In the second quarter, reported revenues declined 1%, or increased 3% on a constant currency basis, compared to the prior year period. Earnings per share increased to $0.42, up from $0.36 in the prior year period on a GAAP basis or $0.41 excluding the prior year Paymap settlement charge. The current period EPS includes a negative $0.02 impact from a $15 million accrual ($10 million after-tax) related to a legal matter.

The Company updated its full year financial outlook, narrowing EPS to a range of $1.60 to $1.70, compared to the previous range of $1.58 to $1.70. The current outlook reflects the benefit of a lower expected effective tax rate, partially offset by the legal matter accrual.

“We delivered another solid quarter, led by strong growth from our digital business,” said President and Chief Executive Officer Hikmet Ersek. “While international markets are mixed, our U.S. money transfer business continued to provide steady performance, helping drive good profitability and cash flow.”

Ersek added, “Strategically, we continue to make good progress. We released upgraded mobile apps for westernunion.com in eight markets and expanded our account payout capabilities to be able to reach billions of accounts in more than 50 countries. We also activated thousands of business customers on our new WU EDGE digital platform, and continued to invest in enhancing our technology infrastructure and compliance programs across the company.”

Executive Vice President and Chief Financial Officer Raj Agrawal stated, “Operating margins remain healthy, and strong cash flow generation continues to allow us to return significant funds to shareholders. Given the macro challenges in many parts of the world, we are pleased with our results and outlook.”

Consumer-to-Consumer (C2C) revenues declined 1% in the quarter, or increased 2% on a constant currency basis, on transaction growth of 3%. Westernunion.com C2C revenues increased 19% (or 20% constant currency) on transaction growth of 25%, and represented 8% of total C2C revenue in the quarter.

Consumer-to-Business (C2B) revenues declined 2% in the quarter, or increased 12% on a constant currency basis. The depreciation of the Argentine peso caused the decline in reported revenues, while constant currency growth was led by the Argentina walk-in and U.S. electronic bill payments businesses.

Western Union Business Solutions revenues increased 3%, or 6% on a constant currency basis, driven by strong growth in Europe.

Operating margin in the quarter was 18.9%, including a negative impact of 110 basis points from the legal matter accrual, which relates to the Company’s consumer protection and anti-fraud programs.

The operating margin was 18.1% in the second quarter of last year, or 20.7% excluding the impact of the Paymap settlement agreement. Other factors affecting the year-on-year change in margins include incremental investment in technology and the negative impact of foreign exchange, partially offset by reductions in compensation related costs and other expenses.

The effective tax rate was 7.6%, which compares to 8.5% in the prior year period, or 11.8% excluding the Paymap charge. The current quarter rate included a positive impact of 180 basis points from the legal matter accrual, and also benefitted from several discrete items.

The Company returned $156 million to shareholders in the second quarter, consisting of $78 million of share repurchases and $78 million of dividends. Year-to-date, cash flow from operating activities totaled $486 million and $475 million has been returned to shareholders through share repurchases and dividends.

2016 Full Year Outlook

The Company affirmed its full year 2016 outlooks for constant currency revenue growth, operating profit margin, and operating cash flow. The GAAP revenue outlook was decreased slightly to reflect changes in several key foreign currencies against the U.S. dollar. The impact on operating profit from the currency changes is largely expected to be offset by incremental hedge benefits, with hedge gains now projected at approximately $45 million compared to approximately $40 million in the prior outlook.

The Company’s current outlook for the full year effective tax rate is approximately 12%, compared to a mid-teens rate in the prior outlook.

The outlook for GAAP earnings per share has been narrowed to a range of $1.60 to $1.70, which primarily reflects the impact of the lower effective tax rate and the legal matter accrual.

The updated outlook follows:

Revenue

Low to mid-single digit constant currency revenue increase, with the GAAP revenue change approximately 400 basis points lower than constant currency (previously 300 basis points)
Operating Profit Margin

Operating margin of approximately 20%
Earnings per Share

EPS in a range of $1.60 to $1.70 (previously $1.58 to $1.70)
Cash Flow

Cash flow from operating activities of approximately $1 billion. The cash flow outlook excludes approximately $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 2016.
Additional Statistics

Additional key statistics for the quarter and historical trends can be found in the supplemental tables included with this press release. In the C2C segment, the geographic split for transactions and revenue, including transactions initiated through westernunion.com, is determined based upon the region where the money transfer is initiated and the region where the money transfer is paid. For transactions originated and paid in different regions, we split the transaction count and revenue between the two regions, with each region receiving 50%. For money transfers initiated and paid in the same region, 100% of the transactions and revenue are attributed to that region.

Prior to January 1, 2016, we reported westernunion.com as a separate region with 100% of the corresponding transactions and revenue attributed to that region, regardless of where the transactions were paid out. Separate westernunion.com statistics provided in the tables included with this press release maintain that 100% allocation methodology. Prior period regional results have been adjusted to include transactions initiated through westernunion.com, as described in the preceding paragraph.

All amounts included in the supplemental tables to this press release are rounded to the nearest tenth of a million, except as otherwise noted. As a result, the percentage changes and margins disclosed herein may not recalculate precisely using the rounded amounts provided.