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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended June 30, 2023 |
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission File Number: 001-32903
THE WESTERN UNION COMPANY
(Exact name of registrant as specified in its charter)
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Delaware |
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20-4531180 |
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7001 EAST BELLEVIEW AVENUE |
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Registrant’s telephone number, including area code: (866) 405-5012
Securities registered pursuant to Section 12(b) of the Act:
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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 July 21, 2023, 374,534,805 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)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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||||
Revenues |
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$ |
1,170.0 |
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|
$ |
1,138.3 |
|
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$ |
2,206.9 |
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$ |
2,294.0 |
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Expenses: |
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|
|
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|
|
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||||
Cost of services |
|
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698.9 |
|
|
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653.0 |
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|
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1,328.4 |
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1,308.1 |
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Selling, general, and administrative |
|
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228.5 |
|
|
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221.3 |
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|
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431.2 |
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|
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484.4 |
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Total expenses |
|
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927.4 |
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874.3 |
|
|
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1,759.6 |
|
|
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1,792.5 |
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Operating income |
|
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242.6 |
|
|
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264.0 |
|
|
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447.3 |
|
|
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501.5 |
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Other income/(expense): |
|
|
|
|
|
|
|
|
|
|
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||||
Gain on divestiture of business (Note 4) |
|
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— |
|
|
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— |
|
|
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— |
|
|
|
151.4 |
|
Interest income |
|
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4.2 |
|
|
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1.8 |
|
|
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7.4 |
|
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2.4 |
|
Interest expense |
|
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(27.0 |
) |
|
|
(24.8 |
) |
|
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(52.0 |
) |
|
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(49.6 |
) |
Other expense, net |
|
|
(3.4 |
) |
|
|
(4.8 |
) |
|
|
(5.3 |
) |
|
|
(7.3 |
) |
Total other income/(expense), net |
|
|
(26.2 |
) |
|
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(27.8 |
) |
|
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(49.9 |
) |
|
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96.9 |
|
Income before income taxes |
|
|
216.4 |
|
|
|
236.2 |
|
|
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397.4 |
|
|
|
598.4 |
|
Provision for income taxes |
|
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40.2 |
|
|
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42.2 |
|
|
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69.4 |
|
|
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111.1 |
|
Net income |
|
$ |
176.2 |
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$ |
194.0 |
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$ |
328.0 |
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$ |
487.3 |
|
Earnings per share: |
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Basic |
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$ |
0.47 |
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$ |
0.50 |
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$ |
0.88 |
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$ |
1.25 |
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Diluted |
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$ |
0.47 |
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$ |
0.50 |
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$ |
0.87 |
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$ |
1.25 |
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Weighted-average shares outstanding: |
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Basic |
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375.0 |
|
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386.7 |
|
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374.7 |
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|
389.9 |
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Diluted |
|
|
375.6 |
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387.6 |
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|
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375.6 |
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|
391.0 |
|
See Notes to Condensed Consolidated Financial Statements.
3
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in millions)
|
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Three Months Ended |
|
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Six Months Ended |
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June 30, |
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June 30, |
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||||||||||
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2023 |
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2022 |
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2023 |
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2022 |
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||||
Net income |
|
$ |
176.2 |
|
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$ |
194.0 |
|
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$ |
328.0 |
|
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$ |
487.3 |
|
Other comprehensive income, net of reclassifications and tax (Note 9): |
|
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Unrealized gains/(losses) on investment securities |
|
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(11.4 |
) |
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(23.7 |
) |
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8.6 |
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(75.3 |
) |
Unrealized gains/(losses) on hedging activities |
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(10.8 |
) |
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23.1 |
|
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(21.1 |
) |
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28.4 |
|
Foreign currency translation adjustments |
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— |
|
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— |
|
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— |
|
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(17.8 |
) |
Total other comprehensive loss |
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(22.2 |
) |
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(0.6 |
) |
|
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(12.5 |
) |
|
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(64.7 |
) |
Comprehensive income |
|
$ |
154.0 |
|
|
$ |
193.4 |
|
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$ |
315.5 |
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$ |
422.6 |
|
See Notes to Condensed Consolidated Financial Statements.
4
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except per share amounts)
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June 30, |
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December 31, |
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||
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2023 |
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2022 |
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Assets |
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Cash and cash equivalents |
|
$ |
1,585.9 |
|
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$ |
1,285.9 |
|
Settlement assets |
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3,328.1 |
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3,486.8 |
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Property and equipment, net of accumulated depreciation of $449.7 and $512.8, respectively |
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96.3 |
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109.6 |
|
Goodwill |
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2,034.6 |
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2,034.6 |
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Other intangible assets, net of accumulated amortization of $655.7 and $616.3, respectively |
|
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430.3 |
|
|
|
457.9 |
|
Other assets (Note 5) |
|
|
771.6 |
|
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|
859.9 |
|
Assets held for sale (Note 4) |
|
|
240.6 |
|
|
|
261.6 |
|
Total assets |
|
$ |
8,487.4 |
|
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$ |
8,496.3 |
|
Liabilities and stockholders' equity |
|
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Liabilities: |
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|
|
|
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Accounts payable and accrued liabilities |
|
$ |
418.2 |
|
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$ |
464.0 |
|
Settlement obligations |
|
|
3,328.1 |
|
|
|
3,486.8 |
|
Income taxes payable |
|
|
635.4 |
|
|
|
725.3 |
|
Deferred tax liability, net |
|
|
153.9 |
|
|
|
158.5 |
|
Borrowings |
|
|
2,813.0 |
|
|
|
2,616.8 |
|
Other liabilities |
|
|
350.8 |
|
|
|
384.6 |
|
Liabilities associated with assets held for sale (Note 4) |
|
|
161.5 |
|
|
|
182.5 |
|
Total liabilities |
|
|
7,860.9 |
|
|
|
8,018.5 |
|
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Commitments and contingencies (Note 6) |
|
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Stockholders' equity: |
|
|
|
|
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Preferred stock, $1.00 par value; 10 shares authorized; no shares issued |
|
|
— |
|
|
|
— |
|
Common stock, $0.01 par value; 2,000 shares authorized; 374.5 shares and 373.5 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively |
|
|
3.7 |
|
|
|
3.7 |
|
Capital surplus |
|
|
1,013.6 |
|
|
|
995.9 |
|
Accumulated deficit |
|
|
(210.4 |
) |
|
|
(353.9 |
) |
Accumulated other comprehensive loss |
|
|
(180.4 |
) |
|
|
(167.9 |
) |
Total stockholders' equity |
|
|
626.5 |
|
|
|
477.8 |
|
Total liabilities and stockholders' equity |
|
$ |
8,487.4 |
|
|
$ |
8,496.3 |
|
See Notes to Condensed Consolidated Financial Statements.
5
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net income |
|
$ |
328.0 |
|
|
$ |
487.3 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
20.1 |
|
|
|
22.6 |
|
Amortization |
|
|
72.4 |
|
|
|
70.1 |
|
Gain on divestiture of business, excluding transaction costs (Note 4) |
|
|
— |
|
|
|
(155.8 |
) |
Other non-cash items, net |
|
|
35.6 |
|
|
|
32.8 |
|
Increase/(decrease) in cash, excluding the effects of divestitures, resulting from changes in: |
|
|
|
|
|
|
||
Other assets |
|
|
(52.7 |
) |
|
|
(131.2 |
) |
Accounts payable and accrued liabilities |
|
|
(52.0 |
) |
|
|
19.6 |
|
Income taxes payable |
|
|
(86.4 |
) |
|
|
(20.5 |
) |
Other liabilities |
|
|
(1.0 |
) |
|
|
(18.1 |
) |
Net cash provided by operating activities |
|
|
264.0 |
|
|
|
306.8 |
|
Cash flows from investing activities |
|
|
|
|
|
|
||
Payments for capitalized contract costs |
|
|
(32.9 |
) |
|
|
(26.3 |
) |
Payments for internal use software |
|
|
(46.0 |
) |
|
|
(42.7 |
) |
Purchases of property and equipment |
|
|
(11.2 |
) |
|
|
(15.3 |
) |
Purchases of settlement investments |
|
|
(198.3 |
) |
|
|
(495.3 |
) |
Proceeds from the sale of settlement investments |
|
|
66.8 |
|
|
|
290.2 |
|
Maturities of settlement investments |
|
|
54.3 |
|
|
|
84.4 |
|
Purchases of non-settlement investments (Note 5) |
|
|
— |
|
|
|
(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 |
|
Other investing activities |
|
|
2.2 |
|
|
|
0.9 |
|
Net cash (used in)/provided by investing activities |
|
|
(65.1 |
) |
|
|
292.3 |
|
Cash flows from financing activities |
|
|
|
|
|
|
||
Cash dividends and dividend equivalents paid (Note 9) |
|
|
(178.7 |
) |
|
|
(184.8 |
) |
Common stock repurchased (Note 9) |
|
|
(6.0 |
) |
|
|
(185.5 |
) |
Net proceeds from/(repayments of) commercial paper |
|
|
494.6 |
|
|
|
(15.0 |
) |
Principal payments on borrowings |
|
|
(300.0 |
) |
|
|
(300.0 |
) |
Proceeds from exercise of options |
|
|
0.3 |
|
|
|
9.4 |
|
Net change in settlement obligations |
|
|
(619.8 |
) |
|
|
(112.1 |
) |
Other financing activities |
|
|
0.1 |
|
|
|
— |
|
Net cash used in financing activities |
|
|
(609.5 |
) |
|
|
(788.0 |
) |
Net change in cash and cash equivalents, including settlement, and restricted cash |
|
|
(410.6 |
) |
|
|
(188.9 |
) |
Cash and cash equivalents, including settlement, and restricted cash at beginning of period |
|
|
2,040.7 |
|
|
|
2,110.9 |
|
Cash and cash equivalents, including settlement, and restricted cash at end of period |
|
$ |
1,630.1 |
|
|
$ |
1,922.0 |
|
See Notes to Condensed Consolidated Financial Statements.
6
THE WESTERN UNION COMPANY
SUPPLEMENTAL CASH FLOW INFORMATION
(Unaudited)
(in millions)
|
|
June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Reconciliation of balance sheet cash and cash equivalents to cash flows: |
|
|
|
|
|
|
||
Cash and cash equivalents on balance sheet |
|
$ |
1,585.9 |
|
|
$ |
1,201.9 |
|
Settlement cash and cash equivalents (Note 8) |
|
|
11.1 |
|
|
|
602.7 |
|
Restricted cash in Other assets |
|
|
33.1 |
|
|
|
40.4 |
|
Cash and cash equivalents included in Assets held for sale (Note 4) |
|
|
— |
|
|
|
77.0 |
|
Cash and cash equivalents, including settlement, and restricted cash at end of period |
|
$ |
1,630.1 |
|
|
$ |
1,922.0 |
|
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
50.9 |
|
|
$ |
47.6 |
|
Income taxes paid |
|
$ |
162.3 |
|
|
$ |
148.9 |
|
Accrued and unpaid capitalized contract costs |
|
$ |
— |
|
|
$ |
39.8 |
|
See Notes to Condensed Consolidated Financial Statements.
7
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Total |
|
||||||
|
|
Common Stock |
|
|
Capital |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders' |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Surplus |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
||||||
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 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
176.2 |
|
|
|
— |
|
|
|
176.2 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
9.5 |
|
|
|
— |
|
|
|
— |
|
|
|
9.5 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(89.5 |
) |
|
|
— |
|
|
|
(89.5 |
) |
Repurchase and retirement of common shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
— |
|
|
|
(0.3 |
) |
Shares issued under stock-based compensation plans |
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other comprehensive loss (Note 9) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(22.2 |
) |
|
|
(22.2 |
) |
Balance, June 30, 2023 |
|
|
374.5 |
|
|
$ |
3.7 |
|
|
$ |
1,013.6 |
|
|
$ |
(210.4 |
) |
|
$ |
(180.4 |
) |
|
$ |
626.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Total |
|
||||||
|
|
Common Stock |
|
|
Capital |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders' |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Surplus |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
||||||
Balance, December 31, 2021 |
|
|
393.8 |
|
|
$ |
3.9 |
|
|
$ |
941.0 |
|
|
$ |
(537.2 |
) |
|
$ |
(52.1 |
) |
|
$ |
355.6 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
293.3 |
|
|
|
— |
|
|
|
293.3 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
10.7 |
|
|
|
— |
|
|
|
— |
|
|
|
10.7 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(92.6 |
) |
|
|
— |
|
|
|
(92.6 |
) |
Repurchase and retirement of common shares |
|
|
(8.6 |
) |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(158.9 |
) |
|
|
— |
|
|
|
(159.0 |
) |
Shares issued under stock-based compensation plans |
|
|
1.9 |
|
|
|
0.1 |
|
|
|
8.8 |
|
|
|
— |
|
|
|
— |
|
|
|
8.9 |
|
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 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
194.0 |
|
|
|
— |
|
|
|
194.0 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
12.3 |
|
|
|
— |
|
|
|
— |
|
|
|
12.3 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(89.6 |
) |
|
|
— |
|
|
|
(89.6 |
) |
Repurchase and retirement of common shares |
|
|
(1.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(21.1 |
) |
|
|
— |
|
|
|
(21.1 |
) |
Shares issued under stock-based compensation plans |
|
|
0.1 |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
|
|
— |
|
|
|
0.5 |
|
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 |
|
See Notes to Condensed Consolidated Financial Statements.
8
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 internet and mobile applications hosted by the Company’s third-party white label or co-branded digital 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 consists 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, 2022, the Company's restricted net assets associated with these asset limitations and minimum capital requirements totaled approximately $710 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 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.
9
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 June 30, 2023 and December 31, 2022 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 June 30, 2023 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, 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.
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, and the difference between the exchange rate we set to the customer and the rate available in the wholesale foreign exchange market, when the money transfer involves different send and receive currencies. The Company also offers other services, which includes bill payment services, for which revenue is impacted by similar factors. The Company analyzes its different services individually to determine the appropriate basis for revenue 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-Consumer segment, revenues from foreign exchange and payment services are included in the Company’s Business Solutions segment, and revenues from 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.
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 six months ended June 30, 2023 and 2022 (in millions).
10
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The regional split of revenue shown in the tables below is based upon where transactions are initiated.
|
|
Three Months Ended June 30, 2023 |
|
|||||||||||||
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
||||
|
|
Consumer |
|
|
Exchange |
|
|
|
|
|
|
|
||||
|
|
Money |
|
|
and Payment |
|
|
Other |
|
|
|
|
||||
|
|
Transfers |
|
|
Services(b) |
|
|
Services |
|
|
Total |
|
||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
372.3 |
|
|
$ |
— |
|
|
$ |
33.8 |
|
|
$ |
406.1 |
|
Europe and CIS |
|
|
246.0 |
|
|
|
6.5 |
|
|
|
4.7 |
|
|
|
257.2 |
|
Middle East, Africa, and South Asia |
|
|
264.8 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
264.9 |
|
Latin America and the Caribbean |
|
|
99.8 |
|
|
|
— |
|
|
|
27.3 |
|
|
|
127.1 |
|
East Asia and Oceania |
|
|
54.8 |
|
|
|
— |
|
|
|
— |
|
|
|
54.8 |
|
Revenues from contracts with customers |
|
$ |
1,037.7 |
|
|
$ |
6.5 |
|
|
$ |
65.9 |
|
|
$ |
1,110.1 |
|
Other revenues (a) |
|
|
34.5 |
|
|
|
7.8 |
|
|
|
17.6 |
|
|
|
59.9 |
|
Total revenues |
|
$ |
1,072.2 |
|
|
$ |
14.3 |
|
|
$ |
83.5 |
|
|
$ |
1,170.0 |
|
|
|
Three Months Ended June 30, 2022 |
|
|||||||||||||
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
||||
|
|
Consumer |
|
|
Exchange |
|
|
|
|
|
|
|
||||
|
|
Money |
|
|
and Payment |
|
|
Other |
|
|
|
|
||||
|
|
Transfers |
|
|
Services(b) |
|
|
Services |
|
|
Total |
|
||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
406.5 |
|
|
$ |
— |
|
|
$ |
32.4 |
|
|
$ |
438.9 |
|
Europe and CIS |
|
|
273.1 |
|
|
|
20.7 |
|
|
|
5.6 |
|
|
|
299.4 |
|
Middle East, Africa, and South Asia |
|
|
158.9 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
159.0 |
|
Latin America and the Caribbean |
|
|
94.1 |
|
|
|
— |
|
|
|
29.7 |
|
|
|
123.8 |
|
East Asia and Oceania |
|
|
59.2 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
59.4 |
|
Revenues from contracts with customers |
|
$ |
991.8 |
|
|
$ |
20.7 |
|
|
$ |
68.0 |
|
|
$ |
1,080.5 |
|
Other revenues (a) |
|
|
35.1 |
|
|
|
15.0 |
|
|
|
7.7 |
|
|
|
57.8 |
|
Total revenues |
|
$ |
1,026.9 |
|
|
$ |
35.7 |
|
|
$ |
75.7 |
|
|
$ |
1,138.3 |
|
|
|
Six Months Ended June 30, 2023 |
|
|||||||||||||
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
||||
|
|
Consumer |
|
|
Exchange |
|
|
|
|
|
|
|
||||
|
|
Money |
|
|
and Payment |
|
|
Other |
|
|
|
|
||||
|
|
Transfers |
|
|
Services(b) |
|
|
Services |
|
|
Total |
|
||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
719.6 |
|
|
$ |
— |
|
|
$ |
67.2 |
|
|
$ |
786.8 |
|
Europe and CIS |
|
|
479.7 |
|
|
|
13.0 |
|
|
|
10.2 |
|
|
|
502.9 |
|
Middle East, Africa, and South Asia |
|
|
434.1 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
434.3 |
|
Latin America and the Caribbean |
|
|
199.5 |
|
|
|
— |
|
|
|
55.5 |
|
|
|
255.0 |
|
East Asia and Oceania |
|
|
110.1 |
|
|
|
— |
|
|
|
— |
|
|
|
110.1 |
|
Revenues from contracts with customers |
|
$ |
1,943.0 |
|
|
$ |
13.0 |
|
|
$ |
133.1 |
|
|
$ |
2,089.1 |
|
Other revenues (a) |
|
|
67.5 |
|
|
|
16.7 |
|
|
|
33.6 |
|
|
|
117.8 |
|
Total revenues |
|
$ |
2,010.5 |
|
|
$ |
29.7 |
|
|
$ |
166.7 |
|
|
$ |
2,206.9 |
|
11
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
Six Months Ended June 30, 2022 |
|
|||||||||||||
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
||||
|
|
Consumer |
|
|
Exchange |
|
|
|
|
|
|
|
||||
|
|
Money |
|
|
and Payment |
|
|
Other |
|
|
|
|
||||
|
|
Transfers |
|
|
Services(b) |
|
|
Services |
|
|
Total |
|
||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
787.7 |
|
|
$ |
17.9 |
|
|
$ |
64.1 |
|
|
$ |
869.7 |
|
Europe and CIS |
|
|
556.9 |
|
|
|
54.4 |
|
|
|
9.2 |
|
|
|
620.5 |
|
Middle East, Africa, and South Asia |
|
|
321.2 |
|
|
|
0.4 |
|
|
|
0.2 |
|
|
|
321.8 |
|
Latin America and the Caribbean |
|
|
182.2 |
|
|
|
0.5 |
|
|
|
55.8 |
|
|
|
238.5 |
|
East Asia and Oceania |
|
|
120.6 |
|
|
|
12.5 |
|
|
|
0.5 |
|
|
|
133.6 |
|
Revenues from contracts with customers |
|
$ |
1,968.6 |
|
|
$ |
85.7 |
|
|
$ |
129.8 |
|
|
$ |
2,184.1 |
|
Other revenues (a) |
|
|
57.3 |
|
|
|
39.1 |
|
|
|
13.5 |
|
|
|
109.9 |
|
Total revenues |
|
$ |
2,025.9 |
|
|
$ |
124.8 |
|
|
$ |
143.3 |
|
|
$ |
2,294.0 |
|
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 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’s average share price during the periods and their effect was anti-dilutive, were 10.1 million and 8.6 million for the three months ended June 30, 2023 and 2022, respectively, and 9.7 million and 7.9 million for the six months ended June 30, 2023 and 2022, respectively.
The following table provides the calculation of diluted weighted-average shares outstanding (in millions):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Basic weighted-average shares outstanding |
|
|
375.0 |
|
|
|
386.7 |
|
|
|
374.7 |
|
|
|
389.9 |
|
Common stock equivalents |
|
|
0.6 |
|
|
|
0.9 |
|
|
|
0.9 |
|
|
|
1.1 |
|
Diluted weighted-average shares outstanding |
|
|
375.6 |
|
|
|
387.6 |
|
|
|
375.6 |
|
|
|
391.0 |
|
4. 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 for cash consideration of $910.0 million. The sale was completed in three closings, with the entire cash consideration collected at the 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.
12
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In connection with the first closing, the Company reclassified $17.8 million of currency translation gains previously included within Accumulated other comprehensive loss ("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 June 30, 2023 and December 31, 2022, the Company has classified the proceeds allocated to the European Union operations of approximately $104 million within Other liabilities in the Condensed Consolidated Balance Sheets. The final closing occurred on July 1, 2023 and included the European Union operations. The gain associated with the final closing that will be recognized in the third quarter of 2023 will be subject to regulatory capital adjustments. During the period between the first and final closings, the Company was required to pay 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 $1.5 million and $8.1 million for the three months ended June 30, 2023 and 2022, respectively, and $2.9 million and $10.9 million for the six months ended June 30, 2023 and 2022, respectively, and was included in Other expense, net in the Condensed Consolidated Statements of Income. The related income tax expense on this income was 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 final closing was completed on July 1, 2023.
Business Solutions revenues included in the Condensed Consolidated Statements of Income were $14.3 million and $35.7 million and direct operating expenses, excluding corporate allocations, were $12.6 million and $27.8 million for the three months ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023 and 2022, Business Solutions revenues were $29.7 million and $124.8 million, respectively, and direct operating expenses, excluding corporate allocations, were $26.1 million and $90.4 million, respectively. For both the three and six months ended June 30, 2023, divestiture costs directly associated with this transaction were $1.0 million. For the three and six months ended June 30, 2022, divestiture costs directly associated with this transaction were $0.8 million and $4.0 million, respectively.
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 adjustments.
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Cash and cash equivalents |
|
$ |
— |
|
|
$ |
5.2 |
|
Settlement assets |
|
|
91.6 |
|
|
|
74.9 |
|
Property and equipment, net of accumulated depreciation of $0.3 and $1.0, respectively |
|
|
0.7 |
|
|
|
0.7 |
|
Goodwill |
|
|
61.4 |
|
|
|
61.4 |
|
Other intangible assets, net of accumulated amortization of $9.8 and $9.8, respectively |
|
|
1.4 |
|
|
|
1.4 |
|
Other assets |
|
|
85.5 |
|
|
|
118.0 |
|
Total assets |
|
$ |
240.6 |
|
|
$ |
261.6 |
|
|
|
|
|
|
|
|
||
Accounts payable and accrued liabilities |
|
$ |
9.6 |
|
|
$ |
18.2 |
|
Settlement obligations |
|
|
91.6 |
|
|
|
74.9 |
|
Other liabilities |
|
|
60.3 |
|
|
|
89.4 |
|
Total liabilities |
|
$ |
161.5 |
|
|
$ |
182.5 |
|
13
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, 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 |
|
||||||
June 30, 2023 |
|
Level 1 |
|
|
Level 2 |
|
|
Fair Value |
|
|||
Assets: |
|
|
|
|
|
|
|
|
|
|||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|||
Measured at fair value through net income: |
|
|
|
|
|
|
|
|
|
|||
Money market funds |
|
$ |
7.6 |
|
|
|
— |
|
|
$ |
7.6 |
|
Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income): |
|
|
|
|
|
|
|
|
|
|||
State and municipal debt securities |
|
|
— |
|
|
|
1,019.3 |
|
|
|
1,019.3 |
|
Asset-backed securities |
|
|
— |
|
|
|
190.9 |
|
|
|
190.9 |
|
Corporate debt securities |
|
|
— |
|
|
|
147.5 |
|
|
|
147.5 |
|
State and municipal variable-rate demand notes |
|
|
— |
|
|
|
46.3 |
|
|
|
46.3 |
|
United States government agency mortgage-backed securities |
|
|
— |
|
|
|
16.0 |
|
|
|
16.0 |
|
Other assets: |
|
|
|
|
|
|
|
|
|
|||
Derivatives |
|
|
— |
|
|
|
80.8 |
|
|
|
80.8 |
|
Total assets |
|
$ |
7.6 |
|
|
$ |
1,500.8 |
|
|
$ |
1,508.4 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|||
Other liabilities: |
|
|
|
|
|
|
|
|
|
|||
Derivatives |
|
$ |
— |
|
|
$ |
70.3 |
|
|
$ |
70.3 |
|
Total liabilities |
|
$ |
— |
|
|
$ |
70.3 |
|
|
$ |
70.3 |
|
|
|
Fair Value Measurement Using |
|
|
Total |
|
||||||
December 31, 2022 |
|
Level 1 |
|
|
Level 2 |
|
|
Fair Value |
|
|||
Assets: |
|
|
|
|
|
|
|
|
|
|||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|||
Measured at fair value through net income: |
|
|
|
|
|
|
|
|
|
|||
Money market funds |
|
$ |
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 |
|
|
— |
|
|
|
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 |
|
|
— |
|
|
|
48.9 |
|
|
|
48.9 |
|
United States government agency mortgage-backed securities |
|
|
— |
|
|
|
20.5 |
|
|
|
20.5 |
|
Other assets: |
|
|
|
|
|
|
|
|
|
|||
Derivatives |
|
|
— |
|
|
|
126.1 |
|
|
|
126.1 |
|
Total assets |
|
$ |
11.7 |
|
|
$ |
1,459.8 |
|
|
$ |
1,471.5 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|||
Other liabilities: |
|
|
|
|
|
|
|
|
|
|||
Derivatives |
|
$ |
— |
|
|
$ |
98.9 |
|
|
$ |
98.9 |
|
Total liabilities |
|
$ |
— |
|
|
$ |
98.9 |
|
|
$ |
98.9 |
|
14
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 six months ended June 30, 2023, and there were no material, non-recurring fair value adjustments in the three and six months ended June 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 six months ended June 30, 2022, as discussed further in Note 14. There were no transfers between Level 1 and Level 2 measurements during the three and six months ended June 30, 2023 and 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 June 30, 2023, the carrying value and fair value of the Company’s borrowings were $2,813.0 million and $2,668.1 million, respectively (see Note 11). As of December 31, 2022, the carrying value and fair value of the Company’s borrowings were $2,616.8 million and $2,442.5 million, respectively.
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 required the counterparties to pledge marketable securities with a value greater than the amount of cash transferred as collateral, which was held and valued by a third-party custodial bank. These investments generated interest income through the date of repurchase, at which point the purchase price together with the interest due was paid back to the Company. The Company has fully redeemed these investments as of June 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 $100.0 million, which approximated fair value due to the creditworthiness of the 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 $160 million in outstanding letters of credit and bank guarantees as of June 30, 2023, which were primarily held in connection with regulatory requirements, lease arrangements, and certain agent agreements. The Company expects to renew many 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 June 30, 2023.
15
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 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 ($11.4 million as of June 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 ($9.8 million as of June 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 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.
16
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 June 30, 2023 and 2022 totaled $11.5 million and $12.8 million, respectively, and $22.3 million and $24.3 million for the six months ended June 30, 2023 and 2022, respectively.
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 include 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):
|
|
June 30, 2023 |
|
|
Settlement assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
11.1 |
|
Receivables from agents, Business Solutions customers, and others |
|
|
2,000.6 |
|
Less: Allowance for credit losses |
|
|
(11.7 |
) |
Receivables from agents, Business Solutions customers, and others, net |
|
|
1,988.9 |
|
Investment securities |
|
|
1,420.0 |
|
Less: Allowance for credit losses |
|
|
(0.3 |
) |
Investment securities, net |
|
|
1,419.7 |
|
Total settlement assets (a) |
|
$ |
3,419.7 |
|
Settlement obligations: |
|
|
|
|
Money transfer, money order, and payment service payables |
|
$ |
2,759.5 |
|
Payables to agents |
|
|
660.2 |
|
Total settlement obligations (a) |
|
$ |
3,419.7 |
|
|
|
December 31, 2022 |
|
|
Settlement assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
708.1 |
|
Receivables from agents, Business Solutions customers, and others |
|
|
1,533.2 |
|
Less: Allowance for credit losses |
|
|
(13.0 |
) |
Receivables from agents, Business Solutions customers, and others, net |
|
|
1,520.2 |
|
Investment securities |
|
|
1,333.7 |
|
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 |
|
$ |
2,843.3 |
|
Payables to agents |
|
|
718.4 |
|
Total settlement obligations (a) |
|
$ |
3,561.7 |
|
17
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 $1,980.0 million and $1,508.5 million as of June 30, 2023 and December 31, 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 arose from cross-currency payment transactions in the Business Solutions segment. Business Solutions receivables totaled $8.9 million and $11.7 million as of June 30, 2023 and December 31, 2022, respectively. Receivables occurred when funds were paid out to a beneficiary but not yet received.
The Company establishes and monitors an allowance for credit losses related to receivables from agents and others, and Business Solutions customers. 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 June 30, 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 |
|
|
$ |
— |
|
|
|
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 |
|
18
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 June 30, 2023 and December 31, 2022, amounts advanced to agents were $184.1 million and $154.9 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 2052. 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 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 six months ended June 30, 2023 and 2022 and the related allowance for credit losses as of June 30, 2023 and December 31, 2022 were immaterial.
The components of investment securities are as follows (in millions):
|
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Net |
|
|||||
|
|
Amortized |
|
|
Fair |
|
|
Unrealized |
|
|
Unrealized |
|
|
Unrealized |
|
|||||
June 30, 2023 |
|
Cost |
|
|
Value |
|
|
Gains |
|
|
Losses |
|
|
Losses |
|
|||||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Money market funds |
|
$ |
7.6 |
|
|
$ |
7.6 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
State and municipal debt securities (a) |
|
|
1,085.6 |
|
|
|
1,019.3 |
|
|
|
1.8 |
|
|
|
(68.1 |
) |
|
|
(66.3 |
) |
Asset-backed securities |
|
|
191.3 |
|
|
|
190.9 |
|
|
|
0.4 |
|
|
|
(0.8 |
) |
|
|
(0.4 |
) |
Corporate debt securities |
|
|
153.7 |
|
|
|
147.5 |
|
|
|
0.3 |
|
|
|
(6.5 |
) |
|
|
(6.2 |
) |
State and municipal variable-rate demand notes |
|
|
46.3 |
|
|
|
46.3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
United States government agency mortgage-backed securities |
|
|
16.8 |
|
|
|
16.0 |
|
|
|
— |
|
|
|
(0.8 |
) |
|
|
(0.8 |
) |
Total available-for-sale securities |
|
|
1,493.7 |
|
|
|
1,420.0 |
|
|
|
2.5 |
|
|
|
(76.2 |
) |
|
|
(73.7 |
) |
Total investment securities |
|
$ |
1,501.3 |
|
|
$ |
1,427.6 |
|
|
$ |
2.5 |
|
|
$ |
(76.2 |
) |
|
$ |
(73.7 |
) |
19
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
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 June 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 |
|
|
111 |
|
|
$ |
296.5 |
|
|
$ |
(5.6 |
) |
Asset-backed securities |
|
|
28 |
|
|
|
163.8 |
|
|
|
(0.8 |
) |
Corporate debt securities |
|
|
28 |
|
|
|
84.3 |
|
|
|
(1.3 |
) |
United States government agency mortgage-backed securities |
|
|
6 |
|
|
|
5.2 |
|
|
|
(0.2 |
) |
One Year or Greater |
|
Number of Securities |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|||
State and municipal debt securities |
|
|
267 |
|
|
$ |
609.4 |
|
|
$ |
(62.5 |
) |
Corporate debt securities |
|
|
11 |
|
|
|
40.5 |
|
|
|
(5.2 |
) |
United States government agency mortgage-backed securities |
|
|
7 |
|
|
|
10.7 |
|
|
|
(0.6 |
) |
As noted above, the Company's provision for credit losses on its investment securities during the three and six months ended June 30, 2023 and the related allowance for credit losses as of June 30, 2023 were immaterial, as the unrealized losses were driven by a rise in U.S. Treasury interest rates. As of June 30, 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 June 30, 2023 (in millions):
|
|
Fair Value |
|
|
Due within 1 year |
|
$ |
115.9 |
|
Due after 1 year through 5 years |
|
|
676.8 |
|
Due after 5 years through 10 years |
|
|
437.6 |
|
Due after 10 years |
|
|
189.7 |
|
Total |
|
$ |
1,420.0 |
|
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.
20
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Variable-rate demand notes, having a fair value of $46.3 million, are included in the "Due after 10 years" category, respectively, in the table above.
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 |
|
|||||||||||||||
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
Income Statement |
|
June 30, |
|
|
June 30, |
|
||||||||||
Income for the period (in millions) |
|
Location |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Accumulated other comprehensive loss components: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses on investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale securities |
|
Revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(0.1 |
) |
|
$ |
(0.1 |
) |
Total reclassification adjustments related to investment securities, net of tax |
|
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Gains/(losses) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency contracts |
|
Revenues |
|
|
7.8 |
|
|
|
13.9 |
|
|
|
16.0 |
|
|
|
14.9 |
|
Interest rate contracts |
|
Interest expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
Income tax expense |
|
Provision for income taxes |
|
|
(0.2 |
) |
|
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
Total reclassification adjustments related to cash flow hedges, net of tax |
|
|
|
|
7.6 |
|
|
13.9 |
|
|
15.8 |
|
|
14.8 |
|
|||
Foreign currency translation adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation |
|
Gain on divestiture of business |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17.8 |
|
Total reclassification adjustments related to foreign currency translation adjustments, net of tax |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17.8 |
|
Total reclassifications, net of tax |
|
|
|
$ |
7.6 |
|
|
$ |
13.9 |
|
|
$ |
15.7 |
|
|
$ |
32.5 |
|
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 |
) |
21
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
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 |
) |
Cash Dividends Paid
In both the first and second quarters of 2023 and 2022, the Company's Board of Directors declared quarterly cash dividends of $0.235 per common share, representing $176.0 million and $182.5 million in total dividends, respectively. $88.0 million was paid on June 30, 2023, $88.0 million was paid on March 31, 2023, $90.8 million was paid on June 30, 2022, and $91.7 million was paid on March 31, 2022. On July 19, 2023, the Company's Board of Directors declared a quarterly cash dividend of $0.235 per common share, payable on September 29, 2023.
Share Repurchases
On February 10, 2022, the Company's Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2024. No shares were repurchased during the six months ended June 30, 2023 under this share repurchase authorization. During the six months ended June 30, 2022, 9.2 million shares were repurchased under this authorization for $171.0 million, excluding commissions, at an average cost of $18.52. As of June 30, 2023, $648.2 million remained available under 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 Mexican peso, the 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 was 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 used derivatives to: (i) 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.
22
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 takes action when doubt arises about the counterparties’ ability to perform. These actions have included 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.
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 June 30, 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.
23
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 June 30, 2023 and December 31, 2022 were as follows (in millions):
|
|
June 30, 2023 |
|
|
Contracts designated as hedges: |
|
|
|
|
Euro |
|
$ |
260.0 |
|
Canadian dollar |
|
|
104.6 |
|
British pound |
|
|
50.9 |
|
Australian dollar |
|
|
50.4 |
|
Swiss franc |
|
|
37.4 |
|
Other (a) |
|
|
43.7 |
|
Contracts not designated as hedges: |
|
|
|
|
Euro |
|
$ |
521.0 |
|
Mexican peso |
|
|
176.3 |
|
British pound |
|
|
120.1 |
|
United Arab Emirates dirham |
|
|
68.6 |
|
Indian rupee |
|
|
53.8 |
|
Philippine peso |
|
|
44.0 |
|
Australian dollar |
|
|
41.4 |
|
Canadian dollar |
|
|
36.2 |
|
Indonesian rupiah |
|
|
31.6 |
|
Brazilian real |
|
|
31.0 |
|
Singapore dollar |
|
|
28.1 |
|
Other (a) |
|
|
175.5 |
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
Contracts designated as hedges: |
|
|
|
|
Euro |
|
$ |
321.6 |
|
Canadian dollar |
|
|
117.3 |
|
Australian dollar |
|
|
53.2 |
|
Swiss franc |
|
|
40.4 |
|
British pound |
|
|
40.4 |
|
Swedish krona |
|
|
25.8 |
|
Other (a) |
|
|
22.1 |
|
Contracts not designated as hedges: |
|
|
|
|
Euro |
|
$ |
603.2 |
|
Mexican peso |
|
|
132.9 |
|
British pound |
|
|
115.1 |
|
Indian rupee |
|
|
52.6 |
|
Australian dollar |
|
|
48.7 |
|
Canadian dollar |
|
|
32.2 |
|
Japanese yen |
|
|
30.5 |
|
Chinese yuan |
|
|
30.1 |
|
Swiss franc |
|
|
28.3 |
|
Swedish krona |
|
|
26.7 |
|
Philippine peso |
|
|
26.2 |
|
Other (a) |
|
|
137.0 |
|
24
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 foreign currency forward contracts and option contracts, mostly with small and medium size enterprises and derived a currency spread from this activity as part of its Business Solutions operations. The Company aggregated its Business Solutions foreign currency exposures arising from customer contracts, including the derivative contracts described above, and hedged the resulting net currency risks by entering into offsetting contracts with Convera through the end of the final closing of the Business Solutions divestiture. The derivatives written were part of the broader portfolio of foreign currency positions arising from the Company’s cross-currency payments operations, which primarily included 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 $13.5 million and $33.6 million for the three months ended June 30, 2023 and 2022, respectively, and $27.8 million and $112.2 million for the six months ended June 30, 2023 and 2022, respectively. None of the derivative contracts used in Business Solutions operations were designated as accounting hedges and the majority of these derivative contracts have a duration at inception of greater than 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 $1.5 billion and $3.0 billion as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023, the significant majority of customer contracts are written in the following currencies: the United States dollar and euro.
Balance Sheet
The following table summarizes the fair value of derivatives reported in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (in millions):
|
|
Derivative Assets |
|
|
Derivative Liabilities |
|
||||||||||||||
|
|
|
|
Fair Value |
|
|
|
|
Fair Value |
|
||||||||||
|
|
Balance Sheet |
|
June 30, |
|
|
December 31, |
|
|
Balance Sheet |
|
June 30, |
|
|
December 31, |
|
||||
|
|
Location |
|
2023 |
|
|
2022 |
|
|
Location |
|
2023 |
|
|
2022 |
|
||||
Derivatives designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency cash flow hedges |
|
Other assets |
|
$ |
18.5 |
|
|
$ |
35.2 |
|
|
Other liabilities |
|
$ |
9.1 |
|
|
$ |
4.7 |
|
Total derivatives designated as hedges |
|
|
|
$ |
18.5 |
|
|
$ |
35.2 |
|
|
|
|
$ |
9.1 |
|
|
$ |
4.7 |
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Business Solutions operations - foreign currency (a) |
|
Assets held for sale |
|
$ |
58.6 |
|
|
$ |
88.6 |
|
|
Liabilities associated with assets held for sale |
|
$ |
59.5 |
|
|
$ |
89.5 |
|
Foreign currency |
|
Other assets |
|
|
3.7 |
|
|
|
2.3 |
|
|
Other liabilities |
|
|
1.7 |
|
|
|
4.7 |
|
Total derivatives not designated as hedges |
|
|
|
$ |
62.3 |
|
|
$ |
90.9 |
|
|
|
|
$ |
61.2 |
|
|
$ |
94.2 |
|
Total derivatives |
|
|
|
$ |
80.8 |
|
|
$ |
126.1 |
|
|
|
|
$ |
70.3 |
|
|
$ |
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.
25
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 has required its Business Solutions customers to maintain collateral balances which may mitigate the risk associated with potential customer defaults.
The following tables summarize the gross and net fair value of derivative assets and liabilities as of June 30, 2023 and December 31, 2022 (in millions):
Offsetting of Derivative Assets
|
|
|
|
|
Gross |
|
|
Net Amounts |
|
|
Derivatives |
|
|
|
|
|||||
|
|
Gross |
|
|
Amounts Offset in |
|
|
Presented in |
|
|
Not Offset in |
|
|
|
|
|||||
|
|
Amounts of |
|
|
the Condensed |
|
|
the Condensed |
|
|
the Condensed |
|
|
|
|
|||||
|
|
Recognized |
|
|
Consolidated |
|
|
Consolidated |
|
|
Consolidated |
|
|
Net |
|
|||||
June 30, 2023 |
|
Assets |
|
|
Balance Sheets |
|
|
Balance Sheets |
|
|
Balance Sheets |
|
|
Amounts |
|
|||||
Derivatives subject to a master netting arrangement or similar agreement |
|
$ |
32.4 |
|
|
$ |
— |
|
|
$ |
32.4 |
|
|
$ |
(20.3 |
) |
|
$ |
12.1 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
|
48.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
80.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Derivatives subject to a master netting arrangement or similar agreement |
|
$ |
55.8 |
|
|
$ |
— |
|
|
$ |
55.8 |
|
|
$ |
(26.3 |
) |
|
$ |
29.5 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
|
70.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
126.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
26
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Offsetting of Derivative Liabilities
|
|
|
|
|
Gross |
|
|
Net Amounts |
|
|
Derivatives |
|
|
|
|
|||||
|
|
Gross |
|
|
Amounts Offset in |
|
|
Presented in |
|
|
Not Offset in |
|
|
|
|
|||||
|
|
Amounts of |
|
|
the Condensed |
|
|
the Condensed |
|
|
the Condensed |
|
|
|
|
|||||
|
|
Recognized |
|
|
Consolidated |
|
|
Consolidated |
|
|
Consolidated |
|
|
Net |
|
|||||
June 30, 2023 |
|
Liabilities |
|
|
Balance Sheets |
|
|
Balance Sheets |
|
|
Balance Sheets |
|
|
Amounts |
|
|||||
Derivatives subject to a master netting arrangement or similar agreement |
|
$ |
54.3 |
|
|
$ |
— |
|
|
$ |
54.3 |
|
|
$ |
(20.3 |
) |
|
$ |
34.0 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
|
16.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
70.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Derivatives subject to a master netting arrangement or similar agreement |
|
$ |
77.8 |
|
|
$ |
— |
|
|
$ |
77.8 |
|
|
$ |
(26.3 |
) |
|
$ |
51.5 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
|
21.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
98.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 six months ended June 30, 2023 and 2022 (in millions):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Foreign currency derivatives (a) |
|
$ |
(3.5 |
) |
|
$ |
37.3 |
|
|
$ |
(5.7 |
) |
|
$ |
43.5 |
|
27
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 six months ended June 30, 2023 and 2022 (in millions):
|
|
Three Months Ended June 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 |
|
$ |
1,170.0 |
|
|
$ |
(27.0 |
) |
|
$ |
1,138.3 |
|
|
$ |
(24.8 |
) |
Gain/(loss) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gains reclassified from AOCL into earnings |
|
|
7.8 |
|
|
|
— |
|
|
|
13.9 |
|
|
|
— |
|
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |
|
|
1.7 |
|
|
|
— |
|
|
|
1.4 |
|
|
|
— |
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses reclassified from AOCL into earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Six Months Ended June 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 |
|
$ |
2,206.9 |
|
|
$ |
(52.0 |
) |
|
$ |
2,294.0 |
|
|
$ |
(49.6 |
) |
Gain/(loss) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gains reclassified from AOCL into earnings |
|
|
16.0 |
|
|
|
— |
|
|
|
14.9 |
|
|
|
— |
|
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |
|
|
3.3 |
|
|
|
— |
|
|
|
2.5 |
|
|
|
— |
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses reclassified from AOCL into earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
28
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Undesignated Hedges
The following table presents the location and amount of pre-tax net gains from undesignated hedges in the Condensed Consolidated Statements of Income on derivatives for the three and six months ended June 30, 2023 and 2022 (in millions):
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
Derivatives (a) |
|
Location |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Foreign currency derivatives (b) |
|
Selling, general, and administrative |
|
$ |
3.3 |
|
|
$ |
43.3 |
|
|
$ |
8.0 |
|
|
$ |
55.0 |
|
All cash flows associated with derivatives are included in Cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.
Based on June 30, 2023 foreign exchange rates, an accumulated other comprehensive pre-tax gain of $7.5 million related to the foreign currency forward contracts is expected to be reclassified into Revenues within the next 12 months.
11. Borrowings
The Company’s outstanding borrowings consisted of the following (in millions):
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Commercial paper (a) |
|
$ |
674.6 |
|
|
$ |
180.0 |
|
Notes: |
|
|
|
|
|
|
||
4.250% notes due 2023 (b) |
|
|
— |
|
|
|
300.0 |
|
2.850% notes due 2025 (c) |
|
|
500.0 |
|
|
|
500.0 |
|
1.350% notes due 2026 (c) |
|
|
600.0 |
|
|
|
600.0 |
|
2.750% notes due 2031 (c) |
|
|
300.0 |
|
|
|
300.0 |
|
6.200% notes due 2036 (c) |
|
|
500.0 |
|
|
|
500.0 |
|
6.200% notes due 2040 (c) |
|
|
250.0 |
|
|
|
250.0 |
|
Total borrowings at par value |
|
|
2,824.6 |
|
|
|
2,630.0 |
|
Debt issuance costs and unamortized discount, net |
|
|
(11.6 |
) |
|
|
(13.2 |
) |
Total borrowings at carrying value (d) |
|
$ |
2,813.0 |
|
|
$ |
2,616.8 |
|
The following summarizes the Company’s maturities of its notes at par value as of June 30, 2023 (in millions):
29
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Due within 1 year |
|
$ |
— |
|
Due after 1 year through 2 years |
|
|
500.0 |
|
Due after 2 years through 3 years |
|
|
600.0 |
|
Due after 3 years through 4 years |
|
|
— |
|
Due after 4 years through 5 years |
|
|
— |
|
Due after 5 years |
|
|
1,050.0 |
|
Total |
|
$ |
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 18.6% and 17.9% for the three months ended June 30, 2023 and 2022, respectively, and 17.4% and 18.6% for the six months ended June 30, 2023 and 2022, respectively. The increase in the Company's effective tax rate for the three months ended June 30, 2023 compared to the corresponding period in the prior year was primarily due to discrete tax effects in the current period, partially offset by the effects of the sale of the Company's Business Solutions business and lower amounts of research and development expenses required to be capitalized in the current year. The decrease in the Company's effective tax rate for the six months ended June 30, 2023 compared to the corresponding period in the prior year was primarily due to the effects of the sale of the Company's Business Solutions business and lower amounts of research and development expenses required to be capitalized in the current year, partially offset by discrete tax effects in the current period. The sale of the Business Solutions business has been and will continue to be included in the Company's estimated annual effective rate in accordance with the gains related to 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 June 30, 2023 and December 31, 2022 was $297.5 million and $290.7 million, respectively, including interest and penalties.
The Company’s tax filings are subject to examination by U.S. federal, state, and various non-United States jurisdictions. The conclusion of the examination 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’s financial 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. The Company’s U.S. federal income tax returns since 2019 are also eligible to be examined.
13. Stock-Based Compensation Plans
For the three months ended June 30, 2023 and 2022, the Company recognized stock-based compensation expense of $9.5 million and $12.3 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 six months ended June 30, 2023 and 2022, the Company recognized stock-based compensation expense of $17.5 million and $23.0 million, respectively.
30
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
During the six months ended June 30, 2023, the Company granted 1.0 million options at a weighted-average exercise price of $13.27 and 4.1 million performance-based restricted stock units and restricted stock units at a weighted-average grant date fair value of $13.11. As of June 30, 2023, the Company had 7.1 million outstanding options at a weighted-average exercise price of $18.09, of which 4.2 million options were exercisable at a weighted-average exercise price of $19.28. The Company had 8.0 million outstanding performance-based restricted stock units (based on target performance) and restricted stock units at a weighted-average grant date fair value of $16.72 as of June 30, 2023.
14. Segments
As further described in Note 1, the Company classifies 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 transactions in its regions. By means of common processes and systems, these regions, including Branded Digital, 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 facilitated 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 the Buyer, and the final closing for this transaction occurred on July 1, 2023. Accordingly, the Company will no longer report Business Solutions revenues and operating expenses in future periods. 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 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.
31
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 six months ended June 30, 2023 and 2022 (in millions):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consumer-to-Consumer |
|
$ |
1,072.2 |
|
|
$ |
1,026.9 |
|
|
$ |
2,010.5 |
|
|
$ |
2,025.9 |
|
Business Solutions (a) |
|
|
14.3 |
|
|
|
35.7 |
|
|
|
29.7 |
|
|
|
124.8 |
|
Other |
|
|
83.5 |
|
|
|
75.7 |
|
|
|
166.7 |
|
|
|
143.3 |
|
Total consolidated revenues |
|
$ |
1,170.0 |
|
|
$ |
1,138.3 |
|
|
$ |
2,206.9 |
|
|
$ |
2,294.0 |
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consumer-to-Consumer |
|
$ |
230.7 |
|
|
$ |
225.6 |
|
|
$ |
408.5 |
|
|
$ |
432.8 |
|
Business Solutions (a) |
|
|
1.8 |
|
|
|
8.3 |
|
|
|
3.7 |
|
|
|
35.8 |
|
Other |
|
|
18.4 |
|
|
|
30.3 |
|
|
|
50.5 |
|
|
|
51.8 |
|
Total segment operating income |
|
|
250.9 |
|
|
|
264.2 |
|
|
|
462.7 |
|
|
|
520.4 |
|
Russia/Belarus exit costs (b) |
|
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
(11.2 |
) |
Business Solutions exit costs (b) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7.7 |
) |
Operating expense redeployment program costs (c) |
|
|
(8.3 |
) |
|
|
— |
|
|
|
(15.4 |
) |
|
|
— |
|
Total consolidated operating income |
|
$ |
242.6 |
|
|
$ |
264.0 |
|
|
$ |
447.3 |
|
|
$ |
501.5 |
|
32
THE WESTERN UNION COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We are a leading provider of money movement and payment services, operating in two business segments:
Item 2.
The following discussion should be read in conjunction with the condensed consolidated financial statements and the notes to those statements included in 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, 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 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; material changes in the market value or liquidity of securities that we hold; restrictions imposed by our debt obligations; (ii) events related to our regulatory and litigation environment, such as: liabilities or loss of business resulting from a failure by us, our agents, or their subagents to comply with laws and regulations and regulatory or judicial interpretations thereof, including laws and regulations designed to protect
33
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 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
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 on our segments is provided in the Segment Discussion below.
34
Results of Operations
The following discussion of our consolidated results of operations and segment results refers to the three and six months ended June 30, 2023 compared to the same periods in 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 for the three and six months ended June 30, 2023 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 a decrease to revenues of $40.6 million and $75.8 million, respectively, for the three and six months ended June 30, 2023 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”) for cash consideration of $910.0 million. The sale was completed in three closings, with the entire cash consideration collected at the 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. The second closing, which occurred on December 31, 2022 and included the United Kingdom operations, resulted in a gain of $96.9 million. The final closing occurred on July 1, 2023 and included the European Union operations. The gain associated with the final closing that will be recognized in the third quarter of 2023 will be subject to regulatory capital adjustments. During the period between the first and final closings, we were required to pay the Buyer a measure of profit of the European Union and United Kingdom operations, while we owned them, adjusted for the provision for income taxes, occupancy charges for employees of the Buyer using our facilities, and other items. Refer to Part I, Item 1, Financial Statements, Note 4, Assets Held for Sale and Related Divestiture for further discussion.
Business Solutions revenues included in our Condensed Consolidated Statements of Income were $14.3 million and $35.7 million and direct operating expenses, excluding corporate allocations, were $12.6 million and $27.8 million for the three months ended June 30, 2023 and 2022, respectively. Business Solutions revenues were $29.7 million and $124.8 million and direct operating expenses, excluding corporate allocations, were $26.1 million and $90.4 million for the six months ended June 30, 2023 and 2022, respectively. For both the three and six months ended June 30, 2023, divestiture costs directly associated with this transaction were $1.0 million. For the three and six months ended June 30, 2022, divestiture costs directly associated with this transaction were $0.8 million and $4.0 million, respectively.
Beginning in March 2023, we experienced a significant increase in our business originating from Iraq which contributed 10% and 6% to our revenue growth for the three and six months ended June 30, 2023 relative to the corresponding prior periods. Over the past few months, we have been in regular discussions with policymakers in both the United States and Iraq about the elevated remittance volumes flowing through our network in Iraq. We believe this volume to be the effect of policy changes by the Central Bank of Iraq and 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. Due to recent United States government actions, including those announced on July 19, 2023 impacting 14 Iraqi banks, some of whom were our agents, the ongoing and future application of our own compliance and risk controls, and future regulatory and policy changes, we expect these elevated remittance volumes relating to Iraq to be significantly lower going forward.
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. Revenues associated with the Russia and Belarus operations, including transactions sent from, into, and within these countries for the six months ended June 30, 2022 were approximately $28 million.
35
The following table sets forth our consolidated results of operations for the three and six months ended June 30, 2023 and 2022:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
(in millions, except per share amounts) |
|
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
Revenues |
|
$1,170.0 |
|
$1,138.3 |
|
3% |
|
$2,206.9 |
|
$2,294.0 |
|
(4)% |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
698.9 |
|
653.0 |
|
7% |
|
1,328.4 |
|
1,308.1 |
|
2% |
Selling, general, and administrative |
|
228.5 |
|
221.3 |
|
3% |
|
431.2 |
|
484.4 |
|
(11)% |
Total expenses |
|
927.4 |
|
874.3 |
|
6% |
|
1,759.6 |
|
1,792.5 |
|
(2)% |
Operating income |
|
242.6 |
|
264.0 |
|
(8)% |
|
447.3 |
|
501.5 |
|
(11)% |
Other income/(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestiture of business |
|
— |
|
— |
|
(a) |
|
— |
|
151.4 |
|
(a) |
Interest income |
|
4.2 |
|
1.8 |
|
(a) |
|
7.4 |
|
2.4 |
|
(a) |
Interest expense |
|
(27.0) |
|
(24.8) |
|
9% |
|
(52.0) |
|
(49.6) |
|
5% |
Other expense, net |
|
(3.4) |
|
(4.8) |
|
(30)% |
|
(5.3) |
|
(7.3) |
|
(26)% |
Total other income/(expense), net |
|
(26.2) |
|
(27.8) |
|
(6)% |
|
(49.9) |
|
96.9 |
|
(a) |
Income before income taxes |
|
216.4 |
|
236.2 |
|
(8)% |
|
397.4 |
|
598.4 |
|
(34)% |
Provision for income taxes |
|
40.2 |
|
42.2 |
|
(5)% |
|
69.4 |
|
111.1 |
|
(38)% |
Net income |
|
$176.2 |
|
$194.0 |
|
(9)% |
|
$328.0 |
|
$487.3 |
|
(33)% |
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$0.47 |
|
$0.50 |
|
(6)% |
|
$0.88 |
|
$1.25 |
|
(30)% |
Diluted |
|
$0.47 |
|
$0.50 |
|
(6)% |
|
$0.87 |
|
$1.25 |
|
(30)% |
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
375.0 |
|
386.7 |
|
|
|
374.7 |
|
389.9 |
|
|
Diluted |
|
375.6 |
|
387.6 |
|
|
|
375.6 |
|
391.0 |
|
|
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, and the difference between the exchange rate we set to the customer and the rate available in the wholesale foreign exchange market, when the money transfer involves different send and 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 six months ended June 30, 2023 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.
36
The following table sets forth our consolidated revenue results for the three and six months ended June 30, 2023 and 2022:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
(dollars in millions) |
|
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
Revenues, as reported (GAAP) |
|
$1,170.0 |
|
$1,138.3 |
|
3% |
|
$2,206.9 |
|
$2,294.0 |
|
(4)% |
Foreign currency impact (a) |
|
|
|
|
|
3% |
|
|
|
|
|
4% |
Divestitures impact (b) |
|
|
|
|
|
3% |
|
|
|
|
|
4% |
Revenue change, constant currency adjusted, excluding Business Solutions (Non-GAAP) |
|
|
|
|
|
9% |
|
|
|
|
|
4% |
In addition to the impacts from foreign currency and the divestiture of our Business Solutions business, as described above, for the three and six months ended June 30, 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 inflation, partially offset by revenue declines in our Europe and CIS and North America regions. In addition, for the six months ended June 30, 2023, GAAP revenues decreased when compared to the corresponding period in the prior year as a result of the suspension of our operations in Russia and Belarus in March 2022.
Operating Expenses Overview
Operating expense redeployment program
On October 20, 2022, we announced an operating expense redeployment program which aims to redeploy approximately $150 million in expenses in our current cost base over the next 5 years, accomplished through optimizations in vendor management, our real estate footprint, marketing, and people 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 throughout 2023. We have incurred and expect to incur incremental expenses associated with the implementation of this program. We incurred $6.0 million and $2.3 million of Cost of services and Selling, general, and administrative expenses, respectively, for a total of $8.3 million of expenses for the three months ended June 30, 2023. We incurred $7.9 million and $7.5 million of Cost of services and Selling, general, and administrative expenses, respectively, for a total of $15.4 million of expenses for the six months ended June 30, 2023. We have incurred $37.2 million of total expenses under this program through June 30, 2023.
Cost of Services
Cost of services primarily consists of agent commissions, which represented more than 60% of total cost of services for the three and six months ended June 30, 2023 and 2022. For the three and six months ended June 30, 2023, Cost of services increased compared to the corresponding periods in the prior year primarily due to increased agent commissions, which generally vary with revenues, as well as increased investment in information technology, partially offset by a decrease associated with the Business Solutions divestiture.
Selling, General, and Administrative
For the three and six months ended June 30, 2023, Selling, general and administrative expenses were impacted by a decrease associated with the Business Solutions divestiture, a reduction in general and administrative expenses in our shared services functions, and a reduction in advertising expenses, partially offset by costs associated with our operating expense redeployment program and increases in employee incentive compensation. In addition, for the six months ended June 30, 2023 compared to the corresponding period in the prior year, Selling, general and administrative expenses decreased due to exit costs associated with the suspension of our operations in Russia and Belarus and the Business Solutions divestiture that were incurred in the prior period.
37
Total Other Income/(Expense), Net
Total other income/(expense), net for the six months ended June 30, 2023, when compared to the corresponding period in the prior year, was impacted by the gain on the first closing of the Business Solutions divestiture in the prior year.
Income Taxes
Our effective tax rates on pre-tax income were 18.6% and 17.9% for the three months ended June 30, 2023 and 2022, respectively, and 17.4% and 18.6% for the six months ended June 30, 2023 and 2022, respectively. The increase in our effective tax rate for the three months ended June 30, 2023 compared to the corresponding period in the prior year was primarily due to discrete tax effects in the current period, partially offset by the effects of the sale of our Business Solutions business and lower amounts of research and development expenses required to be capitalized in the current year. The decrease in our effective tax rate for the six months ended June 30, 2023 compared to the corresponding period in the prior year was primarily due to the effects of the sale of our Business Solutions business and lower amounts of research and development expenses required to be capitalized in the current year, partially offset by discrete tax effects in the current period.
As of June 30, 2023, the total amount of tax contingency reserves was $243.1 million, including accrued interest and penalties, net of related items.
Earnings Per Share
During the three months ended June 30, 2023 and 2022, basic and diluted earnings per share were $0.47 and $0.50, respectively. During the six months ended June 30, 2023, basic and diluted earnings per share were $0.88 and $0.87, respectively, and during the six months ended June 30, 2022, basic and diluted earnings per share were $1.25. 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 June 30, 2023 and 2022, there were 10.1 million and 8.6 million, respectively, and for the six months ended June 30, 2023 and 2022, there were 9.7 million and 7.9 million, respectively, of shares excluded from the diluted earnings per share calculation 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 our average share price during the periods and their effect was anti-dilutive.
Earnings per share for the three and six months ended June 30, 2023 compared to the corresponding periods in the prior year were impacted by the previously described factors impacting net income, offset by a lower number of average shares outstanding.
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 are Consumer-to-Consumer and Business Solutions. On August 4, 2021, we entered into an agreement to sell our Business Solutions business, as discussed above. The operations of the Business Solutions business sold in the final closing have been included in Revenues and Operating income after the second closing and have completely transitioned to the Buyer as of the final closing. However, between the first and final closings, we were required to pay the Buyer a measure of the profits from these operations, while we owned them, adjusted for other charges, and this expense is recognized in Other expense, net in the Condensed Consolidated Statements of Income.
During the three and six months ended June 30, 2023, we incurred $8.3 million and $15.4 million of costs, respectively, associated with our operating expense redeployment program, as described above, primarily related to severance and expenses associated with streamlining the Company's organizational and legal structure. During the six months ended June 30, 2022, we incurred $11.2 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 were primarily related to severance and non-cash impairments of property and equipment, an operating lease right-of-use asset, and other intangible assets.
38
While certain of the expenses are identifiable to our segments, the expenses are not included in the measurement 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 six months ended June 30, 2023 and 2022:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Consumer-to-Consumer |
|
|
92 |
% |
|
|
90 |
% |
|
|
91 |
% |
|
|
88 |
% |
Business Solutions |
|
|
1 |
% |
|
|
3 |
% |
|
|
1 |
% |
|
|
6 |
% |
Other |
|
|
7 |
% |
|
|
7 |
% |
|
|
8 |
% |
|
|
6 |
% |
|
|
|
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 six months ended June 30, 2023 and 2022:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
(dollars and transactions in millions) |
|
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
Revenues |
|
$1,072.2 |
|
$1,026.9 |
|
4% |
|
$2,010.5 |
|
$2,025.9 |
|
(1)% |
Operating income |
|
$230.7 |
|
$225.6 |
|
2% |
|
$408.5 |
|
$432.8 |
|
(6)% |
Operating income margin |
|
22% |
|
22% |
|
|
|
20% |
|
21% |
|
|
Key indicator: |
|
|
|
|
|
|
|
|
|
|
|
|
Consumer-to-Consumer transactions |
|
70.6 |
|
68.2 |
|
4% |
|
135.9 |
|
137.9 |
|
(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 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 transactions in our regions. By means of common processes and systems, these regions, including Branded Digital 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 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 transactions for the three and six months ended June 30, 2023 and 2022. Where reported separately in the discussion below, Branded Digital consists of 100% of the transactions conducted and funded through that channel.
39
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 June 30, 2023 |
|
Six Months Ended June 30, 2023 |
||||||||||||
|
|
Revenue Growth / (Decline) as |
|
Foreign |
|
Constant Currency Revenue Growth / (Decline)(a) - (Non-GAAP) |
|
Transaction Growth / (Decline) |
|
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") |
|
(8)% |
|
(1)% |
|
(7)% |
|
4% |
|
(8)% |
|
0% |
|
(8)% |
|
3% |
Europe and CIS ("EU & CIS") |
|
(12)% |
|
(2)% |
|
(10)% |
|
(1)% |
|
(14)% |
|
(2)% |
|
(12)% |
|
(13)% |
Middle East, Africa, and South Asia ("MEASA") |
|
66% |
|
(1)% |
|
67% |
|
8% |
|
35% |
|
(1)% |
|
36% |
|
3% |
Latin America and the Caribbean ("LACA") |
|
6% |
|
(2)% |
|
8% |
|
8% |
|
10% |
|
(3)% |
|
13% |
|
9% |
East Asia and Oceania ("APAC") |
|
(7)% |
|
(3)% |
|
(4)% |
|
1% |
|
(7)% |
|
(3)% |
|
(4)% |
|
(1)% |
Total Consumer-to-Consumer segment: |
|
4% |
|
(1)% |
|
5% |
|
4% |
|
(1)% |
|
(1)% |
|
0% |
|
(1)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Branded Digital(b) |
|
(2)% |
|
0% |
|
(2)% |
|
12% |
|
(5)% |
|
(1)% |
|
(4)% |
|
9% |
The table below sets forth regional revenues as a percentage of our Consumer-to-Consumer revenue for the three and six months ended June 30, 2023 and 2022:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Consumer-to-Consumer revenue as a percentage of segment revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NA |
|
|
35 |
% |
|
|
40 |
% |
|
|
37 |
% |
|
|
39 |
% |
EU & CIS |
|
|
24 |
% |
|
|
28 |
% |
|
|
25 |
% |
|
|
29 |
% |
MEASA |
|
|
26 |
% |
|
|
16 |
% |
|
|
22 |
% |
|
|
17 |
% |
LACA |
|
|
10 |
% |
|
|
10 |
% |
|
|
10 |
% |
|
|
9 |
% |
APAC |
|
|
5 |
% |
|
|
6 |
% |
|
|
6 |
% |
|
|
6 |
% |
Branded Digital, which is included in the regional percentages above, represented approximately 21% and 22% of our Consumer-to-Consumer revenues for the three months ended June 30, 2023 and 2022, respectively, and 21% and 22% for the six months ended June 30, 2023 and 2022, respectively.
Our consumers transferred $27.5 billion and $23.4 billion in cross-border principal for the three months ended June 30, 2023 and 2022, respectively, and $50.5 billion and $47.2 billion in cross-border principal for the six months ended June 30, 2023 and 2022, respectively. The increase in cross-border principal transferred during the three and six months ended June 30, 2023 compared to the corresponding periods in the prior year was primarily attributable to principal growth due to a change in monetary policy in Iraq, as discussed above, and growth in our NA, LACA, and APAC regions. Consumer-to-Consumer cross-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 cross-border principal is 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
Both Consumer-to-Consumer money transfer revenue and transactions increased 4% for the three months ended June 30, 2023 compared to the corresponding period in the prior year and decreased 1% for the six months ended June 30, 2023, compared to the corresponding period in the prior year.
40
Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, negatively impacted revenue by 1% for both the three and six months ended June 30, 2023, compared to the corresponding periods in the prior year.
In our Consumer-to-Consumer regions, the decrease in NA revenue for the three and six months ended June 30, 2023 compared to the corresponding periods in the prior year was primarily due to promotional pricing related to our new Branded Digital go-to-market strategy and a continued decline in our U.S. domestic business. Our EU & CIS revenues were negatively impacted by pricing and continued transaction declines for the three and six months ended June 30, 2023. In addition, for the six months ended June 30, 2023 compared to the corresponding period in the prior year, EU & CIS revenues were negatively impacted by our suspension of operations in Russia and Belarus. Revenues in the EU & CIS region were and will continue to be negatively impacted by the loss of a significant retail agent in the fourth quarter of 2022. Revenue growth in the MEASA region was driven by a change in monetary policy in Iraq, as discussed above, and revenue growth in the LACA region benefited from an increase in local currency revenue per transaction 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 revenues could continue to be adversely impacted by price reductions we have implemented in connection with our go-to-market strategy.
Operating Income
Consumer-to-Consumer operating income increased 2% for the three months ended June 30, 2023, compared to the corresponding period in the prior year, and was impacted by an increase in revenues, as discussed above, partially offset by agent commissions, which generally vary with revenues. For the six months ended June 30, 2023, Consumer-to-Consumer operating income decreased 6%, compared to the prior period, and was impacted by a decrease in revenues, as discussed above. Consumer-to-Consumer operating income for the three and six months ended June 30, 2023 was impacted by a reduction in general and administrative expenses in our shared services functions and a reduction in advertising expenses, partially offset by increased investment in information technology and increases in employee incentive compensation.
Business Solutions
The following table sets forth our Business Solutions segment results of operations for the three and six months ended June 30, 2023 and 2022:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
(dollars in millions) |
|
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
Revenues |
|
$14.3 |
|
$35.7 |
|
(60)% |
|
$29.7 |
|
$124.8 |
|
(76)% |
Operating income |
|
$1.8 |
|
$8.3 |
|
(79)% |
|
$3.7 |
|
$35.8 |
|
(90)% |
Operating income margin |
|
12% |
|
23% |
|
|
|
12% |
|
29% |
|
|
Revenues
Business Solutions revenue decreased 60% and 76% for the three and six months ended June 30, 2023, respectively, compared to the corresponding periods in the prior year primarily due to the first and second closings of the sale of our Business Solutions business, which occurred on March 1, 2022 and December 31, 2022, as described further above.
41
Operating Income
For the three and six months ended June 30, 2023, the decrease in operating income when compared to the corresponding periods in the prior year was impacted by the first and second closings of the sale of our Business Solutions business.
Effective January 1, 2022, we stopped allocating corporate costs to our Business Solutions segment, given our agreement to sell this business.
Other
Other primarily consists of our cash-based bill payments businesses in Argentina and the United States, in addition to our money order services.
The following table sets forth Other results for the three and six months ended June 30, 2023 and 2022:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
(dollars in millions) |
|
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
Revenues |
|
$83.5 |
|
$75.7 |
|
10% |
|
$166.7 |
|
$143.3 |
|
16% |
Operating income |
|
$18.4 |
|
$30.3 |
|
(39)% |
|
$50.5 |
|
$51.8 |
|
(3)% |
Operating income margin |
|
22% |
|
40% |
|
|
|
30% |
|
36% |
|
|
Revenues
For the three and six months ended June 30, 2023 compared to the corresponding periods in the prior year, Other revenues increased primarily due to increased investment revenues associated with our money order investment securities. For the six months ended June 30, 2023, revenues also increased due to an increase in local currency revenue per transaction in our cash-based bill payments services offered at retail locations in Argentina, due to inflation, partially offset by the strengthening of the United States dollar against the Argentine peso.
Operating Income
Other operating income decreased for the three and six months ended June 30, 2023 compared to the corresponding periods in the prior year due to increased investment in information technology, an increase in consulting expenses associated with new services, and a reduction in the reimbursement of expenses associated with transition services provided after the first and second closings of the sale of our Business Solutions business, partially offset by an increase in revenue.
Capital Resources and Liquidity
Our primary source of liquidity has been cash generated from our operating activities, primarily from net income and fluctuations in working capital. Our working capital is affected by the timing of payments for employee and agent incentives, interest payments on our outstanding borrowings and timing of income tax payments, among other items. Many of our annual employee incentive compensation and agent incentive payments are made in the first quarter following the year they were incurred. The majority of our interest payments are due in the second and fourth quarters. The annual payments resulting from the United States tax reform legislation enacted in 2017 (the “Tax Act”) include amounts related to the United States taxation of certain previously undistributed earnings of foreign subsidiaries. These payments are due in the second quarter of each year through 2025.
42
Our future cash flows could be impacted by a variety of factors, some of which are out of our control. These factors include, but are not limited to, changes in economic conditions, especially those impacting migrant populations, changes in income tax laws or the status of income tax audits, including the resolution of outstanding tax matters, and the settlement or resolution of legal contingencies.
Substantially all of our cash flows from operating activities have been generated from subsidiaries. Most of these cash flows are generated from our regulated subsidiaries. Our regulated subsidiaries may transfer all excess cash to the parent company for general corporate use, except for assets subject to legal or regulatory restrictions, including: (i) requirements to maintain cash and other qualifying investment balances, free of any liens or other encumbrances, related to the payment of certain of our money transfer and other payment obligations, (ii) other legal or regulatory restrictions, including statutory or formalized minimum net worth requirements, and (iii) restrictions on transferring assets outside of the countries where these assets are located.
We currently believe we have adequate liquidity to meet our business needs, including payments under our debt and other obligations, through our existing cash balances, our ability to generate cash flows through operations, and our $1.5 billion revolving credit facility ("Revolving Credit Facility"), which expires in January 2025 and supports our commercial paper program. Our commercial paper program enables us to issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of any borrowings outstanding on our Revolving Credit Facility.
To help ensure availability of our worldwide cash where needed, we utilize a variety of planning and financial strategies, including decisions related to the amounts, timing, and manner by which cash is repatriated or otherwise made available from our international subsidiaries. These decisions can influence our overall tax rate and impact our total liquidity. We regularly evaluate our United States cash requirements, taking tax consequences and other factors into consideration and also the potential uses of cash internationally to determine the appropriate level of dividend repatriations of our foreign source income.
Cash and Investment Securities
As of June 30, 2023 and December 31, 2022, we had Cash and cash equivalents of $1,585.9 million and $1,291.1 million, respectively, which includes $5.2 million related to Business Solutions as of December 31, 2022. As described in Part I, Item 1, Financial Statements, Note 4, Assets Held for Sale and Related Divestiture, we collected the entirety of the cash consideration related to the sale of our Business Solutions business, subject to regulatory approval and other closing conditions.
In many cases, we receive funds from money transfers and certain other payment services before we settle the payment of those transactions. These funds, referred to as Settlement assets on our Condensed Consolidated Balance Sheets, are not used to support our operations. However, we earn income from investing these funds. We maintain a portion of these settlement assets in highly liquid investments, classified as Cash and cash equivalents within Settlement assets, to fund settlement obligations.
Investment securities, classified within Settlement assets on the Condensed Consolidated Balance Sheets, were $1,419.7 million and $1,333.4 million as of June 30, 2023 and December 31, 2022, respectively, and consist primarily of highly-rated state and municipal debt securities. These investment securities are held in order to comply with state licensing requirements in the United States and are required to have credit ratings of "A-" or better from a major credit rating agency. Refer to Part 1, Item 1, Financial Statements, Note 8, Settlement Assets and Obligations for more details regarding investment securities.
Investment securities are exposed to market risk due to changes in interest rates and credit risk. We regularly monitor credit risk and attempt to mitigate our exposure by investing in highly-rated securities and diversifying our investment portfolio. Our investment securities are also actively managed with respect to concentration. As of June 30, 2023, all investments with a single issuer and each individual security represented less than 10% of our investment securities portfolio.
43
Cash Flows from Operating Activities
Cash provided by operating activities decreased to $264.0 million during the six months ended June 30, 2023, from $306.8 million in the corresponding period in the prior year, primarily due to increased transition tax payments related to our 2017 United States federal tax liability. Cash provided by operating activities can be impacted by changes to our consolidated net income, in addition to fluctuations in our working capital balances, among other factors.
Financing Resources
As of June 30, 2023, we had outstanding borrowings at par value of $2,824.6 million. The significant majority of these outstanding borrowings consist of unsecured fixed-rate notes with maturities ranging from 2025 to 2040.
Commercial paper and cash, including cash generated from operations, were used to repay $300.0 million of the aggregate principal amount of 4.250% unsecured notes due in June 2023.
Our Revolving Credit Facility provides for unsecured financing facilities in an aggregate amount of $1.5 billion, including a $250.0 million letter of credit sub-facility. Interest due under the Revolving Credit Facility is fixed for the term of each borrowing and is payable according to the terms of that borrowing. Generally, interest is calculated using a selected term benchmark rate plus an interest rate margin of 110 basis points. A facility fee is also payable quarterly at an annual rate of 15 basis points on the total facility, regardless of usage. Both the interest rate margin and facility fee percentage are based on certain of our credit ratings. Our Revolving Credit Facility allows us to draw loans payable based upon the Secured Overnight Financing Rate, the Euro Interbank Offered Rate, or the Sterling Overnight Index Average.
The purpose of our Revolving Credit Facility, which is diversified through a group of 19 participating institutions, is to provide general liquidity and to support our commercial paper program, which we believe enhances our short-term credit rating. The largest commitment from any single financial institution within the total committed balance of $1.5 billion is approximately 11%. As of June 30, 2023, we had no outstanding borrowings under our Revolving Credit Facility. If the amount available to borrow under the Revolving Credit Facility decreased, or if the Revolving Credit Facility were eliminated, the cost and availability of borrowing under the commercial paper program may be impacted.
Pursuant to our commercial paper program, we may issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of borrowings outstanding on our Revolving Credit Facility. Our commercial paper borrowings may have maturities of up to 397 days from date of issuance. Interest rates for borrowings are based on market rates at the time of issuance. We had $674.6 million of commercial paper borrowings outstanding as of June 30, 2023. Our commercial paper borrowings as of June 30, 2023 had a weighted-average annual interest rate of approximately 5.3% and a weighted-average term of approximately 5 days. During the six months ended June 30, 2023, the average commercial paper balance outstanding was $158.3 million, and the maximum balance outstanding was $885.0 million. Proceeds from our commercial paper borrowings were used for the repayment of our notes due in June 2023, general corporate purposes, and working capital needs, including the settlement of our money transfer obligations prior to collecting receivables from agents or others.
On January 4, 2022, we repaid all remaining borrowings owed under our prior term loan facility for total consideration of $300.0 million, using proceeds from our commercial paper and cash, including cash generated from operations. We are no longer able to borrow money under this facility.
Cash Priorities
Liquidity
Our objective is to maintain strong liquidity and a capital structure consistent with investment-grade credit ratings. We have existing cash balances, cash flows from operating activities, access to the commercial paper markets, and our Revolving Credit Facility available to support the needs of our business.
Our ability to grow the business, make investments in our business, make acquisitions, return capital to shareholders, including through dividends and share repurchases, and service our debt and tax obligations will depend on our ability to continue to generate excess operating cash through our operating subsidiaries and to continue to receive dividends from those operating subsidiaries, our ability to obtain adequate financing and our ability to identify acquisitions that align with our long-term strategy.
44
For additional information, please refer to Part II, Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in our Annual Report on Form 10‑K for the year ended December 31, 2022.
Capital Expenditures
The total aggregate amount paid for contract costs, purchases of property and equipment, and purchased and developed software was $90.1 million and $84.3 million for the six months ended June 30, 2023 and 2022, respectively. Amounts paid for new and renewed agent contracts vary depending on the terms of existing contracts as well as the timing of new and renewed contract signings. Other capital expenditures during these periods included investments in our information technology infrastructure.
Share Repurchases and Dividends
On February 10, 2022, our Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2024. No shares were repurchased during the six months ended June 30, 2023 under this share repurchase authorization. During the six months ended June 30, 2022, 9.2 million shares were repurchased under this authorization for $171.0 million, excluding commissions, at an average cost of $18.52. As of June 30, 2023, $648.2 million remained available under this share repurchase authorization.
Our Board of Directors declared quarterly cash dividends of $0.235 per common share in the first and second quarters of 2023, representing $176.0 million in total dividends. On July 19, 2023, our Board of Directors declared a quarterly cash dividend of $0.235 per common share, payable on September 29, 2023.
Material Cash Requirements
Debt Service Requirements
Our 2023 and future debt service requirements will include payments on all outstanding indebtedness, including any borrowings under our commercial paper program. Our next scheduled principal payment on our outstanding notes is in 2025.
2017 United States Federal Tax Liability
The Tax Act imposed a tax on certain of our previously undistributed foreign earnings. This tax charge, combined with our other 2017 United States taxable income and tax attributes, resulted in a 2017 United States federal tax liability of approximately $800 million, of which approximately $358 million remained as of June 30, 2023. We elected to pay this liability in periodic installments through 2025 and paid $119.5 million during the second quarter of 2023. Under the terms of the law, we are required to pay the remaining installment payments as summarized in the Capital Resources and Liquidity discussion located in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10‑K for the year ended December 31, 2022. These payments have affected and will continue to adversely affect our cash flows and liquidity and may adversely affect future share repurchases.
Operating Leases
We lease real properties for use as administrative and sales offices, in addition to transportation, office, and other equipment. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 13, Leases, in our Annual Report on Form 10-K for the year ended December 31, 2022 for details on our leasing arrangements, including future maturities of our operating lease liabilities.
We have no material off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
45
Other Commercial Commitments
We had approximately $160 million in outstanding letters of credit and bank guarantees as of June 30, 2023 primarily held in connection with regulatory requirements, lease arrangements, and certain agent agreements. We expect to renew many of our letters of credit and bank guarantees prior to expiration.
As of June 30, 2023, our total amount of unrecognized income tax benefits was $297.5 million, including associated interest and penalties. The timing of any related cash payments for substantially all of these liabilities is inherently uncertain because the ultimate amount and timing of the settlement of such liabilities are affected by factors which are variable and outside our control.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements and accompanying notes. Actual results could differ from those estimates. Our Critical Accounting Policies and Estimates disclosed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10‑K for the year ended December 31, 2022, for which there were no material changes, included:
Risk Management
We are exposed to market risks arising from changes in market rates and prices, including changes in foreign currency exchange rates and interest rates and credit risk related to our agents and customers. A risk management program is in place to manage these risks.
Foreign Currency Exchange Rates
We provide our services primarily through a network of agent locations in more than 200 countries and territories. We manage foreign exchange risk through the structure of the business and an active risk management process. We currently settle with the significant majority of our agents in United States dollars, Mexican pesos, or euros, requiring those agents to obtain local currency to pay recipients, and we generally do not rely on international currency markets to obtain and pay illiquid currencies. However, in certain circumstances, we settle in other currencies. The foreign currency exposure that does exist is limited by the fact that the majority of transactions are paid by the next day after they are initiated, and agent settlements occur within a few days in most instances. To mitigate this risk further, we enter into short duration foreign currency forward contracts, generally with maturities ranging from a few days to one month, to offset foreign exchange rate fluctuations between transaction initiation and settlement. We also have exposure to certain foreign currency denominated cash and other asset and liability positions and may utilize foreign currency forward contracts, typically with maturities of less than one year at inception, to offset foreign exchange rate fluctuations on these positions. In certain consumer money transfer and bill payment transactions involving different send and receive currencies, we generate revenue based on the difference between the exchange rate set by us to the consumer or business and a rate available in the wholesale foreign exchange market, helping to provide protection against currency fluctuations. We attempt to promptly buy and sell foreign currencies as necessary to cover our net payables and receivables which are denominated in foreign currencies.
We use longer-term foreign currency forward contracts to help mitigate risks associated with changes in foreign currency exchange rates on revenues denominated primarily in the euro, and, to a lesser degree, the Canadian dollar, the British pound, and other currencies. We use contracts with maturities of up to 36 months at inception to mitigate some of the impact that changes in foreign currency exchange rates could have on forecasted revenues, with a targeted weighted-average maturity of approximately one year.
46
We believe the use of longer-term foreign currency forward contracts provides predictability of future cash flows from our international operations.
As of June 30, 2023, a hypothetical uniform 10% strengthening or weakening in the value of the United States dollar relative to all other currencies in which our net income is generated would have resulted in a decrease/increase to pre-tax annual income of approximately $17 million, based on our forecast of unhedged exposure to foreign currency at that date. There are inherent limitations in this sensitivity analysis, primarily due to the following assumptions: (i) foreign exchange rate movements are linear and instantaneous, (ii) fixed exchange rates between certain currency pairs are retained, (iii) the unhedged exposure is static, and (iv) we would not hedge any additional exposure. As a result, the analysis is unable to reflect the potential effects of more complex market changes that could arise, which may positively or negatively affect income.
Interest Rates
We invest in several types of interest-bearing assets, with a total value as of June 30, 2023 of approximately $2.6 billion. Approximately $1.3 billion of these assets bear interest at floating rates. These assets primarily include cash in banks, money market investments, and state and municipal variable-rate securities and are included in our Condensed Consolidated Balance Sheets within Cash and cash equivalents and Settlement assets. To the extent these assets are held in connection with money transfers and other related payment services awaiting redemption, they are classified as Settlement assets. Earnings on these investments will increase and decrease with changes in the underlying short-term interest rates.
The remaining interest-bearing assets pay fixed interest rates and primarily consist of highly-rated state and municipal debt securities and asset-backed securities. These investments may include investments made from cash received from our money order services, money transfer business, and other related payment services awaiting redemption and are classified within Settlement assets in the Condensed Consolidated Balance Sheets. As interest rates rise, the fair value of these fixed-rate interest-bearing securities will decrease; conversely, a decrease to interest rates would result in an increase to the fair values of the securities. We have classified these investments as available-for-sale within Settlement assets in the Condensed Consolidated Balance Sheets, and accordingly, recorded these instruments at their fair value with the net unrealized gains and losses, excluding credit-related losses, net of the applicable deferred income tax effect, being added to or deducted from our Total stockholders’ equity in our Condensed Consolidated Balance Sheets.
Borrowings under our commercial paper program mature in such a short period that the financing is effectively floating rate. As of June 30, 2023, there were $674.6 million in outstanding borrowings under our commercial paper program.
We review our overall exposure to floating and fixed rates by evaluating our net asset or liability position and the duration of each individual position. We manage this mix of fixed versus floating exposure in an attempt to minimize risk, reduce costs, and improve returns. Our exposure to interest rates can be modified by changing the mix of our interest-bearing assets as well as adjusting the mix of fixed versus floating rate debt. The latter is accomplished primarily through the use of interest rate swaps and the decision regarding terms of any new debt issuances (i.e., fixed versus floating). From time to time, we use interest rate swaps designated as hedges to vary the percentage of fixed to floating rate debt, subject to market conditions. As of June 30, 2023, our weighted-average effective rate on total borrowings was approximately 4.1%.
At June 30, 2023, a hypothetical 100 basis point increase/decrease in interest rates would result in a decrease/increase to pre-tax income for the next twelve months of approximately $7 million based on borrowings that are sensitive to interest rate fluctuations, net of the impact of hedges. The same 100 basis point increase/decrease in interest rates, if applied to our cash and investment balances on June 30, 2023 that bear interest at floating rates, would result in an offsetting increase/decrease to pre-tax income for the next twelve months of approximately $13 million. There are inherent limitations in the sensitivity analysis presented, primarily due to the assumptions that interest rate changes would be instantaneous and consistent across all geographies in which our interest-bearing assets are held and our liabilities are payable. As a result, the analysis is unable to reflect the potential effects of more complex market changes, including changes in credit risk regarding our investments, which may positively or negatively affect income. In addition, the mix of fixed versus floating rate debt and investments and the level of assets and liabilities will change over time, including the impact from commercial paper borrowings that may be outstanding in future periods.
47
Credit Risk
To manage our exposures to credit risk with respect to investment securities, money market fund investments, derivatives, and other credit risk exposures resulting from our relationships with banks and financial institutions, we regularly review investment concentrations, trading levels, credit spreads, and credit ratings, and we attempt to diversify our investments among global financial institutions.
We are also exposed to credit risk related to receivable balances from agents in the money transfer, walk-in bill payment, and money order settlement process. We perform a credit review before each agent signing and conduct periodic analyses of agents and certain other parties we transact with directly. In addition, we are exposed to losses directly from consumer transactions, particularly through our digital channels, where transactions are originated through means other than cash and are therefore subject to "chargebacks," insufficient funds or other collection impediments, such as fraud, which are anticipated to increase as digital channels become a greater proportion of our money transfer business.
Our losses have been less than 2% of our consolidated revenues in all periods presented.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information under Risk Management in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report is incorporated herein by reference.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of the Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our controls and procedures related to our reporting and disclosure obligations (as defined by Rules 13a-15(e) and 15d-15(e) within the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2023, which is the end of the period covered by this Quarterly Report on Form 10‑Q. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that, as of June 30, 2023, the disclosure controls and procedures were effective to ensure that information required to be disclosed by us, including our consolidated subsidiaries, in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported, as applicable, within the time periods specified in the rules and forms of the Securities and Exchange Commission, and are designed to ensure that information required to be disclosed by us in the reports that we file or submit is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10‑Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
48
Review Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of The Western Union Company
Results of Review of Interim Financial Statements
We have reviewed the condensed consolidated balance sheet of The Western Union Company (the Company) as of June 30, 2023, the related condensed consolidated statements of income, comprehensive income, and stockholders’ equity for the three and six months ended June 30, 2023 and 2022, the condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2022, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity for the year then ended, and the related notes and schedule (not presented herein); and in our report dated February 24, 2022, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2022, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
|
|
|
/s/ Ernst & Young LLP |
Denver, Colorado |
|
July 26, 2023 |
|
49
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, 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 June 30, 2023:
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Approximate Dollar |
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Total Number of Shares |
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Value of Shares that |
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Purchased as Part of |
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May Yet Be Purchased |
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Total Number of |
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Average Price |
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Publicly Announced |
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Under the Plans or |
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Period |
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Shares Purchased (a) |
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Paid per Share |
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Plans or Programs (b) |
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Programs (in millions) |
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April 1 - 30 |
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13,441 |
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$ |
11.02 |
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— |
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$ |
648.2 |
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May 1 - 31 |
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3,869 |
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$ |
12.04 |
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— |
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$ |
648.2 |
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June 1 - 30 |
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13,104 |
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$ |
11.66 |
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— |
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$ |
648.2 |
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Total |
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30,414 |
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$ |
11.43 |
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— |
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers
During the three months ended June 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.
50
Item 6. Exhibits
See Exhibit Index for documents filed or furnished herewith and incorporated herein by reference.
EXHIBIT INDEX
Exhibit |
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Description |
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3.1 |
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10.1 |
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15 |
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Letter from Ernst & Young LLP Regarding Unaudited Interim Financial Information |
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31.1 |
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31.2 |
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32 |
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101.INS |
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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) |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
________________________________
*Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 6 of this report.
51
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.
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The Western Union Company (Registrant) |
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Date: July 26, 2023 |
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By: |
/s/ Devin B. McGranahan |
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Devin B. McGranahan |
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President and Chief Executive Officer |
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Date: July 26, 2023 |
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By: |
/s/ Matt Cagwin |
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Matt Cagwin |
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Chief Financial Officer |
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(Principal Financial Officer) |
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Date: July 26, 2023 |
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By: |
/s/ Mark Hinsey |
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Mark Hinsey |
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Chief Accounting Officer and Controller |
52
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
Amended and Restated Effective July 19, 2023
Exhibit 10.1
1. Purpose
This severance/change in control policy (the “Policy”) is maintained by The Western Union Company, a Delaware corporation (“Western Union”), to enable Western Union to offer a form of income protection to its Eligible Executives in the event their employment with the Company is involuntarily terminated other than for Cause or, in the event of a Change in Control, if their employment terminates involuntarily other than for Cause or by the Eligible Executive for Good Reason during the 24 months following the Change in Control.
This Policy shall constitute a “welfare plan” within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and shall be construed in a manner consistent with such intent.
2. Effective Date
This Policy was originally adopted as of September 29, 2006 (the "Effective Date"). The Policy was amended and restated effective July 19, 2023.
3. Definitions
Base Salary means the Eligible Executive’s current annualized rate of base cash compensation as paid on each regularly scheduled payday for the Eligible Executive's regular work schedule as of his or her Termination Date, including any before-tax contributions that are deducted for Company benefit plan purposes. Base Salary shall not include taxable or nontaxable fringe benefits or awards, vacation, performance awards, bonus, commission or other incentive pay, temporary stipends or any payments which are not made on each regular payday, regardless of how such payments may be characterized. Notwithstanding the foregoing, in the event the Eligible Executive’s Base Salary is reduced under circumstances entitling the Eligible Executive to terminate due to Good Reason, Base Salary shall be the annualized rate of base cash compensation in effect prior to the reduction in Base Salary giving rise to Good Reason.
Board means the Board of Directors of Western Union.
Cause means the willful and continued failure by an Eligible Executive to substantially perform the duties assigned by the Company (other than a failure resulting from Disability), the willful engagement by an Eligible Executive in conduct which is demonstrably injurious to the Company (monetarily or otherwise), any act of dishonesty, the commission of a felony, the continued failure by an Eligible Executive to meet performance standards, violation by an Eligible Executive of Company policy including the Code of Conduct, an Eligible Executive’s excessive absenteeism or a significant violation by an Eligible Executive of any statutory or common law duty of loyalty to the Company.
Change in Control means
- 1 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
- 2 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
Committee means the Compensation and Benefits Committee of the Board or its delegate or successor.
Company means Western Union, including any of its 50% or more owned or controlled subsidiaries or any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise, including, without limitation, any successor due to a Change in Control) to substantially all of the business or assets of Western Union, except that for purposes of Section 16, the definition of Change in Control, and other provisions where the context so requires, Company means Western Union or any such successor.
Disability means the inability of the Eligible Executive to substantially perform such Eligible Executive’s duties and responsibilities due to a physical or mental condition (i) that would entitle such Eligible Executive to benefits under the Company’s long-term disability plan under which he or she is covered or, if the Committee deems it relevant, any disability rights provided as a matter of local law or (ii) if such Eligible Executive is not eligible for long-term disability benefits under any plan sponsored by the Company, that would, as determined by the Committee, entitle such Eligible Executive to benefits under the Company’s long-term disability plan if the Eligible Executive were eligible therefor.
Eligible Executive means 1) the Chief Executive Officer of Western Union, or 2) any executive officer or other key employee of the Company who is selected by the Committee to participate in the Policy in its sole discretion.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Good Reason means any one or more of the following: (i) action by the Company resulting in a material diminution of the Eligible Executive’s titles or positions with the Company; (ii) a reduction in the Eligible Executive’s Base Salary or bonus opportunity; or (iii) action by the Company to require an increase of more than 50 miles in the Eligible Executive’s commute to the Eligible Executive’s current principal work location without the Eligible Executive’s consent. Within 30 days after the Eligible Executive becomes aware of one or more actions or inactions described in the preceding sentence, the Eligible Executive shall deliver written notice to the Company of the action(s) or inaction(s) (the “Good Reason Notice”). The Company shall have 30 days after the Good Reason Notice is delivered to cure the particular action(s) or inaction(s). If the Company so effects a cure, the Good Reason Notice will be deemed rescinded and of no further force and effect. If the action(s) or inaction(s) that led to the Good Reason Notice are not cured, termination will occur 30 days following the end of the cure period.
Severance Benefits means the benefits payable to an Eligible Executive pursuant to this Policy.
- 3 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
Severance Period means (a) with respect to Western Union’s Chief Executive Officer, the 18 consecutive month period commencing on the Chief Executive Officer’s Termination Date or, in the case of a separation from service for an eligible termination reason under Section 5(b), the 36 consecutive month period commencing on the Chief Executive Officer’s Termination Date, and (b) with respect to all other Eligible Executives, the 12 consecutive month period commencing on the Eligible Executive’s Termination Date if the Eligible Executive’s separation from service is for an eligible termination reason under Section 5(a), and the 24 consecutive month period commencing on the Eligible Executive’s Termination Date if the Eligible Executive’s separation from service is for an eligible termination reason under Section 5(b).
Termination Date means the date on which the Eligible Executive’s employment with the Company terminates for a reason set forth under Section 5.
4. Eligibility
All Eligible Executives are eligible to receive benefits according to the terms of this Policy upon the commencement of their employment, or if later, their designation as an Eligible Executive.
5. Eligible Termination Reasons
An Eligible Executive shall not be entitled to any benefits under this Policy upon a separation from service for an eligible termination reason under this Section 5 if the Eligible Executive becomes employed by any subsidiary or affiliate of Western Union (as determined under Internal Revenue Code, as amended (“Code”), Section 414(b) or (c), but substituting a 50 percent ownership level for the 80 percent ownership level therein) immediately following his or her termination of employment from the Company by which the Eligible Executive is employed.
6. Non-Eligible Termination Reasons
A non-eligible termination reason is any reason for an Eligible Executive’s separation from service by or from the Company that is not an eligible termination reason described in Section 5.
7. Severance and Change in Control Benefits. The provisions of this Section 7 are subject, without limitation, to the provisions of Section 9 hereof.
(a) Post-Termination Payments. Subject to the remaining terms of this Policy (including, without limitation, Section 9), if an Eligible Executive’s employment with the Company is terminated after the Effective Date for any reason set forth in Section 5, the Company shall pay to the Eligible Executive the following amounts in accordance with Section 10:
- 4 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
(i) Severance Pay.
If the Eligible Executive’s employment with the Company is terminated for an eligible termination reason described in Section 5(a), an amount equal to 1.5 in the case of Western Union’s Chief Executive Officer and 1.0 in the case of any other Eligible Executive multiplied by the Eligible Executive’s Base Salary for the year in which the Termination Date occurs.
Notwithstanding the foregoing, in the case of an Eligible Executive who, as of the Termination Date, has been employed by the Company for 6 months or less, the amount of severance pay otherwise payable under the foregoing provisions of this subsection shall be reduced to an amount equal to .5 multiplied by the Eligible Executive’s Base Salary.
If the Eligible Executive’s employment with the Company terminates for an eligible termination reason described in Section 5(b), an amount equal to 2 multiplied by the sum of (1) 100% of the Eligible Executive’s Base Salary and (2) the percentage of the Eligible Executive’s Base Salary established as the target bonus for the Eligible Executive under the Company’s Senior Executive Annual Incentive Plan (or the bonus plan then applicable to the Eligible Executive), for the year in which the Termination Date occurs. If an Eligible Executive’s target bonus for the year in which the Termination Date occurs has not been established at the time an amount is payable under this subsection 7(a)(i)(B), then such amount shall be calculated using the Eligible Executive’s annual target bonus for the immediately preceding year, or, if no such prior year target bonus exists with respect to the Eligible Executive, the prior year target bonus established for a similarly situated Eligible Executive, as determined by the Committee. (The reference to the Eligible Executive’s target bonus for the year in which the Termination Date occurs in this subsection 7(a)(i)(B) is solely for purposes of calculating the Eligible Executive’s severance pay, and shall not give the Executive any right to be paid an amount for the year in which the Termination Date occurs under the Company’s Senior Executive Annual Incentive Plan (or the bonus plan then applicable to the Eligible Executive)).
(ii) Prorated Bonus for Year of Termination. Subject to the Committee’s certification that the applicable performance goals for the year in which the Termination Date occurs have been achieved, a prorated amount equal to the product of (A) the bonus which could have been paid to the Eligible Executive under the Company’s Senior Executive Annual Incentive Plan (or the bonus plan then applicable to the Eligible Executive) for the year in which the Termination Date occurs based on actual corporate, regional, division, business unit, and/or individual performance for such year, and (B) the ratio of the number of days the Eligible Executive was employed by the Company during such year up to and including the Termination Date to 365. Achievement of individual performance goals will be determined by the Committee in its sole and absolute discretion.
- 5 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
(b) Continued Benefits Coverage. If an Eligible Executive’s employment with the Company terminates for any reason set forth in Section 5, the Eligible Executive and his or her eligible dependents shall be given the opportunity to elect continued group health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (“COBRA”) with respect to all group health plans that are subject to COBRA in which the Eligible Executive and his or her dependents were participating immediately prior to such termination. The Company shall pay to the Eligible Executive, as an additional Severance Benefit, a lump sum payment equal to:
as determined by the Company in its sole discretion (the “Health Coverage Subsidy”). No Health Coverage Subsidy will be provided to an Eligible Executive who is not enrolled in a Company-sponsored group medical or dental plan on the date of termination. The Health Coverage Subsidy shall constitute taxable income to the Eligible Executive and shall be paid in a lump sum in accordance with Section 10.
An Eligible Executive shall not be entitled to receive any perquisites after the Termination Date. The Eligible Executive’s continued group health coverage under this subsection shall cease as of the date the Eligible Executive becomes eligible to receive such benefits under a subsequent employer’s benefit program, to the extent permitted under COBRA. Eligible Executives receiving Severance Benefits under this Policy are not eligible to continue contributions to the Company's qualified retirement plans or nonqualified deferred compensation programs.
(c) Long-Term Incentive Awards
(i) Non-Change in Control.
Awards granted under The Western Union Company 2015 Long-Term Incentive Plan (or a successor plan) (the “LTIP”) to an individual who is an Eligible Executive on the date the award is granted will be prorated effective on the Eligible Executive’s Termination Date, if the Eligible Executive’s employment with the Company is terminated for an eligible termination reason described in Section 5(a). Such prorated award shall be calculated on a grant-by-grant basis in accordance with the applicable award agreement.
- 6 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
Awards granted prior to February 22, 2023, will remain subject to the terms of the Policy in effect at the time of grant.
(ii) Change in Control.
For awards granted under the LTIP to an individual who is an Eligible Executive on the date the award is granted, if the Eligible Executive’s employment with the Company terminates for an eligible termination reason described in Section 5(b) during the 24-month period commencing on the effective date of a Change in Control, then awards that are eligible to become fully vested and exercisable or payable contingent upon the Eligible Executive’s continued employment and the passage of time (whether or not the Company or the Eligible Executive have attained any specified performance goals) (“Time Vested Awards”) and that are held by the Eligible Executive (including but not limited to grants of nonqualified stock options, stock appreciation rights, restricted stock awards, and restricted stock unit awards), shall become fully vested and exercisable or payable effective on the Eligible Executive’s Termination Date, with the timing of such settlement or payment to be governed by the terms of the applicable award agreement. In the event this subsection applies, nonqualified stock options and stock appreciation rights granted to an Eligible Executive (while an Eligible Executive) shall be exercisable until the later of (1) the date specified in the applicable award agreement or (2) the end of the Eligible Executive’s Severance Period (or, if earlier, the expiration of the original term of the award) but not thereafter. Notwithstanding the foregoing, if, at the time of an Eligible Executive’s termination of employment, the Eligible Executive has satisfied the applicable age or age and service requirement for “Retirement” under the LTIP, all nonqualified stock options and stock appreciation rights which vested in accordance with this Section 7(c)(ii) shall be exercisable in accordance with their terms until the earlier of (A) the date which is two years after the Eligible Executive’s Termination Date or the end of the Eligible Executive’s Severance Period (if the award was granted while an Eligible Executive), whichever is later, or (B) the expiration of the original term of the award.
For awards granted under the LTIP to an individual who is an Eligible Executive on the date the award is granted, if the Eligible Executive’s employment with the Company terminates for an eligible termination reason described in Section 5(b) during the 24-month period commencing on the effective date of a Change in Control, then awards that are eligible to become fully vested and exercisable or payable contingent upon the attainment of specified performance goals) (“Performance Grants”) held by the Eligible Executive, shall become fully vested and exercisable or payable effective on the Eligible Executive’s Termination Date based on the greater of 1) actual performance results, as estimated and determined by the Committee in its sole discretion based on performance through the Termination Date, or 2) target performance as defined in the applicable award agreement, with the timing of such settlement or payment to be governed by the terms of the applicable award agreement.
(iii) Award Agreement.
Notwithstanding anything in the Policy to the contrary, to the extent an award provides for more favorable treatment than the treatment specified in the Policy, the terms of the award agreement shall govern.
- 7 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
(d) Legal Fees. Effective for Termination Dates occurring on or after the date of a Change in Control, if after exhausting the administrative remedies provided for in Section 19 herein, an Eligible Executive commences litigation regarding a bona fide claim for damages or other relief arising as a result of a claim for benefits under the Policy, and as a result thereof, whether by judgment or settlement, becomes entitled to receive benefits in an amount greater than prior to such litigation, the Company shall reimburse the reasonable legal fees and related expenses that are incurred by the Eligible Executive in connection with such litigation. Any such reimbursement shall be paid as soon as practicable following the resolution of the litigation, and in no event later than March 15 of the calendar year following the calendar year in which the resolution of such litigation occurs.
8. Code Section 280G
(a) In the event it is determined that any payments or benefits provided by the Company to or on behalf of an Eligible Executive (any such payments or benefits being referred to in this Section as “Payments”) would be subject to the excise tax imposed by Code Section 4999, or any interest or penalties are incurred by the Eligible Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively referred to herein as the “Excise Tax”), then the Payments to such an Eligible Executive shall be reduced to an amount which is one dollar less than the smallest amount that would give rise to any Excise Tax, if such reduction would provide the Eligible Executive a greater net after-tax amount (after taking into account federal, state, local and social security taxes). Any reduction will occur in the following order: (i) reduction of cash payments; (ii) cancellation of accelerated vesting of equity awards; and (iii) reduction of other employee benefits. If reduction in cash payments or acceleration of vesting of compensation from an Eligible Executive’s equity awards is to be reduced, (i) in the case of cash, such reduction in cash payments shall be made in reverse chronological order, with earliest payment reduced first and (ii) in the case of equity, such acceleration of vesting shall be cancelled in the reverse order of the date of grant.
(b) All determinations required to be made under this Section shall be made by the independent registered public accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control (the “Accounting Firm”). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint another nationally recognized independent registered public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). The Accounting Firm shall provide its calculations, together with detailed supporting documentation, to the Company and the Eligible Executive within fifteen (15) calendar days after the date on which the Eligible Executive’s right to Payment is triggered (if requested at that time by the Company or the Eligible Executive) or such other time as agreed between the Company and the Eligible Executive. All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determines that no Excise Tax is payable by the Eligible Executive, it shall furnish the Eligible Executive with a written opinion that no Excise Tax will be imposed. Any good faith determination by the Accounting Firm shall be binding upon the Company and the Eligible Executive.
9. Requirement of Release and Restrictive Covenant
The provision of Severance Benefits under this Policy is conditioned upon the Eligible Executive timely signing an Agreement and Release (in a form satisfactory to the Company) which will include restrictive covenants and a comprehensive release of all claims.
- 8 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
In this Agreement and Release, the Eligible Executive will be asked to release the Company and its directors, officers, employees and agents from any and all claims the Eligible Executive may have against them, including but not limited to any contract, tort, or wage and hour claims, and any claims under Title VII, the ADEA, the ADA, ERISA, and other federal, state, local or foreign laws. Under the Agreement and Release, the Eligible Executive must also agree not to solicit business similar to any business offered by the Company from any Company customer, not to advise any entity to cancel or limit its business with the Company, not to recruit, solicit, or encourage any employee to leave their employment with the Company, not to perform the same or substantially the same functions or job duties that the Eligible Executive performed for the Company for any business enterprise engaging in activities that compete with the business activities of the Company, not to disclose any of Company’s trade secrets or confidential information, and not to disparage the Company or its employees in any way, to the extent permitted by applicable law. These obligations are in addition to any other non-solicitation, noncompete, nondisclosure, or confidentiality agreements the Eligible Executive may have executed while employed by Company.
Nothing contained in the Agreement and Release or the Company’s other agreements with the Eligible Executive are intended to limit Eligible Executive’s ability to (i) report possible violations of law or regulation to, or file a charge or complaint with, the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Department of Justice, Congress, any Inspector General, or any other federal, state or local governmental agency or commission (“Government Agencies”), (ii) communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company or (iii) under applicable United States federal law to (A) disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law or (B) disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.
No Severance Benefits will commence under this Policy prior to the eighth day following the date on which the Company has received the Eligible Executive's fully executed Agreement and Release.
10. Method of Payment of Severance Benefits Under Sections 7(a) and 7(b)
(a) Severance Benefits payable hereunder to an Eligible Executive pursuant to Section 7(a) of this Policy on account of a separation from service for an eligible termination reason under Section 5 shall be paid in a lump sum within 30 days following the date on which this Agreement and Release has been executed and is fully effective and nonrevocable (but in any event no later than 60 days following the Termination Date). The bonus for the year in which the Termination Date occurs payable hereunder to an Eligible Executive pursuant to Section 7(a)(ii) of this Policy on account of a separation from service for an eligible termination reason under Section 5 shall be paid to the Eligible Executive in a lump sum cash payment at the same time as bonus payments for such year are paid to other executives under the Company’s Senior Executive Annual Incentive Plan (or other bonus plan applicable to the Eligible Executive for such year) (but in any event no later than March 15th immediately following the performance year). The cash payment referenced in Section 7(b) of this Policy shall be made in a lump sum within 30 days following the date on which this Agreement and Release has been executed and is fully effective and nonrevocable (but in any event no later than 60 days following the Termination Date).
- 9 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
(b) If an Eligible Executive dies after becoming eligible for Severance Benefits but prior to executing an Agreement and Release, his or her estate or representative may not execute an Agreement and Release and no Severance Benefits will be paid under this Policy. All payments will be net of amounts withheld with respect to taxes, offsets, or other obligations.
(c) Coordination with Other Plans. If the amounts paid under this Policy are viewed as a substitute for other severance payments and benefits that constitute nonqualified deferred compensation under Code Section 409A, then such other agreement governing the other severance payments and benefits shall control the timing and form of payment of the benefits provided under this Policy to the extent required to comply with Code Section 409A.
11. Offsets
(a) Non-duplication of Benefits. The Company may, in its discretion and to the extent permitted under applicable law, offset against the Eligible Executive’s Severance Benefits under this Policy any other severance, termination, end of service gratuity, compensation for non-competition commitments (whether paid during the term of employment or post-termination), or similar benefits or amounts payable to the Eligible Executive by the Company, including, but not limited to any amounts paid under any offer letter, employment agreement or other individual contractual arrangement, amounts paid pursuant to federal, state, or local workers’ notification or office closing requirements, or statutory severance benefits or payments made on account of any notice period (including but not limited to payments made in lieu of notice or for periods during which the Eligible Executive is released from further duties) as provided under any offer letter, employment agreement or other individual contractual arrangement or pursuant to the law of any country or political subdivision thereof.
(b) Offsets and Property. Subject to Code Section 409A, the Company also may, in its discretion and to the extent permitted under applicable law, offset against the Eligible Executive's Severance Benefits under this Policy the value of unreturned property and any amounts the Eligible Executive owes to the Company. The entire amount of any offset taken pursuant to this Section 11(b) shall not exceed $5,000 in any taxable year, and the offset shall be taken at the same time and in the same amount as such amount would have been otherwise due from the Eligible Executive.
(c) Overpayment. The Company may recover any overpayment of Severance Benefits made to an Eligible Executive or an Eligible Executive's estate under this Policy or, to the extent permitted by applicable law, offset any other overpayment made to the Eligible Executive against any Severance Benefits or other amount the Company owes the Eligible Executive or the Eligible Executive's estate.
12. Outplacement
The Company shall pay on behalf of an Eligible Executive who is eligible for Severance Benefits under the Policy all reasonable fees and costs charged by an outplacement firm selected by the Company to provide outplacement services. The scope of any outplacement services will be determined in the sole discretion of the Company. Under no circumstances shall any Eligible Executive be eligible to receive a cash payment or any other benefit in lieu of outplacement services.
- 10 -
THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
Any outplacement services provided under this Section 12 must be provided to the Eligible Employee no later than December 31 of the second calendar year following the calendar year in which the Termination Date occurs.
13. Re-employment and Other Employment
In the event an Eligible Executive is re-employed by the Company prior to the commencement of or within the Severance Period, or otherwise performs services for the Company in any capacity during the Severance Period (including, without limitation, as an employee or contractor of any enterprise which provides any services to the Company, but excluding individuals who are not performing services for the Company on a substantially-full time basis or who are also providing services to entities that are not related to The Western Union Company or its subsidiaries or affiliates, in either case as determined by the Employee Benefits Committee of The Western Union Company in its sole discretion and documented in writing), the payment of any Severance Benefits payable with respect to the prior termination immediately will cease and such Severance Benefits shall no longer be payable under this Policy. In addition, the Eligible Executive will be required to repay to the Company a prorated amount of the Severance Pay (as set forth in Section 7 above) received by the Eligible Executive prior to such rehire or other commencement of services. Such repayment of Severance Pay is a condition of, and must be made prior to, any such rehire or commencement of services. The prorated amount to be paid will be based upon the period between the effective date of the Eligible Executive’s rehire (or other commencement of services) and the end of the Eligible Executive’s Severance Period, as calculated by the Company in its sole discretion.
14. Funding
This Policy is not funded, and payment of benefits hereunder shall be made solely from the general assets of the Company. An Eligible Executive entitled to benefits hereunder shall have only the rights of a general creditor of the Company.
15. Administration
This Policy shall be administered by the Committee, which as the Named Fiduciary shall have the absolute discretion and exclusive right to interpret, construe and administer the Policy and to make final determinations on all questions arising under the Policy, including but not limited to questions concerning eligibility for, the amount of and receipt of Policy benefits. All decisions of the Committee will be conclusive, final and binding upon the parties. Notwithstanding the foregoing, upon the occurrence of a Change in Control, determinations of the Committee hereunder shall be subject to de novo judicial review.
16. Amendment or Termination of the Policy
Western Union reserves the right to amend or terminate this Policy at any time in its sole discretion, provided, however, that during the period commencing upon the earliest of (a) the signing of a definitive agreement that, if consummated, would result in a Change in Control, or (b) the filing of a tender offer with the Securities and Exchange Commission that, if accepted, would result in a Change in Control (each, a "Triggering Event") and ending upon the earlier of (x) the date on which the Committee in its sole discretion determines that the Triggering Event will not actually result in a Change in Control, or (y) the 36-month anniversary of the Change in Control, the Company shall not amend or terminate this Policy as it applies to an Eligible Executive without the consent of such affected Eligible Executive. Notwithstanding the foregoing, this Policy may be amended at any time, without the consent of any Eligible Executive, as necessary or desirable to comply with the requirements, or avoid the application, of Code Section 409A.
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THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
17. Section 409A
Notwithstanding any provision of this Policy, the Policy will be construed, administered or deemed amended as necessary to comply with the requirements of Code Section 409A to avoid taxation under Code Section 409A(a)(1) to the extent subject to Code Section 409A. The Committee, in its sole discretion shall determine the requirements of Code Section 409A applicable to the Policy and shall interpret the terms of the Policy consistently therewith. Under no circumstances, however, shall the Company or any affiliate or any of its or their employees, officers, directors, service providers or agents have any liability to any person for any taxes, penalties or interest due on amounts paid or payable under the Policy, including any taxes, penalties or interest imposed under Code Section 409A. The payments to Eligible Executives pursuant to this Policy are also intended to be exempt from Code Section 409A to the maximum extent possible, first, to the extent such payments are scheduled to be paid and are in fact paid during the short-term deferral period, as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and then under the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii), and for this purpose each payment shall be considered a separate payment such that the determination of whether a payment qualifies as a short-term deferral shall be made without regard to whether other payments so qualify and the determination of whether a payment qualifies under the separation pay exemption shall be made without regard to any payments which qualify as short-term deferrals. To the extent any amounts under this Policy are payable by reference to an Eligible Executive’s “termination of employment,” such term shall be deemed to refer to the Eligible Executive’s “separation from service,” within the meaning of Code Section 409A. Notwithstanding any other provision in this Policy, if an Eligible Executive is a “specified employee,” as defined in Code Section 409A, as of the date of the Eligible Executive’s separation from service, then to the extent any amount payable under this Policy (i) constitutes the payment of nonqualified deferred compensation, within the meaning of Code Section 409A, (ii) is payable upon the Eligible Executive’s separation from service and (iii) under the terms of this Policy would be payable prior to the 6-month anniversary of the Eligible Executive’s separation from service, such payment shall be delayed until the earlier to occur of (a) the 6-month anniversary of the separation from service or (b) the date of the Eligible Executive’s death. Further, to the extent the amounts payable under this Policy constitute the payment of nonqualified deferred compensation, within the meaning of Code Section 409A and the period to consider the Agreement and Release spans two separate taxable years, any payments required to be made to the Eligible Executive which are conditioned on the timely execution of the Agreement and Release shall be made in the later taxable year.
18. Miscellaneous
No Eligible Executive shall vest in any entitlement to or eligibility for benefits under this Policy until he or she has satisfied all requirements for eligibility and the conditions required to receive the benefits specified in this Policy have been satisfied. No interest shall accrue on any benefit to which an Eligible Executive may be entitled under this Policy. No benefits hereunder, whether or not in pay status, shall be subject to any pledge or assignment, and no creditor may attach or garnish any Eligible Executive’s Policy benefits. This Policy does not create any contract of employment or right to employment for any period of time. Employment with the Company is at-will, and may be terminated by either the Company or the Eligible Executive at any time for any reason.
19. Review Procedure
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THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
Executives eligible to receive benefits under this Policy will be notified of such eligibility as soon as administratively practicable after the event occurs which gives rise to the provision of Policy benefits. If an executive who believes he or she is eligible to receive Policy benefits does not receive such notice or disagrees with the amount of benefits set forth in such notice, or if an executive is informed that he or she is not eligible for benefits under this Policy, the executive (or his or her legal representative) may file a written claim for benefits with the Company's senior human resources executive or such other officer or body designated by the Committee for this purpose. The written claim must include the facts supporting the claim, the amount claimed, and the executive’s name and mailing address.
If the claim is denied in part or in full, the Company's senior human resources executive (or other designated officer or body) will notify the executive by mail no later than 90 days after receipt of the written claim. If special circumstances require an extension of time for processing the claim, the executive will be notified in writing before the end of the initial 90-day period. If the claim is denied, the notice of denial will state the specific reasons for the denial, the provisions of the Policy on which the denial is based, a description of any additional information or material required by the Committee to consider the claim (if applicable), as well as an explanation as to why such information or material is necessary, an explanation of the Policy’s review procedures and the time limits applicable to such procedures, as well as a statement of the executive’s right to bring a civil action under ERISA Section 502(a) in the event of an adverse determination upon review.
An executive (or his or her legal representative) may appeal a denial by filing a written appeal with the Committee. The written appeal must be received no later than 60 days after the executive or legal representative received the notice of denial. During the same 60-day period, the executive or legal representative may have reasonable access to relevant documents, records, or other information and may submit written comments and supporting documents, records and other materials to the Committee. A document, record, or other information shall be considered relevant to the claim if such document, record, or other information (i) was relied upon in making the benefit determination, (ii) was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination, or (iii) demonstrates compliance with the administrative processes and safeguards designed to ensure and verify that benefit claim determinations are made in accordance with the Policy and that, where appropriate, the Policy provisions have been applied consistently with respect to similarly situated executives or designated beneficiaries.
The Committee will review the appeal and notify the executive or legal representative by mail of its final decision within 60 days. If special circumstances require and extension of time for processing the claim, the executive will be notified in writing before the end of the initial 60-day period. If the claim is denied, the notice of denial will state the reason for the denial, references to the specific Sections of the Policy on which the denial is based, a statement that the executive may receive, upon request and free of charge, copies of all documents and information relevant to the appeal, a description of the Policy’s claims and appeals procedures, and a statement of the executive’s right to bring an action under Section 502 of ERISA.
20. Time Limits on Starting Lawsuits.
No Eligible Executive or Eligible Executive’s legal representative may file or commence any lawsuit or legal action to obtain any benefit under this Policy, without first having complied with and exhausted all levels of appeal required by this Policy, and in any event no more than 180 days after the final appeal is denied by the Committee or the Committee’s delegate(s). Failure to follow the claim procedures of this Policy, including timeframes and exhaustion of administrative remedies, shall result in a loss of benefits, if otherwise available.
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THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
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THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
Rights Under the Employee Retirement Income Security Act (ERISA)
As a participant in the Policy, an Eligible Executive is entitled to certain rights and protections under ERISA which provides that all Policy participants shall be entitled to:
Receive Information About The Policy And Benefits
The executive may examine, without charge, at the Policy administrator’s office and at other specified locations such as worksites, all documents governing the policy and a copy of the latest annual report (Form 5500 Series) filed with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.
The executive may obtain, upon written request to the Policy administrator, copies of documents governing the operation of the Policy including copies of the latest annual report (Form 5500 Series). The Policy administrator may make a reasonable charge for the copies.
The executive may receive a summary of the Policy’s annual financial report. The Policy administrator is required by law to furnish each participant with a copy of this summary annual report.
Prudent Actions by Policy Fiduciaries
In addition to creating rights for Policy participants, ERISA imposes duties upon the people who are responsible for the operation of the Policy. The people who operate the Policy, called "fiduciaries" of the Policy, have a duty to do so prudently and in the interest of the Policy participants and beneficiaries. No one, including an executive’s employer or any other person, may fire an executive or otherwise discriminate against an executive in any way to prevent such executive from obtaining a welfare benefit or exercising his or her rights under ERISA.
Enforcement of Rights
If an executive’s claim for benefits is denied or ignored, in whole or in part, the executive has a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.
Under ERISA, there are steps that can be taken to enforce the above rights. For example, if an executive requests a copy of Policy documents or the latest annual report from the Policy and does not receive them within 30 days, the executive may file suit in a Federal court. In such a case, the court may require the Policy administrator to provide the materials, and pay the executive up to $110 a day until the executive receives the materials, unless the materials were not sent because of reasons beyond the control of the Policy administrator. If an executive has a claim for benefits which is denied or ignored, in whole or in part, he or she may file suit in a state or Federal Court. If it should happen that the fiduciaries misuse Policy money, or if an executive is discriminated against for asserting his or her rights, the executive may seek assistance from the U.S. Department of Labor, or may file a suit in a Federal court. The court will decide who should pay court costs and legal fees. If the executive is successful the court may order the person the executive has sued to pay these costs and fees. If the executive loses, the court may order the executive to pay these costs and fees, for example, if it finds the executive’s claim is frivolous.
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THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
Assistance With Questions
An executive who has questions about the Policy should contact the Policy administrator. If an executive has any questions about this statement or about his or her rights under ERISA, or if the executive needs assistance in obtaining documents from the Policy administrator, he or she should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in a telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, NW, Washington, D.C. 20210. The executive may also obtain certain publications about his or her rights and responsibilities under ERISA by calling the publication’s hotline of the Employee Benefits Security Administration.
ADDITIONAL INFORMATION
The details on the following chart are provided for the Eligible Executive’s information and possible use.
Name of Policy Type of Policy Policy Year:
The Western Union Company Severance/
Change in Control Policy Welfare 1/1 - 12/31
(Executive Committee Level)
Type of Policy Administration
Self-Administered
Policy Sponsor
The Western Union Company
7001 E. Belleview Avenue
Denver, CO 80237
Policy Administrator
Compensation and Benefits Committee of the Board of Directors
c/o The Western Union Company
Office of the General Counsel
7001 E. Belleview Avenue
Denver, CO 80237
Agent for Service of Legal Process
The Western Union Company
Office of the General Counsel
7001 E. Belleview Avenue
Denver, CO 80237
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THE WESTERN UNION COMPANY
SEVERANCE/CHANGE IN CONTROL POLICY
(Executive Committee Level)
In addition, service of legal process may be made upon the Policy administrator.
Identification Number (Policy Sponsor)
20-4531180
Identification Number (Policy)
506
THIS DESCRIPTION OF THE WESTERN UNION COMPANY SEVERANCE/CHANGE IN CONTROL POLICY FOR EXECUTIVE COMMITTEE-LEVEL PARTICIPANTS SERVES AS THE OFFICIAL POLICY DOCUMENT AND AS THE LEGAL SUMMARY PLAN DESCRIPTION.
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Exhibit 15
Letter from Ernst & Young LLP Regarding Unaudited Interim Financial Information
The Board of Directors and Stockholders of The Western Union Company
We are aware of the incorporation by reference in the following Registration Statements:
of our report dated July 26, 2023, relating to the unaudited condensed consolidated interim financial statements of The Western Union Company that are included in its Form 10-Q for the quarter ended June 30, 2023.
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/s/ Ernst & Young LLP |
Denver, Colorado |
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July 26, 2023 |
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Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I, Devin B. McGranahan, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of The Western Union Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: |
July 26, 2023 |
/s/ Devin B. McGranahan |
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Devin B. McGranahan |
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President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
I, Matt Cagwin, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of The Western Union Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: |
July 26, 2023 |
/s/ Matt Cagwin |
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Matt Cagwin |
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Chief Financial Officer |
Exhibit 32
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
The certification set forth below is being submitted in connection with the Quarterly Report of The Western Union Company on Form 10-Q for the period ended June 30, 2023 (the "Report") for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Devin B. McGranahan and Matt Cagwin certify that, to the best of each of their knowledge:
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Date: |
July 26, 2023 |
/s/ Devin B. McGranahan |
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Devin B. McGranahan |
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President and Chief Executive Officer |
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Date: |
July 26, 2023 |
/s/ Matt Cagwin |
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Matt Cagwin |
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Chief Financial Officer |