Western Union(US:WU)2021-11-01 16:00PART I FINANCIAL INFORMATION Item 1. Financial Statements Unaudited condensed consolidated financial statements for Q3 2021 and 2020, covering income, balance sheets, cash flows, and notes Condensed Consolidated Statements of Income Q3 2021 revenues increased to $1.29 billion, net income to $232.7 million, and diluted EPS to $0.57 Condensed Consolidated Statements of Income (in millions, except per share amounts) | Indicator | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,286.3 | $1,258.5 | $3,786.0 | $3,563.2 | | Operating Income | $318.6 | $285.2 | $806.3 | $740.2 | | Net Income | $232.7 | $228.6 | $637.0 | $567.2 | | Diluted EPS | $0.57 | $0.55 | $1.55 | $1.37 | Condensed Consolidated Balance Sheets Total assets decreased to $8.87 billion due to assets held for sale, while liabilities decreased and equity increased Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,003.4 | $1,428.2 | | Assets held for sale | $1,492.2 | $— | | Total Assets | $8,871.0 | $9,496.3 | | Borrowings | $2,852.6 | $3,067.2 | | Liabilities associated with assets held for sale | $855.4 | $— | | Total Liabilities | $8,502.4 | $9,309.7 | | Total Stockholders' Equity | $368.6 | $186.6 | Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $686 million, with significant cash used in investing and financing activities Cash Flow Summary for Nine Months Ended Sep 30 (in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $686.0 | $585.6 | | Net cash used in investing activities | ($332.9) | ($68.7) | | Net cash used in financing activities | ($745.5) | ($709.8) | | Net change in cash, cash equivalents, and restricted cash | ($392.4) | ($192.9) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, the $910 million Business Solutions sale, stc Bank investment, and segment performance - On August 4, 2021, the Company agreed to sell its Business Solutions business for $910 million in cash The assets and liabilities of this business are now classified as held for sale The first closing is expected in Q1 202249 - The Company agreed to invest $200.0 million for a 15% ownership interest in stc Bank (formerly Saudi Digital Payments Company), a digital white label partner The transaction closed in October 202154 Segment Revenues (in millions) | Segment | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Consumer-to-Consumer | $1,104.5 | $3,282.5 | | Business Solutions | $116.8 | $312.6 | | Other | $65.0 | $190.9 | | Total | $1,286.3 | $3,786.0 | Shareholder Returns (Nine Months Ended Sep 30, 2021) | Activity | Amount | | :--- | :--- | | Share Repurchases | $225.0 million (9.6 million shares) | | Dividends Declared | $287.6 million ($0.235 per share quarterly) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2021 financial results, highlighting revenue growth, Business Solutions sale, and liquidity Results of Operations Q3 2021 consolidated revenue increased 2% to $1.3 billion, with operating income up 12% Consolidated Results Summary | Metric | Three Months 2021 vs 2020 | Nine Months 2021 vs 2020 | | :--- | :--- | :--- | | Revenue Change (GAAP) | +2% | +6% | | Revenue Change (Constant Currency) | +2% | +5% | | Operating Income Change | +12% | +9% | | Diluted EPS Change | +4% | +13% | - The company entered into an agreement to sell its Business Solutions business for $910 million This segment's revenues were $116.8 million in Q3 2021, up from $89.1 million in Q3 2020177 - The increase in the effective tax rate for Q3 and the nine-month period was primarily due to increased deferred tax expense arising from changes in permanent reinvestment assertions related to the decision to classify the Business Solutions business as held for sale192 Segment Discussion C2C segment revenue was flat in Q3 but grew 6% YTD, while Business Solutions revenue surged 31% Consumer-to-Consumer (C2C) Segment Performance (Q3 2021 vs Q3 2020) | Metric | Change | | :--- | :--- | | Revenue | 0% | | Transactions | -1% | | Operating Income | -2% | | Digital Money Transfer Revenue | +15% | - The LACA (Latin America and the Caribbean) region was a standout in C2C, with 25% reported revenue growth in Q3, driven by increased principal transferred and recovery from prior-period COVID-19 impacts204210 Business Solutions Segment Performance (Q3 2021 vs Q3 2020) | Metric | Change | | :--- | :--- | | Revenue | +31% | | Operating Income | +308.5% (from $9.4M to $38.4M) | | Operating Margin | 33% (up from 11%) | Capital Resources and Liquidity The company maintains strong liquidity through operating cash flow and a $1.5 billion credit facility, prioritizing debt service and shareholder returns - The company maintains a $1.5 billion revolving credit facility expiring in January 2025, which supports its commercial paper program As of September 30, 2021, there were no borrowings on the facility and $120.0 million outstanding under the commercial paper program224 - In March 2021, the company issued $900 million in new unsecured notes (due 2026 and 2031) and used the proceeds to repay $650 million of a term loan and $500 million of notes due in 2022231232 - A significant future cash requirement is the remaining federal tax liability of approximately $541 million from the 2017 Tax Act, which is being paid in installments through 2025242 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency, interest rate, and credit risks, managed through a risk management program - The company is exposed to foreign currency risk, interest rate risk, and credit risk These risks are managed through an active risk management program262247 - A hypothetical uniform 10% strengthening of the U.S dollar against all other currencies would result in an estimated decrease to pre-tax annual income of approximately $40 million251 - A hypothetical 100 basis point change in interest rates would have a net positive impact on pre-tax income of approximately $13 million over the next twelve months, as the benefit to floating-rate assets ($17M) outweighs the cost on floating-rate liabilities ($4M)257 Controls and Procedures Management concluded disclosure controls and procedures were effective, with a change due to a new global platform - The Principal Executive Officer and Principal Financial Officer concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective263 - A change to internal controls over financial reporting occurred in Q1 2021 due to the transition of money transfer settlement processes to a new global platform This is expected to strengthen controls by standardizing processes264 PART II OTHER INFORMATION Legal Proceedings The company is subject to various legal proceedings, with estimated reasonably possible losses of approximately $30 million - Information on legal proceedings is incorporated by reference from Note 7 of the financial statements271 - As of September 30, 2021, the company estimated that reasonably possible potential litigation losses in excess of its recorded liability were approximately $30 million67 Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for 2020 - There were no material changes to the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2020272 Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2021, the company repurchased 3.47 million shares at $21.72 per share, with $557.6 million remaining for repurchase Share Repurchases for Quarter Ended September 30, 2021 | Month | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July | 717,462 | $23.21 | | August | 781,419 | $22.14 | | September | 1,970,349 | $21.01 | | Total | 3,469,230 | $21.72 | - As of September 30, 2021, approximately $557.6 million remained available for repurchase under the publicly announced plan authorized through December 31, 2021274 Defaults Upon Senior Securities The company reports no defaults upon senior securities - The company reports no defaults upon senior securities275 Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company275 Other Information The company reports no other information for this item - The company reports no other information for this item275 Exhibits This section lists exhibits filed with the report, including CEO and CFO certifications and XBRL data files - The report includes an Exhibit Index listing documents filed or furnished, such as officer certifications (Exhibits 31.1, 31.2, 32) and Inline XBRL documents (Exhibits 101, 104)276277