Summary of Western Union – Q2 Earnings Call 2017

Western Union Q2 Earnings Call 2017.

Here are the summary points for the WU Q2 Earnings Call (2017), so that you don’t have to read all the report:

  • Our digital business continue to excel with westernunion.com transactions increasing 25%
  • Our Speedpay electronic bill payments business, however, again posted good result, delivering double-digit growth in the quarter.
  • …continued declines from the oil producing countries in the Middle East and Africa.
  • strong leadership position in digital money transfer, with westernunion.com money transfer revenue of more than $340 million last year and delivering strong growth again in this year.
  • Over the next few years, we plan to expand well beyond the 40 countries where we have westernunion.com transaction sites today, with an emphasis on mobile
  • We recently published new industry research on the significant financial and human resource cost faced by universities when managing payments from international students.
  • With our Speedpay U.S. electronic bill payment business, we are focused on adding more billers and additional features and services for consumers and billers.
  • Second quarter reported revenues of $1.4 billion were flat compared to the prior-year period
  • In the Middle East, Africa and South Asia region, revenue declined 12%, or 11% constant currency, and transactions were down 10%, as oil prices continued to negatively affect key send markets. Total inbound business to India was down approximately 15% in the quarter, an improvement compared to the 20% decline in the first quarter, and the decline was largely attributable to softness in the Middle East send markets. In the APAC region, revenue was down 4%, or 2% constant currency, while transactions decreased 1%.
  • Westernunion.com C2C revenue delivered strong performance again in the quarter, with revenue increasing 21% or 23% constant currency, on 25% transaction growth. Westernunion.com represented 9% of total C2C revenue in the quarter.
  • Business Solutions revenues declined 4%
  • Our bill payments revenues are now reported in other, rather than a separate C2B segment due to recent organizational changes
  • The bill payments businesses represented over 85% of other revenues in the quarter
  • The largest component of other is our Speedpay U.S. electronic bill payments business, which had revenues of over $320 million in 2016.
  • The decline in GAAP operating margin was due to a $49 million accrual towards a possible resolution with a state regulator
  • Compliance expense was 3.2% of revenue for the second quarter
  • Through two quarters, compliance expense was at 3.5% and we now expect the full-year expense to be slightly lower than we previously thought, although still in the 3.5% to 4% range.
  • The C2C margin was 24.8%, up from 23% in the prior-year period. The margin increase was primarily due to benefits from the timing of marketing spending and lower commission expense.
  • CEO & Team Comments:
  • Russia showed good transaction growth. As you recall that – especially Russia to Ukraine has been a good corridor for us.
  • (On Compliance Cost): But you can look at the trend for the last two or three years, it’s been in that 3.5% to 4% range.
  • Our focus is expanding our dot-com. I wish I could be as soon as possibly 200 countries, right, like my retail money transfer business. On the 40 send countries, 20 of them are on mobile app already, 40 are online. And there is a roadmap to add additional countries. For competitive reasons, I don’t want to tell which countries we’re going to launch, but we will launch countries very soon, new countries and you’re going to see new announcement and the team is very much focused.
  • We are extremely pleased with the dot-com numbers. And compared with the competition, our business on 2016 was $340 million. And 2017, we will be – if you take that growth rate, we will be over $400 million.
  • Our focus is on digital. Digital on the consumer money transfer, digital is – also on the payments business. I think these are growing very fast, and that will help us overall growth also, because don’t forget, westernunion.com is growing very fast, and with $400 million over projected revenue, it’s probably the largest in the market. However, it’s only 9% of our revenue. And so, if that comes to a bigger number, that will definitely have a total impact on the total company results. Although other example is the Speedpay. Speedpay business is over $300 million, $350 million business…
  • Analyst Q: So the question is in regards to M&A. There was some discussion late in 2015, and it’s been pretty quiet since then. Are there any particular regions or capabilities that you’re targeting? It sounds like online remittance has been a recent target. So is it safe to assume that future M&A would likely be targeted at similar capabilities? And with the majority of the cash held internationally, should we be thinking of non-U.S. companies as likely targets?
    • Well, we will – obviously, we are constantly looking at the market, which capabilities are there, and we will – if we need that, we will acquire them wherever that is and where we will have a long-term return on that. So saying that, though, we did not see as today a significant opportunity on M&A, strategic opportunity we didn’t see here yet. And look at our – you said digital, you look at our digital business. It’s a best practice in the market. And obviously combining our digital with our capabilities and going to the market in 40 markets, you don’t have other company who has been 40 outbound countries to connect in 200 countries….. …….But if there is an acquisition opportunity, which will upgrade our systems, upgrade our digital capabilities, we will definitely look at that and we are not shy to do that.

Source: https://seekingalpha.com/article/4094709-western-union-wu-q2-2017-results-earnings-call-transcript?page=1

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