Western Unio (WU)

Q2 2010 Earnings Call

July 27, 2010 8:30 am ET


Christina Gold - Chief Executive Officer, President and Director

Scott Scheirman - Chief Financial Officer and Executive Vice President

Hikmet Ersek - Chief Operating Officer and Director

Michael Salop - Senior Vice President of Investor Relations


Adam Frisch - Morgan Stanley

Bryan Keane - Crédit Suisse AG

David Parker - Lazard Capital Markets LLC

Tien-Tsin Huang - JP Morgan Chase & Co

Darrin Peller - Barclays Capital

Ashwin Shirvaikar - Citigroup Inc

James Kissane - BofA Merrill Lynch

Glenn Greene - Oppenheimer & Co. Inc.



Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Western Union Earnings Conference Call. My name is Carissa, and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today's call, Mr. Mike Salop, Senior VP of Investor Relations. Please proceed.

Michael Salop

Thank you, and good morning, everyone. On today's call, we will have comments from Christina Gold, Western Union's President and Chief Executive Officer; Hikmet Ersek, our Chief Operating Officer and CEO select; and Scott Scheirman, Executive Vice President and Chief Financial Officer. After the comments, we will have time for your questions.

As we indicated in our press release, we have prepared slides to accompany this call and webcast. These slides can be found at westernunion.com under the Investor Relations tab and will remain available after the call. Consistent with the first quarter, additional operational statistics have been provided in a supplemental table with our press release.

As a reminder, today's call is being recorded and our comments include forward-looking statements. Please refer to the cautionary language in the earnings release and in Western Union's filings with the Securities and Exchange Commission, including the 2009 Form 10-K for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements.

During the call, we will also discuss some items that do not conform to Generally Accepted Accounting Principles. We have reconciled those items to the most comparable GAAP measures on our website, westernunion.com, under the Investor Relations section. All statements made by Western Union officers on this call are the property of the Western Union Company and subject to copyright protection. Other than the replay, Western Union has not authorized and disclaims responsibility for any recording, replay or distribution of any transcription of this call.

Before I turn the call over to Christina, I'd like to mention that Western Union will be hosting an Investor Day in New York on the morning of September 30. You can now register for the event on our Investor Relations section of our website and the meeting will also be webcast.

Now I'd like turn the call over to Christina Gold.

Christina Gold

Thank you, Mike, and welcome to everyone on the call. We are pleased with the quarter's results as the positive momentum we experienced in our C2C business at the beginning of the year has continued in the second quarter. Thanks to the diversified nature of our portfolio, global transaction growth increased to 9% led by improvement in the Americas region. Our operating margin, excluding restructuring expenses, was 27%, 150 basis point improvement from the first quarter, and earnings per share, excluding restructuring, increased 16% from the second quarter of last year. We grew our agent locations to almost 430,000 in the quarter and we purchased $217 million of stock and paid $40 million of dividends. So on many fronts, it was a good quarter and our business is on track as we enter the second half of the year.

Longer-term, we continue to have global opportunities to increase our market share in money transfer through network growth, focus marketing and consumer segment expansion. We can enhance our growth by offering new products like Prepaid to existing consumers and building our position in new consumer segments such as small and medium enterprise business-to-business payments.

As most of you are aware, I will be retiring on September 1, so this is my last earnings call with you. Although there have been challenges, I believe the foundation is strong and the company is well positioned for future growth. Today, Western Union has a strong global brand, an unmatched network, the right strategies of solid financial position and an energized management team under Hikmet Ersek's leadership ready to move forward. At this time, I would like to turn the rest of the call over to Hikmet and Scott who will give you more perspective on the quarter, as well as take your questions. Hikmet?

Hikmet Ersek

Thank you, Christina, and good morning, everyone. I would like to take a moment to once again thank Christina for her leadership and contributions to Western Union over the years and wish her the best. I agree with her that the foundation of the company is strong and the opportunities are big and Mike's team is excited about leading Western Union into its next stage.

This morning, I would like to give you some more color on the second quarter results. Many markets contributed to the performance in the quarter. The Americas delivered further improvements with double-digit transaction gain and its first revenue increase since the second quarter of 2008. Our international markets also had solid growth even with economic challenges in some parts of the world. Although our U.S. bill payment business declined as expected in the quarter on the other side, customers deliver good results with $28 million in revenues, up from $26 million in the first quarter.

We continue to make advances and retro [ph] (11:26) accomplish money transfer and various mobile initiatives as we leverage our network brand and compliance capabilities. This stinient [ph] (11:35) of comp transaction in international markets increased over 60% in the quarter. The comp-based money transfer transaction, which includes both account-to-cash and cash-to-account, with banks grew more than 70%. In mobile, we have now enabled over 60,000 agent locations in 17 countries to provide cash-to-mobile service and we have begun a pilot program in Malaysia offering mobile-to-cash. We are moving forward with our Prepaid strategy as we now have over 500,000 Prepaid Cards in force and over 8,000 retail locations offering the cards. Let's now take a more detailed look at our results.

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