The Western Union Company (NYSE:WU) Q4 2020 Earnings Conference Call February 10, 2021 4:30 PM ET Company Participants Brendan Metrano – Vice President-Investor Relations Hikmet Ersek – Chief Executive Officer Rajesh Agrawal – Chief Financial Officer Conference Call Participants Tien-tsin Huang – JP Morgan Jason Kupferberg – Bank of America Darrin Peller – Wolfe Research Rayna Kumar – Evercore Jeff Cantwell – Guggenheim Securities James Faucette – Morgan Stanley Bryan Keane – Deutsche Bank Andrew Jeffrey – ...

Financial Data and Key Metrics Changes - Revenue for Q3 2020 was $1.3 billion, a decline of 4% compared to the prior year, with a constant currency revenue decline of 1% [20][21] - GAAP operating margin was 22.7%, compared to 15.1% in the prior year, primarily due to restructuring costs in the previous year and current productivity savings [31] - Adjusted earnings per share increased to $0.57 from $0.49 in the prior year [33] Business Line Data and Key Metrics Changes - Consumer-to-Consumer (C2C) segment revenue was flat on a constant currency basis, with transaction growth of 6% driven by a 96% increase in digital money transfer [21][22] - Digital money transfer revenues grew 45%, accounting for 21% of total C2C revenue and 31% of total C2C transactions [24][26] - Business Solutions segment revenue decreased 11% on a reported basis, representing 7% of total company revenues [30] Market Data and Key Metrics Changes - North America revenue trends improved to flat year-over-year, driven by U.S. outbound business [27] - Revenue in Europe and CIS increased 3% on a reported basis, led by Germany, France, and Russia [28] - Latin America and Caribbean region revenue decreased 21% on a reported basis due to COVID-19 impacts [29] Company Strategy and Development Direction - The company is focused on enhancing digital offerings and investing in customer acquisition, data analytics, and technology infrastructure [16][17] - The digital business is seen as a significant source of incremental profit, with over 80% of westernunion.com customers being new to the company [13][14] - The company aims to expand its omnichannel capabilities and improve its network coverage and quality [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery from COVID-19, noting strong performance in digital channels and retail trends [7][19] - The company anticipates continued growth in digital transactions and is preparing for a new normal post-pandemic [66] - Management expects GAAP revenues for the full year to decline in the high-single digits due to COVID-19 impacts [34] Other Important Information - The company has a strong financial position with $1.3 billion in cash and an undrawn $1.5 billion revolving credit facility [34] - The company is on track to achieve $50 million in annual productivity savings this year [18] Q&A Session Summary Question: Trends in principal per transaction and customer stickiness - Management noted that higher principal per transaction is driven by customers transacting at higher levels and new customers exhibiting similar behavior [38][39] Question: C2C business trajectory and October performance - Management indicated that the business is improving month-to-month, with retail contributions and digital growth driving overall performance [44][45] Question: Capital deployment and stock buyback considerations - Management stated that they are considering stock buybacks as confidence in the business grows, while maintaining a strong dividend policy [48][49] Question: Guidance for fourth quarter and pricing strategies - Management clarified that the guidance reflects ongoing trends and that dynamic pricing strategies are in place to drive customer acquisition [51][54] Question: Opportunities in white label partnerships - Management highlighted the potential for growth in white label partnerships, particularly with financial institutions transitioning from correspondent banking [67][68]

PART I FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited financial statements for Q3 and 9M 2020 reflect revenue and net income declines for the nine-month period, influenced by COVID-19 and a 2019 divestiture, while Q3 operating and net income increased due to lower restructuring expenses [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q3 2020 revenues decreased 4% to $1,258.5 million, but net income increased 69% to $228.6 million due to lower operating expenses, while 9M revenues fell 11% to $3,563.2 million and net income decreased 39% to $567.2 million Consolidated Statements of Income Highlights (in millions, except per share data) | Metric | Q3 2020 | Q3 2019 | YoY Change | 9M 2020 | 9M 2019 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $1,258.5 | $1,306.9 | -3.7% | $3,563.2 | $3,984.4 | -10.6% | | **Operating Income** | $285.2 | $197.4 | +44.5% | $740.2 | $707.5 | +4.6% | | **Net Income** | $228.6 | $135.0 | +69.3% | $567.2 | $922.9 | -38.5% | | **Diluted EPS** | $0.55 | $0.32 | +71.9% | $1.37 | $2.13 | -35.7% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2020, total assets slightly increased to $8,827.2 million, liabilities marginally decreased, and stockholders' equity shifted from a $39.5 million deficit to a $67.1 million surplus Balance Sheet Summary (in millions) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,251.4 | $1,450.5 | | Total assets | $8,827.2 | $8,758.5 | | Borrowings | $3,036.5 | $3,229.3 | | Total liabilities | $8,760.1 | $8,798.0 | | Total stockholders' equity/(deficit) | $67.1 | ($39.5) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations for 9M 2020 decreased to $585.6 million, with $709.8 million used in financing for dividends and repurchases, while prior year investing included significant divestiture proceeds Cash Flow Summary for Nine Months Ended Sep 30 (in millions) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $585.6 | $665.3 | | Net cash (used in)/provided by investing activities | ($68.7) | $657.0 | | Net cash used in financing activities | ($709.8) | ($903.8) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business segments, revenue recognition, COVID-19 impact on retail volumes offset by digital growth, ongoing restructuring, the 2019 Speedpay divestiture, and dividend/share repurchase activities - The company's business consists of two main segments: Consumer-to-Consumer (C2C) money transfers and Business Solutions for enterprise payments, with other services including bill payments and money orders[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) - The COVID-19 pandemic negatively impacted retail transaction volumes starting in March 2020, which was partially offset by revenue growth from westernunion.com and other digital channels[26](index=26&type=chunk) - In May 2019, the company sold its Speedpay business, which resulted in a pre-tax gain of approximately **$523 million** and affects year-over-year comparability in the 'Other' segment[45](index=45&type=chunk) - A restructuring plan approved in August 2019 is expected to incur total expenses of approximately **$150 million** through 2020, with **$24.8 million** incurred for the nine months ended Sep 30, 2020, compared to **$98.9 million** in the same period of 2019[48](index=48&type=chunk)[52](index=52&type=chunk) - The company declared quarterly cash dividends of **$0.225 per share** in each of the first three quarters of 2020[95](index=95&type=chunk) - During the nine months ended Sep 30, 2020, the company repurchased **8.5 million shares** for **$217.4 million**, with share repurchases temporarily paused during the first quarter of 2020[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q3 revenue decline to COVID-19 and FX, offset by digital growth, with operating income up due to lower restructuring; C2C saw transaction growth but revenue decline from mix shift, while Business Solutions declined - The COVID-19 pandemic negatively impacted retail transaction volumes, which was partially offset by strong growth in digital channels (westernunion.com and other digital transactions)[148](index=148&type=chunk) - Fluctuations in the USD, particularly its strengthening against the Argentine peso, negatively impacted revenues by **$41.1 million** in Q3 2020 and **$134.8 million** in the first nine months of 2020[149](index=149&type=chunk) - The 2019 restructuring plan is expected to generate expense savings of at least **$50 million** in 2020 and approximately **$100 million** in 2021[161](index=161&type=chunk) - The company temporarily paused share repurchases in Q1 2020, and as of September 30, 2020, **$782.6 million** remained available under the share repurchase authorization[216](index=216&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) Consolidated revenue decreased 4% in Q3 and 11% in 9M 2020 due to COVID-19, FX, and divestitures, while Q3 operating expenses declined 12%, leading to a 44% increase in operating income to $285.2 million Consolidated Revenue Change Analysis | Period | GAAP Revenue Change | Foreign Currency Impact | Divestitures Impact | Adjusted Revenue Change (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | | **Q3 2020** | (4)% | 3% | 0% | (1)% | | **9M 2020** | (11)% | 4% | 3% | (4)% | - Cost of Services decreased in Q3 and 9M 2020 due to lower agent commissions (tied to revenue), reduced restructuring expenses, and lower employee-related costs[164](index=164&type=chunk) - Selling, General, and Administrative expenses decreased due to lower employee-related expenses (including incentive pay and restructuring savings) and reduced restructuring costs[165](index=165&type=chunk) - The effective tax rate decreased to **12.4%** for Q3 2020 (vs. **16.8%** in Q3 2019) and **13.5%** for 9M 2020 (vs. **17.9%** in 9M 2019), primarily due to higher domestic pre-tax income in the prior year from the Speedpay sale[167](index=167&type=chunk)[168](index=168&type=chunk) [Segment Discussion](index=59&type=section&id=Segment%20Discussion) C2C segment transactions grew 6% but revenue fell 1% due to a digital mix shift, with Digital Money Transfer revenue up 45%; Business Solutions and 'Other' segments declined due to COVID-19 and the Speedpay divestiture Consumer-to-Consumer Segment Performance | Metric | Q3 2020 | Q3 2019 | % Change | 9M 2020 | 9M 2019 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $1,106.5M | $1,113.0M | (1)% | $3,098.5M | $3,282.8M | (6)% | | **Transactions** | 77.3M | 73.0M | 6% | 212.1M | 215.6M | (2)% | | **Operating Income** | $272.4M | $263.8M | 3% | $695.1M | $747.3M | (7)% | - Digital Money Transfer revenue grew **45%** in Q3 2020 (**46%** constant currency) and accounted for **21%** of total C2C revenue, up from **14%** in Q3 2019[179](index=179&type=chunk)[180](index=180&type=chunk) - The spread between C2C transaction growth (up **6%**) and revenue decline (down **1%**) in Q3 was attributed to a business mix shift, primarily growth in digital white label partnerships which have a lower revenue per transaction[182](index=182&type=chunk) Business Solutions Segment Performance | Metric | Q3 2020 | Q3 2019 | % Change | | :--- | :--- | :--- | :--- | | **Revenues** | $89.1M | $100.6M | (11)% | | **Operating Income** | $9.4M | $16.7M | (44)% | [Capital Resources and Liquidity](index=67&type=section&id=Capital%20Resources%20and%20Liquidity) Operating cash flow decreased to $585.6 million for 9M 2020, but the company maintains adequate liquidity via cash, operations, and a $1.5 billion credit facility, with a remaining $604 million tax liability payable through 2025 - The company believes it has adequate liquidity from existing cash, operating cash flows, and its **$1.5 billion** revolving credit facility, which had no outstanding borrowings as of September 30, 2020[201](index=201&type=chunk) - Cash provided by operating activities decreased to **$585.6 million** in 9M 2020 from **$665.3 million** in 9M 2019, due to timing of restructuring payments, incentive payments, and vendor payments[206](index=206&type=chunk) - A 2017 US federal tax liability of approximately **$800 million** is being paid in installments through 2025, with about **$604 million** remaining as of September 30, 2020[218](index=218&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=81&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency, interest rates, and credit, mitigated by derivatives; a 10% USD strengthening could reduce pre-tax income by $45 million, and credit losses remain below 2% of revenues - The company uses longer-term foreign currency forward contracts (up to 36 months) to mitigate risk on revenues denominated in foreign currencies like the euro, British pound, and Canadian dollar[228](index=228&type=chunk) - A hypothetical **10%** uniform strengthening of the U.S. dollar would result in an estimated decrease to pre-tax annual income of approximately **$45 million**, based on the company's unhedged exposure forecast[231](index=231&type=chunk) - The company is exposed to credit risk from agent receivables and consumer transactions, particularly chargebacks from electronic channels, with total losses remaining approximately **2%** or less of consolidated revenues[239](index=239&type=chunk)[243](index=243&type=chunk) [Item 4. Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of September 30, 2020, despite significant employee turnover in technology and accounting due to restructuring, which is being actively managed to maintain internal controls - The Principal Executive Officer and Principal Financial Officer concluded that as of September 30, 2020, the company's disclosure controls and procedures were effective[245](index=245&type=chunk) - The company's 2019 restructuring plan has caused significant employee turnover in technology and accounting functions, which management is actively monitoring to maintain internal controls[246](index=246&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=83&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings, detailed in Note 8, include shareholder and class actions, with reasonably possible potential losses exceeding recorded liabilities estimated at **$30 million** as of September 30, 2020 - Information on legal proceedings is incorporated by reference from Note 8, Commitments and Contingencies[252](index=252&type=chunk) - As of September 30, 2020, the company estimated reasonably possible potential litigation losses in excess of its recorded liability to be approximately **$30 million**[66](index=66&type=chunk) [Item 1A. Risk Factors](index=83&type=section&id=Item%201A.%20Risk%20Factors) The COVID-19 pandemic is a significant risk, negatively impacting retail transactions and agent access, with its future extent highly uncertain and dependent on duration, government actions, and economic conditions - The primary updated risk factor relates to the COVID-19 pandemic, which has negatively impacted the business and its future impact is highly uncertain[254](index=254&type=chunk) - The pandemic has resulted in lower consumer and commercial activity and the closure of some agent locations, leading to declines in retail C2C transactions[255](index=255&type=chunk) - Future impacts depend on uncertain developments, including the duration of the outbreak, the availability of a vaccine, government actions, and its effects on the global economy and migration patterns[257](index=257&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q3 2020, **21,912 shares** were repurchased at an average of **$22.12** for tax withholding, not under the public program, with **$782.6 million** remaining for future repurchases Share Repurchases for Q3 2020 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | July 2020 | 11,949 | $21.19 | 0 | | August 2020 | 4,170 | $23.00 | 0 | | September 2020 | 5,793 | $23.41 | 0 | | **Total** | **21,912** | **$22.12** | **0** | - As of September 30, 2020, **$782.6 million** remained available for repurchase under the board's authorization, which runs through December 31, 2021[259](index=259&type=chunk) [Item 6. Exhibits](index=86&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data files - The filing includes required certifications from the Chief Executive Officer and Chief Financial Officer[262](index=262&type=chunk) - Interactive Data Files (Inline XBRL) are included as exhibits to the filing[262](index=262&type=chunk)

Financial Data and Key Metrics Changes - The company reported second quarter revenue of approximately $1.1 billion, a decline of 17% compared to the prior year period, while adjusted constant currency revenue declined 11% [19] - GAAP earnings per share for the quarter was $0.39, down from $1.42 in the prior year period, primarily due to the gain on sale from divestitures in 2019 [29] - Adjusted operating margin for the second quarter was 20.4%, compared to 20.3% in the prior year period, driven by productivity savings and cost management measures [27] Business Line Data and Key Metrics Changes - The consumer-to-consumer (C2C) segment revenue declined 12% or 11% on a constant currency basis, with transaction volume down 8% for the quarter [19] - Digital money transfer revenues, including westernunion.com and digital partnerships, increased 48% or 50% on a constant currency basis, accounting for 22% of total C2C revenue [21] - Digital-initiated transactions accounted for 31% of C2C segment transactions, up from 15% in the second quarter of 2019 [11] Market Data and Key Metrics Changes - North America revenue declined 6% on a reported basis, while transactions declined 7%, with improvements noted each month throughout the quarter [22] - Revenue in the Europe and CIS region decreased 10% on a reported basis, but transactions grew 4% due to strength in Russia [23] - Latin America and Caribbean region revenue decreased 45% on a reported basis, attributed to restrictive government policies [24] Company Strategy and Development Direction - The company is focused on three key objectives: driving digital growth, enhancing the global network, and optimizing the organization [14] - The current environment has benefited the broader digital money transfer market, with a focus on acquiring new customers and enhancing services like real-time payments [15] - The company continues to enhance its global distribution network, renegotiating agreements with agents and increasing real-time account payout capabilities [16] Management's Comments on Operating Environment and Future Outlook - Management noted that while the macro environment has improved since the significant drop-off in March and April, uncertainty remains due to COVID-19 [13] - The company is not reissuing 2020 financial targets at this time, citing continued caution in the operating environment [13] - Management expressed confidence in the company's ability to deliver solid margins despite softer revenue trends, with a flexible cost structure allowing for adjustments [33] Other Important Information - The company generated healthy cash flow, returning nearly $93 million in dividends to shareholders in the second quarter [30] - The company has an undrawn $1.5 billion revolving credit facility and no significant debt maturities until 2022, maintaining a strong financial position [30] Q&A Session Summary Question: Transaction growth and principal growth expectations - Management indicated that while the World Bank forecasts a 20% decline in the remittance market, they believe their growth trajectory is different, with low single-digit growth in cross-border principal and over 20% growth in June and July [37] Question: Performance of the white label business - Management highlighted strong performance in the white label business, primarily with financial institutions, and noted that the sales cycle is longer but the opportunity is significant [40] Question: Digital versus retail customer mix - Management confirmed that 80% of new customers on the digital platform are new to Western Union, indicating a strong customer acquisition trend [44] Question: Impact of stimulus on transaction trends - Management noted that while government stimulus has helped the economy, it does not have a direct impact on sending principals, as customers are primarily looking for trusted brands [49] Question: Growth in specific corridors or geographies - Management reported broad-based improvement across key geographies, with Europe showing strong recovery and Latin America lagging due to later onset of COVID-19 [55]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-32903 WesternUnion WU THE WESTERN UNION COMPANY (Exact name of registrant as specified in its charter) Delaware (State or ...

Financial Data and Key Metrics Changes - First quarter revenues declined 1% on an adjusted constant currency basis, with adjusted operating margin expanding to 20.5% and adjusted EPS growing 7% year-over-year to $0.44 [15][36] - First quarter revenue of $1.2 billion declined 11% compared to the prior year period, primarily due to divestitures, while adjusted constant currency revenue declined 1% [28] - GAAP earnings per share in the quarter was $0.42 compared to $0.39 in the prior year period, and adjusted earnings per share was $0.44, compared to $0.41 in the prior year period [36] Business Line Data and Key Metrics Changes - In the consumer-to-consumer segment, reported revenue declined 4% or 3% on a constant currency basis, with transactions declining 3% primarily due to COVID-19 impacts [28] - Digital money transfer revenues increased 21% or 22% on a constant currency basis in the quarter, accounting for 16% of total C2C revenues [32][33] - Business Solutions revenue increased 3% on a reported basis or 5% constant currency, representing 8% of company revenues in the quarter [33] Market Data and Key Metrics Changes - North America revenue declined 2% on both reported and constant currency basis, while transactions declined 5% [29] - Revenue in the Europe and CIS region decreased 5% on both reported and constant currency basis, with transactions growing 1% [30] - Revenue in the Latin America and Caribbean region decreased 11% on a reported basis or 3% constant currency on transaction declines of 5% [32] Company Strategy and Development Direction - The company is focused on expanding digital capabilities, diversifying its global payments network, and optimizing its organization [9][21] - The strategic decisions made in previous years have positioned the company to navigate the COVID-19 crisis from a position of strength [8][10] - The company aims to capitalize on opportunities emerging from the accelerated industry transformation post-COVID-19 [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the significant impact of COVID-19 on the business but expects this impact to be temporary [19] - The company is not reinstating formal financial targets for 2020 due to high levels of uncertainty [38] - Management remains optimistic about long-term prospects and believes the company is well-positioned for future success [42] Other Important Information - The company has pledged significant funds to support COVID-19 relief efforts and is implementing measures to ensure the safety of employees and customers [14] - The company has an undrawn $1.5 billion revolving credit facility and no significant debt maturities until 2022 [41] Q&A Session Summary Question: On the expense side, what should be assumed regarding fixed costs and potential savings? - Management targets $150 million of run rate savings over three years, with potential for additional short-term savings depending on revenue trends [44][45] Question: How is the digital versus traditional customer mix shifting? - Most new customers are digital, with some traditional customers converting to digital due to lockdowns [46][47] Question: Can you provide insights on April trends and improvements? - C2C transactions declined 21% in April, showing improvement from March, with positive signs in certain markets [52][53] Question: How is government stimulus impacting outbound volumes? - Stimulus payments have helped sustain consumer base, with improvements seen in both digital and retail businesses [80][81] Question: What are the expectations for the tax rate for the year? - The tax rate came in lower than models, and management is evaluating the implications for the rest of the year [82]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-32903 WesternUnion WU THE WESTERN UNION COMPANY (Exact name of registrant as specified in its charter) Delaware (State o ...

PART I [Forward-Looking Statements](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines forward-looking statements in the 10-K report, emphasizing that actual results may differ due to economic conditions, competition, regulatory changes, and operational risks - The report contains forward-looking statements, and actual outcomes may differ materially due to risks, uncertainties, and assumptions[3](index=3&type=chunk) - Key risk factors include changes in general economic conditions, failure to compete effectively, political conditions, customer confidence deterioration, inability to adopt new technology, foreign exchange rate fluctuations, security breaches, and regulatory changes[4](index=4&type=chunk)[5](index=5&type=chunk)[6](index=6&type=chunk)[7](index=7&type=chunk) [Item 1. Business](index=8&type=section&id=Item%201.%20Business) Western Union is a global leader in money movement and payment services, operating through Consumer-to-Consumer and Business Solutions segments with a focus on regulatory compliance - Western Union is a leader in global money movement and payment services, operating through over **550,000 agent locations** in more than **200 countries and territories**, and via branded websites[8](index=8&type=chunk)[9](index=9&type=chunk) Consolidated Revenue by Segment (2017-2019) | Segment | 2019 | 2018 | 2017 | | :------------------- | :---- | :---- | :---- | | Consumer-to-Consumer | 83 % | 80 % | 79 % | | Business Solutions | 7 % | 7 % | 7 % | | Other | 10 % | 13 % | 14 % | | Total | 100 % | 100 % | 100 % | [Overview](index=8&type=section&id=Overview) - Western Union provides fast, reliable, and convenient global money movement and payment services, with a strong brand presence and a network of over **550,000 agent locations** in more than **200 countries and territories** as of December 31, 2019[8](index=8&type=chunk)[9](index=9&type=chunk) - The company's services include Consumer-to-Consumer money transfers, Business Solutions for cross-border payments and foreign exchange, and other services like bill payments and money orders[9](index=9&type=chunk)[10](index=10&type=chunk)[13](index=13&type=chunk) [Our Segments](index=9&type=section&id=Our%20Segments) - Western Union manages its business through two primary segments: Consumer-to-Consumer and Business Solutions, with other services reported under 'Other'[12](index=12&type=chunk) - The 'Other' segment includes cash-based and electronic-based bill payment services, money order services, and corporate costs related to strategic initiatives[13](index=13&type=chunk) Consolidated Revenue by Segment (2017-2019) | Segment | 2019 | 2018 | 2017 | | :------------------- | :---- | :---- | :---- | | Consumer-to-Consumer | 83 % | 80 % | 79 % | | Business Solutions | 7 % | 7 % | 7 % | | Other | 10 % | 13 % | 14 % | | Total | 100 % | 100 % | 100 % | [Consumer-to-Consumer Segment](index=11&type=section&id=Consumer-to-Consumer%20Segment) - The Consumer-to-Consumer segment is the core of the business, representing **83% of total consolidated revenues in 2019**, primarily from cross-border money transfers[18](index=18&type=chunk) - Revenue is derived from customer fees, varying by channel, locations, principal amount, currency exchange differences, and speed of service[19](index=19&type=chunk) - Services are offered through walk-in agent locations and online channels (westernunion.com and mobile apps), with various funding and payout options including cash, debit/credit cards, and bank accounts[23](index=23&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - The segment faces robust competition from global and regional money transfer providers, electronic channels (including digital currencies), banks, and informal networks[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [Business Solutions Segment](index=17&type=section&id=Business%20Solutions%20Segment) - The Business Solutions segment accounted for **7% of total consolidated revenues in 2019**, focusing on cross-border, cross-currency payment and foreign exchange solutions for small and medium-sized enterprises[41](index=41&type=chunk) - Revenue is primarily generated from foreign exchange spreads on spot rate currency exchanges, with some revenue from foreign currency forward and option contracts[42](index=42&type=chunk)[43](index=43&type=chunk) - Competition in this segment includes financial institutions, non-bank competitors, and electronic payment providers, with key competitive factors being customer service, expertise, customized solutions, and payment network speed[46](index=46&type=chunk)[47](index=47&type=chunk) [Other](index=19&type=section&id=Other) - The 'Other' segment includes bill payment services in Argentina and the United States, and money order services, contributing **10% of total consolidated revenues in 2019**[48](index=48&type=chunk) - In May 2019, the company sold a substantial majority of its U.S. electronic bill payments business, Speedpay, for approximately **$750 million**, recording a pre-tax gain of **$523 million**[50](index=50&type=chunk) - Money order services generate investment income from interest on settlement assets, primarily held in U.S. tax-exempt state and municipal debt securities[51](index=51&type=chunk) [Intellectual Property](index=19&type=section&id=Intellectual%20Property) - The Western Union® and WU® brands, logos, trademarks, and service marks are globally recognized and material to the company, with significant annual investment in brand support[52](index=52&type=chunk) [Risk Management](index=19&type=section&id=Risk%20Management) - The company manages credit and fraud risks through a dedicated department, monitoring agent receivables, consumer/business transactions (especially electronic ones prone to chargebacks), and derivatives[53](index=53&type=chunk)[54](index=54&type=chunk) - Foreign currency exposure is managed through business structure (settling with agents in major currencies) and short-duration forward contracts, with Business Solutions hedging net currency risks from customer contracts[58](index=58&type=chunk) - Interest rate risk is managed by evaluating net asset/liability positions and adjusting the mix of fixed vs. floating rate debt, primarily using interest rate swaps[59](index=59&type=chunk) [Regulation](index=21&type=section&id=Regulation) - Western Union's business is subject to extensive global laws and regulations, including anti-money laundering (AML), anti-terrorist financing, fraud prevention, consumer protection, licensing, and data privacy[60](index=60&type=chunk) - Non-compliance by the company, its agents, or subagents can lead to regulatory actions, civil/criminal penalties, license revocations, service limitations, and reputational damage[60](index=60&type=chunk) - The company has enhanced its global compliance programs, including dedicated personnel, training, suspicious activity reporting, and agent support, to address evolving legal standards[61](index=61&type=chunk)[62](index=62&type=chunk) [Money Transfer and Payment Instrument Licensing and Regulation](index=23&type=section&id=Money%20Transfer%20and%20Payment%20Instrument%20Licensing%20and%20Regulation) - Most services are subject to AML laws (e.g., Bank Secrecy Act in the US) requiring risk-based AML programs, reporting of large cash/suspicious transactions, and customer/agent due diligence[63](index=63&type=chunk) - Economic sanctions programs (e.g., OFAC) restrict transactions with certain countries, regions, and individuals; new OFAC limits in October 2019 are expected to restrict services to Cuba[64](index=64&type=chunk) - In the EU, PSD2 (Second EU Payment Services Directive) has increased supervisory powers, mandated customer identity verification, and imposed investment safeguarding rules, leading to increased compliance costs and risks[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Consumer Protection Regulations](index=27&type=section&id=Consumer%20Protection%20Regulations) - The Dodd-Frank Act and the CFPB impose significant consumer protection obligations, including enhanced pre-transaction disclosures, error resolution, and transaction cancellation rights for international transfers from the US[76](index=76&type=chunk) - Evolving global consumer protection principles and increased coordination among governmental agencies (e.g., ICPEN) may lead to new laws and increased compliance costs[77](index=77&type=chunk) [Derivatives Regulations](index=27&type=section&id=Derivatives%20Regulations) - Dodd-Frank Act rules and EU regulations (e.g., European Market Infrastructure Regulation) subject foreign exchange hedging and derivatives contracts to reporting, recordkeeping, and potential clearing/margin requirements, increasing business costs[78](index=78&type=chunk)[79](index=79&type=chunk) - There is a risk of future CFTC registration as a swap dealer, which would lead to additional costs, including regulatory capital and margin requirements[79](index=79&type=chunk) [Unclaimed Property Regulations](index=29&type=section&id=Unclaimed%20Property%20Regulations) - The company is subject to unclaimed property laws in the US and other countries, requiring turnover of unclaimed property (e.g., unpaid money transfers, money orders) after specified periods[81](index=81&type=chunk) [Privacy Regulations and Information Security Standards](index=29&type=section&id=Privacy%20Regulations%20and%20Information%20Security%20Standards) - The company's handling of personal information is subject to evolving information security, data privacy, and data protection laws globally, including GDPR in the EU and CCPA in California[82](index=82&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - Increased data localization laws and the pending e-Privacy Regulation in the EU present operational and technological challenges, potentially increasing costs and impacting personal information processing[86](index=86&type=chunk)[87](index=87&type=chunk) - Conflicting regulatory goals (preventing illicit activity vs. protecting privacy) and increasing data sharing requests from government agencies create a complex and rapidly changing legal environment[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) [Banking Regulations](index=33&type=section&id=Banking%20Regulations) - The company has subsidiaries operating under banking licenses in Austria and Brazil and is subject to regulation by the Austrian Financial Market Authority and the Brazilian Central Bank, as well as the NYDFS for its Austrian banking subsidiary[91](index=91&type=chunk) [Other](index=33&type=section&id=Other) - Certain services are subject to card association rules and regulations, such as PCI DSS, requiring compliance with payment card account security standards[92](index=92&type=chunk) [Employees and Labor](index=33&type=section&id=Employees%20and%20Labor) - As of December 31, 2019, Western Union employed approximately **11,500 employees globally**, with about **1,900 in the United States**[93](index=93&type=chunk) [Available Information](index=33&type=section&id=Available%20Information) - The company's SEC filings (10-K, 10-Q, 8-K) are available free of charge on its investor relations website (www.westernunion.com) and the SEC's website (www.sec.gov)[94](index=94&type=chunk) [Information About our Executive Officers](index=34&type=section&id=Information%20About%20our%20Executive%20Officers) Executive Officers as of February 20, 2020 | Name | Age | Position | | :--------------- | :-- | :----------------------------------------- | | Hikmet Ersek | 59 | President, Chief Executive Officer, Director | | Raj Agrawal | 54 | Chief Financial Officer | | Jean Claude Farah | 49 | President, Global Network | | Khalid Fellahi | 55 | President, Consumer Money Transfer | | Jacqueline Molnar | 56 | Chief Transformation Officer, Global Head of Compliance | | Michelle Swanback | 51 | President, Product and Platform | | Andrew Summerill | 46 | Interim President, Payments | | Caroline Tsai | 50 | Chief Legal Officer, Corporate Secretary | | Richard Williams | 54 | Chief People Officer | [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks that could adversely affect Western Union's business, financial condition, results of operations, and cash flows, categorized by business and regulatory environments - Risks are grouped into 'Risks Relating to Our Business and Industry' and 'Risks Related to Our Regulatory and Litigation Environment'[106](index=106&type=chunk) [Risks Relating to Our Business and Industry](index=37&type=section&id=Risks%20Relating%20to%20Our%20Business%20and%20Industry) - Global economic downturns, slower growth in money transfer markets, and disruptions (e.g., civil unrest, natural disasters, public health emergencies like coronavirus) could reduce demand for services and impact migration patterns, adversely affecting the business[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - Intense competition from global/niche providers, banks, electronic/mobile/internet services, and digital currencies poses a threat to future growth, requiring effective pricing and service differentiation[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Breaches of information security safeguards or interruptions in systems (including cyber attacks) could damage reputation, disrupt operations, and lead to material costs and regulatory enforcement actions[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) - The company faces credit, liquidity, and fraud risks from agents, consumers, businesses, and third-party processors, especially with the increasing proportion of electronic transactions[160](index=160&type=chunk)[161](index=161&type=chunk)[165](index=165&type=chunk) - Substantial debt (**$3.2 billion** as of Dec 31, 2019) and tax obligations (from the Tax Act) could restrict operations, limit dividend payments/share repurchases, and increase vulnerability to economic changes[194](index=194&type=chunk) [Risks Related to Our Regulatory and Litigation Environment](index=62&type=section&id=Risks%20Related%20to%20Our%20Regulatory%20and%20Litigation%20Environment) - Failure to comply with a wide range of increasingly strict laws and regulations (AML, anti-terrorist financing, sanctions, consumer protection) by the company or its agents could lead to significant penalties, license revocations, and business model changes[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - The company is subject to consent agreements and enforcement actions by regulators (e.g., Joint Settlement Agreements, NYDFS Consent Order), which impose heightened compliance requirements and could result in additional costs or loss of business[209](index=209&type=chunk) - Regulatory initiatives and changes in laws, including those related to competition, could undermine exclusive agent arrangements, increase operating costs, or require changes in the business model[216](index=216&type=chunk)[217](index=217&type=chunk)[222](index=222&type=chunk) - The Dodd-Frank Act and CFPB regulations have significantly impacted the business by imposing additional regulatory obligations, consumer disclosures, error resolution requirements, and potential liability for agent non-compliance[225](index=225&type=chunk)[226](index=226&type=chunk)[228](index=228&type=chunk) - The company is subject to litigation, including class-action lawsuits, and regulatory actions, which could result in material settlements, judgments, fines, or penalties[236](index=236&type=chunk)[237](index=237&type=chunk) - Compliance with evolving data privacy and security laws (e.g., GDPR, CCPA) increases operational costs and risks of fines, sanctions, and reputational damage[238](index=238&type=chunk)[241](index=241&type=chunk) - Differences between accrued amounts for unclaimed property and actual claims by jurisdictions could significantly impact results and cash flows, especially with ongoing audits[243](index=243&type=chunk)[244](index=244&type=chunk) - Failure to meet changing regulatory capital requirements worldwide could adversely affect the business, financial condition, and liquidity[245](index=245&type=chunk)[246](index=246&type=chunk)[248](index=248&type=chunk) [Item 1B. Unresolved Staff Comments](index=78&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item indicates no unresolved staff comments from the SEC [Item 2. Properties](index=78&type=section&id=Item%202.%20Properties) Western Union occupies primarily leased facilities in approximately 50 countries, with corporate headquarters in Denver and international headquarters in Dublin, operating global shared service centers - As of December 31, 2019, the company occupied facilities in approximately **50 countries**, mostly leased, for operational, sales, and administrative purposes[249](index=249&type=chunk) - Corporate headquarters are in Denver, Colorado, and international headquarters in Dublin, Ireland, with shared service centers in Lithuania, Costa Rica, India, and the Philippines[249](index=249&type=chunk) - The company sold its former corporate headquarters in Englewood, Colorado, in January 2020[250](index=250&type=chunk) [Item 3. Legal Proceedings](index=78&type=section&id=Item%203.%20Legal%20Proceedings) This item refers to Note 6, Commitments and Contingencies, in the Financial Statements for legal proceedings information - Information on legal proceedings is incorporated by reference from Note 6, Commitments and Contingencies, in Part II, Item 8[251](index=251&type=chunk) [Item 4. Mine Safety Disclosures](index=78&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Western Union's business PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=79&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section provides information on Western Union's common stock trading, stockholder numbers, stock repurchases, and dividend policy, highlighting factors influencing future decisions - Western Union's common stock trades on the New York Stock Exchange under the symbol 'WU', with **3,203 stockholders of record** as of February 14, 2020[253](index=253&type=chunk) Common Stock Repurchases (Q4 2019) | Period | Total Number of Shares Purchased (a) | Average Price per Share | | :---------------- | :----------------------------------- | :---------------------- | | October 1 - 31 | 987,962 | $23.93 | | November 1 - 30 | 788,473 | $27.07 | | December 1 - 31 | 795,812 | $27.00 | | Total | 2,572,247 | $25.84 | - The Board of Directors authorized **$1.0 billion** in common stock repurchases through December 31, 2021, with all remaining available as of December 31, 2019[254](index=254&type=chunk) Cash Dividends Declared Per Common Share (2018-2019) | Year | Q1 | Q2 | Q3 | Q4 | | :--- | :---- | :---- | :---- | :---- | | 2019 | $0.20 | $0.20 | $0.20 | $0.20 | | 2018 | $0.19 | $0.19 | $0.19 | $0.19 | - Future dividends and share repurchases depend on financial condition, earnings, liquidity, debt obligations, capital requirements, regulatory constraints, and cash availability in the United States[256](index=256&type=chunk) [Item 6. Selected Financial Data](index=81&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of Western Union's selected consolidated financial data, including statements of income, cash flow, and balance sheet information, providing an overview of key financial trends Selected Statements of Income Data (2015-2019) | (in millions, except per share data) | 2019 | 2018 | 2017 | 2016 | 2015 | | :----------------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Revenues | $5,292.1 | $5,589.9 | $5,524.3 | $5,422.9 | $5,483.7 | | Operating expenses | 4,358.1 | 4,467.8 | 5,048.5 | 4,935.9 | 4,371.5 | | Operating income | 934.0 | 1,122.1 | 475.8 | 487.0 | 1,112.2 | | Gain on divestitures of businesses | 524.6 | — | — | — | — | | Interest income | 6.3 | 4.8 | 4.9 | 3.5 | 10.9 | | Interest expense | (152.0) | (149.6) | (142.1) | (152.5) | (167.9) | | Other income/(expense), net | 8.5 | 14.1 | 8.9 | 3.7 | (13.4) | | Income before income taxes | 1,321.4 | 991.4 | 347.5 | 341.7 | 941.8 | | Net income/(loss) | 1,058.3 | 851.9 | (557.1) | 253.2 | 837.8 | | Depreciation and amortization | 257.7 | 264.7 | 262.9 | 263.2 | 270.2 | | Basic Earnings/(loss) per share | $2.47 | $1.89 | $(1.19) | $0.52 | $1.63 | | Diluted Earnings/(loss) per share | $2.46 | $1.87 | $(1.19) | $0.51 | $1.62 | | Cash dividends declared per common share | $0.80 | $0.76 | $0.70 | $0.64 | $0.62 | Selected Cash Flow Data (2015-2019) | (in millions) | 2019 | 2018 | 2017 | 2016 | 2015 | | :---------------------------------- | :------- | :------- | :------- | :--------- | :--------- | | Net cash provided by operating activities | $914.6 | $821.3 | $742.0 | $1,041.9 | $1,071.1 | | Capital expenditures | (127.7) | (339.0) | (177.1) | (229.8) | (266.5) | | Common stock repurchased | (552.6) | (412.4) | (502.8) | (501.6) | (511.3) | Selected Balance Sheet Data (2015-2019) | (in millions) | 2019 | 2018 | 2017 | 2016 | 2015 | | :------------------------ | :--------- | :--------- | :--------- | :--------- | :--------- | | Settlement assets | $3,296.7 | $3,813.8 | $4,188.9 | $3,749.1 | $3,308.7 | | Total assets | 8,758.5 | 8,996.8 | 9,231.4 | 9,419.6 | 9,449.2 | | Settlement obligations | 3,296.7 | 3,813.8 | 4,188.9 | 3,749.1 | 3,308.7 | | Borrowings | 3,229.3 | 3,433.7 | 3,033.6 | 2,786.1 | 3,215.9 | | Total liabilities | 8,798.0 | 9,306.6 | 9,722.8 | 8,517.4 | 8,044.3 | | Total stockholders' equity/(deficit) | (39.5) | (309.8) | (491.4) | 902.2 | 1,404.9 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=84&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Western Union's financial condition and results of operations for 2019 versus 2018, covering consolidated results, segment performance, capital, liquidity, and critical accounting policies, highlighting currency, divestitures, and restructuring impacts - Consolidated revenues for 2019 decreased by **5% to $5,292.1 million** from **$5,589.9 million in 2018**, primarily due to foreign currency fluctuations and divestitures, partially offset by Consumer-to-Consumer transaction growth[276](index=276&type=chunk) - Operating income decreased by **17% to $934.0 million** in 2019 from **$1,122.1 million in 2018**, impacted by foreign currency and increased selling, general, and administrative expenses[276](index=276&type=chunk) - Net income increased by **24% to $1,058.3 million** in 2019 from **$851.9 million in 2018**, significantly boosted by a **$524.6 million gain on divestitures**[276](index=276&type=chunk) Consolidated Results of Operations (2019 vs. 2018) | (in millions, except per share amounts) | 2019 | 2018 | % Change | | :-------------------------------------- | :--------- | :--------- | :------- | | Revenues | $5,292.1 | $5,589.9 | (5)% | | Cost of services | 3,086.5 | 3,300.8 | (6)% | | Selling, general, and administrative | 1,271.6 | 1,167.0 | 9% | | Total expenses | 4,358.1 | 4,467.8 | (2)% | | Operating income | 934.0 | 1,122.1 | (17)% | | Gain on divestitures of businesses | 524.6 | — | (a) | | Interest income | 6.3 | 4.8 | 31% | | Interest expense | (152.0) | (149.6) | 2% | | Other income, net | 8.5 | 14.1 | (40)% | | Total other income/(expense), net | 387.4 | (130.7) | (a) | | Income before income taxes | 1,321.4 | 991.4 | 33% | | Provision for income taxes | 263.1 | 139.5 | 89% | | Net income | $1,058.3 | $851.9 | 24% | | Basic Earnings per share | $2.47 | $1.89 | 31% | | Diluted Earnings per share | $2.46 | $1.87 | 32% | [Overview](index=84&type=section&id=Overview) - Western Union is a leading provider of money movement and payment services, with two main segments: Consumer-to-Consumer (money transfers) and Business Solutions (cross-border payments and foreign exchange)[267](index=267&type=chunk)[268](index=268&type=chunk) - The 'Other' segment includes bill payment services and money order services, along with certain corporate costs[269](index=269&type=chunk) [Results of Operations](index=84&type=section&id=Results%20of%20Operations) - Revenues for 2019 were negatively impacted by **$238.9 million** due to fluctuations in the United States dollar against foreign currencies, including a **$161.2 million reduction** from the strengthening of the dollar against the Argentine peso[272](index=272&type=chunk)[274](index=274&type=chunk) - Operating income was negatively impacted by **$63.5 million** due to foreign currency fluctuations in 2019, with **$43.4 million** attributed to the Argentine peso[274](index=274&type=chunk) - The sale of the Speedpay business in May 2019 generated a pre-tax gain of approximately **$523 million**, significantly impacting total other income/expense[275](index=275&type=chunk)[291](index=291&type=chunk) [Revenues Overview](index=86&type=section&id=Revenues%20Overview) - GAAP revenues decreased by **5% in 2019** compared to 2018, primarily due to foreign currency fluctuations (**4% negative impact**) and the divestitures of Speedpay and Paymap (**4% negative impact**)[282](index=282&type=chunk) - Constant currency adjusted revenues, excluding divestitures, increased by **3% in 2019**, driven by higher local currency revenue per transaction in Argentina (due to inflation) and growth in the Consumer-to-Consumer segment[282](index=282&type=chunk) Consolidated Revenue Change (2019 vs. 2018) | (dollars in millions) | Year 2019 | Ended December 2018 | % Change | | :----------------------------------------------------------------- | :--------- | :------------------ | :------- | | Revenues, as reported - (GAAP) | $5,292.1 | $5,589.9 | (5)% | | Foreign currency impact | | | 4% | | Divestitures impact | | | 4% | | Revenue change, constant currency adjusted and excluding divestitures - (Non-GAAP) | | | 3% | [Operating Expenses Overview](index=88&type=section&id=Operating%20Expenses%20Overview) - The company continues to enhance its global compliance programs to detect and prevent money laundering, terrorist financing, fraud, and other illicit activities, leading to increased costs[283](index=283&type=chunk)[284](index=284&type=chunk) - A restructuring plan approved in August 2019 aims to change the operating model and improve cost structure through senior management reorganization, headcount reduction, and facility consolidation, with expected total expenses of **$150 million** through 2020[286](index=286&type=chunk) - Restructuring-related expenses for 2019 totaled **$115.5 million**, primarily for severance and employee benefits, allocated to Cost of services (**$39.8 million**) and Selling, general, and administrative (**$75.7 million**)[287](index=287&type=chunk) [Cost of Services](index=90&type=section&id=Cost%20of%20Services) - Cost of services, primarily agent commissions (**60% of total**), decreased in 2019 due to the Speedpay divestiture and lower variable costs, partially offset by restructuring-related severance and employee benefits[289](index=289&type=chunk) [Selling, General, and Administrative](index=90&type=section&id=Selling%2C%20General%2C%20and%20Administrative) - Selling, general, and administrative expenses increased in 2019 due to restructuring-related expenses (severance, relocation, facility closures, consulting) and higher marketing costs[290](index=290&type=chunk) [Total Other Income/Expense, Net](index=90&type=section&id=Total%20Other%20Income%2FExpense%2C%20Net) - Total other income/expense, net, was favorably impacted in 2019 by the gain on the Speedpay sale, partially offset by non-recurring foreign exchange gains in the prior year[291](index=291&type=chunk) [Income Taxes](index=90&type=section&id=Income%20Taxes) - The effective tax rate increased to **19.9% in 2019** from **14.1% in 2018**, primarily due to increased domestic pre-tax income from divestiture gains and certain discrete items[292](index=292&type=chunk) - As of December 31, 2019, total tax contingency reserves were **$309.0 million**, including accrued interest and penalties[293](index=293&type=chunk) - A significant proportion of profits are foreign-derived (**67% in 2019**), making the overall effective tax rate susceptible to changes in foreign tax laws[294](index=294&type=chunk) [Earnings Per Share](index=92&type=section&id=Earnings%20Per%20Share) Earnings Per Share (2019 vs. 2018) | Metric | 2019 | 2018 | % Change | | :-------- | :---- | :---- | :------- | | Basic EPS | $2.47 | $1.89 | 31% | | Diluted EPS | $2.46 | $1.87 | 32% | - EPS growth in 2019 was driven by higher net income (including divestiture gains) and a lower number of outstanding shares due to stock repurchases[296](index=296&type=chunk) [Segment Discussion](index=92&type=section&id=Segment%20Discussion) - Segment results are computed based on consistent accounting policies, with corporate costs allocated primarily by revenue percentage[297](index=297&type=chunk)[298](index=298&type=chunk) - Restructuring-related expenses, goodwill impairment charges, and certain regulatory expenses (NYDFS Consent Order, Joint Settlement Agreements, WU Way initiative) are excluded from segment operating income for performance assessment[299](index=299&type=chunk)[300](index=300&type=chunk)[693](index=693&type=chunk)[694](index=694&type=chunk)[695](index=695&type=chunk)[696](index=696&type=chunk) Segment Revenues as % of Consolidated Totals (2019 vs. 2018) | Segment | 2019 | 2018 | | :------------------- | :---- | :---- | | Consumer-to-Consumer | 83 % | 80 % | | Business Solutions | 7 % | 7 % | | Other | 10 % | 13 % | | Total | 100 % | 100 % | [Consumer-to-Consumer Segment](index=94&type=section&id=Consumer-to-Consumer%20Segment) Consumer-to-Consumer Segment Results (2019 vs. 2018) | (dollars and transactions in millions) | 2019 | 2018 | % Change | | :------------------------------------- | :--------- | :--------- | :------- | | Revenues | $4,407.8 | $4,453.6 | (1)% | | Operating income | $975.4 | $1,048.2 | (7)% | | Operating income margin | 22% | 24% | | | Consumer-to-Consumer transactions | 289.4 | 287.0 | 1% | - Consumer-to-Consumer revenue decreased **1% in 2019**, despite **1% transaction growth**, primarily due to a **2% negative impact** from foreign currency fluctuations[309](index=309&type=chunk) - Operating income decreased **7% in 2019**, impacted by increased corporate overhead allocations (due to Speedpay divestiture) and higher marketing costs, partially offset by decreased variable costs[316](index=316&type=chunk) Consumer-to-Consumer Regional Growth (2019) | Region | Revenue Growth/ (Decline), as Reported - (GAAP) | Foreign Exchange Translation Impact | Constant Currency Growth/ (Decline) (Non-GAAP) | Transaction Growth/ (Decline) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------- | :--------------------------------------------- | :---------------------------- | | North America (NA) | 2% | 0% | 2% | (2)% | | Europe and Russia/CIS (EU & CIS) | (2)% | (3)% | 1% | 5% | | Middle East, Africa, and South Asia (MEASA) | (1)% | (1)% | 0% | (1)% | | Latin America and the Caribbean (LACA) | 1% | (10)% | 11% | 8% | | East Asia and Oceania (APAC) | (13)% | (1)% | (12)% | (7)% | | Total Consumer-to-Consumer | (1)% | (2)% | 1% | 1% | | westernunion.com | 17% | (1)% | 18% | 16% | - Westernunion.com represented approximately **14% of Consumer-to-Consumer revenues in 2019**, up from **12% in 2018**, showing strong growth[307](index=307&type=chunk) [Business Solutions Segment](index=97&type=section&id=Business%20Solutions%20Segment) Business Solutions Segment Results (2019 vs. 2018) | (dollars in millions) | 2019 | 2018 | % Change | | :-------------------- | :----- | :----- | :------- | | Revenues | $388.8 | $386.8 | 0% | | Operating income | $46.8 | $23.4 | (a) | | Operating income margin | 12% | 6% | | - Business Solutions revenue was flat in 2019, with a **4% negative impact** from foreign currency exchange rates[318](index=318&type=chunk) - Operating income and margin increased in 2019 due to decreased information technology costs and other expense reductions, some of which are not expected to recur[320](index=320&type=chunk) [Other](index=99&type=section&id=Other) Other Segment Results (2019 vs. 2018) | (dollars in millions) | 2019 | 2018 | % Change | | :-------------------- | :----- | :----- | :------- | | Revenues | $495.5 | $749.5 | (34)% | | Operating income | $27.3 | $50.5 | (46)% | | Operating income margin | 6% | 7% | | - Other revenue decreased **34% in 2019**, primarily due to the sale of Speedpay and a decrease in the Argentine bill payments business from the strengthening of the US dollar against the Argentine peso[323](index=323&type=chunk) - Other operating income decreased due to lower Speedpay and Paymap revenues, net of reduced direct and allocated expenses[324](index=324&type=chunk) [Capital Resources and Liquidity](index=99&type=section&id=Capital%20Resources%20and%20Liquidity) - Primary liquidity sources are cash from operating activities, existing cash balances, and a **$1.5 billion revolving credit facility** supporting a commercial paper program[325](index=325&type=chunk)[330](index=330&type=chunk) - Future cash flows are subject to economic conditions, tax laws, audit outcomes, and legal contingencies[326](index=326&type=chunk) - As of December 31, 2019, cash and cash equivalents were **$1,450.5 million**, up from **$973.4 million in 2018**, partly due to **$750 million cash proceeds** from the Speedpay divestiture[332](index=332&type=chunk) - Cash provided by operating activities increased to **$914.6 million in 2019** from **$821.3 million in 2018**, due to timing of significant payments in 2018 (IRS agreement, NYDFS Consent Order) partially offset by taxes from divestiture gains and restructuring payments in 2019[335](index=335&type=chunk)[336](index=336&type=chunk) Outstanding Borrowings (as of December 31, 2019) | Borrowing Type | Amount (in millions) | | :------------------------------ | :------------------- | | Commercial paper | $245.0 | | 3.600% notes due 2022 | 500.0 | | 4.250% notes due 2023 | 300.0 | | 2.850% notes due 2025 | 500.0 | | 6.200% notes due 2036 | 500.0 | | 6.200% notes due 2040 | 250.0 | | Term loan facility borrowing | 950.0 | | **Total borrowings at par value** | **$3,245.0** | | Debt issuance costs and unamortized discount, net | (15.7) | | **Total borrowings at carrying value** | **$3,229.3** | - The company's consolidated adjusted EBITDA interest coverage ratio was **9:1 for 2019**, well above the **3:1 covenant requirement**[357](index=357&type=chunk) Contractual Obligations (as of December 31, 2019) | Items related to amounts included on our balance sheet: | Total | Payments Due Within 1 Year | Payments Due 1-3 Years | Payments Due 3-5 Years | Payments Due After 5 Years | | :------------------------------------------------------ | :---------- | :------------------------- | :--------------------- | :--------------------- | :------------------------- | | Borrowings, including interest | $4,352.6 | $358.4 | $818.0 | $1,306.9 | $1,869.3 | | 2017 United States federal income taxes | 668.0 | 64.0 | 128.0 | 278.0 | 198.0 | | Unrecognized tax benefits | 319.5 | — | — | — | — | | Operating leases | 302.5 | 53.2 | 83.7 | 63.1 | 102.5 | | Foreign currency derivative contracts | 159.5 | 131.4 | 27.6 | 0.5 | — | | Other | 20.5 | 16.2 | 4.3 | — | — | | Other contractual obligations: | | | | | | | Purchase obligations | 166.3 | 102.0 | 57.2 | 6.8 | 0.3 | | **Total** | **$5,988.9** | **$725.2** | **$1,118.8** | **$1,655.3** | **$2,170.1** | [Critical Accounting Policies and Estimates](index=115&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The determination of worldwide income tax provision requires significant judgment due to complexities in interpreting tax laws across multiple jurisdictions[379](index=379&type=chunk)[380](index=380&type=chunk) - Tax benefits from uncertain tax positions are recognized only when 'more likely than not' to be sustained, with reserves established based on management's judgment[380](index=380&type=chunk)[381](index=381&type=chunk) - Derivatives are used to manage foreign currency and interest rate exposures and facilitate Business Solutions payments, with certain arrangements designated as cash flow or fair value hedges[384](index=384&type=chunk) - Other intangible assets (contract costs, acquired contracts, software) are amortized over their benefit periods and reviewed annually for impairment based on estimated undiscounted cash flows[389](index=389&type=chunk)[390](index=390&type=chunk) - Goodwill is tested for impairment annually at the reporting unit level, involving qualitative and quantitative assessments based on discounted cash flow analyses and significant management judgment regarding revenue growth rates and EBITDA margins[393](index=393&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk) - Legal contingencies are accrued when a loss is probable and reasonably estimable, requiring significant judgment due to the unpredictable nature of legal actions[402](index=402&type=chunk)[403](index=403&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=121&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines Western Union's exposure to market risks from foreign currency exchange rates, interest rates, and credit risk, describing strategies and financial instruments used for risk management - The company is exposed to market risks from foreign currency exchange rates, interest rates, and credit risk, managed through a risk management program[407](index=407&type=chunk) [Foreign Currency Exchange Rates](index=121&type=section&id=Foreign%20Currency%20Exchange%20Rates) - Foreign exchange risk is managed through business structure (settling with agents in major currencies) and short-duration forward contracts (days to one month) to offset fluctuations between transaction initiation and settlement[408](index=408&type=chunk)[410](index=410&type=chunk) - Longer-term foreign currency forward contracts (up to **36 months**) are used to mitigate risks on forecasted revenues, primarily in EUR, CAD, GBP, and AUD[411](index=411&type=chunk) - The strengthening of the US dollar against the Argentine peso has negatively impacted results, and further devaluation or transfer restrictions could adversely affect operations and cash flows from Argentina[412](index=412&type=chunk) - A hypothetical **10% strengthening/weakening of the US dollar** would result in an approximate **$45 million decrease/increase** to pre-tax annual income[414](index=414&type=chunk) [Interest Rates](index=125&type=section&id=Interest%20Rates) - Approximately **$1.4 billion** of the company's **$2.7 billion interest-bearing assets** bear floating rates, making them sensitive to interest rate changes[415](index=415&type=chunk) - As of December 31, 2019, **$1.2 billion of borrowings** are subject to floating interest rates, including the Term Loan Facility and commercial paper[417](index=417&type=chunk) - A hypothetical **100 basis point increase/decrease in interest rates** would result in an approximate **$12 million decrease/increase** to annual pre-tax income from borrowings, offset by an approximate **$14 million increase/decrease** from cash and investment balances[419](index=419&type=chunk) [Credit Risk](index=125&type=section&id=Credit%20Risk) - Credit risk from investment securities, money market funds, and derivatives is managed by reviewing concentrations, trading levels, credit spreads, and diversifying investments among global financial institutions[420](index=420&type=chunk) - Credit risk also arises from agent receivables in money transfer/bill payment processes and from consumer electronic transactions (chargebacks, insufficient funds, fraud)[422](index=422&type=chunk) - In Business Solutions, credit risk relates to derivatives written to customers and trade credit extensions, mitigated by ongoing credit reviews and collateral requirements[423](index=423&type=chunk) - Losses from bad debts have consistently been approximately **1% of consolidated revenues**[424](index=424&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=128&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Western Union's audited consolidated financial statements, including income, comprehensive income, balance sheets, cash flow, and stockholders' equity statements, with notes detailing accounting policies and disclosures - The company's internal control over financial reporting was deemed effective as of December 31, 2019, based on COSO criteria, as audited by Ernst & Young LLP[429](index=429&type=chunk)[431](index=431&type=chunk) - Critical audit matters identified include management's estimate of uncertain tax positions and the goodwill impairment assessment of the Business Solutions reporting unit, both involving significant judgment[445](index=445&type=chunk)[446](index=446&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=129&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) - Management is responsible for establishing and maintaining adequate internal control over financial reporting, designed to provide reasonable assurance regarding financial reporting reliability[427](index=427&type=chunk) - As of December 31, 2019, management concluded that the company's internal control over financial reporting was effective, based on the COSO (2013 framework) criteria[429](index=429&type=chunk) [Report of Independent Registered Public Accounting Firm](index=130&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - Ernst & Young LLP audited Western Union's internal control over financial reporting and expressed an unqualified opinion that it was effective as of December 31, 2019[431](index=431&type=chunk) - The firm also issued an unqualified opinion on the consolidated financial statements for the period ended December 31, 2019[432](index=432&type=chunk)[439](index=439&type=chunk) [Opinion on the Financial Statements](index=131&type=section&id=Opinion%20on%20the%20Financial%20Statements) - The independent registered public accounting firm, Ernst & Young LLP, expressed an unqualified opinion that the consolidated financial statements present fairly, in all material respects, the financial position and results of operations for the period ended December 31, 2019, in conformity with U.S. GAAP[439](index=439&type=chunk) [Critical Audit Matters](index=133&type=section&id=Critical%20Audit%20Matters) - Auditing management's estimate of tax benefits for uncertain tax positions required significant judgment due to the complexity of international tax laws and varying interpretations[446](index=446&type=chunk) - The goodwill impairment assessment for the Business Solutions reporting unit was complex due to the subjective nature of assumptions (revenue growth, EBITDA margins) and the reporting unit's fair value not significantly exceeding its carrying value[446](index=446&type=chunk) [Consolidated Statements of Income/(Loss)](index=136&type=section&id=Consolidated%20Statements%20of%20Income%2F%28Loss%29) Consolidated Statements of Income/(Loss) (2017-2019) | (in millions, except per share amounts) | 2019 | 2018 | 2017 | | :-------------------------------------- | :--------- | :--------- | :--------- | | Revenues | $5,292.1 | $5,589.9 | $5,524.3 | | Cost of services | 3,086.5 | 3,300.8 | 3,353.0 | | Selling, general, and administrative | 1,271.6 | 1,167.0 | 1,231.5 | | Goodwill impairment charge | — | — | 464.0 | | Total expenses | 4,358.1 | 4,467.8 | 5,048.5 | | Operating income | 934.0 | 1,122.1 | 475.8 | | Gain on divestitures of businesses | 524.6 | — | — | | Interest income | 6.3 | 4.8 | 4.9 | | Interest expense | (152.0) | (149.6) | (142.1) | | Other income, net | 8.5 | 14.1 | 8.9 | | Total other income/(expense), net | 387.4 | (130.7) | (128.3) | | Income before income taxes | 1,321.4 | 991.4 | 347.5 | | Provision for income taxes | 263.1 | 139.5 | 904.6 | | Net income/(loss) | $1,058.3 | $851.9 | $(557.1) | | Basic Earnings/(loss) per share | $2.47 | $1.89 | $(1.19) | | Diluted Earnings/(loss) per share | $2.46 | $1.87 | $(1.19) | | Weighted-average shares outstanding (Basic) | 427.6 | 451.8 | 467.9 | | Weighted-average shares outstanding (Diluted) | 430.9 | 454.4 | 467.9 | [Consolidated Statements of Comprehensive Income/(Loss)](index=137&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%2F%28Loss%29) Consolidated Statements of Comprehensive Income/(Loss) (2017-2019) | (in millions) | 2019 | 2018 | 2017 | | :------------------------------------------------ | :--------- | :-------- | :--------- | | Net income/(loss) | $1,058.3 | $851.9 | $(557.1) | | Other comprehensive income/(loss), net of reclassifications and tax: | | | | | Unrealized gains/(losses) on investment securities | 25.8 | (4.3) | 6.5 | | Unrealized gains/(losses) on hedging activities | (11.0) | 50.3 | (74.4) | | Foreign currency translation adjustments | — | (19.5) | (6.2) | | Defined benefit pension plan adjustments | 7.2 | 1.8 | 9.0 | | Total other comprehensive income/(loss) | 22.0 | 28.3 | (65.1) | | Comprehensive income/(loss) | $1,080.3 | $880.2 | $(622.2) | [Consolidated Balance Sheets](index=138&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets (as of December 31, 2019 and 2018) | (in millions, except per share amounts) | 2019 | 2018 | | :-------------------------------------- | :--------- | :--------- | | **Assets** | | | | Cash and cash equivalents | $1,450.5 | $973.4 | | Settlement assets | 3,296.7 | 3,813.8 | | Property and equipment, net | 186.9 | 270.4 | | Goodwill | 2,566.6 | 2,725.0 | | Other intangible assets, net | 494.9 | 598.2 | | Other assets | 762.9 | 616.0 | | **Total assets** | **$8,758.5** | **$8,996.8** | | **Liabilities and stockholders' deficit** | | | | Accounts payable and accrued liabilities | $601.9 | $564.9 | | Settlement obligations | 3,296.7 | 3,813.8 | | Income taxes payable | 1,019.7 | 1,054.0 | | Deferred tax liability, net | 152.1 | 161.1 | | Borrowings | 3,229.3 | 3,433.7 | | Other liabilities | 498.3 | 279.1 | | **Total liabilities** | **8,798.0** | **9,306.6** | | Total stockholders' deficit | (39.5) | (309.8) | | **Total liabilities and stockholders' deficit** | **$8,758.5** | **$8,996.8** | [Consolidated Statements of Cash Flows](index=139&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (2017-2019) | (in millions) | 2019 | 2018 | 2017 | | :------------------------------------------------ | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $914.6 | $821.3 | $742.0 | | Net cash provided by/(used in) investing activities | 632.3 | (328.8) | (204.6) | | Net cash used in financing activities | (1,069.8) | (357.2) | (570.5) | | Net change in cash, cash equivalents, and restricted cash | 477.1 | 135.3 | (33.1) | | Cash, cash equivalents, and restricted cash at end of year | $1,456.8 | $979.7 | $844.4 | | Supplemental cash flow information: | | | | | Interest paid | $151.3 | $142.5 | $128.0 | | Income taxes paid/(refunded) | $318.9 | $339.4 | $(11.6) | [Consolidated Statements of Stockholders' Equity/(Deficit)](index=140&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%2F%28Deficit%29) Consolidated Statements of Stockholders' Equity/(Deficit) (2017-2019) | (in millions) | Common Shares | Stock Amount | Capital Surplus | Retained Earnings/ (Accumulated Deficit) | Accumulated Other Comprehensive Loss | Total Stockholders' Equity/(Deficit) | | :------------------------------------------------ | :------------ | :----------- | :-------------- | :--------------------------------------- | :----------------------------------- | :----------------------------------- | | Balance, December 31, 2016 | 481.5 | $4.8 | $640.9 | $419.3 | $(162.8) | $902.2 | | Net loss | — | — | — | (557.1) | — | (557.1) | | Common stock dividends declared ($0.70 per share) | — | — | — | (325.6) | — | (325.6) | | Repurchase and retirement of common shares | (25.7) | (0.2) | — | (502.5) | — | (502.7) | | Balance, December 31, 2017 | 459.0 | 4.6 | 697.8 | (965.9) | (227.9) | (491.4) | | Net income | — | — | — | 851.9 | — | 851.9 | | Common stock dividends declared ($0.76 per share) | — | — | — | (341.7) | — | (341.7) | | Repurchase and retirement of common shares | (20.9) | (0.2) | — | (413.8) | — | (414.0) | | Balance, December 31, 2018 | 441.2 | 4.4 | 755.6 | (838.8) | (231.0) | (309.8) | | Net income | — | — | — | 1,058.3 | — | 1,058.3 | | Common stock dividends and dividend equivalents declared ($0.80 per share) | — | — | — | (342.6) | — | (342.6) | | Repurchase and retirement of common shares | (27.6) | (0.2) | — | (552.8) | — | (553.0) | | Balance, December 31, 2019 | 418.0 | $4.2 | $841.2 | $(675.9) | $(209.0) | $(39.5) | [Notes to Consolidated Financial Statements](index=142&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Business and Basis of Presentation](index=142&type=section&id=1.%20Business%20and%20Basis%20of%20Presentation) - Western Union operates in Consumer-to-Consumer and Business Solutions segments, with other services including bill payments and money orders[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk) - Approximately **$610 million of subsidiary assets** are restricted due to legal or regulatory limitations on transfer outside their respective countries, and subsidiaries must meet minimum capital requirements[464](index=464&type=chunk) - Consolidated financial statements are unclassified due to the short-term nature of settlement obligations versus the ability to invest cash awaiting settlement in long-term securities[467](index=467&type=chunk) [2. Summary of Significant Accounting Policies](index=144&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - Financial statements are prepared in conformity with U.S. GAAP, requiring management estimates and assumptions[468](index=468&type=chunk) - Basic EPS excludes stock options and unvested restricted stock; diluted EPS reflects potential dilution using the treasury stock method[470](index=470&type=chunk) - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[473](index=473&type=chunk)[474](index=474&type=chunk)[475](index=475&type=chunk) - Business combinations are accounted for using the acquisition method, recognizing assets and liabilities at fair value, with excess purchase price recorded as goodwill[479](index=479&type=chunk) - Settlement assets (**$3,296.7 million in 2019**) and obligations (**$3,296.7 million in 2019**) represent funds received/to be received from agents and amounts payable for money transfers, money orders, and payment services[483](index=483&type=chunk)[487](index=487&type=chunk) - Goodwill is tested for impairment annually at the reporting unit level; a **$464.0 million impairment charge** was recognized in 2017 for the Business Solutions unit[491](index=491&type=chunk) - Other intangible assets, primarily contract costs and software, are amortized on a straight-line basis and reviewed for impairment[492](index=492&type=chunk)[498](index=498&type=chunk) - The company uses derivatives to minimize foreign currency and interest rate exposures and facilitate Business Solutions payments, with certain derivatives designated as cash flow or fair value hedges[506](index=506&type=chunk) - New accounting standards adopted in 2019 and 2018 include lease accounting (ROU assets and lease liabilities on balance sheet) and revenue recognition (five-step model), with immaterial impact on financial position and results of operations[516](index=516&type=chunk)[517](index=517&type=chunk) [3. Revenue](index=155&type=section&id=3.%20Revenue) - Revenue from contracts with customers was **$5,033.2 million in 2019** and **$5,382.6 million in 2018**, primarily derived from transaction fees and foreign exchange spreads[522](index=522&type=chunk)[523](index=523&type=chunk) - Revenue is recognized at a point in time when the integrated service (e.g., money transfer, bill payment) is completed and funds are available to the recipient[526](index=526&type=chunk)[527](index=527&type=chunk)[528](index=528&type=chunk) Disaggregation of Revenue by Product Type and Region (2019) | Regions: | Consumer Money Transfers | Foreign Exchange and Payment Services | Consumer Bill Payments | Other Services | Total | | :-------------------------------- | :----------------------- | :------------------------------------ | :--------------------- | :------------- | :--------- | | North America (NA) | $1,653.5 | $95.4 | $223.0 | $55.9 | $2,027.8 | | Europe and Russia/CIS (EU & CIS) | 1,350.1 | 127.1 | 3.2 | 4.1 | 1,484.5 | | Middle East, Africa, and South Asia (MEASA) | 642.0 | 1.8 | 0.4 | — | 644.2 | | Latin America and the Caribbean (LACA) | 395.2 | 3.4 | 129.4 | 15.3 | 543.3 | | East Asia and Oceania (APAC) | 263.5 | 68.4 | 1.5 | — | 333.4 | | Revenues from contracts with customers | $4,304.3 | $296.1 | $357.5 | $75.3 | $5,033.2 | | Other revenues | 103.5 | 92.7 | 37.3 | 25.4 | 258.9 | | Total revenues | $4,407.8 | $388.8 | $394.8 | $100.7 | $5,292.1 | [4. Restructuring-Related Expenses and Business Transformation Expenses](index=160&type=section&id=4.%20Restructuring-Related%20Expenses%20and%20Business%20Transformation%20Expenses) - A restructuring plan approved in August 2019 aims to reorganize senior management, reduce headcount, and consolidate facilities, with expected total expenses of **$150 million** through 2020[533](index=533&type=chunk) - For 2019, **$115.5 million in restructuring-related expenses** were incurred, primarily for severance and employee benefits, with **$38.2 million paid in cash**[535](index=535&type=chunk) Restructuring-Related Expenses (2019) | Expense Category | Amount (in millions) | | :--------------------------------- | :------------------- | | Cost of services | $39.8 | | Selling, general, and administrative | 75.7 | | **Total expenses, pre-tax** | **$115.5** | | Total expenses, net of tax | $90.0 | - Business transformation expenses related to the 'WU Way' initiative were effectively complete by December 31, 2017, with **$94.4 million incurred in 2017**[537](index=537&type=chunk)[538](index=538&type=chunk) [5. Divestitures, Business Combinations, and Goodwill](index=161&type=section&id=5.%20Divestitures%2C%20Business%20Combinations%2C%20and%20Goodwill) - In May 2019, the company sold its U.S. electronic bill payments business (Speedpay) for approximately **$750 million cash**, recording a pre-tax gain of **$523 million**[539](index=539&type=chunk) - A goodwill impairment charge of **$464.0 million** was recognized in 2017 for the Business Solutions reporting unit, driven by decreased projected revenue growth rates, EBITDA margins, and the impact of the Tax Act[540](index=540&type=chunk)[541](index=541&type=chunk) Goodwill by Segment (as of December 31, 2019) | Segment | Goodwill, net (in millions) | | :------------------- | :-------------------------- | | Consumer-to-Consumer | $1,980.7 | | Business Solutions | $532.0 | | Other | $53.9 | | **Total** | **$2,566.6** | [6. Commitments and Contingencies](index=165&type=section&id=6.%20Commitments%20and%20Contingencies) - The company had approximately **$335 million** in outstanding letters of credit and bank guarantees as of December 31, 2019, primarily for safeguarding consumer funds, lease arrangements, and agent agreements[546](index=546&type=chunk) - The company is subject to various claims and litigation, with reasonably possible potential litigation losses in excess of recorded liabilities estimated at approximately **$30 million** as of December 31, 2019[547](index=547&type=chunk)[548](index=548&type=chunk) - In January 2017, the company entered into Joint Settlement Agreements with the DOJ, FTC, FinCEN, and state attorneys general, requiring a **$586 million payment** for consumer reimbursement and enhanced compliance practices[550](index=550&type=chunk)[551](index=551&type=chunk)[552](index=552&type=chunk) - In January 2018, the company agreed to the NYDFS Consent Order, paying a civil monetary penalty of **$60 million** to resolve an investigation into anti-money laundering programs[564](index=564&type=chunk) - A shareholder derivative action filed in January 2020 alleges misconduct related to anti-fraud and AML compliance programs, with the action currently stayed pending a special committee investigation[554](index=554&type=chunk)[556](index=556&type=chunk)[557](index=557&type=chunk)[558](index=558&type=chunk) [7. Related Party Transactions](index=173&type=section&id=7.%20Related%20Party%20Transactions) - The company pays commissions to certain equity method agents for money transfer and other services, totaling **$57.1 million in 2019**[567](index=567&type=chunk) [8. Investment Securities](index=174&type=section&id=8.%20Investment%20Securities) - Investment securities, primarily highly-rated state and municipal debt securities, are included in Settlement assets and are held to satisfy outstanding settlement obligations in accordance with regulatory requirements[568](index=568&type=chunk) - Substantially all investment securities are classified as available-for-sale and recorded at fair value, with unrealized gains and losses excluded from earnings and presented in Accumulated other comprehensive loss[569](index=569&type=chunk) Investment Securities within Settlement Assets (as of December 31, 2019) | Category | Amortized Cost (in millions) | Fair Value (in millions) | | :---------------------------------------- | :--------------------------- | :----------------------- | | Money market funds | $24.6 | $24.6 | | State and municipal debt securities | 1,227.4 | 1,257.8 | | State and municipal variable-rate demand notes | 276.1 | 276.1 | | United States government agency mortgage-backed securities | 66.3 | 67.2 | | Corporate debt securities | 52.3 | 52.4 | | Other United States government agency debt securities | 34.9 | 34.9 | | United States Treasury securities | 9.8 | 10.0 | | **Total investment securities within Settlement assets** | **$1,691.4** | **$1,723.0** | [9. Fair Value Measurements](index=176&type=section&id=9.%20Fair%20Value%20Measurements) - Fair value is measured using a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[576](index=576&type=chunk) Assets Measured at Fair Value (as of December 31, 2019) | Category | Level 1 (in millions) | Level 2 (in millions) | Total Fair Value (in millions) | | :---------------------------------------- | :-------------------- | :-------------------- | :----------------------------- | | Money market funds | $24.6 | — | $24.6 | | State and municipal debt securities | — | 1,257.8 | 1,257.8 | | State and municipal variable-rate demand notes | — | 276.1 | 276.1 | | United States government agency mortgage-backed securities | — | 67.2 | 67.2 | | Corporate debt securities | — | 52.4 | 52.4 | | Other United States government agency debt securities | — | 34.9 | 34.9 | | United States Treasury securities | 10.0 | — | 10.0 | | Derivatives | — | 204.5 | 204.5 | | **Total assets** | **$34.6** | **$1,892.9** | **$1,927.5** | Liabilities Measured at Fair Value (as of December 31, 2019) | Category | Level 1 (in millions) | Level 2 (in millions) | Total Fair Value (in millions) | | :---------- | :-------------------- | :-------------------- | :----------------------------- | | Derivatives | — | $159.5 | $159.5 | | **Total liabilities** | **—** | **$159.5** | **$159.5** | - The fair value of borrowings was **$3,372.2 million** as of December 31, 2019, compared to a carrying value of **$3,229.3 million**[580](index=580&type=chunk) [10. Other Assets and Other Liabilities](index=178&type=section&id=10.%20Other%20Assets%20and%20Other%20Liabilities) Components of Other Assets (in millions) | Category | 2019 | 2018 | | :------------------------ | :------- | :------- | | Derivatives | $204.5 | $245.5 | | ROU assets | 199.7 | — | | Prepaid expenses | 102.4 | 101.3 | | Amounts advanced to agents | 96.4 | 57.6 | | Equity method investments | 33.0 | 31.3 | | Other | 126.9 | 180.3 | | **Total other assets** | **$762.9** | **$616.0** | Components of Other Liabilities (in millions) | Category | 2019 | 2018 | | :------------------------ | :------- | :------- | | Operating lease liabilities | $242.3 | — | | Derivatives | 159.5 | 176.2 | | Pension obligations | 11.4 | 16.0 | | Other | 85.1 | 86.9 | | **Total other liabilities** | **$498.3** | **$279.1** | [11. Income Taxes](index=178&type=section&id=11.%20Income%20Taxes) Pre-Tax Income by Jurisdiction (in millions) | Jurisdiction | 2019 | 2018 | 2017 | | :--------------- | :------- | :--------- | :--------- | | Domestic | $434.7 | $(11.4) | $(238.8) | | Foreign | 886.7 | 1,002.8 | 586.3 | | **Total pre-tax income** | **$1,321.4** | **$991.4** | **$347.5** | - Foreign sources accounted for **67% of pre-tax income in 2019**, down from **101% in 2018**, with domestic pre-tax income increasing due to divestiture gains[583](index=583&type=chunk) Provision for Income Taxes (in millions) | Category | 2019 | 2018 | 2017 | | :------- | :------ | :------ | :------ | | Federal | $153.7 | $62.9 | $848.5 | | State and local | 22.9 | 0.6 | 5.4 | | Foreign | 86.5 | 76.0 | 50.7 | | **Total provision for income taxes** | **$263.1** | **$139.5** | **$904.6** | Effective Tax Rate Reconciliation | Item | 2019 | 2018 | 2017 | | :---------------------------------------- | :----- | :----- | :------ | | Federal statutory rate | 21.0% | 21.0% | 35.0% | | State income taxes, net of federal income tax benefits | 1.4% | 0.4% | 1.7% | | Foreign rate differential, net of United States tax paid on foreign earnings | (5.5)% | (8.2)% | (69.3)% | | Divestitures | 2.4% | —% | —% | | Tax Act impact | —% | 2.3% | 251.5% | | NYDFS Consent Order impact | —% | —% | 6.0% | | Goodwill impairment | —% | —% | 46.7% | | Base erosion anti-abuse tax (BEAT) | —% | 3.0% | —% | | Lapse of statute of limitations | (0.5)% | (2.2)% | (10.0)% | | Valuation allowances | 0.1% | —% | 0.8% | | Other | 1.0% | (2.2)% | (2.1)% | | **Effective tax rate** | **19.9%** | **14.1%** | **260.3%** | - The 2017 Tax Act imposed a one-time tax on previously undistributed foreign earnings, resulting in an approximately **$800 million federal tax liability**, with **$668 million remaining** as of December 31, 2019, payable in installments through 2025[592](index=592&type=chunk) - Total tax contingency reserves for uncertain tax positions were **$309.0 million** as of December 31, 2019[593](index=593&type=chunk) [12. Employee Benefit Plans](index=183&type=section&id=12.%20Employee%20Benefit%20Plans) - The company administers several defined contribution plans globally, with aggregate expenses of **$20.0 million** in both 2019 and 2018[600](index=600&type=chunk) - The frozen defined benefit pension plan had an unfunded obligation of **$11.4 million** as of December 31, 2019, down from **$16.0 million in 2018**[601](index=601&type=chunk) - Plan assets totaled **$237.1 million in 2019**, primarily diversified in fixed income (**60%**), equity (**20%**), and alternative investments (**2

Financial Data and Key Metrics Changes - Fourth quarter revenue increased by 3% on an adjusted constant currency basis, while reported revenue of $1.3 billion declined by 7% compared to the prior year period [8][19] - Adjusted EPS for the fourth quarter was $0.38, down from $0.51 in the prior year [29] - The GAAP effective tax rate was 31.4% in the quarter compared to 9.8% in the prior year period, primarily due to certain discrete benefits in the prior year [28] Business Line Data and Key Metrics Changes - Consumer-to-Consumer (C2C) segment reported revenue was flat, with a 1% increase on a constant currency basis, while transactions declined by 1% [20] - Digital money transfer revenues increased by 25% on a constant currency basis in the fourth quarter, with westernunion.com revenue growing by 17% [24][10] - Business Solutions revenue was flat on a reported basis but increased by 1% on a constant currency basis, driven by strong performance in Europe [25] Market Data and Key Metrics Changes - North America revenue grew by 1% on both reported and constant currency basis, while transactions declined by 4% [21] - The Europe and CIS region saw revenue increase by 1% or 2% on a constant currency basis, with transactions increasing by 5% [22] - The APAC region experienced a revenue decline of 10% on both reported and constant currency basis, primarily due to the Philippines domestic business [24] Company Strategy and Development Direction - The company aims to enhance its global payments network, drive digital growth, and optimize its organization in 2020 [13][16] - A focus on transitioning the consumer business from a transaction-based model to a lifetime value model is underway [15] - The company plans to expand real-time account payout capabilities to over 100 countries [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2022 margin and EPS targets, with expectations for a strong start in 2020 [18] - The company does not anticipate a material impact from the coronavirus, as China represents only 2% of total revenues [58] - Management highlighted the importance of partnerships and digital expansion as key growth drivers [39][40] Other Important Information - The company returned over $880 million to shareholders in 2019 and announced a 13% increase in the quarterly dividend [8][9] - The company incurred $17 million in restructuring expenses in the fourth quarter, with a total of $115 million for the full year [27] Q&A Session Summary Question: Guidance for business solutions and revenue shape - Management indicated that fundamentals remain unchanged and digital expansion is expected to perform well [36] Question: Update on Amazon partnership and third-party pipeline - Management noted that partnerships are growing and contributing to strong digital growth, with ongoing discussions for additional partnerships [39] Question: North America transaction and revenue delta - The decline in domestic money transfer transactions in the U.S. was a key driver, but digital cross-border transactions grew at 26% [44] Question: Impact of pricing initiatives - Management confirmed that dynamic pricing initiatives are yielding positive results, contributing to revenue stability [56] Question: Unit economics of digital white-label programs - Management stated that while revenue per transaction is lower, the margins can be high due to lower associated costs [72]