Source: Western Union
The Western Union Company (NYSE: WU) today reported financial results for the 2014 fourth quarter and full year, and its financial outlook for 2015.
The Company also announced that its board of directors declared a substantially-increased quarterly cash dividend of $0.155 per common share and approved a new $1.2 billion three-year share repurchase authorization.
For the 2014 full year, the Company reported a revenue increase of 1%, or 4% on a constant currency basis. Operating margin improved to 20.3% for the year, driven by efficiency initiatives, while earnings per share increased 11% to $1.59 as a result of increased operating profit, a lower effective tax rate, and fewer diluted shares outstanding. Cash flow from operating activities was approximately $1 billion in 2014, with $753 million returned to shareholders through dividends and share repurchases.
“I am pleased with the 2014 results,” said President and Chief Executive Officer Hikmet Ersek. “We returned to revenue growth in the consumer money transfer business, further expanded online and account based capabilities, and exceeded our earnings expectations.”
Ersek added, “We also further enhanced our compliance programs around the world, while at the same time driving margin improvement and generating strong cash flow. Consistent with our ongoing focus on prudent capital allocation, we continued to return the majority of free cash flow to shareholders in 2014. Our confidence in future cash flow generation has allowed us to implement a substantial dividend increase and a new share repurchase authorization.”
Enhanced Capital Return Program
The Western Union board of directors declared a quarterly cash dividend of $0.155 per common share, which represents a 24% increase over the previous quarterly dividend of $0.125 per common share. The dividend is payable March 31, 2015, to stockholders of record at the close of business on March 17, 2015. The board of directors also approved a new $1.2 billion share repurchase authorization, which expires December 31, 2017.
Fourth Quarter 2014 Results
In the fourth quarter, revenues declined 1% compared to the prior year period, or increased 4% on a constant currency basis. The differential between reported and constant currency revenue was the result of depreciation of the Argentine peso, the Euro, and various other major currencies around the world, partially offset by the effect of the Company’s foreign exchange hedging programs.
Consumer-to-Consumer (C2C) revenues declined 2%, or increased 2% constant currency, while transactions increased 2% in the quarter. Westernunion.com C2C revenue increased 19%, including a negative 4% impact from currency, on transaction growth of 27%. Electronic channels revenue, which includes westernunion.com, account based money transfer through banks, and mobile money transfer, increased 17% and represented 6% of total Company revenues in the quarter.
Consumer-to-Business (C2B) revenues grew 4% in the quarter, or 15% constant currency. The differential between reported and constant currency revenue changes in C2B was primarily the result of depreciation of the Argentine peso compared to the prior year period.
Western Union Business Solutions revenues increased 1%, or 5% on a constant currency basis.
Operating margin was 19.6% in the quarter, which compares to 16.8% in the fourth quarter of 2013. The operating margin improvement primarily resulted from cost savings initiatives and lower integration expenses.
Earnings per share increased 35% to $0.42 in the fourth quarter, compared to $0.31 in the prior year period, as a result of increased operating profit, a lower effective tax rate, and fewer diluted shares outstanding.
Executive Vice President and Chief Financial Officer Raj Agrawal added, “Efficiency initiatives helped us generate good profit growth in the fourth quarter, despite some global currency and economic headwinds. Our foreign exchange hedging programs also contributed to offsetting the impact of the stronger dollar in the quarter, and should aid our 2015 results as well.”
Cash flow from operating activities totaled approximately $1.0 billion for the full year, with $753 million returned to shareholders through $488 million of share repurchases and $265 million of dividends. In the fourth quarter, the Company returned $108 million to shareholders through $43 million of share repurchases and $65 million of dividends.
2015 Full Year Outlook
The Company’s outlook for 2015 reflects its continuing focus on key strategic imperatives: strengthening its consumer money transfer business, with an emphasis on online and mobile expansion; expanding the reach and penetration of Business Solutions; and generating and deploying strong cash flow for shareholders.
The outlook also reflects the challenging macroeconomic environment, including the adverse impact on revenue of the appreciation of the U.S. dollar against major currencies around the world and the softening of European and certain other economies; and competitive pressures in the U.S. retail domestic money transfer business.
The Company anticipates foreign currency translation will negatively impact revenues by approximately $300 million compared to 2014 rates. This impact is net of an expected benefit of approximately $70 million from foreign exchange hedges implemented to partially mitigate the effect of major currency movements. Operating margins are expected to benefit from previously implemented cost savings initiatives and the foreign exchange hedges.
The effective tax rate is expected to increase from 12% in 2014 to approximately 13% in 2015.
The Company expects the following outlook for 2015:
Low single digit constant currency revenue increase
Low to mid-single digit GAAP revenue decrease
Operating Profit Margin
Operating margin of approximately 21%
Earnings per Share
EPS in a range of approximately $1.58 to $1.65
Cash flow from operating activities of approximately $1 billion. The cash flow outlook excludes $100 million of anticipated final tax payments relating to the agreement announced with the U.S. Internal Revenue Service in December 2011. Some or all of these payments may occur in 2015.