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b

 

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, 2024

 

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

img156424880_0.jpg 

THE WESTERN UNION COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

 

20-4531180
(I.R.S. Employer
Identification No.)

 

7001 EAST BELLEVIEW AVENUE
Denver, Colorado 80237
(Address of principal executive offices)

 

 

Registrant’s telephone number, including area code: (866) 405-5012

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $0.01 Par Value

WU

The New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer☐ Non-accelerated filer ☐

Smaller reporting company Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No

As of April 19, 2024, 338,335,142 shares of the registrant’s common stock were outstanding.

 

 

 

 

 


THE WESTERN UNION COMPANY

INDEX

 

PAGE
NUMBER

PART I FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Income for the three months ended March 31, 2024 and 2023

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023

4

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

6

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

8

 

 

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

 

 

 

Item 4.

Controls and Procedures

41

 

 

 

 

Review Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)

42

 

 

 

PART II OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

43

 

 

 

Item 1A.

Risk Factors

43

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

 

 

 

Item 3.

Defaults Upon Senior Securities

43

 

 

 

Item 4.

Mine Safety Disclosures

43

 

 

 

Item 5.

Other Information

43

 

 

 

Item 6.

Exhibits

44

 

 

2


PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

THE WESTERN UNION COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in millions, except per share amounts)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Revenues

 

$

1,049.1

 

 

$

1,036.9

 

Expenses:

 

 

 

 

 

 

Cost of services

 

 

641.3

 

 

 

629.5

 

Selling, general, and administrative

 

 

215.7

 

 

 

202.7

 

Total expenses

 

 

857.0

 

 

 

832.2

 

Operating income

 

 

192.1

 

 

 

204.7

 

Other income/(expense):

 

 

 

 

 

 

Interest income

 

 

3.1

 

 

 

3.2

 

Interest expense

 

 

(26.1

)

 

 

(25.0

)

Other income/(expense), net

 

 

0.9

 

 

 

(1.9

)

Total other expense, net

 

 

(22.1

)

 

 

(23.7

)

Income before income taxes

 

 

170.0

 

 

 

181.0

 

Provision for income taxes

 

 

27.3

 

 

 

29.2

 

Net income

 

$

142.7

 

 

$

151.8

 

Earnings per share:

 

 

 

 

 

 

Basic

 

$

0.41

 

 

$

0.41

 

Diluted

 

$

0.41

 

 

$

0.40

 

Weighted-average shares outstanding:

 

 

 

 

 

 

Basic

 

 

344.4

 

 

 

374.4

 

Diluted

 

 

345.7

 

 

 

375.5

 

 

See Notes to Condensed Consolidated Financial Statements.

3


THE WESTERN UNION COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in millions)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Net income

 

$

142.7

 

 

$

151.8

 

Other comprehensive income, net of reclassifications and tax (Note 9):

 

 

 

 

 

 

Unrealized gains/(losses) on investment securities

 

 

(4.6

)

 

 

20.0

 

Unrealized gains/(losses) on hedging activities

 

 

10.8

 

 

 

(10.3

)

Total other comprehensive income

 

 

6.2

 

 

 

9.7

 

Comprehensive income

 

$

148.9

 

 

$

161.5

 

 

See Notes to Condensed Consolidated Financial Statements.

4


THE WESTERN UNION COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in millions, except per share amounts)

 

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,106.5

 

 

$

1,268.6

 

Settlement assets

 

 

3,635.6

 

 

 

3,687.0

 

Property and equipment, net of accumulated depreciation of $446.1 and $438.8, respectively

 

 

88.6

 

 

 

91.4

 

Goodwill

 

 

2,049.5

 

 

 

2,034.6

 

Other intangible assets, net of accumulated amortization of $685.6 and $685.9, respectively

 

 

369.0

 

 

 

380.2

 

Other assets

 

 

804.0

 

 

 

737.0

 

Total assets

 

$

8,053.2

 

 

$

8,198.8

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

392.7

 

 

$

453.0

 

Settlement obligations

 

 

3,635.6

 

 

 

3,687.0

 

Income taxes payable

 

 

668.9

 

 

 

659.5

 

Deferred tax liability, net

 

 

149.4

 

 

 

147.6

 

Borrowings

 

 

2,540.3

 

 

 

2,504.6

 

Other liabilities

 

 

268.4

 

 

 

268.1

 

Total liabilities

 

 

7,655.3

 

 

 

7,719.8

 

 

 

 

 

 

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $1.00 par value; 10 shares authorized; no shares issued

 

 

 

 

 

 

Common stock, $0.01 par value; 2,000 shares authorized; 339.6 shares and 350.5 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

3.4

 

 

 

3.5

 

Capital surplus

 

 

1,040.6

 

 

 

1,031.9

 

Accumulated deficit

 

 

(485.0

)

 

 

(389.1

)

Accumulated other comprehensive loss

 

 

(161.1

)

 

 

(167.3

)

Total stockholders' equity

 

 

397.9

 

 

 

479.0

 

Total liabilities and stockholders' equity

 

$

8,053.2

 

 

$

8,198.8

 

 

See Notes to Condensed Consolidated Financial Statements.

5


THE WESTERN UNION COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in millions)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

142.7

 

 

$

151.8

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

9.2

 

 

 

10.2

 

Amortization

 

 

37.4

 

 

 

36.4

 

Other non-cash items, net

 

 

20.0

 

 

 

19.3

 

Increase/(decrease) in cash, excluding the effects of acquisitions and divestitures, resulting from changes in:

 

 

 

 

 

 

Other assets

 

 

(46.6

)

 

 

(28.1

)

Accounts payable and accrued liabilities

 

 

(64.4

)

 

 

(62.2

)

Income taxes payable

 

 

8.8

 

 

 

17.2

 

Other liabilities

 

 

(13.1

)

 

 

(7.3

)

Net cash provided by operating activities

 

 

94.0

 

 

 

137.3

 

Cash flows from investing activities

 

 

 

 

 

 

Payments for capitalized contract costs

 

 

(2.4

)

 

 

(31.0

)

Payments for internal use software

 

 

(21.7

)

 

 

(19.6

)

Purchases of property and equipment

 

 

(11.0

)

 

 

(6.8

)

Purchases of settlement investments

 

 

(130.2

)

 

 

(124.7

)

Proceeds from the sale of settlement investments

 

 

160.2

 

 

 

22.2

 

Maturities of settlement investments

 

 

23.3

 

 

 

22.4

 

Proceeds from the sale of non-settlement investments

 

 

 

 

 

100.0

 

Other investing activities

 

 

(24.5

)

 

 

1.1

 

Net cash used in investing activities

 

 

(6.3

)

 

 

(36.4

)

Cash flows from financing activities

 

 

 

 

 

 

Cash dividends and dividend equivalents paid (Note 9)

 

 

(80.5

)

 

 

(88.1

)

Common stock repurchased (Note 9)

 

 

(150.6

)

 

 

(5.1

)

Net proceeds from/(repayments of) commercial paper

 

 

35.0

 

 

 

(155.0

)

Proceeds from exercise of options

 

 

 

 

 

0.3

 

Net change in settlement obligations

 

 

(136.9

)

 

 

109.1

 

Other financing activities

 

 

(0.1

)

 

 

(0.2

)

Net cash used in financing activities

 

 

(333.1

)

 

 

(139.0

)

Net change in cash and cash equivalents, including settlement, and restricted cash

 

 

(245.4

)

 

 

(38.1

)

Cash and cash equivalents, including settlement, and restricted cash at beginning of period

 

 

1,786.2

 

 

 

2,040.7

 

Cash and cash equivalents, including settlement, and restricted cash at end of period

 

$

1,540.8

 

 

$

2,002.6

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

 

6


THE WESTERN UNION COMPANY

SUPPLEMENTAL CASH FLOW INFORMATION

(Unaudited)

(in millions)

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Reconciliation of balance sheet cash and cash equivalents to cash flows:

 

 

 

 

 

 

Cash and cash equivalents on balance sheet

 

$

1,106.5

 

 

$

1,228.6

 

Settlement cash and cash equivalents (Note 8)

 

 

412.4

 

 

 

737.1

 

Restricted cash in Other assets

 

 

21.9

 

 

 

36.9

 

Cash and cash equivalents, including settlement, and restricted cash at end of period

 

$

1,540.8

 

 

$

2,002.6

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

 

$

21.4

 

 

$

16.9

 

Income taxes paid

 

$

17.1

 

 

$

13.3

 

 

See Notes to Condensed Consolidated Financial Statements.

7


THE WESTERN UNION COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

 

 

Capital

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Surplus

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, December 31, 2023

 

 

350.5

 

 

$

3.5

 

 

$

1,031.9

 

 

$

(389.1

)

 

$

(167.3

)

 

$

479.0

 

Net income

 

 

 

 

 

 

 

 

 

 

 

142.7

 

 

 

 

 

 

142.7

 

Stock-based compensation

 

 

 

 

 

 

 

 

8.7

 

 

 

 

 

 

 

 

 

8.7

 

Common stock dividends and dividend equivalents declared ($0.235 per share)

 

 

 

 

 

 

 

 

 

 

 

(81.9

)

 

 

 

 

 

(81.9

)

Repurchase and retirement of common shares

 

 

(12.3

)

 

 

(0.1

)

 

 

 

 

 

(156.7

)

 

 

 

 

 

(156.8

)

Shares issued under stock-based compensation plans

 

 

1.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.2

 

 

 

6.2

 

Balance, March 31, 2024

 

 

339.6

 

 

$

3.4

 

 

$

1,040.6

 

 

$

(485.0

)

 

$

(161.1

)

 

$

397.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

 

 

Capital

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Surplus

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, December 31, 2022

 

 

373.5

 

 

$

3.7

 

 

$

995.9

 

 

$

(353.9

)

 

$

(167.9

)

 

$

477.8

 

Net income

 

 

 

 

 

 

 

 

 

 

 

151.8

 

 

 

 

 

 

151.8

 

Stock-based compensation

 

 

 

 

 

 

 

 

8.0

 

 

 

 

 

 

 

 

 

8.0

 

Common stock dividends and dividend equivalents declared ($0.235 per share)

 

 

 

 

 

 

 

 

 

 

 

(88.6

)

 

 

 

 

 

(88.6

)

Repurchase and retirement of common shares

 

 

(0.5

)

 

 

(0.1

)

 

 

 

 

 

(6.1

)

 

 

 

 

 

(6.2

)

Shares issued under stock-based compensation plans

 

 

1.4

 

 

 

0.1

 

 

 

0.2

 

 

 

 

 

 

 

 

 

0.3

 

Other comprehensive income (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.7

 

 

 

9.7

 

Balance, March 31, 2023

 

 

374.4

 

 

$

3.7

 

 

$

1,004.1

 

 

$

(296.8

)

 

$

(158.2

)

 

$

552.8

 

 

See Notes to Condensed Consolidated Financial Statements.

8


THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Business and Basis of Presentation

Business

The Western Union Company (“Western Union” or the “Company”) is a leader in cross-border, cross-currency money movement, payments, and digital financial services, empowering consumers, businesses, financial institutions, and governments with fast, reliable, and convenient ways to send money and make payments around the world. The Western Union® brand is globally recognized. The Company’s services are available through a network of agent locations in more than 200 countries and territories and also through money transfer transactions conducted and funded through websites and mobile applications marketed under the Company’s brands (“Branded Digital”) and transactions initiated on internet and mobile applications hosted by the Company’s third-party white label partners. Each location in the Company’s agent network is capable of providing one or more of the Company’s services.

The Western Union business consists of the following operating segments:

Consumer Money Transfer - The Consumer Money Transfer segment facilitates money transfers, which are primarily sent from retail agent locations worldwide or through websites and mobile devices. The Company’s money transfer service is provided through one interconnected global network. This service is available for international cross-border transfers and, in certain countries, intra-country transfers.
Consumer Services - The Consumer Services segment includes the Company’s bill payment services which facilitate payments for consumers, businesses, and other organizations, as well as the Company’s money order services, retail foreign exchange services, prepaid cards, lending partnerships, digital wallets, and media network.

See Note 14 for further information regarding the Company’s segments.

On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business, and the final closing for this transaction occurred on July 1, 2023. See Note 4 for further information regarding this transaction.

There are legal or regulatory limitations on transferring certain assets of the Company outside of the countries where these assets are located. However, there are generally no limitations on the use of these assets within those countries. Additionally, the Company must meet minimum capital requirements in some countries in order to maintain operating licenses. As of December 31, 2023, the Company's restricted net assets associated with these asset limitations and minimum capital requirements totaled approximately $440 million.

Various aspects of the Company’s services and businesses are subject to United States federal, state, and local regulation, as well as regulation by foreign jurisdictions, including certain banking and other financial services regulations.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and were prepared in accordance with the instructions for Form 10‑Q and Article 10 of Regulation S-X. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted.

The unaudited condensed consolidated financial statements in this quarterly report are presented on a consolidated basis and include the accounts of the Company and its majority-owned subsidiaries. Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts have been eliminated as of March 31, 2024 and December 31, 2023 and for all periods presented.

9


Table of Contents

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In the opinion of management, these condensed consolidated financial statements include all the normal recurring adjustments necessary to fairly present the Company’s condensed consolidated results of operations, financial position, and cash flows as of March 31, 2024 and for all periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements within the Company’s Annual Report on Form 10‑K for the year ended December 31, 2023.

Consistent with industry practice, the accompanying Condensed Consolidated Balance Sheets are unclassified due to the short-term nature of the Company’s settlement obligations contrasted with the Company’s ability to invest cash awaiting settlement in long-term investment securities.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board issued a new accounting pronouncement regarding segment reporting. The standard requires that public entities expand reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The Company is required to adopt the new standard for its 2024 annual reporting and effective January 1, 2025 for its interim reporting, using a retrospective approach. Management is currently evaluating the potential impact that the adoption of this standard will have on the Company’s disclosures.

In December 2023, the Financial Accounting Standards Board issued a new accounting pronouncement regarding income tax disclosures. The standard requires that public entities disclose more consistent and detailed categories in their statutory to effective income tax rate reconciliations and further disaggregate income taxes paid by jurisdiction. The Company is required to adopt the new standard for its 2025 annual reporting, using a prospective approach. Management is currently evaluating the potential impact that the adoption of this standard will have on the Company’s disclosures.

2. Revenue

The Company’s revenues are primarily derived from consideration paid by customers to transfer money. These revenues vary by transaction based upon factors such as channel, send and receive locations, the principal amount sent, and the difference between the exchange rate set by the Company to the customer and a rate available in the wholesale foreign exchange market, when the money transfer involves different send and receive currencies. The Company also offers other consumer services, for which revenue is impacted by similar factors. The Company analyzes its different services individually to determine the appropriate basis for revenue recognition. For additional information on the Company's different services, refer to the Company’s consolidated financial statements within the Company’s Annual Report on Form 10‑K for the year ended December 31, 2023.

Revenues from consumer money transfers are included in the Company’s Consumer Money Transfer segment and revenues from consumer bill payment and other services are included in the Company’s Consumer Services segment. Revenues from business-to-business foreign exchange and payment services were included in the Company’s Business Solutions segment. See Note 14 for further information on the Company’s segments.

The substantial majority of the Company’s revenue is recognized at a point in time. The following tables represent the disaggregation of revenue earned from contracts with customers by product type and region for the three months ended

10


Table of Contents

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

March 31, 2024 and 2023 (in millions). The regional split of revenue shown in the tables below is based upon where transactions are initiated.

 

Three Months Ended March 31, 2024

 

 

Consumer

 

 

 

 

 

 

 

 

Money

 

 

Consumer

 

 

 

 

 

Transfer

 

 

Services

 

 

Total

 

Regions:

 

 

 

 

 

 

 

 

 

North America

 

$

354.5

 

 

$

39.4

 

 

$

393.9

 

Europe and CIS

 

 

224.4

 

 

 

4.5

 

 

 

228.9

 

Middle East, Africa, and South Asia

 

 

192.3

 

 

 

0.1

 

 

 

192.4

 

Latin America and the Caribbean

 

 

107.5

 

 

 

23.1

 

 

 

130.6

 

Asia Pacific

 

 

49.9

 

 

 

 

 

 

49.9

 

Revenues from contracts with customers

 

$

928.6

 

 

$

67.1

 

 

$

995.7

 

Other revenues (a)

 

 

33.4

 

 

 

20.0

 

 

 

53.4

 

Total revenues

 

$

962.0

 

 

$

87.1

 

 

$

1,049.1

 

 

 

Three Months Ended March 31, 2023

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

Consumer

 

 

Exchange

 

 

 

 

 

 

 

 

Money

 

 

and Payment

 

 

Consumer

 

 

 

 

 

Transfer

 

 

Services(b)

 

 

Services

 

 

Total

 

Regions:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

347.3

 

 

$

 

 

$

33.4

 

 

$

380.7

 

Europe and CIS

 

 

233.7

 

 

 

6.5

 

 

 

5.5

 

 

 

245.7

 

Middle East, Africa, and South Asia

 

 

169.3

 

 

 

 

 

 

0.1

 

 

 

169.4

 

Latin America and the Caribbean

 

 

99.7

 

 

 

 

 

 

28.2

 

 

 

127.9

 

Asia Pacific

 

 

55.3

 

 

 

 

 

 

 

 

 

55.3

 

Revenues from contracts with customers

 

$

905.3

 

 

$

6.5

 

 

$

67.2

 

 

$

979.0

 

Other revenues (a)

 

 

33.0

 

 

 

8.9

 

 

 

16.0

 

 

 

57.9

 

Total revenues

 

$

938.3

 

 

$

15.4

 

 

$

83.2

 

 

$

1,036.9

 

 

(a)
Includes revenue from investment income generated on settlement assets primarily related to money transfer and money order services, impacts from the Company's foreign currency cash flow hedges, and other sources.
(b)
On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business, and the final closing for this transaction occurred on July 1, 2023.

 

 

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THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

3. Earnings Per Share

The calculation of basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Outstanding options to purchase Western Union stock and unvested shares of restricted stock are excluded from basic shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares of restricted stock have vested, using the treasury stock method. The treasury stock method assumes proceeds from the exercise price of stock options and the unamortized compensation expense of options and restricted stock are available to acquire shares at an average market price throughout the period, and therefore, reduce the dilutive effect.

Shares excluded from the diluted earnings per share calculation were 11.4 million and 9.2 million for the three months ended March 31, 2024 and 2023, respectively. The effect of these shares was anti-dilutive under the treasury stock method, as the assumed proceeds of the options and restricted stock per unit were above the Company's average share price during the periods.

The following table provides the calculation of diluted weighted-average shares outstanding (in millions):

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Basic weighted-average shares outstanding

 

 

344.4

 

 

 

374.4

 

Common stock equivalents

 

 

1.3

 

 

 

1.1

 

Diluted weighted-average shares outstanding

 

 

345.7

 

 

 

375.5

 

 

 

 

4. Divestiture

On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC (collectively, “the Buyer”) for cash consideration of $910.0 million. The sale was completed in three closings, with the entire cash consideration collected at the first closing and allocated to the closings on a relative fair value basis. The final closing for this transaction occurred on July 1, 2023. During the period between the second and final closings, the Company was required to pay the Buyer a measure of profit of the European Union operations, while owned by the Company, adjusted for the occupancy charges for employees of the Buyer using Company facilities, and other items, as contractually agreed, which was $1.4 million for the three months ended March 31, 2023, and was included in Other expense, net in the Condensed Consolidated Statements of Income. The related income tax expense on this income was also passed to the Buyer.

Business Solutions revenues included in the Condensed Consolidated Statements of Income were $15.4 million and direct operating expenses, excluding corporate allocations, were $13.5 million for the three months ended March 31, 2023. For the three months ended March 31, 2023, divestiture costs directly associated with this transaction were immaterial.

5. Fair Value Measurements

Fair value, as defined by the relevant accounting standards, represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For additional information on how the Company measures fair value, refer to the Company’s consolidated financial statements within the Company’s Annual Report on Form 10‑K for the year ended December 31, 2023.

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THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables present the Company’s assets and liabilities, which are measured at fair value on a recurring basis, by category (in millions):

 

 

Fair Value Measurement Using

 

 

Total

 

March 31, 2024

 

Level 1

 

 

Level 2

 

 

Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

Settlement assets:

 

 

 

 

 

 

 

 

 

Measured at fair value through net income:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

13.0

 

 

$

 

 

$

13.0

 

Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income):

 

 

 

 

 

 

 

 

 

State and municipal debt securities

 

 

 

 

 

1,044.8

 

 

 

1,044.8

 

Asset-backed securities

 

 

 

 

 

213.8

 

 

 

213.8

 

Corporate debt securities

 

 

 

 

 

86.2

 

 

 

86.2

 

State and municipal variable-rate demand notes

 

 

 

 

 

47.7

 

 

 

47.7

 

United States government agency mortgage-backed securities

 

 

 

 

 

10.5

 

 

 

10.5

 

Other assets:

 

 

 

 

 

 

 

 

 

Derivatives

 

 

 

 

 

15.7

 

 

 

15.7

 

Total assets

 

$

13.0

 

 

$

1,418.7

 

 

$

1,431.7

 

Liabilities:

 

 

 

 

 

 

 

 

 

Other liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

$

 

 

$

6.7

 

 

$

6.7

 

Total liabilities

 

$

 

 

$

6.7

 

 

$

6.7

 

 

 

Fair Value Measurement Using

 

 

Total

 

December 31, 2023

 

Level 1

 

 

Level 2

 

 

Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

Settlement assets:

 

 

 

 

 

 

 

 

 

Measured at fair value through net income:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

11.8

 

 

$

 

 

$

11.8

 

Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income):

 

 

 

 

 

 

 

 

 

State and municipal debt securities

 

 

 

 

 

1,011.4

 

 

 

1,011.4

 

Asset-backed securities

 

 

 

 

 

195.7

 

 

 

195.7

 

Corporate debt securities

 

 

 

 

 

152.2

 

 

 

152.2

 

State and municipal variable-rate demand notes

 

 

 

 

 

86.8

 

 

 

86.8

 

United States government agency mortgage-backed securities

 

 

 

 

 

12.1

 

 

 

12.1

 

Other assets:

 

 

 

 

 

 

 

 

 

Derivatives

 

 

 

 

 

10.8

 

 

 

10.8

 

Total assets

 

$

11.8

 

 

$

1,469.0

 

 

$

1,480.8

 

Liabilities:

 

 

 

 

 

 

 

 

 

Other liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

$

 

 

$

17.4

 

 

$

17.4

 

Total liabilities

 

$

 

 

$

17.4

 

 

$

17.4

 

 

There were no material, non-recurring fair value adjustments in the three months ended March 31, 2024 and 2023. There were no transfers between Level 1 and Level 2 measurements during the three months ended March 31, 2024 and 2023.

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THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Other Fair Value Measurements

The carrying amounts for many of the Company’s financial instruments, including certain cash and cash equivalents, settlement cash and cash equivalents, and settlement receivables and obligations approximate fair value due to their short maturities. The Company’s borrowings are classified as Level 2 within the valuation hierarchy, and the aggregate fair value of these borrowings was based on quotes from multiple banks. Fixed-rate notes are carried in the Company’s Condensed Consolidated Balance Sheets at their original issuance values as adjusted over time to accrete that value to par. As of March 31, 2024, the carrying value and fair value of the Company’s borrowings were $2,540.3 million and $2,453.9 million, respectively (see Note 11). As of December 31, 2023, the carrying value and fair value of the Company’s borrowings were $2,504.6 million and $2,419.0 million, respectively.

6. Commitments and Contingencies

Letters of Credit and Bank Guarantees

The Company had approximately $150 million in outstanding letters of credit and bank guarantees as of March 31, 2024, which were primarily held in connection with regulatory requirements, lease arrangements, and certain agent agreements. The Company expects to renew many of its letters of credit and bank guarantees prior to expiration.

Litigation and Related Contingencies

The Company is subject to certain claims and litigation that could result in losses, including damages, fines, and/or civil penalties, which could be significant, and in some cases, criminal charges. The Company regularly evaluates the status of legal matters to assess whether a loss is probable and reasonably estimable in determining whether an accrual is appropriate. Furthermore, in determining whether disclosure is appropriate, the Company evaluates each legal matter to assess if there is at least a reasonable possibility that a material loss or additional material losses may have been incurred. The Company also evaluates whether an estimate of possible loss or range of loss can be made. Unless otherwise specified below, the Company believes that there is at least a reasonable possibility that a loss or additional loss may have been incurred for each of the matters described below.

For those matters that the Company believes there is at least a reasonable possibility that a loss or additional loss may have been incurred and can reasonably estimate the loss or potential loss, the reasonably possible potential litigation losses in excess of the Company’s recorded liability for probable and estimable losses was approximately $30 million as of March 31, 2024. For the remaining matters, management is unable to provide a meaningful estimate of the possible loss or range of loss because, among other reasons: (i) the proceedings are in preliminary stages; (ii) specific damages have not been sought; (iii) damage claims are unsupported and/or unreasonable; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; or (vi) novel legal issues or unsettled legal theories are being asserted.

The outcomes of legal actions are unpredictable and subject to significant uncertainties, and it is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss, and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Accordingly, actual losses may be in excess of the established liability or the range of reasonably possible loss.

Legal Matters

In October 2015, Consumidores Financieros Asociación Civil para su Defensa, an Argentinian consumer association, filed a purported class action lawsuit in Argentina’s National Commercial Court No. 19 against the Company’s subsidiary Western Union Financial Services Argentina S.R.L. (“WUFSA”). The lawsuit alleges, among other things, that WUFSA’s fees for money transfers sent from Argentina are excessive and that WUFSA does not provide consumers with adequate information about foreign exchange rates. The plaintiff is seeking, among other things, an order requiring WUFSA to reimburse consumers for the fees they paid and the foreign exchange revenue associated with money transfers

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THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

sent from Argentina, plus punitive damages. The complaint does not specify a monetary value of the claim or a time period. In November 2015, the Court declared the complaint formally admissible as a class action. The notice of claim was served on WUFSA in May 2016, and in June 2016 WUFSA filed a response to the claim and moved to dismiss it on statute of limitations and standing grounds. In April 2017, the Court deferred ruling on the motion until later in the proceedings. The process for notifying potential class members has been completed, and the case is in the evidentiary stage. Due to the stage of this matter, the Company is unable to predict the outcome or the possible loss or range of loss, if any, associated with this matter. WUFSA intends to defend itself vigorously.

In December 2022, a purported class action complaint was filed against several money transfer business defendants, including the Company, in the United States District Court for the Northern District of California, alleging that these defendants violated the federal Right to Financial Privacy Act and California’s Financial Information Privacy Act. The United States Department of Homeland Security and Immigration and Customs Enforcement are also named as defendants. The operative complaint alleges that the defendants violated plaintiffs’ financial privacy rights by sharing private financial information with law enforcement agencies through a program coordinated by the Transaction Record Analysis Center. On January 24, 2023, an amended complaint was filed naming the Company's subsidiary Western Union Financial Services, Inc. (“WUFSI”) as a defendant in place of The Western Union Company. The court granted in part and denied in part WUFSI’s motion to dismiss the operative complaint on March 21, 2024. On February 21, 2024, another purported class action complaint was filed in the United States District Court for the Central District of California against the Company (d/b/a WUFSI) and other defendants on behalf of California residents whose information was sent to the Transaction Record Analysis Center. On April 12, 2024, an amended complaint was filed naming WUFSI as a defendant in place of the Company. Due to the preliminary stage of these matters, the ultimate outcome and any potential financial impact to the Company cannot be reasonably determined at this time. WUFSI intends to defend itself vigorously in these matters.

In late 2017, three individuals filed a lawsuit against certain alleged Western Union entities (collectively, the “Defendants”) in the Commercial Court in Kinshasa-Gombe in the Democratic Republic of the Congo (“DRC”), which was later joined by three additional individuals. These six individuals (the “Plaintiffs), including current and/or former DRC government officials, claim that their privacy rights were violated and sought €22.4 million in damages. In 2018, the Commercial Court in Kinshasa-Gombe entered a judgment against the Defendants in the amount of €10.5 million ($11.3 million as of March 31, 2024). In 2019, the Commercial Court in Kinshasa-Gombe entered a judgment against The Western Union Company (“TWUC”) in the amount of €9 million ($9.7 million as of March 31, 2024). The business in the DRC is operated through independent agents. No Western Union entity has a presence in the country. The Plaintiffs have previously sought and may continue to attempt to seize funds from the Company's independent agents in the DRC to satisfy the judgments. The Defendants have learned that certain challenges to the judgments have been denied. The Defendants and TWUC intend to continue to challenge both judgments and defend themselves vigorously in these matters.

In addition to the principal matters described above, the Company is a party to a variety of other legal matters that arise in the normal course of the Company’s business. While the results of these other legal matters cannot be predicted with certainty, management believes that the final outcome of these matters will not have a material adverse effect either individually or in the aggregate on the Company’s financial condition, results of operations, or cash flows.

7. Related Party Transactions

The Company has ownership interests in certain of its agents accounted for under the equity method of accounting. The Company pays these agents commissions for money transfer and other services provided on the Company’s behalf. Commission expense recognized for these agents for the three months ended March 31, 2024 and 2023 totaled $10.4 million and $10.8 million, respectively.

15


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THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

8. Settlement Assets and Obligations

Settlement assets represent funds received or to be received from agents and others for unsettled money transfers, money orders, and consumer payments. The Company records corresponding settlement obligations relating to amounts payable under money transfers, money orders, and consumer payment service arrangements.

Settlement assets and obligations consisted of the following (in millions):

 

 

March 31, 2024

 

 

December 31, 2023

 

Settlement assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

412.4

 

 

$

496.0

 

Receivables from agents and others

 

 

1,832.2

 

 

 

1,748.3

 

Less: Allowance for credit losses

 

 

(11.9

)

 

 

(15.4

)

Receivables from agents and others, net

 

 

1,820.3

 

 

 

1,732.9

 

Investment securities

 

 

1,403.0

 

 

 

1,458.2

 

Less: Allowance for credit losses

 

 

(0.1

)

 

 

(0.1

)

Investment securities, net

 

 

1,402.9

 

 

 

1,458.1

 

Total settlement assets

 

$

3,635.6

 

 

$

3,687.0

 

Settlement obligations: