9 |
|
| $ | 499.0 |
|
| $ | 661.2 |
|
Other comprehensive income, net of reclassifications and tax (Note 9): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Unrealized losses on investment securities |
|
| (30.0 | ) |
|
| (7.9 | ) |
|
| (105.3 | ) |
|
| (18.7 | ) |
|
| (13.7 | ) |
|
| (30.0 | ) |
|
| (5.1 | ) |
|
| (105.3 | ) |
Unrealized gains on hedging activities |
|
| 25.6 |
|
|
| 18.2 |
|
|
| 54.0 |
|
|
| 44.4 |
| ||||||||||||||||
Unrealized gains/(losses) on hedging activities |
|
| 10.0 |
|
|
| 25.6 |
|
|
| (11.1 | ) |
|
| 54.0 |
| ||||||||||||||||
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| (17.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17.8 | ) |
Defined benefit pension plan adjustments |
|
| — |
|
|
| 2.3 |
|
|
| — |
|
|
| 7.1 |
| ||||||||||||||||
Total other comprehensive income/(loss) |
|
| (4.4 | ) |
|
| 12.6 |
|
|
| (69.1 | ) |
|
| 32.8 |
| ||||||||||||||||
Total other comprehensive loss |
|
| (3.7 | ) |
|
| (4.4 | ) |
|
| (16.2 | ) |
|
| (69.1 | ) | ||||||||||||||||
Comprehensive income |
| $ | 169.5 |
|
| $ | 245.3 |
|
| $ | 592.1 |
|
| $ | 669.8 |
|
| $ | 167.3 |
|
| $ | 169.5 |
|
| $ | 482.8 |
|
| $ | 592.1 |
|
See Notes to Condensed Consolidated Financial Statements.
4
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except per share amounts)
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
| ||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 1,176.1 |
|
| $ | 1,208.3 |
|
| $ | 1,138.2 |
|
| $ | 1,285.9 |
|
Settlement assets |
|
| 3,095.7 |
|
|
| 2,843.5 |
|
|
| 3,480.8 |
|
|
| 3,486.8 |
|
Property and equipment, net of accumulated depreciation of $635.4 and $650.4, respectively |
|
| 112.0 |
|
|
| 129.4 |
| ||||||||
Property and equipment, net of accumulated depreciation of $448.8 and $512.8, respectively |
|
| 90.8 |
|
|
| 109.6 |
| ||||||||
Goodwill |
|
| 2,034.6 |
|
|
| 2,034.6 |
|
|
| 2,034.6 |
|
|
| 2,034.6 |
|
Other intangible assets, net of accumulated amortization of $730.4 and $731.8, respectively |
|
| 466.2 |
|
|
| 417.1 |
| ||||||||
Other assets (Note 5) |
|
| 1,201.8 |
|
|
| 737.7 |
| ||||||||
Other intangible assets, net of accumulated amortization of $666.8 and $616.3, respectively |
|
| 406.9 |
|
|
| 457.9 |
| ||||||||
Other assets |
|
| 762.4 |
|
|
| 859.9 |
| ||||||||
Assets held for sale (Note 4) |
|
| 814.9 |
|
|
| 1,452.9 |
|
|
| — |
|
|
| 261.6 |
|
Total assets |
| $ | 8,901.3 |
|
| $ | 8,823.5 |
|
| $ | 7,913.7 |
|
| $ | 8,496.3 |
|
Liabilities and stockholders' equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts payable and accrued liabilities |
| $ | 435.7 |
|
| $ | 450.2 |
|
| $ | 433.1 |
|
| $ | 464.0 |
|
Settlement obligations |
|
| 3,095.7 |
|
|
| 2,843.5 |
|
|
| 3,480.8 |
|
|
| 3,486.8 |
|
Income taxes payable |
|
| 849.8 |
|
|
| 870.7 |
|
|
| 661.7 |
|
|
| 725.3 |
|
Deferred tax liability, net |
|
| 161.6 |
|
|
| 203.8 |
|
|
| 141.3 |
|
|
| 158.5 |
|
Borrowings |
|
| 2,611.0 |
|
|
| 3,008.4 |
|
|
| 2,309.1 |
|
|
| 2,616.8 |
|
Other liabilities (Note 4) |
|
| 668.7 |
|
|
| 269.4 |
| ||||||||
Other liabilities |
|
| 274.1 |
|
|
| 384.6 |
| ||||||||
Liabilities associated with assets held for sale (Note 4) |
|
| 550.5 |
|
|
| 821.9 |
|
|
| — |
|
|
| 182.5 |
|
Total liabilities |
|
| 8,373.0 |
|
|
| 8,467.9 |
|
|
| 7,300.1 |
|
|
| 8,018.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commitments and contingencies (Note 6) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock, $1.00 par value; 10 shares authorized; no shares issued |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common stock, $0.01 par value; 2,000 shares authorized; 385.9 shares and 393.8 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively |
|
| 3.9 |
|
|
| 3.9 |
| ||||||||
Common stock, $0.01 par value; 2,000 shares authorized; 366.8 shares and 373.5 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively |
|
| 3.7 |
|
|
| 3.7 |
| ||||||||
Capital surplus |
|
| 983.0 |
|
|
| 941.0 |
|
|
| 1,023.3 |
|
|
| 995.9 |
|
Accumulated deficit |
|
| (337.4 | ) |
|
| (537.2 | ) |
|
| (229.3 | ) |
|
| (353.9 | ) |
Accumulated other comprehensive loss |
|
| (121.2 | ) |
|
| (52.1 | ) |
|
| (184.1 | ) |
|
| (167.9 | ) |
Total stockholders' equity |
|
| 528.3 |
|
|
| 355.6 |
|
|
| 613.6 |
|
|
| 477.8 |
|
Total liabilities and stockholders' equity |
| $ | 8,901.3 |
|
| $ | 8,823.5 |
|
| $ | 7,913.7 |
|
| $ | 8,496.3 |
|
See Notes to Condensed Consolidated Financial Statements.
5
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 661.2 |
|
| $ | 637.0 |
|
| $ | 499.0 |
|
| $ | 661.2 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation |
|
| 31.8 |
|
|
| 38.4 |
|
|
| 29.9 |
|
|
| 31.8 |
|
Amortization |
|
| 105.7 |
|
|
| 121.9 |
|
|
| 108.6 |
|
|
| 105.7 |
|
Gain on divestiture of business, excluding transaction costs (Note 4) |
|
| (155.8 | ) |
|
| — |
|
|
| (18.0 | ) |
|
| (155.8 | ) |
Gain on the sale of noncontrolling interest in a private company (Note 4) |
|
| — |
|
|
| (47.9 | ) | ||||||||
Other non-cash items, net |
|
| 54.0 |
|
|
| 124.2 |
|
|
| 64.7 |
|
|
| 54.0 |
|
Increase/(decrease) in cash, excluding the effects of divestitures, resulting from changes in: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other assets |
|
| (166.4 | ) |
|
| (78.3 | ) |
|
| (91.1 | ) |
|
| (166.4 | ) |
Accounts payable and accrued liabilities |
|
| 50.6 |
|
|
| (27.9 | ) |
|
| (47.5 | ) |
|
| 50.6 |
|
Income taxes payable |
|
| (29.6 | ) |
|
| (61.7 | ) |
|
| (60.0 | ) |
|
| (29.6 | ) |
Other liabilities |
|
| (29.1 | ) |
|
| (19.7 | ) |
|
| 33.0 |
|
|
| (29.1 | ) |
Net cash provided by operating activities |
|
| 522.4 |
|
|
| 686.0 |
|
|
| 518.6 |
|
|
| 522.4 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Payments for capitalized contract costs |
|
| (58.4 | ) |
|
| (94.7 | ) |
|
| (34.3 | ) |
|
| (58.4 | ) |
Payments for internal use software |
|
| (68.0 | ) |
|
| (59.1 | ) |
|
| (66.7 | ) |
|
| (68.0 | ) |
Purchases of property and equipment |
|
| (21.1 | ) |
|
| (26.4 | ) |
|
| (16.2 | ) |
|
| (21.1 | ) |
Purchases of settlement investments |
|
| (663.3 | ) |
|
| (336.4 | ) |
|
| (382.0 | ) |
|
| (663.3 | ) |
Proceeds from the sale of settlement investments |
|
| 544.1 |
|
|
| 689.9 |
|
|
| 207.6 |
|
|
| 544.1 |
|
Maturities of settlement investments |
|
| 131.9 |
|
|
| 172.0 |
|
|
| 112.9 |
|
|
| 131.9 |
|
Proceeds from the sale of noncontrolling interest in a private company (Note 4) |
|
| — |
|
|
| 50.9 |
| ||||||||
Purchase of noncontrolling interest in stc Bank (Note 4) |
|
| — |
|
|
| (200.0 | ) | ||||||||
Purchases of non-settlement investments (Note 5) |
|
| (400.0 | ) |
|
| — |
|
|
| — |
|
|
| (400.0 | ) |
Proceeds from the sale of non-settlement investments (Note 5) |
|
| 100.0 |
|
|
| — |
| ||||||||
Proceeds from divestiture, net of cash divested (Note 4) |
|
| 896.4 |
|
|
| — |
|
|
| — |
|
|
| 896.4 |
|
Other investing activities |
|
| 5.1 |
|
|
| (3.6 | ) |
|
| 2.2 |
|
|
| 5.1 |
|
Net cash provided by investing activities |
|
| 366.7 |
|
|
| 192.6 |
| ||||||||
Net cash (used in)/provided by investing activities |
|
| (76.5 | ) |
|
| 366.7 |
| ||||||||
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash dividends and dividend equivalents paid (Note 9) |
|
| (275.5 | ) |
|
| (288.7 | ) |
|
| (266.0 | ) |
|
| (275.5 | ) |
Common stock repurchased (Note 9) |
|
| (193.1 | ) |
|
| (235.8 | ) |
|
| (97.1 | ) |
|
| (193.1 | ) |
Net proceeds from/(repayments of) commercial paper |
|
| (100.0 | ) |
|
| 40.0 |
| ||||||||
Net proceeds from issuance of borrowings |
|
| — |
|
|
| 891.7 |
| ||||||||
Net repayments of commercial paper |
|
| (10.0 | ) |
|
| (100.0 | ) | ||||||||
Principal payments on borrowings |
|
| (300.0 | ) |
|
| (1,150.0 | ) |
|
| (300.0 | ) |
|
| (300.0 | ) |
Make-whole premium on early extinguishment of debt |
|
| — |
|
|
| (14.3 | ) | ||||||||
Proceeds from exercise of options |
|
| 9.5 |
|
|
| 11.6 |
|
|
| 0.3 |
|
|
| 9.5 |
|
Net change in settlement obligations |
|
| (31.0 | ) |
|
| (138.3 | ) |
|
| (162.2 | ) |
|
| (31.0 | ) |
Other financing activities |
|
| (0.2 | ) |
|
| — |
|
|
| — |
|
|
| (0.2 | ) |
Net cash used in financing activities |
|
| (890.3 | ) |
|
| (883.8 | ) |
|
| (835.0 | ) |
|
| (890.3 | ) |
Net change in cash and cash equivalents, including settlement, and restricted cash |
|
| (1.2 | ) |
|
| (5.2 | ) |
|
| (392.9 | ) |
|
| (1.2 | ) |
Cash and cash equivalents, including settlement, and restricted cash at beginning of period |
|
| 2,110.9 |
|
|
| 2,143.1 |
|
|
| 2,040.7 |
|
|
| 2,110.9 |
|
Cash and cash equivalents, including settlement, and restricted cash at end of period |
| $ | 2,109.7 |
|
| $ | 2,137.9 |
|
| $ | 1,647.8 |
|
| $ | 2,109.7 |
|
See Notes to Condensed Consolidated Financial Statements.
6
THE WESTERN UNION COMPANY
SUPPLEMENTAL CASH FLOW INFORMATION
(Unaudited)
(in millions)
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Reconciliation of balance sheet cash and cash equivalents to cash flows: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents on balance sheet |
| $ | 1,176.1 |
|
| $ | 1,003.4 |
|
| $ | 1,138.2 |
|
| $ | 1,176.1 |
|
Settlement cash and cash equivalents (Note 8) |
|
| 817.2 |
|
|
| 1,082.9 |
|
|
| 484.4 |
|
|
| 817.2 |
|
Restricted cash in Other assets |
|
| 52.4 |
|
|
| 8.6 |
|
|
| 25.2 |
|
|
| 52.4 |
|
Cash and cash equivalents included in Assets held for sale (Note 4) |
|
| 64.0 |
|
|
| 43.0 |
|
|
| — |
|
|
| 64.0 |
|
Cash and cash equivalents, including settlement, and restricted cash |
| $ | 2,109.7 |
|
| $ | 2,137.9 |
| ||||||||
Cash and cash equivalents, including settlement, and restricted cash at end of period |
| $ | 1,647.8 |
|
| $ | 2,109.7 |
| ||||||||
|
|
|
|
|
|
| ||||||||||
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest paid |
| $ | 64.8 |
|
| $ | 69.7 |
|
| $ | 73.1 |
|
| $ | 64.8 |
|
Income taxes paid |
| $ | 180.8 |
|
| $ | 156.5 |
|
| $ | 176.6 |
|
| $ | 180.8 |
|
Internal use software capitalized but not yet paid |
| $ | — |
|
| $ | 24.1 |
| ||||||||
Accrued and unpaid capitalized contract costs |
| $ | 36.0 |
|
| $ | — |
|
| $ | — |
|
| $ | 36.0 |
|
See Notes to Condensed Consolidated Financial Statements.
7
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Other |
| Total |
|
|
|
|
|
|
|
|
|
| Other |
| Total |
| ||||||||||||||||||||||
|
| Common Stock |
|
| Capital |
| Accumulated |
| Comprehensive |
| Stockholders' |
|
| Common Stock |
|
| Capital |
| Accumulated |
| Comprehensive |
| Stockholders' |
| ||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Surplus |
|
| Deficit |
|
| Loss |
|
| Equity |
|
| Shares |
|
| Amount |
|
| Surplus |
|
| Deficit |
|
| Loss |
|
| Equity |
| ||||||||||||
Balance, December 31, 2021 |
|
| 393.8 |
|
| $ | 3.9 |
|
| $ | 941.0 |
|
| $ | (537.2 | ) |
| $ | (52.1 | ) |
| $ | 355.6 |
| ||||||||||||||||||||||||
Balance, December 31, 2022 |
|
| 373.5 |
|
| $ | 3.7 |
|
| $ | 995.9 |
|
| $ | (353.9 | ) |
| $ | (167.9 | ) |
| $ | 477.8 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 151.8 |
|
|
| — |
|
|
| 151.8 |
| ||||||||||||||||||||||||
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 8.0 |
|
|
| — |
|
|
| — |
|
|
| 8.0 |
| ||||||||||||||||||||||||
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (88.6 | ) |
|
| — |
|
|
| (88.6 | ) | ||||||||||||||||||||||||
Repurchase and retirement of common shares |
|
| (0.5 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| (6.1 | ) |
|
| — |
|
|
| (6.2 | ) | ||||||||||||||||||||||||
Shares issued under stock-based compensation plans |
|
| 1.4 |
|
|
| 0.1 |
|
|
| 0.2 |
|
|
| — |
|
|
| — |
|
|
| 0.3 |
| ||||||||||||||||||||||||
Other comprehensive income (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9.7 |
|
|
| 9.7 |
| ||||||||||||||||||||||||
Balance, March 31, 2023 |
|
| 374.4 |
|
|
| 3.7 |
|
|
| 1,004.1 |
|
|
| (296.8 | ) |
|
| (158.2 | ) |
|
| 552.8 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 293.3 |
|
|
| — |
|
|
| 293.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 176.2 |
|
|
| — |
|
|
| 176.2 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 10.7 |
|
|
| — |
|
|
| — |
|
|
| 10.7 |
|
|
| — |
|
|
| — |
|
|
| 9.5 |
|
|
| — |
|
|
| — |
|
|
| 9.5 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (92.6 | ) |
|
| — |
|
|
| (92.6 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (89.5 | ) |
|
| — |
|
|
| (89.5 | ) |
Repurchase and retirement of common shares |
|
| (8.6 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| (158.9 | ) |
|
| — |
|
|
| (159.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.3 | ) |
|
| — |
|
|
| (0.3 | ) |
Shares issued under stock-based compensation plans |
|
| 1.9 |
|
|
| 0.1 |
|
|
| 8.8 |
|
|
| — |
|
|
| — |
|
|
| 8.9 |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other comprehensive loss (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (64.1 | ) |
|
| (64.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.2 | ) |
|
| (22.2 | ) |
Balance, March 31, 2022 |
|
| 387.1 |
|
|
| 3.9 |
|
|
| 960.5 |
|
|
| (495.4 | ) |
|
| (116.2 | ) |
|
| 352.8 |
| ||||||||||||||||||||||||
Balance, June 30, 2023 |
|
| 374.5 |
|
|
| 3.7 |
|
|
| 1,013.6 |
|
|
| (210.4 | ) |
|
| (180.4 | ) |
|
| 626.5 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194.0 |
|
|
| — |
|
|
| 194.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 171.0 |
|
|
| — |
|
|
| 171.0 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 12.3 |
|
|
| — |
|
|
| — |
|
|
| 12.3 |
|
|
| — |
|
|
| — |
|
|
| 9.7 |
|
|
| — |
|
|
| — |
|
|
| 9.7 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (89.6 | ) |
|
| — |
|
|
| (89.6 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (88.4 | ) |
|
| — |
|
|
| (88.4 | ) |
Repurchase and retirement of common shares |
|
| (1.1 | ) |
|
| — |
|
|
| — |
|
|
| (21.1 | ) |
|
| — |
|
|
| (21.1 | ) |
|
| (7.8 | ) |
|
| — |
|
|
| — |
|
|
| (101.5 | ) |
|
| — |
|
|
| (101.5 | ) |
Shares issued under stock-based compensation plans |
|
| 0.1 |
|
|
| — |
|
|
| 0.5 |
|
|
| — |
|
|
| — |
|
|
| 0.5 |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other comprehensive loss (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.6 | ) |
|
| (0.6 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.7 | ) |
|
| (3.7 | ) |
Balance, June 30, 2022 |
|
| 386.1 |
|
|
| 3.9 |
|
|
| 973.3 |
|
|
| (412.1 | ) |
|
| (116.8 | ) |
|
| 448.3 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 173.9 |
|
|
| — |
|
|
| 173.9 |
| ||||||||||||||||||||||||
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 9.6 |
|
|
| — |
|
|
| — |
|
|
| 9.6 |
| ||||||||||||||||||||||||
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91.5 | ) |
|
| — |
|
|
| (91.5 | ) | ||||||||||||||||||||||||
Repurchase and retirement of common shares |
|
| (0.5 | ) |
|
| — |
|
|
| — |
|
|
| (7.7 | ) |
|
| — |
|
|
| (7.7 | ) | ||||||||||||||||||||||||
Shares issued under stock-based compensation plans |
|
| 0.3 |
|
|
| — |
|
|
| 0.1 |
|
|
|
|
|
| — |
|
|
| 0.1 |
| |||||||||||||||||||||||||
Other comprehensive loss (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4.4 | ) |
|
| (4.4 | ) | ||||||||||||||||||||||||
Balance, September 30, 2022 |
|
| 385.9 |
|
| $ | 3.9 |
|
| $ | 983.0 |
|
| $ | (337.4 | ) |
| $ | (121.2 | ) |
| $ | 528.3 |
| ||||||||||||||||||||||||
Balance, September 30, 2023 |
|
| 366.8 |
|
| $ | 3.7 |
|
| $ | 1,023.3 |
|
| $ | (229.3 | ) |
| $ | (184.1 | ) |
| $ | 613.6 |
|
8
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Other |
| Total |
|
|
|
|
|
|
|
|
|
| Other |
| Total |
| ||||||||||||||||||||||
|
| Common Stock |
|
| Capital |
| Accumulated |
| Comprehensive |
| Stockholders' |
|
| Common Stock |
|
| Capital |
| Accumulated |
| Comprehensive |
| Stockholders' |
| ||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Surplus |
|
| Deficit |
|
| Loss |
|
| Equity |
|
| Shares |
|
| Amount |
|
| Surplus |
|
| Deficit |
|
| Loss |
|
| Equity |
| ||||||||||||
Balance, December 31, 2020 |
|
| 411.2 |
|
| $ | 4.1 |
|
| $ | 885.1 |
|
| $ | (543.1 | ) |
| $ | (159.5 | ) |
| $ | 186.6 |
| ||||||||||||||||||||||||
Balance, December 31, 2021 |
|
| 393.8 |
|
| $ | 3.9 |
|
| $ | 941.0 |
|
| $ | (537.2 | ) |
| $ | (52.1 | ) |
| $ | 355.6 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 181.8 |
|
|
| — |
|
|
| 181.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 293.3 |
|
|
| — |
|
|
| 293.3 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 10.8 |
|
|
| — |
|
|
| — |
|
|
| 10.8 |
|
|
| — |
|
|
| — |
|
|
| 10.7 |
|
|
| — |
|
|
| — |
|
|
| 10.7 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97.9 | ) |
|
| — |
|
|
| (97.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (92.6 | ) |
|
| — |
|
|
| (92.6 | ) |
Repurchase and retirement of common shares |
|
| (3.7 | ) |
|
| — |
|
|
| — |
|
|
| (89.0 | ) |
|
| — |
|
|
| (89.0 | ) |
|
| (8.6 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| (158.9 | ) |
|
| — |
|
|
| (159.0 | ) |
Shares issued under stock-based compensation plans |
|
| 2.3 |
|
|
| — |
|
|
| 8.1 |
|
|
| — |
|
|
| — |
|
|
| 8.1 |
|
|
| 1.9 |
|
|
| 0.1 |
|
|
| 8.8 |
|
|
| — |
|
|
| — |
|
|
| 8.9 |
|
Other comprehensive income (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18.4 |
|
|
| 18.4 |
| ||||||||||||||||||||||||
Balance, March 31, 2021 |
|
| 409.8 |
|
|
| 4.1 |
|
|
| 904.0 |
|
|
| (548.2 | ) |
|
| (141.1 | ) |
|
| 218.8 |
| ||||||||||||||||||||||||
Other comprehensive loss (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (64.1 | ) |
|
| (64.1 | ) | ||||||||||||||||||||||||
Balance, March 31, 2022 |
|
| 387.1 |
|
|
| 3.9 |
|
|
| 960.5 |
|
|
| (495.4 | ) |
|
| (116.2 | ) |
|
| 352.8 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 222.5 |
|
|
| — |
|
|
| 222.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194.0 |
|
|
| — |
|
|
| 194.0 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 12.0 |
|
|
| — |
|
|
| — |
|
|
| 12.0 |
|
|
| — |
|
|
| — |
|
|
| 12.3 |
|
|
| — |
|
|
| — |
|
|
| 12.3 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97.0 | ) |
|
| — |
|
|
| (97.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (89.6 | ) |
|
| — |
|
|
| (89.6 | ) |
Repurchase and retirement of common shares |
|
| (3.0 | ) |
|
| — |
|
|
| — |
|
|
| (75.3 | ) |
|
| — |
|
|
| (75.3 | ) |
|
| (1.1 | ) |
|
| — |
|
|
| — |
|
|
| (21.1 | ) |
|
| — |
|
|
| (21.1 | ) |
Shares issued under stock-based compensation plans |
|
| 0.2 |
|
|
| — |
|
|
| 3.5 |
|
|
| — |
|
|
| — |
|
|
| 3.5 |
|
|
| 0.1 |
|
|
| — |
|
|
| 0.5 |
|
|
| — |
|
|
| — |
|
|
| 0.5 |
|
Other comprehensive income (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.8 |
|
|
| 1.8 |
| ||||||||||||||||||||||||
Balance, June 30, 2021 |
|
| 407.0 |
|
|
| 4.1 |
|
|
| 919.5 |
|
|
| (498.0 | ) |
|
| (139.3 | ) |
|
| 286.3 |
| ||||||||||||||||||||||||
Other comprehensive loss (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.6 | ) |
|
| (0.6 | ) | ||||||||||||||||||||||||
Balance, June 30, 2022 |
|
| 386.1 |
|
|
| 3.9 |
|
|
| 973.3 |
|
|
| (412.1 | ) |
|
| (116.8 | ) |
|
| 448.3 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 232.7 |
|
|
| — |
|
|
| 232.7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 173.9 |
|
|
| — |
|
|
| 173.9 |
|
Stock-based compensation |
|
| — |
|
|
| — | �� |
|
| 8.4 |
|
|
| — |
|
|
| — |
|
|
| 8.4 |
|
|
| — |
|
|
| — |
|
|
| 9.6 |
|
|
| — |
|
|
| — |
|
|
| 9.6 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (95.9 | ) |
|
| — |
|
|
| (95.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91.5 | ) |
|
| — |
|
|
| (91.5 | ) |
Repurchase and retirement of common shares |
|
| (3.5 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| (75.4 | ) |
|
| — |
|
|
| (75.5 | ) |
|
| (0.5 | ) |
|
| — |
|
|
| — |
|
|
| (7.7 | ) |
|
| — |
|
|
| (7.7 | ) |
Shares issued under stock-based compensation plans |
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.3 |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
|
Other comprehensive income (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12.6 |
|
|
| 12.6 |
| ||||||||||||||||||||||||
Balance, September 30, 2021 |
|
| 403.6 |
|
| $ | 4.0 |
|
| $ | 927.9 |
|
| $ | (436.6 | ) |
| $ | (126.7 | ) |
| $ | 368.6 |
| ||||||||||||||||||||||||
Other comprehensive loss (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4.4 | ) |
|
| (4.4 | ) | ||||||||||||||||||||||||
Balance, September 30, 2022 |
|
| 385.9 |
|
| $ | 3.9 |
|
| $ | 983.0 |
|
| $ | (337.4 | ) |
| $ | (121.2 | ) |
| $ | 528.3 |
|
See Notes to Condensed Consolidated Financial Statements.
9
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Basis of Presentation
Business
The Western Union Company ("Western Union" or the "Company") is a leader in global money movement and payment services, providing people and businesses with fast, reliable, and convenient ways to send money and make payments around the world. The Western Union® brand is globally recognized. The Company’s services are available through a network of agent locations in more than 200 countries and territories and also through money transfer transactions conducted and funded through websites and mobile applications marketed under the Company’s brands (“Branded Digital”) and transactions initiated on websitesinternet and mobile applications hosted by the Company’s third-party white label or co-branded digital partners (together with Branded Digital, “Digital Money Transfer”).partners. Each location in the Company’s agent network is capable of providing one or more of the Company’s services.
The Western Union business consistsconsisted of the following segments:
All businesses and other services that have not been classified in the above segments are reported as Other, which primarily includes the Company’s bill payment services which facilitate payments from consumers to businesses and other organizations and the Company’s money order services. Certain of the Company's corporate costs such as costs related to strategic initiatives, including costs for the review and closing of mergers, acquisitions, and divestitures, are also included in Other. See Note 14 for further information regarding the Company’s segments.
There are legal or regulatory limitations on transferring certain assets of the Company outside of the countries where these assets are located. However, there are generally no limitations on the use of these assets within those countries. Additionally, the Company must meet minimum capital requirements in some countries in order to maintain operating licenses. As of December 31, 2021,2022, the Company's restricted net assets associated with these asset limitations and minimum capital requirements totaled approximately $460710 million.
Various aspects of the Company’s services and businesses are subject to United States federal, state, and local regulation, as well as regulation by foreign jurisdictions, including certain banking and other financial services regulations.
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and were prepared in accordance with the instructions for Form 10‑Q and Article 10 of Regulation S-X. In compliance with those instructions, certain information
10
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted.
The unaudited condensed consolidated financial statements in this quarterly report are presented on a consolidated basis and include the accounts of the Company and its majority-owned subsidiaries. Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts have been eliminated as of September 30, 20222023 and December 31, 20212022 and for all periods presented.
In the opinion of management, these condensed consolidated financial statements include all the normal recurring adjustments necessary to fairly present the Company’s condensed consolidated results of operations, financial position, and cash flows as of September 30, 20222023 and for all periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements within the Company’s Annual Report on Form 10‑K for the year ended December 31, 2021.2022.
Consistent with industry practice, the accompanying Condensed Consolidated Balance Sheets are unclassified due to the short-term nature of the Company’s settlement obligations contrasted with the Company’s ability to invest cash awaiting settlement in long-term investment securities.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Cash Flow Classification Revision
Beginning in the fourth quarter of 2021, the Company revised its presentation to include changes in settlement cash associated with settlement obligations as a financing activity and changes in settlement cash from purchases, sales, and maturities of settlement investments as an investing activity within its Condensed Consolidated Statements of Cash Flows. Previously, the changes in settlement assets and settlement obligations were presented on a net basis within operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.
Prior period amounts have been revised to conform to this presentation. These changes in presentation have been concluded to be immaterial, having no impact on the Company’s previously reported net income, financial position, or cash flows from operating activities, as changes in the Company’s settlement assets exactly offset changes in its settlement obligations. However, the revised presentation shows all changes associated with settlement cash in the Condensed Consolidated Statements of Cash Flows instead of in the Notes to the Condensed Consolidated Financial Statements.
11
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the effects of the changes in presentation of these cash flows, compared to the previously reported Condensed Consolidated Statements of Cash Flows (in millions):
|
| Nine Months Ended September 30, 2021 |
| |||||||||
|
| As Previously |
|
|
|
|
|
|
| |||
|
| Reported(a) |
|
| Revisions |
|
| As Revised |
| |||
Net cash provided by/(used in): |
|
|
|
|
|
|
|
|
| |||
Operating activities |
| $ | 686.0 |
|
| $ | — |
|
| $ | 686.0 |
|
Investing activities(b) |
|
| (332.9 | ) |
|
| 525.5 |
|
|
| 192.6 |
|
Financing activities(c) |
|
| (745.5 | ) |
|
| (138.3 | ) |
|
| (883.8 | ) |
Net change in cash and cash equivalents, including settlement, and restricted cash |
| $ | (392.4 | ) |
| $ | 387.2 |
|
| $ | (5.2 | ) |
2. Revenue
The Company’s revenues are primarily derived from consideration paid by customers to transfer money. These revenues vary by transaction based upon factors such as channel, send and receive locations, the principal amount sent, whether the money transfer involves different send and receive currencies, the difference between the exchange rate set by the Company to the customer and thea rate available in the wholesale foreign exchange market, when the money transfer involves different send and speed of service, as applicable.receive currencies. The Company also offers several other services, including foreign exchange and payment services and otherwhich includes bill payment services, for which revenue is impacted by similar factors. For the substantial majority of the Company’s revenues, the Company acts as the principal in transactions and reports revenue on a gross basis, as the Company controls the service at all times prior to transfer to the customer, is primarily responsible for fulfilling the customer contracts, has the risk of loss, and has the ability to establish transaction prices. The Company also provides services to financial institutions and other third parties to enable such entities to offer money transfer services to their own customers under their brands. Generally, in these arrangements, consumers agree to terms and conditions specified by the financial institution or other third party that, among other things, establish pricing paid by the consumer for the service. The Company recognizes revenue on a net basis under these arrangements. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.
The Company recognized $1,035.0 million and $1,230.3 million for the three months ended September 30, 2022 and 2021, respectively, and $3,219.1 million and $3,635.7 million for the nine months ended September 30, 2022 and 2021, respectively, in revenues from contracts with customers. There were no material upfront costs incurred to obtain contracts with customers during these same periods. Under the Company’s loyalty programs, which are primarily offered in its money transfer services, the Company must fulfill loyalty program rewards earned by customers. The loyalty program redemption activity has been and continues to be insignificant to the Company’s results of operations, and the Company has immaterial contract liability balances, which primarily relate to its customer loyalty programs and other services. Contract asset balances related to customers were also immaterial as of the periods presented, as the Company typically receives payment of consideration from its customers prior to satisfying performance obligations under the customer contracts. In addition to revenue generated from contracts with customers, the Company recognizes revenue from other sources, including the sale of derivative financial instruments and investment income generated on settlement assets primarily related to money transfer and money order services.
The Company analyzes its different services individually to determine the appropriate basis for revenue recognition, as further described below. recognition. For additional information on the Company's different services, refer to the Company’s consolidated financial statements within the Company’s Annual Report on Form 10‑K for the year ended December 31, 2022.
Revenues from consumer money transfers are included in the Company’s Consumer-to- ConsumerConsumer-to-Consumer segment, revenues from foreign exchange and payment services arewere included in the Company’s Business Solutions segment, and revenues from consumer bill payment and other services are not included in the Company’s segments and are reported as Other. See Note 14 for further information on the Company’s segments. On August 4, 2021,
12
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC. During the third quarter of 2022, all parties agreed for the sale to be completed in three closings instead of two. The first closing occurred on March 1, 2022, the second is expected to occur in December 2022, and the third is expected in the first quarter of 2023. See Note 4 for further information regarding this transaction.
Consumer Money Transfers
For the Company’s money transfer services, customers agree to the Company’s terms and conditions at the time of initiating a transaction. In a money transfer, the Company has one performance obligation as the customer engages the Company to perform one integrated service which typically occurs within minutes — collect the customer’s money and make funds available for payment to a designated person in the currency requested. Therefore, the Company recognizes revenue upon completion of the following: (i) the customer’s acknowledgment of the Company’s terms and conditions and payment information has been received by the Company, (ii) the Company has agreed to process the money transfer, (iii) the Company has provided the customer a unique transaction identification number, and (iv) funds are available to be picked up by the customer's designated receiving party. The transaction price is comprised of a transaction fee and the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market, as applicable, both of which are readily determinable at the time the transaction is initiated.
Foreign Exchange and Payment Services
For the Company’s foreign exchange and payment services, customers agree to terms and conditions for all transactions, either at the time of initiating a transaction or signing a contract with the Company to provide payment services on the customer’s behalf. In the majority of the Company’s foreign exchange and payment services, the Company makes payments to the recipient to satisfy its performance obligation to the customer, and therefore, the Company recognizes revenue on foreign exchange and payment services when this performance obligation has been fulfilled. Revenues from foreign exchange and payment services are primarily comprised of the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market.
Consumer Bill Payments and Other
The Company offers bill payment and other services that vary by contractual features, including the types and amounts of fixed charges and with respect to how fees are billed and collected. The identification of the contract with the customer for revenue recognition purposes is consistent with these features for each of the Company’s bill payment and other services. As with consumer money transfers, customers engage the Company to perform one integrated service — collect money from the consumer and process the transaction, thereby providing billers with real-time or near real-time information regarding consumer payments and simplifying the billers’ collection efforts.
13
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Management has determined that the substantial majority of the Company’s revenue is recognized at a point in time. The following tables represent the disaggregation of revenue earned from contracts with customers by product type and region for the three and nine months ended September 30, 2022 and 2021 (in millions). The regional split of revenue shown in the tables below is based upon where transactions are initiated.
|
| Three Months Ended September 30, 2022 |
| |||||||||||||||||
|
|
|
|
| Foreign |
|
|
|
|
|
|
|
|
|
| |||||
|
| Consumer |
|
| Exchange |
|
|
|
|
|
|
|
|
|
| |||||
|
| Money |
|
| and Payment |
|
| Consumer |
|
| Other |
|
|
|
| |||||
|
| Transfers |
|
| Services(b) |
|
| Bill Payments |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
North America |
| $ | 383.6 |
|
| $ | — |
|
| $ | 17.2 |
|
| $ | 15.2 |
|
| $ | 416.0 |
|
Europe and CIS |
|
| 251.3 |
|
|
| 26.0 |
|
|
| 6.0 |
|
|
| — |
|
|
| 283.3 |
|
Middle East, Africa, and South Asia |
|
| 156.6 |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| 156.7 |
|
Latin America and the Caribbean |
|
| 97.0 |
|
|
| — |
|
|
| 23.4 |
|
|
| 2.1 |
|
|
| 122.5 |
|
East Asia and Oceania |
|
| 56.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 56.5 |
|
Revenues from contracts with customers |
| $ | 945.0 |
|
| $ | 26.0 |
|
| $ | 46.7 |
|
| $ | 17.3 |
|
| $ | 1,035.0 |
|
Other revenues (a) |
|
| 37.4 |
|
|
| 16.6 |
|
|
| 1.2 |
|
|
| (0.6 | ) |
|
| 54.6 |
|
Total revenues |
| $ | 982.4 |
|
| $ | 42.6 |
|
| $ | 47.9 |
|
| $ | 16.7 |
|
| $ | 1,089.6 |
|
|
| Nine Months Ended September 30, 2022 |
| |||||||||||||||||
|
|
|
|
| Foreign |
|
|
|
|
|
|
|
|
|
| |||||
|
| Consumer |
|
| Exchange |
|
|
|
|
|
|
|
|
|
| |||||
|
| Money |
|
| and Payment |
|
| Consumer |
|
| Other |
|
|
|
| |||||
|
| Transfers |
|
| Services(b) |
|
| Bill Payments |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
North America |
| $ | 1,171.3 |
|
| $ | 17.9 |
|
| $ | 52.7 |
|
| $ | 43.8 |
|
| $ | 1,285.7 |
|
Europe and Russia/CIS |
|
| 808.2 |
|
|
| 80.4 |
|
|
| 15.1 |
|
|
| 0.1 |
|
|
| 903.8 |
|
Middle East, Africa, and South Asia |
|
| 477.8 |
|
|
| 0.4 |
|
|
| 0.3 |
|
|
| — |
|
|
| 478.5 |
|
Latin America and the Caribbean |
|
| 279.2 |
|
|
| 0.5 |
|
|
| 74.8 |
|
|
| 6.5 |
|
|
| 361.0 |
|
East Asia and Oceania |
|
| 177.1 |
|
|
| 12.5 |
|
|
| 0.5 |
|
|
| — |
|
|
| 190.1 |
|
Revenues from contracts with customers |
| $ | 2,913.6 |
|
| $ | 111.7 |
|
| $ | 143.4 |
|
| $ | 50.4 |
|
| $ | 3,219.1 |
|
Other revenues (a) |
|
| 94.7 |
|
|
| 55.7 |
|
|
| 3.6 |
|
|
| 10.5 |
|
|
| 164.5 |
|
Total revenues |
| $ | 3,008.3 |
|
| $ | 167.4 |
|
| $ | 147.0 |
|
| $ | 60.9 |
|
| $ | 3,383.6 |
|
|
| Three Months Ended September 30, 2021 |
| |||||||||||||||||
|
|
|
|
| Foreign |
|
|
|
|
|
|
|
|
|
| |||||
|
| Consumer |
|
| Exchange |
|
|
|
|
|
|
|
|
|
| |||||
|
| Money |
|
| and Payment |
|
| Consumer |
|
| Other |
|
|
|
| |||||
|
| Transfers |
|
| Services |
|
| Bill Payments |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
North America |
| $ | 406.7 |
|
| $ | 30.9 |
|
| $ | 18.0 |
|
| $ | 14.4 |
|
| $ | 470.0 |
|
Europe and Russia/CIS |
|
| 345.0 |
|
|
| 39.3 |
|
|
| 1.4 |
|
|
| 0.4 |
|
|
| 386.1 |
|
Middle East, Africa, and South Asia |
|
| 165.8 |
|
|
| 0.5 |
|
|
| 0.2 |
|
|
| — |
|
|
| 166.5 |
|
Latin America and the Caribbean |
|
| 97.5 |
|
|
| 0.9 |
|
|
| 20.2 |
|
|
| 1.7 |
|
|
| 120.3 |
|
East Asia and Oceania |
|
| 69.2 |
|
|
| 17.9 |
|
|
| 0.3 |
|
|
| — |
|
|
| 87.4 |
|
Revenues from contracts with customers |
| $ | 1,084.2 |
|
| $ | 89.5 |
|
| $ | 40.1 |
|
| $ | 16.5 |
|
| $ | 1,230.3 |
|
Other revenues (a) |
|
| 20.3 |
|
|
| 27.3 |
|
|
| 3.6 |
|
|
| 4.8 |
|
|
| 56.0 |
|
Total revenues |
| $ | 1,104.5 |
|
| $ | 116.8 |
|
| $ | 43.7 |
|
| $ | 21.3 |
|
| $ | 1,286.3 |
|
1411
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| Nine Months Ended September 30, 2021 |
| |||||||||||||||||
|
|
|
|
| Foreign |
|
|
|
|
|
|
|
|
|
| |||||
|
| Consumer |
|
| Exchange |
|
|
|
|
|
|
|
|
|
| |||||
|
| Money |
|
| and Payment |
|
| Consumer |
|
| Other |
|
|
|
| |||||
|
| Transfers |
|
| Services |
|
| Bill Payments |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
North America |
| $ | 1,211.0 |
|
| $ | 75.6 |
|
| $ | 54.6 |
|
| $ | 43.2 |
|
| $ | 1,384.4 |
|
Europe and Russia/CIS |
|
| 1,047.8 |
|
|
| 107.3 |
|
|
| 3.6 |
|
|
| 1.0 |
|
|
| 1,159.7 |
|
Middle East, Africa, and South Asia |
|
| 492.2 |
|
|
| 1.5 |
|
|
| 0.4 |
|
|
| — |
|
|
| 494.1 |
|
Latin America and the Caribbean |
|
| 276.7 |
|
|
| 2.5 |
|
|
| 56.8 |
|
|
| 5.6 |
|
|
| 341.6 |
|
East Asia and Oceania |
|
| 204.0 |
|
|
| 51.1 |
|
|
| 0.8 |
|
|
| — |
|
|
| 255.9 |
|
Revenues from contracts with customers |
| $ | 3,231.7 |
|
| $ | 238.0 |
|
| $ | 116.2 |
|
| $ | 49.8 |
|
| $ | 3,635.7 |
|
Other revenues (a) |
|
| 50.8 |
|
|
| 74.6 |
|
|
| 10.0 |
|
|
| 14.9 |
|
|
| 150.3 |
|
Total revenues |
| $ | 3,282.5 |
|
| $ | 312.6 |
|
| $ | 126.2 |
|
| $ | 64.7 |
|
| $ | 3,786.0 |
|
months ended September 30, 2023 and 2022 (in millions). The regional split of revenue shown in the tables below is based upon where transactions are initiated.
| Three Months Ended September 30, 2023 |
| ||||||||||||||
|
|
|
| Foreign |
|
|
|
|
|
|
| |||||
| Consumer |
|
| Exchange |
|
|
|
|
|
|
| |||||
| Money |
|
| and Payment |
|
| Other |
|
|
|
| |||||
| Transfers |
|
| Services(b) |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
North America |
| $ | 369.5 |
|
| $ | — |
|
| $ | 33.8 |
|
| $ | 403.3 |
|
Europe and CIS |
|
| 238.4 |
|
|
| — |
|
|
| 2.7 |
|
|
| 241.1 |
|
Middle East, Africa, and South Asia |
|
| 224.4 |
|
|
| — |
|
|
| 0.1 |
|
|
| 224.5 |
|
Latin America and the Caribbean |
|
| 106.7 |
|
|
| — |
|
|
| 25.5 |
|
|
| 132.2 |
|
East Asia and Oceania |
|
| 51.8 |
|
|
| — |
|
|
| — |
|
|
| 51.8 |
|
Revenues from contracts with customers |
| $ | 990.8 |
|
| $ | — |
|
| $ | 62.1 |
|
| $ | 1,052.9 |
|
Other revenues (a) |
|
| 28.2 |
|
|
| — |
|
|
| 16.7 |
|
|
| 44.9 |
|
Total revenues |
| $ | 1,019.0 |
|
| $ | — |
|
| $ | 78.8 |
|
| $ | 1,097.8 |
|
| Three Months Ended September 30, 2022 |
| ||||||||||||||
|
|
|
| Foreign |
|
|
|
|
|
|
| |||||
| Consumer |
|
| Exchange |
|
|
|
|
|
|
| |||||
| Money |
|
| and Payment |
|
| Other |
|
|
|
| |||||
| Transfers |
|
| Services(b) |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
North America |
| $ | 383.6 |
|
| $ | — |
|
| $ | 32.4 |
|
| $ | 416.0 |
|
Europe and CIS |
|
| 251.3 |
|
|
| 26.0 |
|
|
| 6.0 |
|
|
| 283.3 |
|
Middle East, Africa, and South Asia |
|
| 156.6 |
|
|
| — |
|
|
| 0.1 |
|
|
| 156.7 |
|
Latin America and the Caribbean |
|
| 97.0 |
|
|
| — |
|
|
| 25.5 |
|
|
| 122.5 |
|
East Asia and Oceania |
|
| 56.5 |
|
|
| — |
|
|
| — |
|
|
| 56.5 |
|
Revenues from contracts with customers |
| $ | 945.0 |
|
| $ | 26.0 |
|
| $ | 64.0 |
|
| $ | 1,035.0 |
|
Other revenues (a) |
|
| 37.4 |
|
|
| 16.6 |
|
|
| 0.6 |
|
|
| 54.6 |
|
Total revenues |
| $ | 982.4 |
|
| $ | 42.6 |
|
| $ | 64.6 |
|
| $ | 1,089.6 |
|
| Nine Months Ended September 30, 2023 |
| ||||||||||||||
|
|
|
| Foreign |
|
|
|
|
|
|
| |||||
| Consumer |
|
| Exchange |
|
|
|
|
|
|
| |||||
| Money |
|
| and Payment |
|
| Other |
|
|
|
| |||||
| Transfers |
|
| Services(b) |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
North America |
| $ | 1,089.1 |
|
| $ | — |
|
| $ | 101.0 |
|
| $ | 1,190.1 |
|
Europe and CIS |
|
| 718.1 |
|
|
| 13.0 |
|
|
| 12.9 |
|
|
| 744.0 |
|
Middle East, Africa, and South Asia |
|
| 658.5 |
|
|
| — |
|
|
| 0.3 |
|
|
| 658.8 |
|
Latin America and the Caribbean |
|
| 306.2 |
|
|
| — |
|
|
| 81.0 |
|
|
| 387.2 |
|
East Asia and Oceania |
|
| 161.9 |
|
|
| — |
|
|
| — |
|
|
| 161.9 |
|
Revenues from contracts with customers |
| $ | 2,933.8 |
|
| $ | 13.0 |
|
| $ | 195.2 |
|
| $ | 3,142.0 |
|
Other revenues (a) |
|
| 95.7 |
|
|
| 16.7 |
|
|
| 50.3 |
|
|
| 162.7 |
|
Total revenues |
| $ | 3,029.5 |
|
| $ | 29.7 |
|
| $ | 245.5 |
|
| $ | 3,304.7 |
|
12
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| Nine Months Ended September 30, 2022 |
| ||||||||||||||
|
|
|
| Foreign |
|
|
|
|
|
|
| |||||
| Consumer |
|
| Exchange |
|
|
|
|
|
|
| |||||
| Money |
|
| and Payment |
|
| Other |
|
|
|
| |||||
| Transfers |
|
| Services(b) |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
North America |
| $ | 1,171.3 |
|
| $ | 17.9 |
|
| $ | 96.5 |
|
| $ | 1,285.7 |
|
Europe and CIS |
|
| 808.2 |
|
|
| 80.4 |
|
|
| 15.2 |
|
|
| 903.8 |
|
Middle East, Africa, and South Asia |
|
| 477.8 |
|
|
| 0.4 |
|
|
| 0.3 |
|
|
| 478.5 |
|
Latin America and the Caribbean |
|
| 279.2 |
|
|
| 0.5 |
|
|
| 81.3 |
|
|
| 361.0 |
|
East Asia and Oceania |
|
| 177.1 |
|
|
| 12.5 |
|
|
| 0.5 |
|
|
| 190.1 |
|
Revenues from contracts with customers |
| $ | 2,913.6 |
|
| $ | 111.7 |
|
| $ | 193.8 |
|
| $ | 3,219.1 |
|
Other revenues (a) |
|
| 94.7 |
|
|
| 55.7 |
|
|
| 14.1 |
|
|
| 164.5 |
|
Total revenues |
| $ | 3,008.3 |
|
| $ | 167.4 |
|
| $ | 207.9 |
|
| $ | 3,383.6 |
|
3. Earnings Per Share
The calculation of basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Outstanding options to purchase Western Union stock and unvested shares of restricted stock are excluded from basic shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares of restricted stock have vested, using the treasury stock method. The treasury stock method assumes proceeds from the exercise price of stock options and the unamortized compensation expense of options and restricted stock are available to acquire shares at an average market price throughout the period, and therefore, reduce the dilutive effect.
Shares excluded from the diluted earnings per share calculation were 9.5 million and 8.1 million for the three months ended September 30, 2023 and 2022, respectively, and 9.6 million and 8.0 million for the nine months ended September 30, 2023 and 2022, respectively. The effect of these shares was anti-dilutive under the treasury stock method, primarily due to outstanding options to purchase shares of Western Union stock and restricted stock units, as the assumed proceeds of the options and restricted stock per unit were above the Company’sCompany's average share price during the periods and their effect was anti-dilutive, were 8.1 million and 2.2 million for the three months ended September 30, 2022 and 2021, respectively, and 8.0 million and 1.7 million for the nine months ended September 30, 2022 and 2021, respectively.periods.
The following table provides the calculation of diluted weighted-average shares outstanding (in millions):
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Basic weighted-average shares outstanding |
|
| 386.5 |
|
|
| 406.3 |
|
|
| 388.8 |
|
|
| 409.1 |
|
|
| 373.9 |
|
|
| 386.5 |
|
|
| 374.5 |
|
|
| 388.8 |
|
Common stock equivalents |
|
| 1.1 |
|
|
| 1.7 |
|
|
| 1.1 |
|
|
| 2.2 |
|
|
| 1.1 |
|
|
| 1.1 |
|
|
| 0.9 |
|
|
| 1.1 |
|
Diluted weighted-average shares outstanding |
|
| 387.6 |
|
|
| 408.0 |
|
|
| 389.9 |
|
|
| 411.3 |
|
|
| 375.0 |
|
|
| 387.6 |
|
|
| 375.4 |
|
|
| 389.9 |
|
15
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. Divestitures and Investment Activities
Assets Held for Sale and Related Divestiture
On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC (collectively, the “Buyer”) for cash consideration of $910.0 million. In the third quarter, the Company and the Buyer agreed to complete the divestitureThe sale was completed in three closings, instead of two, the first of which occurred on March 1, 2022 with the entirety of theentire cash consideration collected at that timethe first closing and allocated to the closings on a relative fair value basis. The first closing occurred on March 1, 2022, excluded the operations in the European Union and the United Kingdom, and resulted in a gain of $151.4 million.In connection with the first closing, the Company reclassified $17.8
13
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
million of currency translation gains previously included within Accumulated other comprehensive loss (“AOCL”("AOCL") as a component of Gain on divestiture of business in the Condensed Consolidated Statements of Income. The second closing, which occurred on December 31, 2022 and included the United Kingdom operations, resulted in a gain of $96.9 million. As of September 30,December 31, 2022, the Company has agreed to and paid final working capital adjustments to the Buyer and has classified the proceeds allocated to the European Union and United Kingdom operations of approximately $390104 million within Other liabilities in the Condensed Consolidated Balance Sheets. The secondfinal closing which includes the United Kingdom operations, is expected to occur in December 2022, pending required regulatory approvals. The third closing, which includesoccurred on July 1, 2023, included the European Union operations, is currently expected to occurand resulted in the first quartera gain of 2023, pending required regulatory approvals. The gains associated with the second and third closings are subject to regulatory capital adjustments and will be recognized at the time of each closing.$18.0 million. During the period between the first and thirdfinal closings, the Company willwas required to pay to the Buyer a measure of profit of the European Union and United Kingdom operations, while owned by the Company, adjusted for the occupancy charges for employees of the Buyer using Company facilities, and other items, as contractually agreed, which was $2.7 million for the nine months ended September 30, 2023 and $15.0 million and $25.9 million for the three and nine months ended September 30, 2022, respectively, and was included in Other income/(expense),expense, net in the Condensed Consolidated Statements of Income. The related income tax expense on this income iswas also passed to the Buyer.
The Company has presented the remaining assets of its Business Solutions business as held for sale, along with the associated liabilities, as the Company believes the completions of the second and third closings are probable. The Buyer has rebranded the sold operations within a new standalone company (now referred to as "Convera").
Business Solutions revenues included in the Condensed Consolidated Statements of Income were $42.6 million and $116.8 million and direct operating expenses, excluding corporate allocations, were $27.0 million and $77.1 million for the three months ended September 30, 2022 and 2021, respectively.2022. For the nine months ended September 30, 20222023 and 2021,2022, Business Solutions revenues were $167.429.7 million and $312.6167.4 million, respectively, and direct operating expenses, excluding corporate allocations, were $117.426.1 million and $244.5117.4 million, respectively. For the three and nine months ended September 30, 2023, divestiture costs directly associated with this transaction were $0.1 million and $1.1 million, respectively. For the three and nine months ended September 30, 2022, and 2021, divestiture costs directly associated with this transaction were $0.4 million and $5.2 million, respectively. For the nine months ended September 30, 2022 and 2021, divestiture costs directly associated with this transaction were $4.4 million and $10.7 million, respectively.
16
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table reflects the assets held for sale and associated liabilities of the Business Solutions business in the accompanying Condensed Consolidated Balance Sheets (in millions). These balances are subject to regulatory capital and other requirements which will be finalized upon the third close.
|
| September 30, |
| December 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
| |||
Cash and cash equivalents |
| $ | 64.0 |
|
| $ | 37.7 |
|
| $ | 5.2 |
|
Settlement assets |
|
| 230.3 |
|
|
| 566.0 |
|
|
| 74.9 |
|
Property and equipment, net of accumulated depreciation of $1.7 and $19.3 |
|
| 1.7 |
|
|
| 6.3 |
| ||||
Property and equipment, net of accumulated depreciation of $1.0 |
|
| 0.7 |
| ||||||||
Goodwill |
|
| 229.2 |
|
|
| 532.0 |
|
|
| 61.4 |
|
Other intangible assets, net of accumulated amortization of $77.8 and $360.2 |
|
| 9.7 |
|
|
| 50.4 |
| ||||
Other intangible assets, net of accumulated amortization of $9.8 |
|
| 1.4 |
| ||||||||
Other assets |
|
| 280.0 |
|
|
| 260.5 |
|
|
| 118.0 |
|
Total assets |
| $ | 814.9 |
|
| $ | 1,452.9 |
|
| $ | 261.6 |
|
|
|
|
|
|
|
|
|
|
| |||
Accounts payable and accrued liabilities |
| $ | 81.3 |
|
| $ | 61.6 |
|
| $ | 18.2 |
|
Settlement obligations |
|
| 230.3 |
|
|
| 566.0 |
|
|
| 74.9 |
|
Other liabilities |
|
| 238.9 |
|
|
| 194.3 |
|
|
| 89.4 |
|
Total liabilities |
| $ | 550.5 |
|
| $ | 821.9 |
|
| $ | 182.5 |
|
Investment Activities
The Company entered into an agreement in November 2020, which was subsequently amended, to acquire an ownership interest in stc Bank (formerly Saudi Digital Payments Company), a subsidiary of Saudi Telecom Company and one of the Company’s Consumer-to-Consumer digital white label partners. Under the terms of the amended agreement, the Company agreed to invest $200.0 million for a 15% ownership in stc Bank (“Investment”), and this transaction closed in October 2021. In conjunction with the Investment, the Company and stc Bank extended and expanded the terms of their commercial agreement. The Company assigned a value of $36.0 million to certain rights under the commercial agreement that are included in Other assets in the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 and are being amortized over the life of the agreement.The Company is measuring the Investment at cost, less any impairment, adjusted for any changes resulting from observable price changes in orderly transactions for identical or similar investments in stc Bank.
14
In April 2021, the Company sold a substantial majority of the noncontrolling interest it held in a private company for cash proceeds of $50.9 million. The Company recorded a gain of $47.9 million within Other income/(expense), net, during the nine months ended September 30, 2021. The Company retains an immaterial equity interest in this private company.THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. Fair Value Measurements
Fair value, as defined by the relevant accounting standards, represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For additional information on how the Company measures fair value, refer to the Company’s consolidated financial statements within the Company’s Annual Report on Form 10‑K for the year ended December 31, 2021.
17
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)2022.
The following tables present the Company’s assets and liabilities, which are measured at fair value on a recurring basis, by category (in millions):
|
| Fair Value Measurement Using |
|
| Total |
|
| Fair Value Measurement Using |
|
| Total |
| ||||||||||||
September 30, 2022 |
| Level 1 |
|
| Level 2 |
|
| Fair Value |
| |||||||||||||||
September 30, 2023 |
| Level 1 |
|
| Level 2 |
|
| Fair Value |
| |||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Measured at fair value through net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Money market funds |
| $ | 1.8 |
|
| $ | — |
|
| $ | 1.8 |
|
| $ | 6.4 |
|
| $ | — |
|
| $ | 6.4 |
|
Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
State and municipal debt securities |
|
| — |
|
|
| 1,012.5 |
|
|
| 1,012.5 |
|
|
| — |
|
|
| 981.0 |
|
|
| 981.0 |
|
Asset-backed securities |
|
| — |
|
|
| 187.5 |
|
|
| 187.5 |
| ||||||||||||
Corporate debt securities |
|
| — |
|
|
| 110.3 |
|
|
| 110.3 |
|
|
| — |
|
|
| 152.9 |
|
|
| 152.9 |
|
State and municipal variable-rate demand notes |
|
| — |
|
|
| 97.5 |
|
|
| 97.5 |
|
|
| — |
|
|
| 48.3 |
|
|
| 48.3 |
|
United States government agency mortgage-backed securities |
|
| — |
|
|
| 23.4 |
|
|
| 23.4 |
|
|
| — |
|
|
| 13.6 |
|
|
| 13.6 |
|
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivatives |
|
| — |
|
|
| 328.2 |
|
|
| 328.2 |
|
|
| — |
|
|
| 30.1 |
|
|
| 30.1 |
|
Total assets |
| $ | 1.8 |
|
| $ | 1,571.9 |
|
| $ | 1,573.7 |
|
| $ | 6.4 |
|
| $ | 1,413.4 |
|
| $ | 1,419.8 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivatives |
| $ | — |
|
| $ | 242.3 |
|
| $ | 242.3 |
|
| $ | — |
|
| $ | 5.5 |
|
| $ | 5.5 |
|
Total liabilities |
| $ | — |
|
| $ | 242.3 |
|
| $ | 242.3 |
|
| $ | — |
|
| $ | 5.5 |
|
| $ | 5.5 |
|
|
| Fair Value Measurement Using |
|
| Total |
|
| Fair Value Measurement Using |
|
| Total |
| ||||||||||||
December 31, 2021 |
| Level 1 |
|
| Level 2 |
|
| Fair Value |
| |||||||||||||||
December 31, 2022 |
| Level 1 |
|
| Level 2 |
|
| Fair Value |
| |||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Measured at fair value through net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Money market funds |
| $ | 7.9 |
|
| $ | — |
|
| $ | 7.9 |
|
| $ | 11.7 |
|
| $ | — |
|
| $ | 11.7 |
|
Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
State and municipal debt securities |
|
| — |
|
|
| 1,219.9 |
|
|
| 1,219.9 |
|
|
| — |
|
|
| 933.3 |
|
|
| 933.3 |
|
Asset-backed securities |
|
| — |
|
|
| 184.1 |
|
|
| 184.1 |
| ||||||||||||
Corporate debt securities |
|
| — |
|
|
| 146.9 |
|
|
| 146.9 |
| ||||||||||||
State and municipal variable-rate demand notes |
|
| — |
|
|
| 84.8 |
|
|
| 84.8 |
|
|
| — |
|
|
| 48.9 |
|
|
| 48.9 |
|
Corporate and other debt securities |
|
| — |
|
|
| 57.8 |
|
|
| 57.8 |
| ||||||||||||
United States government agency mortgage-backed securities |
|
| — |
|
|
| 36.4 |
|
|
| 36.4 |
|
|
| — |
|
|
| 20.5 |
|
|
| 20.5 |
|
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivatives |
|
| — |
|
|
| 247.7 |
|
|
| 247.7 |
|
|
| — |
|
|
| 126.1 |
|
|
| 126.1 |
|
Total assets |
| $ | 7.9 |
|
| $ | 1,646.6 |
|
| $ | 1,654.5 |
|
| $ | 11.7 |
|
| $ | 1,459.8 |
|
| $ | 1,471.5 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivatives |
| $ | — |
|
| $ | 183.8 |
|
| $ | 183.8 |
|
| $ | — |
|
| $ | 98.9 |
|
| $ | 98.9 |
|
Total liabilities |
| $ | — |
|
| $ | 183.8 |
|
| $ | 183.8 |
|
| $ | — |
|
| $ | 98.9 |
|
| $ | 98.9 |
|
15
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
There were no material, non-recurring fair value adjustments in the three and nine months ended September 30, 2023 other than approximately $10 million of impairments primarily related to software no longer in use. There were no material, non-recurring fair value adjustments in the three and nine months ended September 30, 2022 other than approximately $9 million of property and equipment, operating lease right-of-use asset, and other intangible asset impairments associated with the Company's suspension of its operations in Russia and Belarus and the first closing of its Business Solutions divestiture in the nine months ended September 30, 2022, as discussed further in Note 14. There were no material, non-recurring fair value adjustments in the three months ended September 30, 2022 and three and nine months ended September 30, 2021 or transfers between Level 1 and Level 2 measurements during the three and nine months ended September 30, 20222023 and 2021.
18
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)2022.
Other Fair Value Measurements
The carrying amounts for many of the Company’s financial instruments, including certain cash and cash equivalents, settlement cash and cash equivalents, and settlement receivables and obligations approximate fair value due to their short maturities. The Company’s borrowings are classified as Level 2 within the valuation hierarchy, and the aggregate fair value of these borrowings was based on quotes from multiple banks. Fixed-rate notes are carried in the Company’s Condensed Consolidated Balance Sheets at their original issuance values as adjusted over time to accrete that value to par. As of September 30, 2023, the carrying value and fair value of the Company’s borrowings were $2,309.1 million and $2,132.0 million, respectively (see Note 11). As of December 31, 2022, the carrying value and fair value of the Company’s borrowings were $2,611.02,616.8 million and $2,387.1 million, respectively (see Note 11). As of December 31, 2021, the carrying value and fair value of the Company’s borrowings were $3,008.4 million and $3,217.22,442.5 million, respectively.
During the nine months ended September 30,In 2022, the Company entered into reverse repurchase agreements, a form of secured lending, with broker-dealer affiliates of large U.S. banks, using a portion of the proceeds from the sale of the Company's Business Solutions business. These agreements requirerequired the counterparties to pledge marketable securities with a value greater than the amount of cash transferred as collateral, which iswas held and valued by a third-party custodial bank. These investments generategenerated interest income through the date of repurchase, at which point the purchase price together with the interest due will bewas paid back to the Company. The Company carrieshas fully redeemed these investments at amortized cost, and as of September 30, 2023. As of December 31, 2022, the carrying value of these investments, as reported in Other assets in the Company's Condensed Consolidated Balance Sheets, was $400.0100.0 million, which approximatesapproximated fair value due to the creditworthiness of the counterparties,counterparty, the value of the collateral, and the investments' short-term nature and variable interest rate.
6. Commitments and Contingencies
Letters of Credit and Bank Guarantees
The Company had approximately $330160 million in outstanding letters of credit and bank guarantees as of September 30, 2022,2023, which were primarily held in connection with safeguarding consumer funds,regulatory requirements, lease arrangements, and certain agent agreements. The Company expects to renew mostmany of its letters of credit and bank guarantees prior to expiration.
Litigation and Related Contingencies
The Company is subject to certain claims and litigation that could result in losses, including damages, fines, and/or civil penalties, which could be significant, and in some cases, criminal charges. The Company regularly evaluates the status of legal matters to assess whether a loss is probable and reasonably estimable in determining whether an accrual is appropriate. Furthermore, in determining whether disclosure is appropriate, the Company evaluates each legal matter to assess if there is at least a reasonable possibility that a material loss or additional material losses may have been incurred. The Company also evaluates whether an estimate of possible loss or range of loss can be made. Unless otherwise specified below, the Company believes that there is at least a reasonable possibility that a loss or additional loss may have been incurred for each of the matters described below.
For those matters that the Company believes there is at least a reasonable possibility that a loss or additional loss may have been incurred and can reasonably estimate the loss or potential loss, the reasonably possible potential litigation losses in excess of the Company’s recorded liability for probable and estimable losses was approximately $30 million as of
16
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
September 30, 2022.2023. For the remaining matters, management is unable to provide a meaningful estimate of the possible loss or range of loss because, among other reasons: (i) the proceedings are in preliminary stages; (ii) specific damages have not been sought; (iii) damage claims are unsupported and/or unreasonable; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; or (vi) novel legal issues or unsettled legal theories are being asserted.
The outcomes of legal actions are unpredictable and subject to significant uncertainties, and it is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss
19
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Accordingly, actual losses may be in excess of the established liability or the range of reasonably possible loss.
Legal Matters
In October 2015, Consumidores Financieros Asociación Civil para su Defensa, an Argentinian consumer association, filed a purported class action lawsuit in Argentina’s National Commercial Court No. 19 against the Company’s subsidiary Western Union Financial Services Argentina S.R.L. (“WUFSA”). The lawsuit alleges, among other things, that WUFSA’s fees for money transfers sent from Argentina are excessive and that WUFSA does not provide consumers with adequate information about foreign exchange rates. The plaintiff is seeking, among other things, an order requiring WUFSA to reimburse consumers for the fees they paid and the foreign exchange revenue associated with money transfers sent from Argentina, plus punitive damages. The complaint does not specify a monetary value of the claim or a time period. In November 2015, the Court declared the complaint formally admissible as a class action. The notice of claim was served on WUFSA in May 2016, and in June 2016 WUFSA filed a response to the claim and moved to dismiss it on statute of limitations and standing grounds. In April 2017, the Court deferred ruling on the motion until later in the proceedings. The process for notifying potential class members has been completed, and the case is in the evidentiary stage. Due to the stage of this matter, the Company is unable to predict the outcome or the possible loss or range of loss, if any, associated with this matter. WUFSA intends to defend itself vigorously.
In December 2022, a purported class action complaint was filed against several money transfer business defendants, including the Company, in the United States District Court for the Northern District of California, alleging that these defendants violated the federal Right to Financial Privacy Act and California’s Financial Information Privacy Act. The United States Department of Homeland Security and Immigration and Customs Enforcement are also named as defendants. The operative complaint alleges that the defendants violated plaintiffs’ financial privacy rights by sharing private financial information with law enforcement agencies through a program coordinated by the Transaction Record Analysis Center. On January 24, 2023, an amended complaint was filed naming the Company's subsidiary Western Union Financial Services, Inc. ("WUFSI") as a defendant in place of The Western Union Company. Due to the preliminary stage of this matter, the ultimate outcome and any potential financial impact to the Company cannot be reasonably determined at this time. WUFSI intends to defend itself vigorously in this matter.
In late 2017, three individuals filed a lawsuit against certain alleged Western Union entities (collectively, the “Defendants”) in the Commercial Court in Kinshasa-Gombe in the Democratic Republic of the Congo ("DRC"), which was later joined by three additional individuals. These six individuals (the "Plaintiffs"), including current and/or former DRC government officials, claim that their privacy rights were violated and sought €22.4 million in damages. In 2018, the Commercial Court in Kinshasa-Gombe entered a judgment against the Defendants in the amount of €10.5 million ($11.0 million as of September 30, 2023). In 2019, the Commercial Court in Kinshasa-Gombe entered a judgment against The Western Union Company ("TWUC") in the amount of €9 million ($9.4 million as of September 30, 2023) The business in the DRC is operated through independent agents. No Western Union entity has a presence in the country. The Plaintiffs have previously sought and may continue to attempt to seize funds from the Company's independent agents in the DRC to satisfy the judgments. The Defendants have learned that certain challenges to the judgments have been denied. The Defendants and TWUC intend to continue to challenge both judgments and defend themselves vigorously in these matters.
In addition to the principal matters described above, the Company is a party to a variety of other legal matters that arise in the normal course of the Company’s business. While the results of these other legal matters cannot be predicted
17
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
with certainty, management believes that the final outcome of these matters will not have a material adverse effect either individually or in the aggregate on the Company’s financial condition, results of operations, or cash flows.
7. Related Party Transactions
The Company has ownership interests in certain of its agents accounted for under the equity method of accounting. The Company pays these agents commissions for money transfer and other services provided on the Company’s behalf. Commission expense recognized for these agents for the three months ended September 30, 20222023 and 20212022 totaled $12.211.5 million and $14.012.2 million, respectively, and $36.533.8 million and $41.236.5 million for the nine months ended September 30, 2023 and 2022, and 2021, respectively.
20
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. Settlement Assets and Obligations
Settlement assets represent funds received or to be received from agents and others for unsettled money transfers, money orders, and consumer payments. The Company records corresponding settlement obligations relating to amounts payable under money transfers, money orders, and consumer payment service arrangements. Settlement assets and obligations also includeincluded amounts receivable from, and payable to, customers for the value of their cross-currency payment transactions related to the Business Solutions segment.
Settlement assets and obligations consisted of the following (in millions):
|
| September 30, 2022 |
|
| September 30, 2023 |
| ||
Settlement assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 817.2 |
|
| $ | 484.4 |
|
Receivables from agents, Business Solutions customers, and others |
|
| 1,277.2 |
| ||||
Receivables from agents and others |
|
| 1,633.8 |
| ||||
Less: Allowance for credit losses |
|
| (11.9 | ) |
|
| (20.5 | ) |
Receivables from agents, Business Solutions customers, and others, net |
|
| 1,265.3 |
| ||||
Receivables from agents and others, net |
|
| 1,613.3 |
| ||||
Investment securities |
|
| 1,243.7 |
|
|
| 1,383.3 |
|
Less: Allowance for credit losses |
|
| (0.2 | ) |
|
| (0.2 | ) |
Investment securities, net |
|
| 1,243.5 |
|
|
| 1,383.1 |
|
Total settlement assets |
| $ | 3,326.0 |
|
| $ | 3,480.8 |
|
Settlement obligations: |
|
|
|
|
|
| ||
Money transfer, money order, and payment service payables |
| $ | 2,695.2 |
|
| $ | 2,732.6 |
|
Payables to agents |
|
| 630.8 |
|
|
| 748.2 |
|
Total settlement obligations |
| $ | 3,326.0 |
|
| $ | 3,480.8 |
|
|
| December 31, 2021 |
|
| December 31, 2022 |
| ||
Settlement assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 835.5 |
|
| $ | 708.1 |
|
Receivables from agents, Business Solutions customers, and others |
|
| 1,198.8 |
|
|
| 1,533.2 |
|
Less: Allowance for credit losses |
|
| (23.7 | ) |
|
| (13.0 | ) |
Receivables from agents, Business Solutions customers, and others, net |
|
| 1,175.1 |
|
|
| 1,520.2 |
|
Investment securities |
|
| 1,398.9 |
|
|
| 1,333.7 |
|
Total settlement assets |
| $ | 3,409.5 |
| ||||
Less: Allowance for credit losses |
|
| (0.3 | ) | ||||
Investment securities, net |
|
| 1,333.4 |
| ||||
Total settlement assets (a) |
| $ | 3,561.7 |
| ||||
Settlement obligations: |
|
|
|
|
|
| ||
Money transfer, money order, and payment service payables |
| $ | 2,838.9 |
|
| $ | 2,843.3 |
|
Payables to agents |
|
| 570.6 |
|
|
| 718.4 |
|
Total settlement obligations |
| $ | 3,409.5 |
| ||||
Total settlement obligations (a) |
| $ | 3,561.7 |
|
18
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Allowance for Credit Losses
Receivables from agents and others primarily represent funds collected by such agents, but in transit to the Company, and were $1,243.31,613.3 million and $1,125.91,508.5 million as of September 30, 20222023 and December 31, 2021,2022, respectively. Cash received by Western Union agents generally becomes available to the Company within one week after initial receipt by the agent. Western Union has a large and diverse agent base, thereby reducing the credit risk of the Company from any one agent. The Company performs ongoing credit evaluations of its agents’ financial condition and credit worthiness.
Receivables from Business Solutions customers arisearose from cross-currency payment transactions in the Business Solutions segment. Business Solutions receivables totaled $22.0 million and $49.211.7 million as of September 30, 2022 and December 31, 2021, respectively.2022. Receivables occuroccurred when funds have beenwere paid out to a beneficiary but not yet received
21
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
from the customer. Collection of these receivables ordinarily occurs within a few days. To mitigate risk associated with potential Business Solutions customer defaults, the Company performs credit reviews on an ongoing basis.received.
The Company establishes and monitors an allowance for credit losses related to receivables from agents and others, and Business Solutions customers.others. The Company has estimated the allowance based on its historical collections experience, adjusted for current conditions and forecasts of future economic conditions based on information known as of September 30, 2022.2023.
The following tables summarize the activity in the allowance for credit losses on receivables from agents and others, and Business Solutions customers (in millions):
| Agents and |
|
| Business Solutions |
| |||
| Others |
|
| Customers |
| |||
Allowance for credit losses as of January 1, 2023 |
| $ | 11.4 |
|
| $ | 1.6 |
|
Current period provision for expected credit losses (a) |
|
| (0.4 | ) |
|
| 0.4 |
|
Write-offs charged against the allowance |
|
| (4.2 | ) |
|
| (0.7 | ) |
Recoveries of amounts previously written off |
|
| 1.8 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| 0.1 |
|
|
| 0.7 |
|
Allowance for credit losses as of March 31, 2023 |
|
| 8.7 |
|
|
| 2.0 |
|
Current period provision for expected credit losses (a) |
|
| 5.3 |
|
|
| 1.0 |
|
Write-offs charged against the allowance |
|
| (4.1 | ) |
|
| (2.4 | ) |
Recoveries of amounts previously written off |
|
| 1.4 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| 0.4 |
|
|
| (0.6 | ) |
Allowance for credit losses as of June 30, 2023 |
|
| 11.7 |
|
|
| — |
|
Current period provision for expected credit losses (a) |
|
| 17.2 |
|
|
| — |
|
Write-offs charged against the allowance |
|
| (7.3 | ) |
|
| — |
|
Recoveries of amounts previously written off |
|
| 1.0 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| (2.1 | ) |
|
| — |
|
Allowance for credit losses as of September 30, 2023 |
| $ | 20.5 |
|
| $ | — |
|
19
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| Agents and |
|
| Business Solutions |
| |||
| Others |
|
| Customers |
| |||
Allowance for credit losses as of January 1, 2022 |
| $ | 18.0 |
|
| $ | 5.7 |
|
Current period provision for expected credit losses (a) |
|
| 1.9 |
|
|
| 0.4 |
|
Write-offs charged against the allowance |
|
| (3.1 | ) |
|
| (0.4 | ) |
Recoveries of amounts previously written off |
|
| 1.7 |
|
|
| — |
|
Impacts of foreign currency exchange rates, divestitures, and other |
|
| (0.1 | ) |
|
| (4.2 | ) |
Allowance for credit losses as of March 31, 2022 |
|
| 18.4 |
|
|
| 1.5 |
|
Current period provision for expected credit losses (a) |
|
| 1.8 |
|
|
| 2.1 |
|
Write-offs charged against the allowance |
|
| (1.3 | ) |
|
| (1.4 | ) |
Recoveries of amounts previously written off |
|
| 1.0 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| (3.0 | ) |
|
| (0.5 | ) |
Allowance for credit losses as of June 30, 2022 |
|
| 16.9 |
|
|
| 1.7 |
|
Current period provision for expected credit losses (a) |
|
| 3.4 |
|
|
| 0.5 |
|
Write-offs charged against the allowance |
|
| (8.1 | ) |
|
| (2.1 | ) |
Recoveries of amounts previously written off |
|
| 1.8 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| (2.4 | ) |
|
| 0.2 |
|
Allowance for credit losses as of September 30, 2022 |
| $ | 11.6 |
|
| $ | 0.3 |
|
|
| Agents and |
|
| Business Solutions |
| ||
|
| Others |
|
| Customers |
| ||
Allowance for credit losses as of January 1, 2021 |
| $ | 49.3 |
|
| $ | 3.9 |
|
Current period provision for expected credit losses (a) |
|
| 2.3 |
|
|
| 1.5 |
|
Write-offs charged against the allowance |
|
| (3.3 | ) |
|
| (0.4 | ) |
Recoveries of amounts previously written off |
|
| 1.9 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| (0.5 | ) |
|
| (0.1 | ) |
Allowance for credit losses as of March 31, 2021 |
|
| 49.7 |
|
|
| 4.9 |
|
Current period provision for expected credit losses (a) |
|
| 3.2 |
|
|
| 1.9 |
|
Write-offs charged against the allowance |
|
| (34.4 | ) |
|
| (0.4 | ) |
Recoveries of amounts previously written off |
|
| 0.6 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| (0.6 | ) |
|
| (0.1 | ) |
Allowance for credit losses as of June 30, 2021 |
|
| 18.5 |
|
|
| 6.3 |
|
Current period provision for expected credit losses (a) |
|
| 2.3 |
|
|
| 0.5 |
|
Write-offs charged against the allowance |
|
| (4.0 | ) |
|
| (0.8 | ) |
Recoveries of amounts previously written off |
|
| 1.4 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| (0.7 | ) |
|
| — |
|
Allowance for credit losses as of September 30, 2021 |
| $ | 17.5 |
|
| $ | 6.0 |
|
22
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In addition, from time to time, the Company makes advances to its agents. The Company generally owes settlement funds payable to these agents that offset these advances. These amounts advanced to agents are included within Other assets in the accompanying Condensed Consolidated Balance Sheets. As of September 30, 20222023 and December 31, 2021,2022, amounts advanced to agents were $147.1177.8 million and $146.9154.9 million, respectively, and the related allowances for credit losses were immaterial.
Investment Securities
Investment securities included in Settlement assets in the Company’s Condensed Consolidated Balance Sheets consist primarily of highly-rated state and municipal debt securities, including fixed-rate term notes and variable-rate demand notes. Variable-rate demand note securities can be put (sold at par) typically on a daily basis with settlement periods ranging from the same day to one week but have varying maturities through 20612052. These securities may be used by the Company for short-term liquidity needs and held for short periods of time. Investment securities are exposed to market risk due to changes in interest rates and credit risk. The Company is required to hold highly-rated, investment grade securities and such investments are restricted to satisfy outstanding settlement obligations in accordance with applicable regulatory requirements.
The Company’s investment securities are classified as available-for-sale and recorded at fair value. Western Union regularly monitors credit risk and attempts to mitigate its exposure by investing in highly-rated securities and through investment diversification.
Unrealized gains on available-for-sale securities are excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes. Available-for-sale securities with a fair value below the amortized cost basis are evaluated on an individual basis to determine whether the impairment is due to credit-related factors or noncredit-related factors. Factors that could indicate a credit loss exists include but are not limited to: (i) negative earnings performance, (ii) credit rating downgrades, or (iii) adverse changes in the regulatory or economic environment of the asset. Any impairment that is not credit-related is excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes, unless the Company intends to sell the impaired
20
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
security, or it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis. Credit-related impairments are recognized immediately as an adjustment to earnings, regardless of whether the Company has the ability or intent to hold the security to maturity and are limited to the difference between fair value and the amortized cost basis. The Company’s provision for credit losses on its available-for-sale securities during the three and nine months ended September 30, 2023 and 2022 and the related allowance for credit losses as of September 30, 2023 and December 31, 2022 were immaterial.
23The components of investment securities are as follows (in millions):
|
|
|
|
|
|
| Gross |
|
| Gross |
|
| Net |
| ||||||
|
| Amortized |
|
| Fair |
|
| Unrealized |
|
| Unrealized |
|
| Unrealized |
| |||||
September 30, 2023 |
| Cost |
|
| Value |
|
| Gains |
|
| Losses |
|
| Losses |
| |||||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Money market funds |
| $ | 6.4 |
|
| $ | 6.4 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
State and municipal debt securities (a) |
|
| 1,062.3 |
|
|
| 981.0 |
|
|
| 0.2 |
|
|
| (81.5 | ) |
|
| (81.3 | ) |
Asset-backed securities |
|
| 188.5 |
|
|
| 187.5 |
|
|
| 0.1 |
|
|
| (1.1 | ) |
|
| (1.0 | ) |
Corporate debt securities |
|
| 159.9 |
|
|
| 152.9 |
|
|
| 0.1 |
|
|
| (7.1 | ) |
|
| (7.0 | ) |
State and municipal variable-rate demand notes |
|
| 48.3 |
|
|
| 48.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
United States government agency mortgage-backed securities |
|
| 14.6 |
|
|
| 13.6 |
|
|
| — |
|
|
| (1.0 | ) |
|
| (1.0 | ) |
Total available-for-sale securities |
|
| 1,473.6 |
|
|
| 1,383.3 |
|
|
| 0.4 |
|
|
| (90.7 | ) |
|
| (90.3 | ) |
Total investment securities |
| $ | 1,480.0 |
|
| $ | 1,389.7 |
|
| $ | 0.4 |
|
| $ | (90.7 | ) |
| $ | (90.3 | ) |
|
|
|
|
|
|
| Gross |
|
| Gross |
|
| Net |
| ||||||
|
| Amortized |
|
| Fair |
|
| Unrealized |
|
| Unrealized |
|
| Unrealized |
| |||||
December 31, 2022 |
| Cost |
|
| Value |
|
| Gains |
|
| Losses |
|
| Gains/(Losses) |
| |||||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Money market funds |
| $ | 11.7 |
|
| $ | 11.7 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
State and municipal debt securities (a) |
|
| 1,010.5 |
|
|
| 933.3 |
|
|
| 0.3 |
|
|
| (77.5 | ) |
|
| (77.2 | ) |
Asset-backed securities |
|
| 183.4 |
|
|
| 184.1 |
|
|
| 0.8 |
|
|
| (0.1 | ) |
|
| 0.7 |
|
Corporate debt securities |
|
| 153.5 |
|
|
| 146.9 |
|
|
| 0.3 |
|
|
| (6.9 | ) |
|
| (6.6 | ) |
State and municipal variable-rate demand notes |
|
| 48.9 |
|
|
| 48.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
United States government agency mortgage-backed securities |
|
| 21.5 |
|
|
| 20.5 |
|
|
| — |
|
|
| (1.0 | ) |
|
| (1.0 | ) |
Total available-for-sale securities |
|
| 1,417.8 |
|
|
| 1,333.7 |
|
|
| 1.4 |
|
|
| (85.5 | ) |
|
| (84.1 | ) |
Total investment securities |
| $ | 1,429.5 |
|
| $ | 1,345.4 |
|
| $ | 1.4 |
|
| $ | (85.5 | ) |
| $ | (84.1 | ) |
The following summarizes investment securities that were in an unrealized loss position as of September 30, 2023, by the length of time the securities were in a continuous loss position (in millions):
Less Than One Year |
| Number of Securities |
|
| Fair Value |
|
| Unrealized Losses |
| |||
State and municipal debt securities |
|
| 106 |
|
| $ | 343.0 |
|
| $ | (11.0 | ) |
Asset-backed securities |
|
| 28 |
|
|
| 160.7 |
|
|
| (1.1 | ) |
Corporate debt securities |
|
| 18 |
|
|
| 32.2 |
|
|
| (0.8 | ) |
21
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
One Year or Greater |
| Number of Securities |
|
| Fair Value |
|
| Unrealized Losses |
| |||
State and municipal debt securities |
|
| 284 |
|
| $ | 616.4 |
|
| $ | (70.5 | ) |
Corporate debt securities |
|
| 22 |
|
|
| 99.5 |
|
|
| (6.3 | ) |
United States government agency mortgage-backed securities |
|
| 11 |
|
|
| 13.0 |
|
|
| (1.0 | ) |
As of September 30, 2022,noted above, the Company had the intent to sell certain state and municipal debt securities and recognized an impairment of $4.6 million, which was recorded to Revenues in the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022. The sale of these securities was completed in the first week of October. The Company does not intend to sell the remaining securities and does not expect it will be required to sell the remaining securities prior to recovering their amortized cost basis. The Company’sCompany's provision for credit losses on its available-for-saleinvestment securities during the three and nine months ended September 30, 2022 and 20212023 and the related allowance for credit losses as of September 30, 2022 and December 31, 2021 were immaterial.
The components of investment securities are as follows (in millions):
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
| Net |
| |||||
|
| Amortized |
|
| Fair |
|
| Unrealized |
|
| Unrealized |
|
| Unrealized |
| |||||
September 30, 2022 |
| Cost |
|
| Value |
|
| Gains |
|
| Losses (b) |
|
| Gains/(Losses) |
| |||||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Money market funds |
| $ | 1.8 |
|
| $ | 1.8 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
State and municipal debt securities (a) |
|
| 1,094.1 |
|
|
| 1,012.5 |
|
|
| — |
|
|
| (81.6 | ) |
|
| (81.6 | ) |
Corporate debt securities |
|
| 117.9 |
|
|
| 110.3 |
|
|
| — |
|
|
| (7.6 | ) |
|
| (7.6 | ) |
State and municipal variable-rate demand |
|
| 97.5 |
|
|
| 97.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
United States government agency |
|
| 24.9 |
|
|
| 23.4 |
|
|
| — |
|
|
| (1.5 | ) |
|
| (1.5 | ) |
Total available-for-sale securities |
|
| 1,334.4 |
|
|
| 1,243.7 |
|
|
| — |
|
|
| (90.7 | ) |
|
| (90.7 | ) |
Total investment securities |
| $ | 1,336.2 |
|
| $ | 1,245.5 |
|
| $ | — |
|
| $ | (90.7 | ) |
| $ | (90.7 | ) |
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
| Net |
| |||||
|
| Amortized |
|
| Fair |
|
| Unrealized |
|
| Unrealized |
|
| Unrealized |
| |||||
December 31, 2021 |
| Cost |
|
| Value |
|
| Gains |
|
| Losses |
|
| Gains/(Losses) |
| |||||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Money market funds |
| $ | 7.9 |
|
| $ | 7.9 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
State and municipal debt securities (a) |
|
| 1,182.6 |
|
|
| 1,219.9 |
|
|
| 39.8 |
|
|
| (2.5 | ) |
|
| 37.3 |
|
State and municipal variable-rate demand |
|
| 84.8 |
|
|
| 84.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Corporate and other debt securities |
|
| 58.1 |
|
|
| 57.8 |
|
|
| 0.2 |
|
|
| (0.5 | ) |
|
| (0.3 | ) |
United States government agency mortgage- |
|
| 35.6 |
|
|
| 36.4 |
|
|
| 0.8 |
|
|
| — |
|
|
| 0.8 |
|
Total available-for-sale securities |
|
| 1,361.1 |
|
|
| 1,398.9 |
|
|
| 40.8 |
|
|
| (3.0 | ) |
|
| 37.8 |
|
Total investment securities |
| $ | 1,369.0 |
|
| $ | 1,406.8 |
|
| $ | 40.8 |
|
| $ | (3.0 | ) |
| $ | 37.8 |
|
24
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)2023, the Company did not intend to sell its securities in an unrealized loss position and did not expect it would be required to sell these securities prior to recovering their amortized cost basis.
The following summarizes the contractual maturities of available-for-sale securities within Settlement assets as of September 30, 20222023 (in millions):
|
| Fair Value |
|
| Fair Value |
| ||
Due within 1 year |
| $ | 123.1 |
|
| $ | 106.8 |
|
Due after 1 year through 5 years |
|
| 539.4 |
|
|
| 631.9 |
|
Due after 5 years through 10 years |
|
| 394.8 |
|
|
| 397.0 |
|
Due after 10 years |
|
| 186.4 |
|
|
| 247.6 |
|
Total |
| $ | 1,243.7 |
|
| $ | 1,383.3 |
|
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations or the Company may have the right to put the obligation prior to its contractual maturity, as with variable-rate demand notes. Variable-rate demand notes, having a fair value of $10.0 million, $10.0 million, and $77.548.3 million, are included in the "Due after 1 year through 5 years," "Due after 5 years through 10 years," and "Due after 10 years" categories, respectively,category in the table above.
2522
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
9. Stockholders’ Equity
Accumulated Other Comprehensive Loss
The following table details reclassifications out of AOCL and into Net income. All amounts reclassified from AOCL affect the line items as indicated below and the amounts in parentheses indicate decreases to Net income in the Condensed Consolidated Statements of Income.
|
| Amounts Reclassified from AOCL to Net Income |
|
| Amounts Reclassified from AOCL to Net Income |
| ||||||||||||||||||||||||||||||
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| Income Statement |
| September 30, |
|
| September 30, |
|
| Income Statement |
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
Income for the period (in millions) |
| Location |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| Location |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Accumulated other comprehensive loss components: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Gains/(losses) on investment securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Losses on investment securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Available-for-sale securities |
| Revenues |
| $ | (8.4 | ) |
| $ | 2.5 |
|
| $ | (8.5 | ) |
| $ | 2.3 |
|
| Revenues |
| $ | (3.6 | ) |
| $ | (8.4 | ) |
| $ | (3.7 | ) |
| $ | (8.5 | ) |
Income tax benefit/(expense) |
| Provision for income taxes |
|
| 1.6 |
|
|
| (0.5 | ) |
|
| 1.6 |
|
|
| (0.5 | ) | ||||||||||||||||||
Income tax benefit |
| Provision for income taxes |
|
| 0.6 |
|
|
| 1.6 |
|
| $ | 0.6 |
|
|
| 1.6 |
| ||||||||||||||||||
Total reclassification adjustments related to investment securities, net of tax |
|
| (6.8 | ) |
|
| 2.0 |
|
|
| (6.9 | ) |
|
| 1.8 |
|
|
| (3.0 | ) |
|
| (6.8 | ) |
|
| (3.1 | ) |
|
| (6.9 | ) | ||||
Gains/(losses) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Gains on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Foreign currency contracts |
| Revenues |
|
| 17.5 |
|
|
| (0.6 | ) |
|
| 32.4 |
|
|
| (10.0 | ) |
| Revenues |
|
| 4.6 |
|
|
| 17.5 |
|
|
| 20.6 |
|
|
| 32.4 |
|
Interest rate contracts |
| Interest expense |
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| (0.5 | ) |
| Interest expense |
|
| 0.1 |
|
|
| — |
|
|
| 0.1 |
|
|
| (0.1 | ) |
Interest rate contracts |
| Other income/(expense), net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.7 |
| ||||||||||||||||||
Income tax benefit/(expense) |
| Provision for income taxes |
|
| (0.2 | ) |
|
| 0.1 |
|
|
| (0.2 | ) |
|
| 0.1 |
| ||||||||||||||||||
Income tax expense |
| Provision for income taxes |
|
| — |
|
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) | ||||||||||||||||||
Total reclassification adjustments related to cash flow hedges, net of tax |
|
| 17.3 |
|
|
| (0.6 | ) |
|
| 32.1 |
|
|
| (9.7 | ) |
|
| 4.7 |
|
|
| 17.3 |
|
|
| 20.5 |
|
|
| 32.1 |
| ||||
Foreign currency translation adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Foreign currency translation |
| Gain on divestiture of business |
|
| — |
|
|
| — |
|
|
| 17.8 |
|
|
| — |
|
| Gain on divestiture of business |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17.8 |
|
Total reclassification adjustments related to foreign currency translation adjustments, net of tax |
|
| — |
|
|
| — |
|
|
| 17.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17.8 |
| ||||
Amortization of components of defined benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Actuarial loss |
| Other income/(expense), net |
|
| — |
|
|
| (3.0 | ) |
|
| — |
|
|
| (9.1 | ) | ||||||||||||||||||
Income tax benefit |
| Provision for income taxes |
|
| — |
|
|
| 0.7 |
|
|
| — |
|
|
| 2.0 |
| ||||||||||||||||||
Total reclassification adjustments related to defined benefit plans, net of tax |
|
| — |
|
|
| (2.3 | ) |
|
| — |
|
|
| (7.1 | ) | ||||||||||||||||||||
Total reclassifications, net of tax |
| $ | 10.5 |
|
| $ | (0.9 | ) |
| $ | 43.0 |
|
| $ | (15.0 | ) |
| $ | 1.7 |
|
| $ | 10.5 |
|
| $ | 17.4 |
|
| $ | 43.0 |
|
2623
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following tables summarize the components of AOCL, net of tax in the accompanying Condensed Consolidated Balance Sheets (in millions):
| Investment |
|
| Hedging |
|
| Foreign Currency |
|
|
|
| |||||
| Securities |
|
| Activities |
|
| Translation |
|
| Total |
| |||||
As of December 31, 2022 |
| $ | (69.4 | ) |
| $ | 20.5 |
|
| $ | (119.0 | ) |
| $ | (167.9 | ) |
Unrealized gains/(losses) |
|
| 24.1 |
|
|
| (2.2 | ) |
|
| — |
|
|
| 21.9 |
|
Tax benefit/(expense) |
|
| (4.2 | ) |
|
| 0.1 |
|
|
| — |
|
|
| (4.1 | ) |
Amounts reclassified from AOCL into earnings, net of tax |
|
| 0.1 |
|
|
| (8.2 | ) |
|
| — |
|
|
| (8.1 | ) |
As of March 31, 2023 |
|
| (49.4 | ) |
|
| 10.2 |
|
|
| (119.0 | ) |
|
| (158.2 | ) |
Unrealized losses |
|
| (13.8 | ) |
|
| (3.1 | ) |
|
| — |
|
|
| (16.9 | ) |
Tax benefit/(expense) |
|
| 2.4 |
|
|
| (0.1 | ) |
|
| — |
|
|
| 2.3 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| — |
|
|
| (7.6 | ) |
|
| — |
|
|
| (7.6 | ) |
As of June 30, 2023 |
|
| (60.8 | ) |
|
| (0.6 | ) |
|
| (119.0 | ) |
|
| (180.4 | ) |
Unrealized gains/(losses) |
|
| (20.2 | ) |
|
| 14.8 |
|
|
| — |
|
|
| (5.4 | ) |
Tax benefit/(expense) |
|
| 3.5 |
|
|
| (0.1 | ) |
|
| — |
|
|
| 3.4 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| 3.0 |
|
|
| (4.7 | ) |
|
| — |
|
|
| (1.7 | ) |
As of September 30, 2023 |
| $ | (74.5 | ) |
| $ | 9.4 |
|
| $ | (119.0 | ) |
| $ | (184.1 | ) |
| Investment |
|
| Hedging |
|
| Foreign Currency |
|
|
|
| |||||
| Securities |
|
| Activities |
|
| Translation |
|
| Total |
| |||||
As of December 31, 2021 |
| $ | 30.4 |
|
| $ | 18.7 |
|
| $ | (101.2 | ) |
| $ | (52.1 | ) |
Unrealized gains/(losses) |
|
| (63.6 | ) |
|
| 6.2 |
|
|
| — |
|
|
| (57.4 | ) |
Tax benefit |
|
| 11.9 |
|
|
| — |
|
|
| — |
|
|
| 11.9 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| 0.1 |
|
|
| (0.9 | ) |
|
| (17.8 | ) |
|
| (18.6 | ) |
As of March 31, 2022 |
|
| (21.2 | ) |
|
| 24.0 |
|
|
| (119.0 | ) |
|
| (116.2 | ) |
Unrealized gains/(losses) |
|
| (28.7 | ) |
|
| 37.3 |
|
|
| — |
|
|
| 8.6 |
|
Tax benefit/(expense) |
|
| 5.0 |
|
|
| (0.3 | ) |
|
| — |
|
|
| 4.7 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| — |
|
|
| (13.9 | ) |
|
| — |
|
|
| (13.9 | ) |
As of June 30, 2022 |
|
| (44.9 | ) |
|
| 47.1 |
|
|
| (119.0 | ) |
|
| (116.8 | ) |
Unrealized gains/(losses) |
|
| (44.7 | ) |
|
| 43.4 |
|
|
| — |
|
|
| (1.3 | ) |
Tax benefit/(expense) |
|
| 7.9 |
|
|
| (0.5 | ) |
|
| — |
|
|
| 7.4 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| 6.8 |
|
|
| (17.3 | ) |
|
| — |
|
|
| (10.5 | ) |
As of September 30, 2022 |
| $ | (74.9 | ) |
| $ | 72.7 |
|
| $ | (119.0 | ) |
| $ | (121.2 | ) |
|
| Investment |
|
| Hedging |
|
| Foreign Currency |
|
| Defined Benefit |
|
|
|
| |||||
|
| Securities |
|
| Activities |
|
| Translation |
|
| Pension Plan |
|
| Total |
| |||||
As of December 31, 2020 |
| $ | 58.3 |
|
| $ | (30.5 | ) |
| $ | (101.2 | ) |
| $ | (86.1 | ) |
| $ | (159.5 | ) |
Unrealized gains/(losses) |
|
| (16.0 | ) |
|
| 24.2 |
|
|
| — |
|
|
| — |
|
|
| 8.2 |
|
Tax benefit/(expense) |
|
| 2.9 |
|
|
| (0.9 | ) |
|
| — |
|
|
| — |
|
|
| 2.0 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| 0.1 |
|
|
| 5.6 |
|
|
| — |
|
|
| 2.5 |
|
|
| 8.2 |
|
As of March 31, 2021 |
|
| 45.3 |
|
|
| (1.6 | ) |
|
| (101.2 | ) |
|
| (83.6 | ) |
|
| (141.1 | ) |
Unrealized gains/(losses) |
|
| 2.3 |
|
|
| (6.2 | ) |
|
| — |
|
|
| — |
|
|
| (3.9 | ) |
Tax expense |
|
| (0.2 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.2 | ) |
Amounts reclassified from AOCL into earnings, net of tax |
|
| 0.1 |
|
|
| 3.5 |
|
|
| — |
|
|
| 2.3 |
|
|
| 5.9 |
|
As of June 30, 2021 |
|
| 47.5 |
|
|
| (4.3 | ) |
|
| (101.2 | ) |
|
| (81.3 | ) |
|
| (139.3 | ) |
Unrealized gains/(losses) |
|
| (7.3 | ) |
|
| 17.7 |
|
|
| — |
|
|
| — |
|
|
| 10.4 |
|
Tax benefit/(expense) |
|
| 1.4 |
|
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| 1.3 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| (2.0 | ) |
|
| 0.6 |
|
|
| — |
|
|
| 2.3 |
|
|
| 0.9 |
|
As of September 30, 2021 |
| $ | 39.6 |
|
| $ | 13.9 |
|
| $ | (101.2 | ) |
| $ | (79.0 | ) |
| $ | (126.7 | ) |
27Cash Dividends Paid
In each of the first three quarters of 2023 and 2022, the Company's Board of Directors declared quarterly cash dividends of $0.235 per common share, representing $263.3 million and $273.2 million in total dividends, respectively. $87.3 million was paid on September 29, 2023, $88.0 million was paid on June 30, 2023, $88.0 million was paid on March 31, 2023, $90.7 million was paid on September 30, 2022, $90.8 million was paid on June 30, 2022, and $91.7 million was paid on March 31, 2022.
Share Repurchases
On February 10, 2022, the Company's Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2024. During the nine months ended September 30, 2023 and 2022, 7.8 million and 9.6 million shares were repurchased under this authorization for $100.0 million and $176.8 million, respectively, excluding commissions, at an average cost of $12.88 and $18.45, respectively. As of September 30, 2023, $548.2 million remained available under this share repurchase authorization. The amounts included in the Common stock repurchased line in the
24
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
On July 22, 2021, the Company’s Board of Directors approved a plan to terminate and settle the Company’s frozen defined benefit pension plan. In the fourth quarter of 2021, the Company settled its defined benefit pension plan. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 12, Employee Benefit Plans, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for details on the termination and settlement of the Company's frozen defined benefit pension plan.
Cash Dividends Paid
The Company's Board of Directors declared quarterly cash dividends of $0.235 per common share in each of the first three quarters of 2022 and 2021, representing $273.2 million and $287.6 million in total dividends, respectively. $90.7 million was paid on September 30, 2022, $90.8 million was paid on June 30, 2022, $91.7 million was paid on March 31, 2022, $95.1 million was paid on September 30, 2021, $95.9 million was paid on June 30, 2021, and $96.6 million was paid on March 31, 2021.
Share Repurchases
During the nine months ended September 30, 2022 and 2021, 9.6 million and 9.6 million shares were repurchased for $176.8 million and $225.0 million, respectively, excluding commissions, at an average cost of $18.45 and $23.45, respectively, under the share repurchase authorizations approved by the Company's Board of Directors, including one which expired on December 31, 2021. On February 10, 2022, the Company's Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2024. As of September 30, 2022, $823.2 million remained availableunder this share repurchase authorization. The amounts included in the Common stock repurchased line in the Company’s Condensed Consolidated Statements of Cash Flows represent both shares authorized by the Board of Directors for repurchase under publicly announced authorizations and shares withheld from employees to cover tax withholding obligations on restricted stock units that have vested.
10. Derivatives
The Company is exposed to foreign currency exchange risk resulting from fluctuations in exchange rates, primarily the euro, and, to a lesser degree, the Canadian dollar,Mexican peso, the Mexican peso,British pound, and other currencies, related to forecasted revenues and settlement assets and obligations, as well as on certain foreign currency denominated cash and other asset and liability positions. The Company is also exposed to risk from derivative contracts, primarily from customer derivatives, arising from its cross-currency Business Solutions payment operations. Additionally, the Company is exposed to interest rate risk related to changes in market rates both prior to and subsequent to the issuance of debt. The Company has usedprimarily uses derivatives to: (i)to minimize its exposures related to changes in foreign currency exchange rates and interest rates and (ii) facilitate cross-currency Business Solutions payments by writing derivatives to customers.rates.
The Company executes derivatives with established financial institutions; the substantial majority of these financial institutions have a credit rating of "A-" or higher from a major credit rating agency. Customer derivatives written by the Company’s Business Solutions operations primarily involve small and medium size enterprises. The primary credit risk inherent in derivative agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. The Company performs a review of the credit risk of these counterparties at the inception of the contract and on an ongoing basis, while also monitoring the concentration of its contracts with any individual counterparty. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements, but takeswould take action whenif doubt arisesarose about the counterparties’ ability to perform. These actions maycould include requiring Business Solutions customers to post or increase collateral, and for all counterparties, the possible termination of the related contracts. The Company’s hedged foreign currency exposures are in liquid currencies; consequently, there is minimal risk that appropriate derivatives to maintain the hedging program would not be available in the future.
28
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Foreign Currency Derivatives
The Company’s policy is to use longer duration foreign currency forward contracts, with maturities of up to 36 months at inception and a targeted weighted-average maturity of approximately one year, to help mitigate some of the risk that changes in foreign currency exchange rates compared to the United States dollar could have on forecasted revenues denominated in other currencies related to its business. As of September 30, 2022,2023, these foreign currency forward contracts had maturities of a maximum of 24 months with a weighted-average maturity of approximately one year. These contracts are accounted for as cash flow hedges of forecasted revenue, with effectiveness assessed based on changes in the spot rate of the affected currencies during the period of designation and thus time value is excluded from the assessment of effectiveness. The initial value of the excluded components is amortized into Revenues within the Company’s Condensed Consolidated Statements of Income.
The Company also uses short duration foreign currency forward contracts, generally with maturities ranging from a few days to one month, to offset foreign exchange rate fluctuations on settlement assets and obligations between initiation and settlement. In addition, forward contracts, typically with maturities of less than one year at inception, are utilized to offset foreign exchange rate fluctuations on certain foreign currency denominated cash and other asset and liability positions. None of these contracts are designated as accounting hedges.
2925
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of September 30, 20222023 and December 31, 20212022 were as follows (in millions):
|
| September 30, 2022 |
|
| September 30, 2023 |
| ||
Contracts designated as hedges: |
|
|
|
|
|
| ||
Euro |
| $ | 364.3 |
|
| $ | 244.0 |
|
Canadian dollar |
|
| 124.1 |
|
|
| 100.0 |
|
British pound |
|
| 56.6 |
| ||||
Australian dollar |
|
| 55.4 |
|
|
| 47.9 |
|
Swiss franc |
|
| 43.3 |
|
|
| 37.4 |
|
British pound |
|
| 36.0 |
| ||||
Swedish krona |
|
| 27.5 |
|
|
| 25.0 |
|
Other (a) |
|
| 24.5 |
|
|
| 17.5 |
|
Contracts not designated as hedges: |
|
|
|
|
|
| ||
Euro |
| $ | 532.8 |
|
| $ | 546.9 |
|
Mexican peso |
|
| 154.6 |
|
|
| 176.7 |
|
British pound |
|
| 80.7 |
|
|
| 111.4 |
|
Indian rupee |
|
| 54.6 |
| ||||
Canadian dollar |
|
| 46.2 |
| ||||
Philippine peso |
|
| 44.9 |
| ||||
Australian dollar |
|
| 67.4 |
|
|
| 40.7 |
|
Indian rupee |
|
| 55.9 |
| ||||
Chinese yuan |
|
| 41.8 |
|
|
| 37.8 |
|
Canadian dollar |
|
| 32.9 |
| ||||
Japanese yen |
|
| 32.1 |
| ||||
Swiss franc |
|
| 28.3 |
| ||||
Brazilian real |
|
| 25.1 |
|
|
| 30.6 |
|
Other (a) |
|
| 168.5 |
|
|
| 172.5 |
|
|
|
|
|
|
| December 31, 2021 |
|
| December 31, 2022 |
| ||
Contracts designated as hedges: |
|
|
|
|
|
| ||
Euro |
| $ | 399.9 |
|
| $ | 321.6 |
|
Canadian dollar |
|
| 134.0 |
|
|
| 117.3 |
|
Australian dollar |
|
| 58.4 |
|
|
| 53.2 |
|
Swiss franc |
|
| 45.9 |
|
|
| 40.4 |
|
British pound |
|
| 43.8 |
|
|
| 40.4 |
|
Swedish krona |
|
| 30.7 |
|
|
| 25.8 |
|
Japanese yen |
|
| 30.4 |
| ||||
Other (a) |
|
| 0.9 |
|
|
| 22.1 |
|
Contracts not designated as hedges: |
|
|
|
|
|
| ||
Euro |
| $ | 755.7 |
|
| $ | 603.2 |
|
Mexican peso |
|
| 132.9 |
| ||||
British pound |
|
| 148.1 |
|
|
| 115.1 |
|
Indian rupee |
|
| 52.6 |
| ||||
Australian dollar |
|
| 48.7 |
| ||||
Canadian dollar |
|
| 144.2 |
|
|
| 32.2 |
|
Australian dollar |
|
| 98.1 |
| ||||
Mexican peso |
|
| 96.3 |
| ||||
Philippine peso |
|
| 76.2 |
| ||||
Indian rupee |
|
| 63.4 |
| ||||
Japanese yen |
|
| 46.0 |
|
|
| 30.5 |
|
Russian ruble |
|
| 44.4 |
| ||||
Chinese yuan |
|
| 31.6 |
|
|
| 30.1 |
|
New Zealand dollar |
|
| 26.6 |
| ||||
Swiss franc |
|
| 25.1 |
|
|
| 28.3 |
|
Swedish krona |
|
| 25.1 |
|
|
| 26.7 |
|
Philippine peso |
|
| 26.2 |
| ||||
Other (a) |
|
| 132.7 |
|
|
| 137.0 |
|
30
Business Solutions Operations
On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC, and the final closing for this transaction occurred on July 1, 2023. See Note 4 for further information regarding this transaction. Prior to the final closing, the Company wrote derivatives, primarily
26
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Business Solutions Operations
The Company writes derivatives, primarily foreign currency forward contracts and option contracts, mostly with small and medium size enterprises and derivesderived a currency spread from this activity as part of its Business Solutions operations. On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC. During the third quarter of 2022, all parties agreed for the sale to be completed in three closings instead of two. The first closing occurred on March 1, 2022, the second is expected to occur in December 2022, and the third is expected in the first quarter of 2023. See Note 4 for further information regarding this transaction. The Company aggregatesaggregated its Business Solutions foreign currency exposures arising from customer contracts, including the derivative contracts described above, and hedgeshedged the resulting net currency risks by entering into offsetting contracts with Convera through the end of the thirdfinal closing of the Business Solutions divestiture. The derivatives written arewere part of the broader portfolio of foreign currency positions arising from the Company’s cross-currency payments operations, which primarily includeincluded spot exchanges of currency in addition to forwards and options. Foreign exchange revenues from the total portfolio of positions included in Revenues in the Company’s Condensed Consolidated Statements of Income were $39.3 million and $99.5 million for the three months ended September 30, 2022 and 2021, respectively, and $151.527.8 million and $271.4151.5 million for the nine months ended September 30, 20222023 and 2021,2022, respectively. None of the derivative contracts used in Business Solutions operations arewere designated as accounting hedges and the majority of these derivative contracts have a duration at inception of less than hedges.one year.
The aggregate equivalent United States dollar notional amount of derivative customer contracts held by the Company in its Business Solutions operations was approximately $5.0 billion and $8.03.0 billion as of September 30, 2022 and December 31, 2021, respectively. The significant majority of customer contracts are written in the following currencies: the United States dollar, euro, and the British pound.2022.
Interest Rate Hedging
Periodically, the Company utilizes interest rate swaps to effectively change the interest rate payments on a portion of its notes from fixed-rate payments to short-term, variable-rate payments in order to manage its overall exposure to interest rate fluctuations. The Company designates these derivatives as fair value hedges. The change in the fair value of the interest rate swaps is offset by a change in the carrying value of the debt being hedged within Borrowings in the Condensed Consolidated Balance Sheets. Interest expense in the Condensed Consolidated Statements of Income has been adjusted to include the effects of interest accrued on the swaps.
The Company terminated two of its treasury locks in the first quarter of 2021, which were associated with the issuance of $600.0 million of aggregate principal amount of 1.350% unsecured notes due March 15, 2026 (“2026 Notes”). The Company received a total of $3.3 million upon termination, of which $2.6 million was deferred as a component of AOCL and will be amortized to Interest expense in the Condensed Consolidated Statements of Income over the term of the 2026 Notes. As a portion of the forecasted interest payments on the 2026 Notes will occur outside the time period originally specified at designation of the treasury locks as cash flow hedges, $0.7 million was recognized in Other income/(expense), net in the Condensed Consolidated Statements of Income, upon termination.
31
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Balance Sheet
The following table summarizes the fair value of derivatives reported in the Company’s Condensed Consolidated Balance Sheets as of September 30, 20222023 and December 31, 20212022 (in millions):
|
| Derivative Assets |
|
| Derivative Liabilities |
|
| Derivative Assets |
|
| Derivative Liabilities |
| ||||||||||||||||||||||||||||
|
|
|
| Fair Value |
|
|
|
| Fair Value |
|
|
|
| Fair Value |
|
|
|
| Fair Value |
| ||||||||||||||||||||
|
| Balance Sheet |
| September 30, |
|
| December 31, |
|
| Balance Sheet |
| September 30, |
|
| December 31, |
|
| Balance Sheet |
| September 30, |
|
| December 31, |
|
| Balance Sheet |
| September 30, |
|
| December 31, |
| ||||||||
|
| Location |
| 2022 |
|
| 2021 |
|
| Location |
| 2022 |
|
| 2021 |
|
| Location |
| 2023 |
|
| 2022 |
|
| Location |
| 2023 |
|
| 2022 |
| ||||||||
Derivatives designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Foreign currency cash flow hedges |
| Other assets |
| $ | 83.2 |
|
| $ | 30.6 |
|
| Other liabilities |
| $ | 0.2 |
|
| $ | 2.6 |
|
| Other assets |
| $ | 22.5 |
|
| $ | 35.2 |
|
| Other liabilities |
| $ | 2.5 |
|
| $ | 4.7 |
|
Total derivatives designated as hedges |
|
|
| $ | 83.2 |
|
| $ | 30.6 |
|
|
|
| $ | 0.2 |
|
| $ | 2.6 |
|
|
|
| $ | 22.5 |
|
| $ | 35.2 |
|
|
|
| $ | 2.5 |
|
| $ | 4.7 |
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Business Solutions operations - foreign currency (a) |
| Assets held for sale |
| $ | 232.9 |
|
| $ | 213.1 |
|
| Liabilities associated with assets held for sale |
| $ | 235.0 |
|
| $ | 174.1 |
|
| Assets held for sale |
| $ | — |
|
| $ | 88.6 |
|
| Liabilities associated with assets held for sale |
| $ | — |
|
| $ | 89.5 |
|
Foreign currency |
| Other assets |
|
| 12.1 |
|
|
| 4.0 |
|
| Other liabilities |
|
| 7.1 |
|
|
| 7.1 |
|
| Other assets |
|
| 7.6 |
|
|
| 2.3 |
|
| Other liabilities |
|
| 3.0 |
|
|
| 4.7 |
|
Total derivatives not designated as hedges |
|
|
| $ | 245.0 |
|
| $ | 217.1 |
|
|
|
| $ | 242.1 |
|
| $ | 181.2 |
|
|
|
| $ | 7.6 |
|
| $ | 90.9 |
|
|
|
| $ | 3.0 |
|
| $ | 94.2 |
|
Total derivatives |
|
|
| $ | 328.2 |
|
| $ | 247.7 |
|
|
|
| $ | 242.3 |
|
| $ | 183.8 |
|
|
|
| $ | 30.1 |
|
| $ | 126.1 |
|
|
|
| $ | 5.5 |
|
| $ | 98.9 |
|
The fair values of derivative assets and liabilities associated with contracts that include netting language that the Company believes to be enforceable have been netted in the following tables to present the Company’s net exposure with these counterparties. The Company’s rights under these agreements generally allow for transactions to be settled on a net basis, including upon early termination, which could occur upon the counterparty’s default, a change in control, or other conditions.
In addition, certain of the Company’s other agreements include netting provisions, the enforceability of which may vary from jurisdiction to jurisdiction, depending on the circumstances. Due to the uncertainty related to the enforceability of these provisions, the derivative balances associated with these agreements are included within "Derivatives that are not or may not be subject to master netting arrangement or similar agreement" in the following tables. In certain circumstances, the Company may requirehad required its Business Solutions customers to maintain collateral balances which mayto mitigate the risk associated with potential customer defaults.
3227
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following tables summarize the gross and net fair value of derivative assets and liabilities as of September 30, 20222023 and December 31, 20212022 (in millions):
Offsetting of Derivative Assets
|
|
|
|
| Gross |
|
| Net Amounts |
|
| Derivatives |
|
|
|
|
|
|
|
| Gross |
|
| Net Amounts |
|
| Derivatives |
|
|
|
| ||||||||||
|
| Gross |
|
| Amounts Offset in |
|
| Presented in |
|
| Not Offset in |
|
|
|
|
| Gross |
|
| Amounts Offset in |
|
| Presented in |
|
| Not Offset in |
|
|
|
| ||||||||||
|
| Amounts of |
|
| the Condensed |
|
| the Condensed |
|
| the Condensed |
|
|
|
|
| Amounts of |
|
| the Condensed |
|
| the Condensed |
|
| the Condensed |
|
|
|
| ||||||||||
|
| Recognized |
|
| Consolidated |
|
| Consolidated |
|
| Consolidated |
|
| Net |
|
| Recognized |
|
| Consolidated |
|
| Consolidated |
|
| Consolidated |
|
| Net |
| ||||||||||
September 30, 2022 |
| Assets |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Amounts |
| |||||||||||||||||||||||||
September 30, 2023 |
| Assets |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Amounts |
| |||||||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | 176.5 |
|
| $ | — |
|
| $ | 176.5 |
|
| $ | (89.2 | ) |
| $ | 87.3 |
|
| $ | 28.9 |
|
| $ | — |
|
| $ | 28.9 |
|
| $ | (4.2 | ) |
| $ | 24.7 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
| 151.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
| $ | 328.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 30.1 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | 163.9 |
|
| $ | — |
|
| $ | 163.9 |
|
| $ | (92.4 | ) |
| $ | 71.5 |
|
| $ | 55.8 |
|
| $ | — |
|
| $ | 55.8 |
|
| $ | (26.3 | ) |
| $ | 29.5 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
| 83.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 70.3 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
| $ | 247.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 126.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Offsetting of Derivative Liabilities
|
|
|
|
| Gross |
|
| Net Amounts |
|
| Derivatives |
|
|
|
|
|
|
|
| Gross |
|
| Net Amounts |
|
| Derivatives |
|
|
|
| ||||||||||
|
| Gross |
|
| Amounts Offset in |
|
| Presented in |
|
| Not Offset in |
|
|
|
|
| Gross |
|
| Amounts Offset in |
|
| Presented in |
|
| Not Offset in |
|
|
|
| ||||||||||
|
| Amounts of |
|
| the Condensed |
|
| the Condensed |
|
| the Condensed |
|
|
|
|
| Amounts of |
|
| the Condensed |
|
| the Condensed |
|
| the Condensed |
|
|
|
| ||||||||||
|
| Recognized |
|
| Consolidated |
|
| Consolidated |
|
| Consolidated |
|
| Net |
|
| Recognized |
|
| Consolidated |
|
| Consolidated |
|
| Consolidated |
|
| Net |
| ||||||||||
September 30, 2022 |
| Liabilities |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Amounts |
| |||||||||||||||||||||||||
September 30, 2023 |
| Liabilities |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Amounts |
| |||||||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | 159.5 |
|
| $ | — |
|
| $ | 159.5 |
|
| $ | (89.2 | ) |
| $ | 70.3 |
|
| $ | 4.2 |
|
| $ | — |
|
| $ | 4.2 |
|
| $ | (4.2 | ) |
| $ | — |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
| 82.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
| $ | 242.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 5.5 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | 109.6 |
|
| $ | — |
|
| $ | 109.6 |
|
| $ | (92.4 | ) |
| $ | 17.2 |
|
| $ | 77.8 |
|
| $ | — |
|
| $ | 77.8 |
|
| $ | (26.3 | ) |
| $ | 51.5 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
| 74.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21.1 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
| $ | 183.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 98.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3328
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Income Statement
Cash Flow Hedges
The effective portion of the change in fair value of derivatives that qualify as cash flow hedges is recorded in AOCL in the Company’s Condensed Consolidated Balance Sheets. Generally, amounts are recognized in income when the related forecasted transaction affects earnings.
The following table presents the pre-tax amount of unrealized gains/(losses) recognized in other comprehensive income from cash flow hedges for the three and nine months ended September 30, 20222023 and 20212022 (in millions):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Foreign currency derivatives (a) |
| $ | 43.4 |
|
| $ | 17.7 |
|
| $ | 86.9 |
|
| $ | 32.4 |
|
Interest rate derivatives |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.3 |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Foreign currency derivatives (a) |
| $ | 14.7 |
|
| $ | 43.4 |
|
| $ | 9.0 |
|
| $ | 86.9 |
|
The following table presents the location and amounts of pre-tax net gains/(losses) from cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 20222023 and 20212022 (in millions):
|
| Three Months Ended September 30, |
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||
|
| Revenues |
|
| Interest Expense |
|
| Revenues |
|
| Interest Expense |
|
|
| Revenues |
|
| Interest Expense |
|
| Revenues |
|
| Interest Expense |
| ||||||||
Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded |
| $ | 1,089.6 |
|
| $ | (25.2 | ) |
| $ | 1,286.3 |
|
| $ | (25.7 | ) |
|
| $ | 1,097.8 |
|
| $ | (27.0 | ) |
| $ | 1,089.6 |
|
| $ | (25.2 | ) |
Gain/(loss) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Gains/(losses) reclassified from AOCL into earnings |
|
| 17.5 |
|
|
| — |
|
|
| (0.6 | ) |
|
| — |
|
| ||||||||||||||||
Gains reclassified from AOCL into earnings |
|
| 4.6 |
|
|
| — |
|
|
| 17.5 |
|
|
| — |
| |||||||||||||||||
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |
|
| 1.5 |
|
|
| — |
|
|
| 1.4 |
|
|
| — |
|
|
|
| 1.6 |
|
|
| — |
|
|
| 1.5 |
|
|
| — |
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Losses reclassified from AOCL into earnings |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
| ||||||||||||||||
Gains/(losses) reclassified from AOCL into earnings |
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
| Nine Months Ended September 30, |
| ||||||||||||||
| 2023 |
|
| 2022 |
| |||||||||||
| Revenues |
|
| Interest Expense |
|
| Revenues |
|
| Interest Expense |
| |||||
Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded |
| $ | 3,304.7 |
|
| $ | (79.0 | ) |
| $ | 3,383.6 |
|
| $ | (74.8 | ) |
Gain/(loss) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains reclassified from AOCL into earnings |
|
| 20.6 |
|
|
| — |
|
|
| 32.4 |
|
|
| — |
|
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |
|
| 4.9 |
|
|
| — |
|
|
| 4.0 |
|
|
| — |
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains/(losses) reclassified from AOCL into earnings |
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| (0.1 | ) |
3429
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| Nine Months Ended September 30, |
| |||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||
|
| Revenues |
|
| Interest Expense |
|
| Revenues |
|
| Interest Expense |
|
| Other income/(expense), net |
| |||||
Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded |
| $ | 3,383.6 |
|
| $ | (74.8 | ) |
| $ | 3,786.0 |
|
| $ | (79.7 | ) |
| $ | 26.8 |
|
Gain/(loss) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gains/(losses) reclassified from AOCL into earnings |
|
| 32.4 |
|
|
| — |
|
|
| (10.0 | ) |
|
| — |
|
|
| — |
|
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |
|
| 4.0 |
|
|
| — |
|
|
| 4.9 |
|
|
| — |
|
|
| — |
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gains/(losses) reclassified from AOCL into earnings |
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| (0.5 | ) |
|
| 0.7 |
|
Undesignated Hedges
The following table presents the location and amount of pre-tax net gains/(losses)gains from undesignated hedges in the Condensed Consolidated Statements of Income on derivatives for the three and nine months ended September 30, 20222023 and 20212022 (in millions):
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
|
|
| September 30, |
|
| September 30, |
|
|
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
Derivatives (a) |
| Location |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| Location |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Foreign currency derivatives (b) |
| Selling, general, and administrative |
| $ | 42.6 |
|
| $ | 23.4 |
|
| $ | 97.6 |
|
| $ | 41.3 |
|
| Selling, general, and administrative |
| $ | 22.5 |
|
| $ | 42.6 |
|
| $ | 30.5 |
|
| $ | 97.6 |
|
All cash flows associated with derivatives are included in Cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.
Based on September 30, 20222023 foreign exchange rates, an accumulated other comprehensive pre-tax gain of $59.812.5 million related to the foreign currency forward contracts is expected to be reclassified into Revenues within the next 12 months.
3530
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
11. Borrowings
The Company’s outstanding borrowings consisted of the following (in millions):
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||
Commercial paper (a) |
| $ | 175.0 |
|
| $ | 275.0 |
|
| $ | 170.0 |
|
| $ | 180.0 |
|
Notes: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
4.250% notes due 2023 (b) |
|
| 300.0 |
|
|
| 300.0 |
|
|
| — |
|
|
| 300.0 |
|
2.850% notes due 2025 |
|
| 500.0 |
|
|
| 500.0 |
|
|
| 500.0 |
|
|
| 500.0 |
|
1.350% notes due 2026 |
|
| 600.0 |
|
|
| 600.0 |
|
|
| 600.0 |
|
|
| 600.0 |
|
2.750% notes due 2031 |
|
| 300.0 |
|
|
| 300.0 |
|
|
| 300.0 |
|
|
| 300.0 |
|
6.200% notes due 2036 |
|
| 500.0 |
|
|
| 500.0 |
|
|
| 500.0 |
|
|
| 500.0 |
|
6.200% notes due 2040 |
|
| 250.0 |
|
|
| 250.0 |
|
|
| 250.0 |
|
|
| 250.0 |
|
Term loan facility borrowing (c) |
|
| — |
|
|
| 300.0 |
| ||||||||
Total borrowings at par value |
|
| 2,625.0 |
|
|
| 3,025.0 |
|
|
| 2,320.0 |
|
|
| 2,630.0 |
|
Debt issuance costs and unamortized discount, net |
|
| (14.0 | ) |
|
| (16.6 | ) |
|
| (10.9 | ) |
|
| (13.2 | ) |
Total borrowings at carrying value (d) |
| $ | 2,611.0 |
|
| $ | 3,008.4 |
|
| $ | 2,309.1 |
|
| $ | 2,616.8 |
|
Term Loan Facility
On December 18, 2018, the Company entered into an amended and restated term loan facility providing for up to $950.0 million in borrowings and extending the final maturity of the facility to January 2024 (the "Term Loan Facility"). Proceeds from the 2026 Notes and $300.0 million of aggregate principal amount of 2.750% unsecured notes due March 15, 2031 ("2031 Notes"), and cash, including cash generated from operations, were used to repay $650.0 million of the Term Loan Facility in the first quarter of 2021 and $500.0 million of the aggregate principal amount of 3.600% unsecured notes due in March 2022 in the second quarter of 2021. On January 4, 2022, the Company repaid all remaining borrowings owed under the Term Loan Facility for total consideration of $300.0 million, using proceeds from commercial paper and cash, including cash generated from operations. The Company is no longer able to borrow money under this facility.
The following summarizes the Company’s maturities of its notes at par value as of September 30, 20222023 (in millions):
Due within 1 year |
| $ | 300.0 |
|
| $ | — |
|
Due after 1 year through 2 years |
|
| — |
|
|
| 500.0 |
|
Due after 2 years through 3 years |
|
| 500.0 |
|
|
| 600.0 |
|
Due after 3 years through 4 years |
|
| 600.0 |
|
|
| — |
|
Due after 4 years through 5 years |
|
| — |
|
|
| — |
|
Due after 5 years |
|
| 1,050.0 |
|
|
| 1,050.0 |
|
Total |
| $ | 2,450.0 |
|
| $ | 2,150.0 |
|
The Company’s obligations with respect to its outstanding borrowings, as described above, rank equally.
12. Income Taxes
The Company’s effective tax rates on pre-tax income were 10.216.3% and 20.210.2% for the three months ended September 30, 20222023 and 2021,2022, respectively, and 16.517.1% and 15.616.5% for the nine months ended September 30, 2023 and 2022, and
36
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2021, respectively. The decreaseincreases in the Company's effective tax raterates for the three and nine months ended September 30, 20222023 compared to the corresponding periodperiods in the prior year waswere primarily due to discrete tax expensesbenefits in the prior period and discrete tax benefits inperiods, including the current period related toeffects of the completion of the IRS examination of the Company's consolidated federal income tax returns for 2017 and 2018 (the "IRS Examination"), discussed below, partially offset by the sale of the Company's Business Solutions business and the Company's decision to suspend its operations in Russia and Belarus. The increase in the Company's effective tax rate for the nine months ended September 30, 2022 compared to the corresponding period in the prior year was primarily due to the sale of the Company's Business Solutions business and the Company's decision to suspend its operations in Russia and Belarus, partially offset by discrete tax expenses in the prior period and discrete tax benefits in the current period related to the completion of the IRS Examination. The impacteffects of the sale of the Company's Business Solutions business isin the current periods compared to the prior periods. The sale of the Business Solutions business has been included in the Company's estimated annual effective rate in accordance with the ongoing effects of which are expectedgains related to continue throughout the year.each closing.
Unrecognized tax benefits are reflected in Income taxes payable in the Condensed Consolidated Balance Sheets. The total amount of unrecognized tax benefits as of September 30, 20222023 and December 31, 20212022 was $356.1301.5 million and $376.3290.7 million, respectively, including interest and penalties. As previously disclosed in Part II, Item 8, Financial Statements and Supplementary Data, Note 11, Income Taxes, in the Company's Annual Report on Form 10-K, the Company continues to believe that it is reasonably possible that its total unrecognized tax benefits could decrease by December 31, 2022, in connection with various matters which may be resolved.
31
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company’s tax filings are subject to examination by U.S. federal, state, and various non-United States jurisdictions. The conclusion of the IRS Examinationexamination of the Company’s consolidated federal income tax returns for 2017 and 2018 resulted in both agreed and unagreed adjustments. The agreed adjustments have been reflected in the Company'sCompany’s financial statements for the three months ended September 30, 2022.statements. The Company is contesting the unagreed adjustments at the IRS Appeals level and believes its reserves for these unagreed adjustments are adequate. The statute of limitations for the U.S. federal returns for 2017 and 2018 has been extended to March 31, 2024.2025. The Company’s U.S. federal income tax returns since 2020 are also eligible to be examined.
13. Stock-Based Compensation Plans
For the three months ended September 30, 20222023 and 2021,2022, the Company recognized stock-based compensation expense of $9.69.7 million and $8.49.6 million, respectively, resulting primarily from stock options, restricted stock units, and performance-based restricted stock units in the Condensed Consolidated Statements of Income. For the nine months ended September 30, 20222023 and 2021,2022, the Company recognized stock-based compensation expense of $32.627.2 million and $31.232.6 million, respectively.
During the nine months ended September 30, 2022,2023, the Company granted 0.61.0 million options at a weighted-average exercise price of $18.6213.27 and 3.64.4 million performance-based restricted stock units and restricted stock units at a weighted-average grant date fair value of $19.9413.05. As of September 30, 2022,2023, the Company had 6.47.1 million outstanding options at a weighted-average exercise price of $18.6818.09, of which 3.64.2 million options were exercisable at a weighted-average exercise price of $19.1619.28. The Company had 6.97.7 million outstanding performance-based restricted stock units (based on target performance) and restricted stock units at a weighted-average grant date fair value of $21.4316.53 as of September 30, 2022.2023.
14. Segments
As further described in Note 1, the Company classifieshas classified its business into two segments: Consumer-to-Consumer and Business Solutions. Operating segments are defined as components of an enterprise that engage in business activities, about which separate financial information is available that is evaluated regularly by the Company’s Chief Operating Decision Maker ("CODM") in allocating resources and assessing performance.
The Consumer-to-Consumer operating segment facilitates money transfers between two consumers. The segment includes five geographic regions whose functions are primarily related to generating, managing, and maintaining agent relationships and localized marketing activities. The Company includes Branded Digital Money Transfer transactions in its regions, including transactions from the Company’s arrangements with financial institutions and other third parties to enable such entities to offer money transfer services to their own customers under their brands.regions. By means of common processes and
37
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
systems, these regions, including Branded Digital, Money Transfer transactions, create one interconnected global network for consumer transactions, thereby constituting one Consumer-to-Consumer money transfer business and one operating segment.
The Business Solutions operating segment facilitatesfacilitated payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises, and other organizations and individuals. On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLCthe Buyer, and The Baupost Group LLC. During the third quarter of 2022, all parties agreedfinal closing for the sale to be completed in three closings instead of two. The first closingthis transaction occurred on MarchJuly 1, 2022,2023. Accordingly, the second is expected to occur in December 2022,Company will no longer report Business Solutions revenues and the third is expected in the first quarter ofoperating expenses after July 1, 2023. See Note 4 for further information regarding this transaction.
All businesses and other services that have not been classified in the above segments are reported as Other, which primarily includes the Company’s bill payment services which facilitate payments from consumers to businesses and other organizations and the Company’s money order services.
Corporate costs, including stock-based compensation and other overhead expenses, are allocated to the segments primarily based on a percentage of the segments’ revenue compared to total revenue. Effective January 1, 2022, the Company stopped allocating corporate costs to its Business Solutions segment, given its agreement to sell this business, as discussed further in Note 4.
32
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the Company’s segment results for the three and nine months ended September 30, 20222023 and 20212022 (in millions):
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Consumer-to-Consumer |
| $ | 982.4 |
|
| $ | 1,104.5 |
|
| $ | 3,008.3 |
|
| $ | 3,282.5 |
|
| $ | 1,019.0 |
|
| $ | 982.4 |
|
| $ | 3,029.5 |
|
| $ | 3,008.3 |
|
Business Solutions (a) |
|
| 42.6 |
|
|
| 116.8 |
|
|
| 167.4 |
|
|
| 312.6 |
|
|
| — |
|
|
| 42.6 |
|
|
| 29.7 |
|
|
| 167.4 |
|
Other |
|
| 64.6 |
|
|
| 65.0 |
|
|
| 207.9 |
|
|
| 190.9 |
|
|
| 78.8 |
|
|
| 64.6 |
|
|
| 245.5 |
|
|
| 207.9 |
|
Total consolidated revenues |
| $ | 1,089.6 |
|
| $ | 1,286.3 |
|
| $ | 3,383.6 |
|
| $ | 3,786.0 |
|
| $ | 1,097.8 |
|
| $ | 1,089.6 |
|
| $ | 3,304.7 |
|
| $ | 3,383.6 |
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Consumer-to-Consumer |
| $ | 193.7 |
|
| $ | 268.2 |
|
| $ | 626.5 |
|
| $ | 708.1 |
|
| $ | 193.4 |
|
| $ | 193.7 |
|
| $ | 601.9 |
|
| $ | 626.5 |
|
Business Solutions (a) |
|
| 15.9 |
|
|
| 38.4 |
|
|
| 51.7 |
|
|
| 61.9 |
|
|
| — |
|
|
| 15.9 |
|
|
| 3.7 |
|
|
| 51.7 |
|
Other |
|
| 21.6 |
|
|
| 12.0 |
|
|
| 73.4 |
|
|
| 36.3 |
|
|
| 21.6 |
|
|
| 21.6 |
|
|
| 72.1 |
|
|
| 73.4 |
|
Total segment operating income |
|
| 231.2 |
|
|
| 318.6 |
|
|
| 751.6 |
|
|
| 806.3 |
|
|
| 215.0 |
|
|
| 231.2 |
|
|
| 677.7 |
|
|
| 751.6 |
|
Russia/Belarus exit costs (b) |
|
| 0.6 |
|
|
| — |
|
|
| (10.6 | ) |
|
| — |
|
|
| — |
|
|
| 0.6 |
|
|
| — |
|
|
| (10.6 | ) |
Business Solutions exit costs (b) |
|
| — |
|
|
| — |
|
|
| (7.7 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7.7 | ) |
Operating expense redeployment program costs (c) |
|
| (4.1 | ) |
|
| — |
|
|
| (19.5 | ) |
|
| — |
| ||||||||||||||||
Total consolidated operating income |
| $ | 231.8 |
|
| $ | 318.6 |
|
| $ | 733.3 |
|
| $ | 806.3 |
|
| $ | 210.9 |
|
| $ | 231.8 |
|
| $ | 658.2 |
|
| $ | 733.3 |
|
3833
THE WESTERN UNION COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2.
The following discussion should be read in conjunction with the condensed consolidated financial statements and the notes to those statements included elsewherein Part I, Item 1, Financial Statements in this report on Form 10-Q. This report on Form 10‑Q 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," “projects,” “designed to,” 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 the Form 10‑Q 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, 2021.2022. 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, 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 or customer experience, 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 exchanges and protocols, and other innovations in technology and business models; geopolitical tensions, political conditions, and related actions, including trade restrictions and government sanctions, 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; 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; 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; changes in tax laws, or their interpretation, any subsequent regulation, and potential related state income tax impacts, and unfavorable resolution of tax contingencies; 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; 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; our ability to attract and retain qualified key employees and to manage our workforce successfully; failure to manage credit and fraud risks presented by our agents, clients, and consumers; 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
39
their subagents to comply with laws and regulations and regulatory or judicial interpretations thereof, including laws and regulations designed to protect
34
consumers, or detect and prevent money laundering, terrorist financing, fraud, and other illicit activity; increased costs or loss of business due to regulatory initiatives and changes in laws, regulations, and industry practices and standards, including changes in interpretations, in the United States and abroad, affecting us, our agents or their subagents, 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, immigration, and immigration;sustainability reporting, including climate-related reporting; 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.
Overview
We are a leading provider of money movement and payment services operatingand have operated in two business segments:
All businesses and other services that have not been classified in the above segments are reported as Other, which primarily includes our bill payment services which facilitate payments from consumers to businesses and other organizations and our money order services. Certain of our corporate costs such as costs related to strategic initiatives, including costs for the review and closing of mergers, acquisitions, and divestitures, are also included in Other. Additional information onregarding our segments is provided in the Segment Discussion below.
4035
Results of Operations
The following discussion of our consolidated results of operations and segment results refers to the three and nine months ended September 30, 20222023 compared to the same periods in 2021.2022. The results of operations should be read in conjunction with the discussion of our segment results of operations, which provide more detailed discussions concerning certain components of the Condensed Consolidated Statements of Income. All significant intercompany accounts and transactions between our segments have been eliminated. The below information has been prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP") unless otherwise noted. All amounts provided in this section 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.
Our revenues and operating income for the three and nine months ended September 30, 20222023 were impacted by fluctuations in the United States dollar compared to foreign currencies. Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in decreasesa decrease to revenues of $60.8$25.6 million and $136.1$101.4 million, respectively, for the three and nine months ended September 30, 2022, respectively,2023 relative to the corresponding periods in the prior year. Fluctuations in the United States dollar compared to foreign currencies negatively impacted operating income by $0.6 million for the three months ended September 30, 2022 and positively impacted operating income by $7.5 million for the nine months ended September 30, 2022, relative to the corresponding periods in the prior year.
On August 4, 2021, we entered into an agreement to sell our Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC (collectively, the “Buyer”"the Buyer”) for cash consideration of $910.0 million. During the third quarter of 2022, we agreed with the Buyer to complete the divestitureThe sale was completed in three closings, instead of two,with the entire cash consideration collected at the first of which occurred on March 1, 2022 with the entirety of the cash consideration collectedclosing and allocated to the closings on a relative fair value basis. The first closing occurred on March 1, 2022, excluded the operations in the European Union and the United Kingdom, and resulted in a gain of $151.4 million. The second closing, which includesoccurred on December 31, 2022 and included the United Kingdom operations, is expected to occurresulted in December 2022, pending required regulatory approvals.a gain of $96.9 million. The thirdfinal closing which includesoccurred on July 1, 2023, included the European Union operations, is expected to occurand resulted in a gain of $18.0 million. During the period between the first quarterand final closings, we were required to pay the Buyer a measure of 2023, pending required regulatory approvals. The gains associated withprofit of the secondEuropean Union and third closings are subject to regulatory capital adjustmentsUnited Kingdom operations, while we owned them, adjusted for the provision for income taxes, occupancy charges for employees of the Buyer using our facilities, and will be recognized at the time of each closing. The Buyer has rebranded the sold operations within a new standalone company (now referred to as "Convera").other items. Refer to Part I, Item 1, Financial Statements, Note 4, DivestituresAssets Held for Sale and Investment ActivitiesRelated Divestiture for further discussion.
Business Solutions revenues included in our Condensed Consolidated Statements of Income were $42.6 million and $116.8 million and direct operating expenses, excluding corporate allocations, were $27.0 million and $77.1 million for the three months ended September 30, 2022 and 2021, respectively.2022. For the nine months ended September 30, 20222023 and 2021,2022, Business Solutions revenues were $167.4$29.7 million and $312.6$167.4 million, respectively, and direct operating expenses, excluding corporate allocations, were $117.4$26.1 million and $244.5$117.4 million, respectively. For the three and nine months ended September 30, 2023, divestiture costs directly associated with this transaction were $0.1 million and $1.1 million, respectively. For the three and nine months ended September 30, 2022, and 2021, divestiture costs directly associated with this transaction were $0.4 million and $5.2$4.4 million, respectively. For
Beginning in March 2023, we experienced a significant increase in our business originating from Iraq which contributed 8% and 6% to our revenues for the three and nine months ended September 30, 20222023 relative to the corresponding prior periods. Over the past several months, we have been in regular discussions with policymakers in both the United States and 2021, divestiture costs directly associatedIraq about the elevated remittance volumes flowing through our network in Iraq. We believe this volume to have been the effect of policy changes by the Central Bank of Iraq. We have actively partnered with regulators to assess and evaluate increased funds flows from a regulatory, compliance, and risk perspective. We also evaluate and apply our own compliance and risk controls. On July 19, 2023, the United States Treasury and the Federal Reserve Bank of New York announced actions that banned 14 Iraqi banks, some of whom were our agents, from conducting U.S. dollar transactions, which reduced our Iraq business for the three months ended September 30, 2023, compared to the three months ended June 30, 2023. In October 2023, the Central Bank of Iraq suspended our largest agent in the country, and it is uncertain whether or when this transaction were $4.4 millionagent will be reinstated and $10.7 million, respectively.resume offering our services. As a result, we believe our business originating from Iraq for the three months ending December 31, 2023 will be significantly reduced, compared to the three months ended September 30, 2023.
In March 2022, we suspended our operations in Russia and Belarus, which are included in our Consumer-to-Consumer segment, due to the Russia/Ukraine conflict (the "Conflict").conflict. Revenues associated with the Russia and Belarus operations, including transactions sent from, into, and within these countries for the three months ended September 30, 2021 were approximately $40 million, and for the nine months ended September 30, 2022 and 2021 and the year ended December 31, 2021, were approximately $28 million, $106 million, and $145 million, respectively. The Conflict has had and is expected to continue to have broader implications to our overall business, including reduced transaction activity in Ukraine. We expect that our results of operations will continue to be negatively impacted by this Conflict for the remainder of 2022 and likely thereafter.million.
4136
The following table sets forth our consolidated results of operations for the three and nine months ended September 30, 20222023 and 2021:2022:
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||||||
(in millions, except per share amounts) |
| 2022 |
| 2021 |
| % Change |
| 2022 |
| 2021 |
| % Change |
| 2023 |
| 2022 |
| % Change |
| 2023 |
| 2022 |
| % Change |
Revenues |
| $1,089.6 |
| $1,286.3 |
| (15)% |
| $3,383.6 |
| $3,786.0 |
| (11)% |
| $1,097.8 |
| $1,089.6 |
| 1% |
| $3,304.7 |
| $3,383.6 |
| (2)% |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
| 637.3 |
| 720.1 |
| (12)% |
| 1,945.4 |
| 2,181.1 |
| (11)% |
| 687.2 |
| 637.3 |
| 8% |
| 2,015.6 |
| 1,945.4 |
| 4% |
Selling, general, and administrative |
| 220.5 |
| 247.6 |
| (11)% |
| 704.9 |
| 798.6 |
| (12)% |
| 199.7 |
| 220.5 |
| (9)% |
| 630.9 |
| 704.9 |
| (11)% |
Total expenses |
| 857.8 |
| 967.7 |
| (11)% |
| 2,650.3 |
| 2,979.7 |
| (11)% |
| 886.9 |
| 857.8 |
| 3% |
| 2,646.5 |
| 2,650.3 |
| 0% |
Operating income |
| 231.8 |
| 318.6 |
| (27)% |
| 733.3 |
| 806.3 |
| (9)% |
| 210.9 |
| 231.8 |
| (9)% |
| 658.2 |
| 733.3 |
| (10)% |
Other income/(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestiture of business |
| — |
| — |
| (a) |
| 151.4 |
| — |
| (a) |
| 18.0 |
| — |
| (a) |
| 18.0 |
| 151.4 |
| (a) |
Interest income |
| 4.9 |
| 0.4 |
| (a) |
| 7.3 |
| 1.1 |
| (a) |
| 3.6 |
| 4.9 |
| (27)% |
| 11.0 |
| 7.3 |
| 51% |
Interest expense |
| (25.2) |
| (25.7) |
| (2)% |
| (74.8) |
| (79.7) |
| (6)% |
| (27.0) |
| (25.2) |
| 7% |
| (79.0) |
| (74.8) |
| 6% |
Other income/(expense), net |
| (17.8) |
| (1.8) |
| (a) |
| (25.1) |
| 26.8 |
| (a) | ||||||||||||
Other expense, net |
| (1.2) |
| (17.8) |
| (93)% |
| (6.5) |
| (25.1) |
| (74)% | ||||||||||||
Total other income/(expense), net |
| (38.1) |
| (27.1) |
| 41% |
| 58.8 |
| (51.8) |
| (a) |
| (6.6) |
| (38.1) |
| (a) |
| (56.5) |
| 58.8 |
| (a) |
Income before income taxes |
| 193.7 |
| 291.5 |
| (34)% |
| 792.1 |
| 754.5 |
| 5% |
| 204.3 |
| 193.7 |
| 5% |
| 601.7 |
| 792.1 |
| (24)% |
Provision for income taxes |
| 19.8 |
| 58.8 |
| (66)% |
| 130.9 |
| 117.5 |
| 11% |
| 33.3 |
| 19.8 |
| 68% |
| 102.7 |
| 130.9 |
| (22)% |
Net income |
| $173.9 |
| $232.7 |
| (25)% |
| $661.2 |
| $637.0 |
| 4% |
| $171.0 |
| $173.9 |
| (2)% |
| $499.0 |
| $661.2 |
| (25)% |
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $0.45 |
| $0.57 |
| (21)% |
| $1.70 |
| $1.56 |
| 9% |
| $0.46 |
| $0.45 |
| 2% |
| $1.33 |
| $1.70 |
| (22)% |
Diluted |
| $0.45 |
| $0.57 |
| (21)% |
| $1.70 |
| $1.55 |
| 10% |
| $0.46 |
| $0.45 |
| 2% |
| $1.33 |
| $1.70 |
| (22)% |
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| 386.5 |
| 406.3 |
|
|
| 388.8 |
| 409.1 |
|
|
| 373.9 |
| 386.5 |
|
|
| 374.5 |
| 388.8 |
|
|
Diluted |
| 387.6 |
| 408.0 |
|
|
| 389.9 |
| 411.3 |
|
|
| 375.0 |
| 387.6 |
|
|
| 375.4 |
| 389.9 |
|
|
Revenues Overview
Revenues are primarily derived from consideration paid by customers to transfer money. These revenues vary by transaction based upon factors such as channel, send and receive locations, the principal amount sent, whether the money transfer involves different send and receive currencies, the difference between the exchange rate we set to the customer and thea rate available in the wholesale foreign exchange market, when the money transfer involves different send and speed of service, as applicable.receive currencies. We also offer several other services, including foreign exchange and payment services and other bill payment services, for which revenue is impacted by similar factors.
Due to the significance of the effect that foreign exchange fluctuations against the United States dollar can have on our reported revenues, constant currency results have been provided in the table below for consolidated revenues. Constant currency results assume foreign revenues are translated from foreign currencies to the United States dollar, net of the effect of foreign currency hedges, at rates consistent with those in the prior year. We have also disclosed the impact of our Business Solutions divestiture on our revenues in the table below. Constant currency measures and measures that exclude the impact of divestitures are non-GAAP financial measures and are provided so that revenue can be viewed without the effect of fluctuations in foreign currency exchange rates and divestitures of our businesses, which is consistent with how management evaluates our revenue results and trends. We believe that these measures provide management and investors with information about revenue results and trends that eliminates currency volatility and divestitures, thereby providing greater clarity regarding, and increasing the comparability of, our underlying results and trends. These disclosures are provided in addition to, and not as a substitute for, the percentage change in revenue on a GAAP basis for the three and nine months ended September 30, 20222023 compared to the corresponding periods in the prior year. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.
42
The following table sets forth our consolidated revenue results for the three and nine months ended September 30, 20222023 and 2021:2022:
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
(dollars in millions) |
| 2022 |
| 2021 |
| % Change |
| 2022 |
| 2021 |
| % Change |
Revenues, as reported (GAAP) |
| $1,089.6 |
| $1,286.3 |
| (15)% |
| $3,383.6 |
| $3,786.0 |
| (11)% |
Foreign currency impact (a) |
|
|
|
|
| 4% |
|
|
|
|
| 4% |
Divestitures impact (b) |
|
|
|
|
| 5% |
|
|
|
|
| 3% |
Revenue change, constant currency adjusted, excluding Business Solutions (Non-GAAP) |
|
|
|
|
| (6)% |
|
|
|
|
| (4)% |
37
| Three Months Ended September 30, |
| Nine Months Ended September 30, | |||||||||
(dollars in millions) |
| 2023 |
| 2022 |
| % Change |
| 2023 |
| 2022 |
| % Change |
Revenues, as reported (GAAP) |
| $1,097.8 |
| $1,089.6 |
| 1% |
| $3,304.7 |
| $3,383.6 |
| (2)% |
Foreign currency impact (a) |
|
|
|
|
| 2% |
|
|
|
|
| 3% |
Divestitures impact (b) |
|
|
|
|
| 4% |
|
|
|
|
| 4% |
Revenue change, constant currency adjusted, excluding Business Solutions (Non-GAAP) |
|
|
|
|
| 7% |
|
|
|
|
| 5% |
ForIn addition to the negative impacts from foreign currency and the divestiture of our Business Solutions business, as described above, for the three and nine months ended September 30, 2022, revenues decreased 15% and 11%, respectively,2023 when compared to the corresponding periods in the prior year, GAAP revenues benefited from an increase in Consumer-to-Consumer revenues in Iraq, as discussed above, and an increase in local currency revenue per transaction in our Argentine operations due to a transaction declineinflation, partially offset by revenue declines in our Consumer-to-Consumer segment, includingEurope and CIS and North America regions. In addition, for the three months ended September 30, 2023 when compared to the corresponding period in the prior year, GAAP revenues benefited from growth in our Branded Digital business, as defined below, and for the nine months ended September 30, 2023 when compared to the corresponding period in the prior year, GAAP revenues were negatively impacted as a result of the suspension of our operations in Russia and Belarus as well as the first closing of the divestiture of our Business Solutions business, as described above. Fluctuations in the exchange rates between the United States dollar and foreign currencies negatively impacted revenue by 4% for the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year.March 2022.
Operating Expenses Overview
Operational efficiencyOperating expense redeployment program
On October 20, 2022, we announced an operational efficiencyoperating expense redeployment program which aims to redeploy approximately $150 million in expenses in our current cost base over the next 5 years,through 2027, accomplished through optimizations in vendor management, our real estate footprint, marketing, and people costs.strategy. We believe these changes will allow us to invest in strategic initiatives. The timing and pace of this redeployment may vary, and we believe that we will continue to refine aspects of the program duringas we progress. We have incurred and expect to incur incremental expenses associated with the remainderimplementation of 2022this program. We incurred $1.0 million and into$3.1 million of Cost of services and Selling, general, and administrative expenses, respectively, for a total of $4.1 million of expenses for the three months ended September 30, 2023. We incurred $8.9 million and $10.6 million of Cost of services and Selling, general, and administrative expenses, respectively, for a total of $19.5 million of expenses for the nine months ended September 30, 2023. We have incurred $41.3 million of total expenses under this program through September 30, 2023.
Enhanced Regulatory Compliance
The financial services industry, including money services businesses, continues to be subject to increasingly strict legal and regulatory requirements, and we continue to focus on and regularly review our compliance programs. In connection with these reviews, and in light of growing and rapidly evolving regulatory complexity and heightened attention of, and increased dialogue with, governmental and regulatory authorities related to our compliance activities, we have made, and continue to make, enhancements to our processes and systems designed to detect and prevent money laundering, terrorist financing, and fraud and other illicit activity, and enhancements designed to improve consumer protection. Some of these changes have had, and we believe will continue to have, an adverse effect on our business, financial condition, and results of operations.
Cost of Services
Cost of services primarily consists of agent commissions, which represented approximately 60% of total cost of services for both the three and nine months ended September 30, 2023 and 2022. For the three and nine months ended September 30, 2022,2023, Cost of services decreasedincreased compared to the corresponding periods in the prior year primarily due to a decrease in Consumer-to-Consumer money transferincreased agent commissions, which generally vary with revenues, as well as increased investment in information technology, and increased other variable expenses, including credit losses and bank fees, partially offset by a decrease associated with the Business Solutions divestiture.
Selling, General, and Administrative
For the three and nine months ended September 30, 2023, Selling, general and administrative expenses decreased due to the Business Solutions divestiture, as discussed above.a reduction in advertising expenses, and a reduction in general and administrative expenses in our shared services functions, partially offset by increases in employee incentive compensation and costs associated with our operating expense redeployment program. In addition, for the nine months ended September 30, 20222023 compared to the corresponding period in the prior period, Cost of servicesyear, Selling, general and administrative expenses decreased due to timingexit costs associated with the suspension of investmentsour operations in information technologyRussia and reductionsBelarus and the Business Solutions divestiture that were incurred in chargebacks and other losses.the prior period.
4338
Selling, General, and Administrative
Total Other Income/(Expense), Net
Selling, general, and administrative expenses decreased
Total other income/(expense), net for the three and nine months ended September 30, 20222023, when compared to the corresponding periods in the prior year, due to a decrease associated withwas impacted by the gain on the first and final closings of the Business Solutions divestiture, which occurred on March 1, 2022 and July 1, 2023, respectively, as discusseddescribed further above, and fluctuations between the United States dollar and foreign currencies. For the three months ended September 30, 2022 compared to the corresponding period in the prior year, the decrease was partially offset by increased marketing costs. For the nine months ended September 30, 2022 compared to the corresponding period in the prior year, the decrease was also due to decreases in employee-related expenses, partially offset by exit costs associated with the suspension of our Russian and Belarus operations and the Business Solutions divestiture, as discussed below.
Total Other Income/(Expense), Net
Total other income/(expense), net during the three months ended September 30, 2022 when compared to the corresponding period in the prior year was impacted by the expense associated with payment obligations to the Buyer of the Business Solutions business for a measure of the profits, as contractually agreed, from the European Union and United Kingdom operations, subsequent to the first closing, which will continue until the third closing. Total other income/(expense), net for the nine months ended September 30, 2022, when compared to the corresponding period in the prior year benefited from the gain on the first closing of the Business Solutions divestiture, debt extinguishment costs incurred in the prior period, and a reduction in net periodic pension costs due to the termination of our U.S. defined benefit pension plan in the fourth quarter of 2021. This was partially offsetwhile owned by a prior year gain of $47.9 million recorded from the sale of a substantial majority of shares we held as a noncontrolling investor in a private company and the measure of profits paid to the Buyer of Business Solutions.us.
Income Taxes
Our effective tax rates on pre-tax income were 10.2%16.3% and 20.2%10.2% for the three months ended September 30, 20222023 and 2021,2022, respectively, and 16.5%17.1% and 15.6%16.5% for the nine months ended September 30, 20222023 and 2021,2022, respectively. The decreaseincreases in our effective tax raterates for the three and nine months ended September 30, 20222023 compared to the corresponding periodperiods in the prior year waswere primarily due to discrete tax expensesbenefits in the prior period and discrete tax benefits inperiods, including the current period related to the completioneffects of the examination of our consolidated federal income tax returns for 2017 and 2018 (the "IRS Examination"), partially offset by the sale of our Business Solutions business and our decision to suspend operations in Russia and Belarus. The increase in our effective tax rate for the nine months ended September 30, 2022 compared to the corresponding period in the prior year was primarily due to the sale of our Business Solutions business and our decision to suspend operations in Russia and Belarus, partially offset by discrete tax expenses in the prior period and discrete tax benefits in the current period related to the completion of the IRS Examination. The impactexamination discussed in Part 1, Item 1, Financial Statements, Note 12, Income Taxes, partially offset by the effects of the sale of our Business Solutions business is included in our estimated annual effective rate, the ongoing effects of which are expectedcurrent periods compared to continue throughout the year.prior periods.
As of September 30, 2022,2023, the total amount of tax contingency reserves was $302.4$241.9 million, including accrued interest and penalties, net of related items. As previously disclosed in Part II, Item 8, Financial Statements and Supplementary Data, Note 11, Income Taxes, in our Annual Report on Form 10-K, we continue to believe that it is reasonably possible that our total unrecognized tax benefits could decrease by December 31, 2022, in connection with various matters which may be resolved.
Earnings Per Share
During the three months ended September 30, 20222023 and 2021, both2022, basic and diluted earnings per share were $0.45$0.46 and $0.57,$0.45, respectively. During the nine months ended September 30, 2023 and 2022, and 2021, basic earnings per share were $1.70 and $1.56, respectively, and diluted earnings per share were $1.70$1.33 and $1.55,$1.70, respectively. Outstanding options to purchase Western Union stock and unvested shares of restricted stock are excluded from basic shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares of restricted stock have vested. For the three months ended September 30, 2022 and 2021 there were 8.1 million and 2.2 million, respectively, and for the nine months ended September 30, 2022 and 2021, there were 8.0 million and 1.7 million, respectively, of sharesShares excluded from the diluted earnings per share calculation were 9.5 million and 8.1 million for the three months ended September 30, 2023 and 2022, respectively, and 9.6 million and 8.0 million for the nine months ended September 30, 2023 and 2022, respectively. The effect of these shares was anti-dilutive under the treasury stock method, primarily due to outstanding options to purchase shares of Western Union stock and restricted stock units, as the assumed
44
proceeds of the options and restricted stock per unit were above our average share price during the periods and their effect was anti-dilutive.periods.
Earnings per share for both the three and nine months ended September 30, 20222023 compared to the corresponding periods in the prior year were impacted by the previously described factors impacting net income and a lower number of average shares outstanding. The lower number of shares outstanding was due to stock repurchases exceeding stock issuances under our stock compensation programs.
Segment Discussion
We manage our business around the consumers and businesses we serve and the types of services we offer. Each of our segments addresses a different combination of consumer groups, distribution networks, and services offered. Our segments arewere Consumer-to-Consumer and Business Solutions. On August 4, 2021, we entered into an agreement to sell our Business Solutions business, and completed the first closing on March 1, 2022. During the third quarter of 2022, we agreed with the Buyer to complete the divestiture in three closings instead of two.as discussed above. The operations of the Business Solutions business to be sold in the second and third closings continue to befinal closing were included in Revenues and Operating income after the firstsecond closing and have completely transitioned to the Buyer as of the final closing. However, between the first and thirdfinal closings, we willwere required to pay the Buyer a measure of the profits from these operations, while we owned them, adjusted for other charges, and this expense iswas recognized in Other income/(expense),expense, net in the Condensed Consolidated Statements of Income.
During the three and nine months ended September 30, 2023, we incurred $4.1 million and $19.5 million of costs, respectively, associated with our operating expense redeployment program, as described above, primarily related to severance and expenses associated with streamlining our organizational and legal structure. During the nine months ended September 30, 2022, we incurred $10.6 million and $7.7 million of exit costs associated with the suspension of our Russia and Belarus operations and the Business Solutions divestiture, respectively. These exit costs arewere primarily related to severance and non-cash impairments of property and equipment, an operating lease right-of-use asset, and other intangible assets. While certain of the expenses are identifiable to our segments, the expenses are not included in the measurement
39
of segment operating income provided to the Chief Operating Decision Maker for purposes of performance assessment and resource allocation. These expenses are therefore excluded from our segment operating income results.
The following table sets forth the components of segment revenues as a percentage of the consolidated totals for the three and nine months ended September 30, 20222023 and 2021:2022:
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Consumer-to-Consumer |
|
| 90 | % |
|
| 86 | % |
|
| 89 | % |
|
| 87 | % |
|
| 93 | % |
|
| 90 | % |
|
| 92 | % |
|
| 89 | % |
Business Solutions |
|
| 4 | % |
|
| 9 | % |
|
| 5 | % |
|
| 8 | % |
|
| 0 | % |
|
| 4 | % |
|
| 1 | % |
|
| 5 | % |
Other |
|
| 6 | % |
|
| 5 | % |
|
| 6 | % |
|
| 5 | % |
|
| 7 | % |
|
| 6 | % |
|
| 7 | % |
|
| 6 | % |
|
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Consumer-to-Consumer Segment
The following table sets forth our Consumer-to-Consumer segment results of operations for the three and nine months ended September 30, 20222023 and 2021:2022:
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||||||
(dollars and transactions in millions) |
| 2022 |
| 2021 |
| % Change |
| 2022 |
| 2021 |
| % Change |
| 2023 |
| 2022 |
| % Change |
| 2023 |
| 2022 |
| % Change |
Revenues |
| $982.4 |
| $1,104.5 |
| (11)% |
| $3,008.3 |
| $3,282.5 |
| (8)% |
| $1,019.0 |
| $982.4 |
| 4% |
| $3,029.5 |
| $3,008.3 |
| 1% |
Operating income |
| $193.7 |
| $268.2 |
| (28)% |
| $626.5 |
| $708.1 |
| (12)% |
| $193.4 |
| $193.7 |
| 0% |
| $601.9 |
| $626.5 |
| (4)% |
Operating income margin |
| 20% |
| 24% |
|
|
| 21% |
| 22% |
|
|
| 19% |
| 20% |
|
|
| 20% |
| 21% |
|
|
Key indicator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer-to-Consumer transactions |
| 66.9 |
| 76.6 |
| (12)% |
| 204.8 |
| 227.6 |
| (10)% |
| 70.6 |
| 66.9 |
| 5% |
| 206.5 |
| 204.8 |
| 1% |
Our Consumer-to-Consumer money transfer service facilitates money transfers sent from our retail agent locations worldwide and money transfer transactions conducted and funded through websites and mobile applications marketed under our Digital Money Transfer services.brands ("Branded Digital"). The segment includes five geographic regions whose functions are primarily related to generating, managing, and maintaining agent relationships and localized marketing activities. We include Branded Digital Money Transfer transactions in our regions, including transactions from our arrangements with financial institutions and other third parties to enable such entities to offer money transfer services to their own customers under
45
their brands.regions. By means of common processes and systems, these regions, including Branded Digital Money Transfer transactions, create one interconnected global network for consumer transactions, thereby constituting one Consumer-to-Consumer money transfer business and one operating segment.
Transaction volume is the primary generator of revenue in our Consumer-to-Consumer segment. A Consumer-to-Consumer transaction constitutes the transfer of funds to a designated recipient utilizing one of our consumer money transfer services. The geographic split for transactions and revenue in the table that follows including Digital Money Transfer transactions, is determined based upon the region where the money transfer is initiated. Included in each region’s transaction and revenue percentages in the tables below are Branded Digital Money Transfer transactions for the three and nine months ended September 30, 20222023 and 2021.2022. Where reported separately in the discussion below, Digital Money Transfer, and its subset Branded Digital consistconsists of 100% of the transactions conducted and funded through those respective channels.that channel.
The table below sets forth revenue and transaction changes by geographic region compared to the same period in the prior year. Additionally, due to the significance of our Consumer-to-Consumer segment to our overall results, we have also provided constant currency results for our Consumer-to-Consumer segment revenues. Consumer-to-Consumer segment constant currency revenue growth/(decline) is a non-GAAP financial measure, as further discussed in Revenues Overview above.
|
| Three Months Ended September 30, 2022 |
| Nine Months Ended September 30, 2022 | ||||||||||||
|
| Revenue Decline as |
| Foreign |
| Constant |
| Transaction Growth / (Decline) |
| Revenue Growth / (Decline) as |
| Foreign |
| Constant |
| Transaction Growth / (Decline) |
Consumer-to-Consumer regional growth/(decline): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America (United States & Canada) ("NA") |
| (5)% |
| 0% |
| (5)% |
| (5)% |
| (3)% |
| 0% |
| (3)% |
| (6)% |
Europe and Russia/CIS ("EU & CIS") |
| (23)% |
| (7)% |
| (16)% |
| (32)% |
| (20)% |
| (6)% |
| (14)% |
| (23)% |
Middle East, Africa, and South Asia ("MEASA") |
| (5)% |
| (2)% |
| (3)% |
| (1)% |
| (2)% |
| (1)% |
| (1)% |
| 0% |
Latin America and the Caribbean ("LACA") |
| 0% |
| (4)% |
| 4% |
| 3% |
| 1% |
| (4)% |
| 5% |
| 3% |
East Asia and Oceania ("APAC") |
| (16)% |
| (5)% |
| (11)% |
| (11)% |
| (11)% |
| (4)% |
| (7)% |
| (12)% |
Total Consumer-to-Consumer segment: |
| (11)% |
| (3)% |
| (8)% |
| (12)% |
| (8)% |
| (2)% |
| (6)% |
| (10)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Money Transfer(b) |
| (12)% |
| (3)% |
| (9)% |
| (20)% |
| (4)% |
| (2)% |
| (2)% |
| (13)% |
Branded Digital(b) |
| (8)% |
| (3)% |
| (5)% |
| (1)% |
| (2)% |
| (3)% |
| 1% |
| (1)% |
40
| Three Months Ended September 30, 2023 |
| Nine Months Ended September 30, 2023 | |||||||||||||
| Revenue Growth / (Decline) as |
| Foreign |
| Constant Currency Revenue Growth / (Decline)(a) - (Non-GAAP) |
| Transaction Growth |
| Revenue Growth / (Decline) as |
| Foreign |
| Constant Currency Revenue Growth / (Decline)(a) - (Non-GAAP) |
| Transaction Growth / (Decline) | |
Consumer-to-Consumer regional growth/(decline): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America (United States & Canada) ("NA") |
| (3)% |
| 0% |
| (3)% |
| 7% |
| (6)% |
| 0% |
| (6)% |
| 4% |
Europe and CIS ("EU & CIS") |
| (9)% |
| 1% |
| (10)% |
| 0% |
| (12)% |
| (1)% |
| (11)% |
| (9)% |
Middle East, Africa, and South Asia ("MEASA") |
| 42% |
| 0% |
| 42% |
| 9% |
| 37% |
| (1)% |
| 38% |
| 5% |
Latin America and the Caribbean ("LACA") |
| 10% |
| 2% |
| 8% |
| 9% |
| 10% |
| (1)% |
| 11% |
| 9% |
East Asia and Oceania ("APAC") |
| (8)% |
| (1)% |
| (7)% |
| 0% |
| (8)% |
| (3)% |
| (5)% |
| (1)% |
Total Consumer-to-Consumer segment: |
| 4% |
| 1% |
| 3% |
| 5% |
| 1% |
| 0% |
| 1% |
| 1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Branded Digital(b) |
| 3% |
| 0% |
| 3% |
| 12% |
| (2)% |
| 0% |
| (2)% |
| 10% |
The table below sets forth regional revenues as a percentage of our Consumer-to-Consumer revenue for the three and nine months ended September 30, 20222023 and 2021:2022:
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Consumer-to-Consumer revenue as a percentage of segment revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
NA |
|
| 40 | % |
|
| 37 | % |
|
| 39 | % |
|
| 37 | % |
|
| 37 | % |
|
| 40 | % |
|
| 37 | % |
|
| 39 | % |
EU & CIS |
|
| 28 | % |
|
| 32 | % |
|
| 29 | % |
|
| 33 | % |
|
| 24 | % |
|
| 28 | % |
|
| 25 | % |
|
| 29 | % |
MEASA |
|
| 16 | % |
|
| 15 | % |
|
| 16 | % |
|
| 15 | % |
|
| 23 | % |
|
| 16 | % |
|
| 22 | % |
|
| 16 | % |
LACA |
|
| 10 | % |
|
| 9 | % |
|
| 10 | % |
|
| 9 | % |
|
| 11 | % |
|
| 10 | % |
|
| 10 | % |
|
| 10 | % |
APAC |
|
| 6 | % |
|
| 7 | % |
|
| 6 | % |
|
| 6 | % |
|
| 5 | % |
|
| 6 | % |
|
| 6 | % |
|
| 6 | % |
Branded Digital, Money Transfer, which is included in the regional percentages above, represented approximately 24%21% of our Consumer-to-Consumer revenues for both the three months ended September 30, 2023 and 2022, and 202121% and 25% and 24%22% for the nine months ended September 30, 2023 and 2022, and 2021, respectively.
46
Our consumers transferred $24.1$26.0 billion and $27.7$23.0 billion in Consumer-to-Consumercross-border principal for the three months ended September 30, 2023 and 2022, respectively, and 2021, of which $23.0$76.5 billion and $26.5 billion related to cross-border principal for the same corresponding periods described above, respectively. Our consumers transferred $73.4 billion and $81.3$70.2 billion in Consumer-to-Consumercross-border principal for the nine months ended September 30, 20222023 and 2021, of which $70.2 billion and $77.6 billion related to cross-border principal for the same corresponding periods described above,2022, respectively. The decreaseincrease in principal and cross-border principal transferred during the three and nine months ended September 30, 20222023 compared to the corresponding periods in the prior year was primarily attributable to principal growth due to a declinechange in Consumer-to-Consumer transactions, including as a result of the suspension of our operationsmonetary policy in Russia and Belarus,Iraq, as discussed above, as well as fluctuationsand growth in exchange rates between the United States dollarour NA and foreign currencies.LACA regions. Consumer-to-Consumer principal is the amount of consumer funds transferred to the designated recipient. Cross-bordercross-border principal is the amount of consumer funds transferred to a designated recipient in a country or territory that differs from the country or territory from which the transaction was initiated. Consumer-to-Consumer principal and cross-border principal are metricsis a metric used by management to monitor and better understand the growth in our underlying business relative to competitors, as well as changes in our market share of global remittances.
Revenues
Consumer-to-Consumer money transfer revenue and transactions decreased 11%increased 4% and 12%5%, respectively, for the three months ended September 30, 20222023 compared to the corresponding period in the prior year, and decreased 8%both revenue and 10%, respectively,transactions increased 1% for the nine months ended September 30, 2022,2023 compared to the corresponding period in the prior year, including due to the suspension of our operations in Russia and Belarus.year. Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, negativelypositively impacted revenue by 3% and 2%1% for the three months ended September 30, 2023 and did not have a significant impact for the nine months ended September 30, 2022, respectively,2023, compared to the corresponding periods in the prior year.
In our Consumer-to-Consumer regions, the decrease in NA revenue for41
For the three and nine months ended September 30, 20222023, in our Consumer-to-Consumer regions, NA revenue decreased and transactions increased compared to the corresponding periods in the prior year was primarily due to decreasespromotional pricing related to our new Branded Digital go-to-market strategy and other price reductions. Growth in cross-border transactions sent from the United States was partially offset by declines in transactions sent within the United States. TheFor the three and nine months ended September 30, 2023, our EU & CIS region experienced transaction volume and revenue declines in Russia and Belarus, France, Germany,revenues were negatively impacted by price reductions and the United Kingdom and was also impacted by promotional pricing. Ourloss of a significant retail agent in the fourth quarter of 2022. In addition, for the nine months ended September 30, 2023 compared to the corresponding period in the prior year, EU & CIS revenues associated with Digital Money Transfer, including white label partnerships, were negatively impacted by our suspension of operations in Russia and Belarus and transaction declines. Revenue growth in the threeMEASA region was driven by a change in monetary policy in Iraq, as discussed above, and nine months ended September 30, 2022 and will be negatively impacted forrevenue growth in the year ending December 31, 2022 and likely thereafter. These white label transactions had lower revenuesLACA region benefited from an increase in local currency revenue per transaction causing a greater decrease to EU & CIS transactions, as compared to revenues.in Argentina, and strength in Ecuador and Venezuela.
We have historically implemented price reductions or price increases throughout many of our global corridors. We will likely continue to implement price changes from time to time in response to competition and other factors. Price reductions generally reduce margins and adversely affect financial results in the short term and may also adversely affect financial results in the long term if transaction volumes do not increase sufficiently. Price increases may adversely affect transaction volumes, as consumers may not use our services if we fail to price them appropriately. We believe that revenues could continue to be adversely impacted by price reductions we have implemented in connection with promotional pricing we recently implemented for Branded Digital transactions, including those sent from the United States.our go-to-market strategy.
Operating Income
Consumer-to-Consumer operating income decreased 28% and 12% for the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year, primarily due to the decreases in revenues, as discussed above, partially offset2023 was impacted by decreases inincreased agent commissions, which generally vary with revenues. For the three months ended September 30, 2022 compared to the corresponding periodrevenues, increased investment in the prior year, the decrease was also a result ofinformation technology, increased marketing costs. In addition, for the nine months ended September 30, 2022 compared to the corresponding prior period, the decrease in operating income wasemployee incentive compensation, and increased variable expenses, including credit losses and bank fees, partially offset by reductionsa reduction in employee-relatedgeneral and administrative expenses the timing of investments in information technology,our shared services functions and decreased chargebacks and other losses.a reduction in advertising expenses.
Business Solutions
The following table sets forth our Business Solutions segment results of operations for the three and nine months ended September 30, 20222023 and 2021:2022:
| Three Months Ended September 30, |
| Nine Months Ended September 30, | |||||||||
(dollars in millions) |
| 2023 |
| 2022 |
| % Change |
| 2023 |
| 2022 |
| % Change |
Revenues |
| $— |
| $42.6 |
| (a) |
| $29.7 |
| $167.4 |
| (82)% |
Operating income |
| $— |
| $15.9 |
| (a) |
| $3.7 |
| $51.7 |
| (a) |
Operating income margin |
| (a) |
| 37% |
|
|
| 12% |
| 31% |
|
|
47
/s/ Ernst & Young LLP | |
Denver, Colorado | |
|
5650
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The information required by this Item 1 is incorporated herein by reference to the discussion in Part I, Item 1, Financial Statements, Note 6, Commitments and Contingencies.
Item 1A. Risk Factors
There have been no material changes to the risk factors described in our Annual Report on Form 10‑K for the year ended December 31, 2021.2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth stock repurchases for each of the three months of the quarter ended September 30, 2022:2023:
|
|
|
|
|
|
|
|
|
|
| Approximate Dollar |
|
|
|
|
|
|
|
|
|
|
| Approximate Dollar |
| ||||||||
|
|
|
|
|
|
|
| Total Number of Shares |
|
| Value of Shares that |
|
|
|
|
|
|
|
| Total Number of Shares |
|
| Value of Shares that |
| ||||||||
|
|
|
|
|
|
|
| Purchased as Part of |
|
| May Yet Be Purchased |
|
|
|
|
|
|
|
| Purchased as Part of |
|
| May Yet Be Purchased |
| ||||||||
|
| Total Number of |
|
| Average Price |
|
| Publicly Announced |
|
| Under the Plans or |
|
| Total Number of |
|
| Average Price |
|
| Publicly Announced |
|
| Under the Plans or |
| ||||||||
Period |
| Shares Purchased (a) |
|
| Paid per Share |
|
| Plans or Programs (b) |
|
| Programs (in millions) |
|
| Shares Purchased (a) |
|
| Paid per Share (c) |
|
| Plans or Programs (b) |
|
| Programs (in millions) |
| ||||||||
July 1 - 31 |
|
| 357,544 |
|
| $ | 16.69 |
|
|
| 350,788 |
|
| $ | 823.2 |
|
|
| 17,666 |
|
| $ | 11.88 |
|
|
| — |
|
| $ | 648.2 |
|
August 1 - 31 |
|
| 88,425 |
|
| $ | 16.95 |
|
|
| — |
|
| $ | 823.2 |
|
|
| 28,604 |
|
| $ | 11.96 |
|
|
| — |
|
| $ | 648.2 |
|
September 1 - 30 |
|
| 14,213 |
|
| $ | 14.37 |
|
|
| — |
|
| $ | 823.2 |
|
|
| 7,774,634 |
|
| $ | 12.88 |
|
|
| 7,766,204 |
|
| $ | 548.2 |
|
Total |
|
| 460,182 |
|
|
|
|
|
| 350,788 |
|
|
|
|
|
| 7,820,904 |
|
| $ | 12.87 |
|
|
| 7,766,204 |
|
|
|
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.Securities Trading Plans of Directors and Executive Officers
57During the three months ended September 30, 2023, none of the Company’s directors or executive officers adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of the Company’s securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any non-Rule 10b5-1 trading arrangement, as defined in Item 408 of Regulation S-K.
51
Item 6. Exhibits
See Exhibit Index for documents filed or furnished herewith and incorporated herein by reference.
EXHIBIT INDEX
Exhibit | Description | ||
| |||
15 | Letter from Ernst & Young LLP Regarding Unaudited Interim Financial Information | ||
31.1 | |||
31.2 | |||
32 | |||
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
5852
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
The Western Union Company (Registrant) | |||
Date: | By: | /s/ Devin B. McGranahan | |
Devin B. McGranahan | |||
President and Chief Executive Officer | |||
Date: | By: | /s/ | |
| |||
| |||
(Principal Financial Officer) | |||
Date: | By: | /s/ Mark Hinsey | |
Mark Hinsey | |||
Chief Accounting Officer and Controller |
5953