Western Union CO (WU) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and the notes to those statements included in Part II, Item 8, Financial Statements and Supplementary Data in this Annual Report on Form 10‑K. This Annual Report on Form 10‑K contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions, and projections about our industry, business, and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Annual Report on Form 10‑K. See the discussion under the heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K and under the heading “Forward-Looking Statements” below.
Overview
We are a leading provider of cross-border, cross-currency money movement, payments, and digital financial services and conduct business in the following operating segments:
•
Consumer Money Transfer - Our Consumer Money Transfer segment facilitates money transfers, which are primarily sent from our retail agent and owned locations worldwide or through websites and mobile devices. Our 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 - Our Consumer Services segment includes our bill payment services, money order services, retail foreign exchange services, media network, prepaid cards, lending partnerships, and digital wallets.
On August 4, 2021, we entered into an agreement to sell our Business Solutions business, and the final closing for this transaction occurred on July 1, 2023. Accordingly, we no longer report Business Solutions revenues and operating expenses after July 1, 2023. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 4, Divestitures and Goodwill for further information related to our Business Solutions divestiture.
Additional information regarding our segments is provided in the Segment Discussion below.
Results of Operations
The following discussion of our consolidated results of operations and segment results refers to the year ended December 31, 2024 compared to the same period in 2023. For discussion of our consolidated results of operations and segment results for the year ended December 31, 2023 compared to the same period in 2022, refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 22, 2024.
The results of operations should be read in conjunction with the discussion of our segment results of operations, which provides more detailed discussions concerning certain components of the Consolidated Statements of Income. All significant intercompany accounts and transactions between our segments have been eliminated. The below information has been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) unless otherwise noted. All amounts provided in this section 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.
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The following table sets forth our consolidated results of operations for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions, except per share amounts) | 2024 | 2023 | % Change | |||||||||
| Revenues | $ | 4,209.7 | $ | 4,357.0 | (3 | )% | ||||||
| Expenses: | ||||||||||||
| Cost of services | 2,620.5 | 2,671.7 | (2 | )% | ||||||||
| Selling, general, and administrative | 863.4 | 867.8 | (1 | )% | ||||||||
| Total expenses | 3,483.9 | 3,539.5 | (2 | )% | ||||||||
| Operating income | 725.8 | 817.5 | (11 | )% | ||||||||
| Other income/(expense): | ||||||||||||
| Gain on divestiture of business | — | 18.0 | (a) | |||||||||
| Interest income | 11.9 | 15.6 | (24 | )% | ||||||||
| Interest expense | (119.8 | ) | (105.3 | ) | 14 | % | ||||||
| Other income, net | 0.7 | — | (a) | |||||||||
| Total other expense, net | (107.2 | ) | (71.7 | ) | 50 | % | ||||||
| Income before income taxes | 618.6 | 745.8 | (17 | )% | ||||||||
| Provision for/(benefit from) income taxes | (315.6 | ) | 119.8 | (a) | ||||||||
| Net income | $ | 934.2 | $ | 626.0 | 49 | % | ||||||
| Earnings per share: | ||||||||||||
| Basic | $ | 2.75 | $ | 1.69 | 63 | % | ||||||
| Diluted | $ | 2.74 | $ | 1.68 | 63 | % | ||||||
| Weighted-average shares outstanding: | ||||||||||||
| Basic | 340.0 | 370.8 | ||||||||||
| Diluted | 341.1 | 371.8 |
(a)
Calculation not meaningful.
Revenues Overview
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 send and receive funding method, the principal amount sent, and, when the money transfer involves different send and receive currencies, the difference between the exchange rate we set to the customer and a rate available in the wholesale foreign exchange market. We also offer other consumer services, for which revenue is impacted by similar factors.
Due to the significance of the effect that foreign exchange fluctuations against the United States dollar can have on our reported revenues, constant currency results have been provided in the table below for consolidated revenues. Constant currency revenues translate revenues denominated in foreign currencies to the United States dollar, net of the effect of foreign currency hedges, at rates consistent with those in the prior year. Constant currency results are also net of the impact of Argentina inflation due to its economy being hyperinflationary. We have also disclosed the impact of the Business Solutions divestiture on our revenues in the table below. Constant currency measures and measures that exclude the impact of divestitures are non-GAAP financial measures and are provided so that revenue can be viewed without the effect of fluctuations in foreign currency exchange rates, net of the hyperinflationary Argentine economy, and divestitures of our businesses, which is consistent with how management evaluates our revenue results and trends. We believe that these measures provide management and investors with information about revenue results and trends that eliminates currency volatility and divestitures, thereby providing greater clarity regarding, and increasing the comparability of, our underlying results and trends. These disclosures are provided in addition to, and not as a substitute for, the percentage change in revenue on a GAAP basis for the year ended December 31, 2024 compared to the prior year. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.
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The following table sets forth our consolidated revenue results for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in millions) | 2024 | 2023 | % Change | |||||||||
| Revenues, as reported - (GAAP) | $ | 4,209.7 | $ | 4,357.0 | (3 | )% | ||||||
| Foreign currency translation and Argentina inflation impact(a) | (1 | )% | ||||||||||
| Divestitures impact(b) | 1 | % | ||||||||||
| Adjusted revenues - (Non-GAAP) | (3 | )% |
(a)
Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges and Argentina inflation, resulted in an increase to GAAP revenues of $11.1 million for the year ended December 31, 2024 when compared to the prior year. We calculate Argentina inflation as the revenue growth not attributable to either transaction growth or the change in price (revenue divided by principal).
(b)
Business Solutions revenues included in our results were $29.7 million for the year ended December 31, 2023.
For the year ended December 31, 2024 when compared to the prior year, GAAP and Adjusted revenues decreased due to a reduction in transactions originating from Iraq, which negatively impacted revenues by slightly more than 3%. We believe that we will continue to see a reduction in transactions originating in Iraq, compared to recent years, primarily driven by changes in monetary policy and related central bank actions.
Operating Expenses Overview
Redeployment program
On October 20, 2022, we announced an operating expense redeployment program, which aims to redeploy and reallocate investment and expenses in our cost base, accomplished through optimizations in vendor management, our real estate footprint, marketing, and people strategy. We believe these changes have allowed us to invest in strategic initiatives. We incurred $92.7 million of total expenses under this program, including severance, from inception through December 31, 2024.
The following table presents the location and amount of operating expenses associated with our redeployment program in the Consolidated Statements of Income for the years ended December 31, 2024 and 2023.
| (dollars in millions) | Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|---|
| Location | 2024 | 2023 | |||||
| Cost of services | $ | 20.2 | $ | 10.6 | |||
| Selling, general, and administrative | 21.2 | 18.9 | |||||
| Total redeployment program costs | $ | 41.4 | $ | 29.5 |
Cost of Services
Cost of services primarily consists of agent commissions, which represented approximately 60% of total cost of services for the years ended December 31, 2024 and 2023. For the year ended December 31, 2024, Cost of services decreased compared to the prior year primarily due to decreases in agent commissions, which generally vary with revenue, lower information technology expenses, and a decrease associated with the Business Solutions divestiture, partially offset by increases in certain variable expenses, including bank fees and credit and non-credit losses, and higher employee compensation primarily associated with our expansion of Company-owned locations.
Selling, General, and Administrative
Selling, general and administrative expenses decreased for the year ended December 31, 2024 when compared to the prior year due to a decrease in advertising costs and decreases associated with the Business Solutions divestiture. These were partially offset by fluctuations between the United States dollar and foreign currencies.
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Total Other Expense, Net
Total other expense, net increased for the year ended December 31, 2024 when compared to the prior year as a result of the prior year gain on the final closing of the Business Solutions divestiture, which occurred on July 1, 2023, as well as increased interest expense in the current year due to higher average commercial paper balances outstanding.
Income Taxes
Our effective tax rates on pre-tax income were (51.0)% and 16.1% for the years ended December 31, 2024 and 2023, respectively. The change in our effective tax rate for the year ended December 31, 2024 compared to the prior year was primarily due to the recognition of deferred tax assets, net of valuation allowance, associated with the reorganization of our international operations and a settlement of the IRS examination of our 2017 and 2018 federal income tax returns, which resulted in tax benefits of $255.2 million and $137.8 million, respectively, for the year ended December 31, 2024.
We have established contingency reserves for a variety of tax exposures. As of December 31, 2024, the total amount of tax contingency reserves was $17.9 million, including accrued interest and penalties, net of related items. Our tax reserves reflect our judgment as to the resolution of the issues involved if subject to judicial review or other settlement. While we believe that our reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a financial cost that does not exceed our related reserve. With respect to these reserves, our income tax expense would include: (i) any changes in tax reserves arising from material changes in the facts and circumstances (i.e., new information) surrounding a tax issue during the period, and (ii) any difference from our tax position as recorded in the financial statements and the final resolution of a tax issue during the period. Such resolution could materially increase or decrease income tax expense in our consolidated financial statements in future periods and could impact our operating cash flows.
A significant proportion of our profits are foreign-derived. For the years ended December 31, 2024 and 2023, 112% and 105%, respectively, of our pre-tax income was derived from foreign sources. While the income tax imposed by any one foreign country is not material to us, our overall effective tax rate could be adversely affected by changes in foreign tax laws.
Earnings Per Share
During the years ended December 31, 2024 and 2023, basic earnings per share were $2.75 and $1.69, respectively, and diluted earnings per share were $2.74 and $1.68, respectively. 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. Shares excluded from the diluted earnings per share calculation were 11.6 million and 9.7 million for the years ended December 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 our average share price during the periods.
Earnings per share for the year ended December 31, 2024 compared to the prior year were impacted by the previously described factors impacting net income and a lower number of average shares outstanding.
Segment Discussion
We manage our business around the consumers and businesses we serve and the types of services we offer. Each of our segments address a different combination of customer groups, distribution networks, and services offered. Our segments are Consumer Money Transfer and Consumer Services. On August 4, 2021, we entered into an agreement to sell our Business Solutions business and the final closing for this transaction was on July 1, 2023. Accordingly, we no longer report Business Solutions revenues and operating expenses after July 1, 2023. For the year ended December 31, 2023, Business Solutions revenues and operating income included in our Consolidated Statements of Income were $29.7 million and $3.7 million, respectively.
During the years ended December 31, 2024 and 2023, we incurred $41.4 million and $29.5 million, respectively, of costs associated with our operating expense redeployment program, as described above, primarily related to severance,
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expenses associated with streamlining our organizational and legal structure, and non-cash impairments of operating lease right-of-use (“ROU”) assets and property and equipment. We also recorded non-cash amortization and impairment of acquired intangible assets in connection with recent business acquisitions. In addition, during the year ended December 31, 2024, we incurred costs associated with operating our Russian entity and impairment costs related to our assets in Russia, as we have decided to pursue either liquidating or selling these assets. In estimating this impairment, we did not include the cash that we believe will be necessary to pay for future costs as we work to liquidate and exit the business. While certain of the above expenses are identifiable to our segments, the expenses are not included in the measurement of segment operating income provided to the Chief Operating Decision Maker (“CODM”) for purposes of performance assessment and resource allocation. These expenses are therefore excluded from our segment operating income results.
Beginning in 2024, we changed our segment reporting methodology to no longer allocate acquisition, separation, and integration costs to our segments. These costs were previously allocated entirely to Consumer Services while it was called Other, and the amounts included in the segment were immaterial for the year ended December 31, 2023. The expenses are no longer included in the measurement of segment operating income provided to the CODM for purposes of performance assessment and resource allocation.
The business segment measurements provided to, and evaluated by, our CODM are computed in accordance with the following principles:
•
The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
•
Corporate costs, including overhead expenses, are allocated to the segments primarily based on a percentage of the segments’ revenue compared to total revenue.
•
All items not included in operating income are excluded from the segments.
The following table sets forth the components of segment revenues as a percentage of the consolidated totals for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||||
| Consumer Money Transfer | 90 | % | 92 | % | ||||
| Consumer Services | 10 | % | 7 | % | ||||
| Business Solutions | — | 1 | % | |||||
| 100 | % | 100 | % |
Consumer Money Transfer
The following table sets forth our Consumer Money Transfer segment results of operations for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars and transactions in millions) | 2024 | 2023 | % Change | |||||||||
| Revenues | $ | 3,798.0 | $ | 4,005.0 | (5 | )% | ||||||
| Operating income | $ | 737.4 | $ | 750.8 | (2 | )% | ||||||
| Operating income margin | 19 | % | 19 | % | ||||||||
| Key indicator: | ||||||||||||
| Consumer Money Transfer transactions | 289.9 | 279.4 | 4 | % |
Our Consumer Money Transfer service facilitates money transfers sent from our retail agent locations worldwide and money transfer transactions conducted and funded through websites and mobile applications marketed under our brands (“Branded Digital”). The segment includes five geographic regions whose functions are primarily related to generating, managing, and maintaining agent relationships and localized marketing activities. We include Branded Digital transactions in our regions. By means of common processes and systems, these regions, including Branded Digital transactions, create
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one interconnected global network for consumer transactions, thereby constituting one Consumer Money Transfer business and one operating segment.
Transaction volume is the primary generator of revenue in our Consumer Money Transfer segment. A Consumer Money Transfer transaction constitutes the transfer of funds to a designated recipient utilizing one of our consumer money transfer services. The geographic split for transactions and revenue in the table that follows is determined based upon the region where the money transfer is initiated. Included in each region’s transaction and revenue percentages in the tables below are Branded Digital transactions for the years ended December 31, 2024 and 2023. Where reported separately in the discussion below, Branded Digital consists of 100% of the transactions conducted and funded through that channel.
The table below sets forth revenue and transaction changes by geographic region compared to the prior year. Additionally, due to the significance of our Consumer Money Transfer segment to our overall results, we have also provided constant currency results for our Consumer Money Transfer segment revenues. Consumer Money Transfer segment adjusted revenue growth/(decline) is a non-GAAP financial measure, as further discussed in Revenues Overview above.
| Year Ended December 31, 2024 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | Adjusted | |||||||||||||||
| Growth / | Foreign | Revenue | ||||||||||||||
| (Decline) | Exchange | Growth / | ||||||||||||||
| as Reported - | Translation | (Decline)(a) - | Transaction | |||||||||||||
| (GAAP) | Impact | (Non-GAAP) | Growth | |||||||||||||
| Consumer Money Transfer regional growth/(decline): | ||||||||||||||||
| North America (United States & Canada) (“NA”) | (1 | )% | 0 | % | (1 | )% | 3 | % | ||||||||
| Europe and CIS (“EU & CIS”) | (2 | )% | (1 | )% | (1 | )% | 5 | % | ||||||||
| Middle East, Africa, and South Asia (“MEASA”) | (19 | )% | (1 | )% | (18 | )% | 3 | % | ||||||||
| Latin America and the Caribbean (“LACA”) | 2 | % | (1 | )% | 3 | % | 0 | % | ||||||||
| Asia Pacific (“APAC”) | (7 | )% | (4 | )% | (3 | )% | 8 | % | ||||||||
| Total Consumer Money Transfer segment | (5 | )% | (1 | )% | (4 | )% | 4 | % | ||||||||
| Branded Digital(b) | 7 | % | (1 | )% | 8 | % | 13 | % |
(a)
Adjusted revenue growth/(decline) assumes that revenues denominated in foreign currencies are translated to the United States dollar, net of the effect of foreign currency hedges, at rates consistent with those in the prior year. LACA, total Consumer Money Transfer, and Branded Digital adjusted revenue growth excludes the effect of increases in local currency revenue due to inflation in Argentina, which is hyperinflationary. We calculate Argentina inflation as the revenue growth not attributable to either transaction growth or the change in price (revenue divided by principal).
(b)
As noted above, Branded Digital revenues are included in the regions.
The table below sets forth regional revenues as a percentage of our Consumer Money Transfer revenue for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||||
| Consumer Money Transfer revenue as a percentage of segment revenue: | ||||||||
| NA | 39 | % | 37 | % | ||||
| EU & CIS | 26 | % | 25 | % | ||||
| MEASA | 18 | % | 21 | % | ||||
| LACA | 12 | % | 11 | % | ||||
| APAC | 5 | % | 6 | % |
Branded Digital, which is included in the regional percentages above, represented approximately 24% and 22% of our Consumer Money Transfer revenues for the years ended December 31, 2024 and 2023, respectively.
Our consumers transferred $102.9 billion and $101.7 billion in cross-border principal for the years ended December 31, 2024 and 2023, respectively. Consumer Money Transfer cross-border principal is the amount of consumer funds transferred to a designated recipient in a country or territory that differs from the country or territory from which the transaction was initiated. Consumer Money Transfer cross-border principal is a metric used by management to monitor and better understand the growth in our underlying business relative to competitors, as well as changes in our market share of global remittances.
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Revenues
Consumer Money Transfer revenue decreased 5%, and transactions increased 4% for the year ended December 31, 2024, compared to the prior year. Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges and Argentina inflation, negatively impacted revenue by 1% for the year ended December 31, 2024, compared to the prior year.
For the year ended December 31, 2024, in our Consumer Money Transfer regions, NA revenue decreased and transactions increased compared to the prior year. Price reductions were partially offset by an increase in cross-border transactions sent from the United States. For the year ended December 31, 2024, our EU & CIS revenues were negatively impacted by price reductions and by one of our retail agents no longer offering cash-based services at its retail locations. Declines in revenue in the MEASA region were driven by a reduction in transactions originating from Iraq primarily driven by changes in monetary policy and related central bank actions, as discussed above.
We have historically implemented price reductions or price increases throughout many of our global corridors. We will likely continue to implement price changes from time to time in response to competition and other factors. Price reductions generally reduce margins and adversely affect financial results in the short term and may also adversely affect financial results in the long term if transaction volumes do not increase sufficiently. Price increases may adversely affect transaction volumes, as consumers may not use our services if we fail to price them appropriately.
Operating Income
Consumer Money Transfer operating income for the year ended December 31, 2024 decreased compared to the prior year due to a decrease in revenue, as discussed above, and fluctuations between the United States dollar and foreign currencies, partially offset by reduced agent commissions, a decrease in advertising costs, and lower information technology expenses.
Consumer Services
The following table sets forth Consumer Services segment results for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in millions) | 2024 | 2023 | % Change | |||||||||
| Revenues | $ | 411.7 | $ | 322.3 | 28 | % | ||||||
| Operating income | $ | 52.3 | $ | 92.5 | (43 | )% | ||||||
| Operating income margin | 13 | % | 29 | % | (16 | )% |
Revenues
For the year ended December 31, 2024 compared to the prior year, Consumer Services revenues increased primarily due to an increase in retail foreign exchange services, growth in new services we are continuing to introduce to our customers, including media network, and an increase in our money order business. Argentina inflation, net of the impact of fluctuations in the United States dollar compared to foreign currencies, resulted in an increase to revenue growth of 13% for the year ended December 31, 2024 relative to the prior year.
Operating Income
Consumer Services operating income for the year ended December 31, 2024 compared to the prior year was negatively impacted by increased expenses associated with our retail foreign exchange services and new services we are continuing to introduce to our customers, including media network, increased investment in information technology, and higher credit losses.
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Capital Resources and Liquidity
Our primary source of liquidity has been cash generated from our operating activities, primarily from net income and fluctuations in working capital. Our working capital is affected by the timing of payments for employee and agent incentives, interest payments on our outstanding borrowings, and timing of income tax payments, among other items. Many of our annual employee incentive compensation and agent incentive payments are made in the first quarter following the year they were incurred. The majority of our interest payments are due in the second and fourth quarters, which results in a decrease in the amount of cash provided by operating activities in those quarters and a corresponding increase to the first and third quarters. The annual payments resulting from the United States tax reform legislation enacted in 2017 (the “Tax Act”) include amounts related to the United States taxation of certain previously undistributed earnings of foreign subsidiaries. The final payment of approximately $221 million is due in the second quarter of 2025.
Our future cash flows could be impacted by a variety of factors, some of which are out of our control. These factors include, but are not limited to, changes in economic conditions, especially those impacting migrant populations, changes in income tax laws or the status of income tax audits, including the resolution of outstanding tax matters, and the settlement or resolution of legal contingencies.
Substantially all of our cash flows from operating activities have been generated from subsidiaries. Most of these cash flows are generated from our regulated subsidiaries. Our regulated subsidiaries may transfer all excess cash to the parent company for general corporate use, except for assets subject to legal or regulatory restrictions, including: (i) requirements to maintain cash and other qualifying investment balances, free of any liens or other encumbrances, related to the payment of certain of our money transfer and other payment obligations, (ii) other legal or regulatory restrictions, including statutory or formalized minimum net worth requirements, and (iii) restrictions on transferring assets outside of the countries where these assets are located.
We currently believe we have adequate liquidity to meet our business needs, including payments under our debt and other obligations, through our existing cash balances, our ability to generate cash flows through operations, and our $1.56 billion revolving credit facility (“Revolving Credit Facility”), which supports our commercial paper program. Our commercial paper program enables us to issue unsecured commercial paper notes in an amount not to exceed $1.56 billion outstanding at any time, reduced to the extent of any borrowings outstanding on our Revolving Credit Facility. As of December 31, 2024, we had no outstanding borrowings on our Revolving Credit Facility and no outstanding borrowings on our commercial paper program.
To help ensure availability of our worldwide cash where needed, we utilize a variety of planning and financial strategies, including decisions related to the amounts, timing, and manner by which cash is repatriated or otherwise made available from our international subsidiaries. These decisions can influence our overall tax rate and impact our total liquidity. We regularly evaluate our United States cash requirements, taking tax consequences and other factors into consideration and also the potential uses of cash internationally to determine the appropriate level of dividend repatriations of our foreign source income.
Cash and Investment Securities
As of December 31, 2024 and 2023, we had Cash and cash equivalents of $1,474.0 million and $1,268.6 million, respectively.
In many cases, we receive funds from money transfers and certain other payment services before we settle the payment of those transactions. These funds, referred to as Settlement assets on our Consolidated Balance Sheets, are not used to support our operations. However, we earn income from investing these funds. We maintain a portion of these settlement assets in highly liquid investments, classified as Cash and cash equivalents within Settlement assets, to fund settlement obligations.
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Investment securities, net, classified within Settlement assets on the Consolidated Balance Sheets, were $1,332.2 million and $1,458.1 million as of December 31, 2024 and 2023, respectively, and consist primarily of highly-rated state and municipal debt securities. These investment securities are held in order to comply with state licensing requirements in the United States and are required to have credit ratings of “A-” or better from a major credit rating agency. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 7, Settlement Assets and Obligations for more details regarding investment securities.
Investment securities are exposed to market risk due to changes in interest rates and credit risk. We regularly monitor credit risk and attempt to mitigate our exposure by investing in highly-rated securities and diversifying our investment portfolio. Our investment securities are also actively managed with respect to concentration. As of December 31, 2024, all investments with a single issuer and each individual security represented less than 10% of our investment securities portfolio.
Cash Flows from Operating Activities
Cash provided by operating activities for the year ended December 31, 2024 decreased to $406.3 million from $783.1 million for the year ended December 31, 2023. For the year ended December 31, 2024 compared to the prior year, cash provided by operating activities was negatively impacted by higher income taxes paid related to the Tax Act, as further discussed below, as well as payments related to United States federal tax liabilities arising from the examination of our tax returns for the 2017 and 2018 tax years, in addition to other changes in working capital balances.
Financing Resources
As of December 31, 2024, we had the following outstanding borrowings (in millions):
| Commercial paper | $ | — | ||
|---|---|---|---|---|
| Notes: | ||||
| 2.850% notes due 2025(a), (b) | 500.0 | |||
| 1.350% notes due 2026(a) | 600.0 | |||
| 2.750% notes due 2031(a) | 300.0 | |||
| 6.200% notes due 2036(a) | 500.0 | |||
| 6.200% notes due 2040(a) | 250.0 | |||
| Term loan facility borrowings (effective rate of 5.8%)(c) | 800.0 | |||
| Total borrowings at par value | 2,950.0 | |||
| Debt issuance costs and unamortized discount, net | (9.2 | ) | ||
| Total borrowings at carrying value(d) | $ | 2,940.8 |
(a)
The difference between the stated interest rate and the effective interest rate is not significant.
(b)
On January 10, 2025, we repaid these notes in full. See additional information in Part II, Item 8, Financial Statements and Supplementary Data, Note 14, Borrowings.
(c)
In December 2024, we drew upon our Term Loan Facility. See additional information in Part II, Item 8, Financial Statements and Supplementary Data, Note 14, Borrowings.
(d)
As of December 31, 2024, our weighted-average effective rate on total borrowings was approximately 4.3%.
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Commercial Paper Program
Pursuant to our commercial paper program, we may issue unsecured commercial paper notes in an amount not to exceed $1.56 billion outstanding at any time, reduced to the extent of borrowings outstanding on our Revolving Credit Facility. Our commercial paper borrowings may have maturities of up to 397 days from date of issuance. Interest rates for borrowings are based on market rates at the time of issuance. As of December 31, 2024, we had no commercial paper borrowings outstanding, and as of December 31, 2023, we had $364.9 million in commercial paper borrowings outstanding. Proceeds from our commercial paper borrowings were used for general corporate purposes and working capital needs, including the settlement of our money transfer obligations prior to collecting receivables from agents or others.
Revolving Credit Facility
Our Revolving Credit Facility provides for unsecured financing facilities and allows us to draw loans payable based upon the Secured Overnight Financing Rate (“SOFR”), the Euro Interbank Offered Rate, or the Sterling Overnight Index Average. On November 30, 2024, we increased the aggregate revolving credit commitments to $1.56 billion, including a $250.0 million letter of credit subfacility and $300.0 million swing line sublimit, and extended the maturity date to November 30, 2029.
Interest due under the Revolving Credit Facility is payable according to the terms of that borrowing. Generally, interest under the Revolving Credit Facility is calculated using either (i) an adjusted term SOFR, or other applicable benchmark based on the currency of the borrowing, plus an interest rate margin determined on a sliding scale from 0.920% to 1.425% based on our credit rating (currently 1.140%) or (ii) a base rate plus a margin determined on a sliding scale from 0.000% to 0.425% based on our credit rating (currently 0.140%). A facility fee on the total amount of the facility is also payable quarterly, regardless of usage, and such facility fee is determined on a sliding scale from 0.080% to 0.200% based on our credit rating (currently 0.110%).
The purpose of our Revolving Credit Facility, which is diversified through a group of 18 participating institutions, is to provide general liquidity and to support our commercial paper program, which we believe enhances our short-term credit rating. The largest commitment from any single financial institution within the total committed balance of $1.56 billion is approximately 13%. As of December 31, 2024 and 2023, we had no outstanding borrowings under the facility. If the amount available to borrow under the Revolving Credit Facility decreased, or if the Revolving Credit Facility were eliminated, the cost and availability of borrowing under the commercial paper program may be impacted.
Term Loan Facility
On June 25, 2024, we entered into a delayed draw term loan credit agreement providing for an unsecured term loan facility in an aggregate amount of $800.0 million (the “Term Loan Facility”). On December 13, 2024, we drew upon the Term Loan Facility in the total amount of $800.0 million, and such borrowings mature on December 13, 2027. We have the option to increase the commitments under the Term Loan Facility by an amount such that the commitments do not exceed $1.0 billion in the aggregate (after giving effect to any such increases). Any such increases would be subject to obtaining additional commitments from existing or new lenders under the Term Loan Facility. We used the proceeds from the Term Loan Facility borrowings to repay our issued and outstanding 2.850% notes due January 2025, to reduce commercial paper balances, and for general corporate purposes.
Notes
For a discussion regarding the terms and maturities of our notes, please refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 14, Borrowings.
Credit Ratings and Debt Covenants
The credit ratings on our debt are an important consideration in our overall business, managing our financing costs, and facilitating access to additional capital on favorable terms. Factors that we believe are important in assessing our credit ratings include earnings, cash flow generation, leverage, available liquidity, and the overall business.
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Our Revolving Credit Facility and Term Loan Facility contain interest rate margins which are determined based on certain of our credit ratings and the Revolving Credit Facility also contains a facility fee that is based on our credit ratings. In addition, the interest rates payable on our notes due in 2026 and 2031 can be impacted by our credit ratings. We are also subject to certain provisions in many of our notes and certain of our derivative contracts, which could require settlement or collateral posting in the event of a change in control combined with a downgrade below investment grade, as further described below. We do not have any other terms within our debt agreements that are tied to changes in our credit ratings.
The Revolving Credit Facility and Term Loan Facility contain covenants, subject to certain exceptions, that, among other things, limit or restrict our ability to sell or transfer assets or merge or consolidate with another company, grant certain types of security interests, incur certain types of liens, impose restrictions on subsidiary dividends, enter into sale and leaseback transactions, incur certain subsidiary level indebtedness, or use proceeds in violation of anti-corruption or anti-money laundering laws. Our notes are subject to similar covenants except that only the notes due in 2036 contain covenants limiting or restricting subsidiary indebtedness, and none of our notes are subject to a covenant that limits our ability to impose restrictions on subsidiary dividends. Both our Revolving Credit Facility and our Term Loan Facility require us to maintain a consolidated adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) interest coverage ratio of greater than 3:1 (ratio of consolidated adjusted EBITDA, defined as net income/(loss) plus the sum of (i) interest expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization expense, (v) any other non-cash deductions, losses, or charges made in determining net income/(loss) for such period, and (vi) extraordinary, non-recurring, or unusual losses or charges (including costs and expenses of litigation included in operating income), minus extraordinary, non-recurring, or unusual gains provided that the amount added back to net income (or net loss) for such extraordinary, non-recurring, or unusual losses, expenses or charges may not exceed 10% of adjusted EBITDA, in each case determined in accordance with United States generally accepted accounting principles for such period, to interest expense) for each period comprising the four most recent consecutive fiscal quarters. Our consolidated interest coverage ratio was 9:1 for the year ended December 31, 2024.
For the year ended December 31, 2024, we were in compliance with our debt covenants. A violation of our debt covenants could impair our ability to borrow, and outstanding amounts borrowed could become due, thereby restricting our ability to use our excess cash for other purposes.
Certain of our notes (including our notes due in 2026, 2031, and 2040) include a change of control triggering event provision, as defined in the terms of the notes. If a change of control triggering event occurs, holders of the notes may require us to repurchase some or all of their notes at a price equal to 101% of the principal amount of their notes, plus any accrued and unpaid interest. A change of control triggering event will occur when there is a change of control involving us, and, among other things, within a specified period in relation to the change of control, the notes are downgraded from an investment grade rating to below an investment grade rating by certain major credit rating agencies.
Cash Priorities
Liquidity
Our objective is to maintain strong liquidity and a capital structure consistent with investment-grade credit ratings. We have existing cash balances, cash flows from operating activities, access to the commercial paper markets, and our Revolving Credit Facility available to support the needs of our business.
Our ability to grow the business, make investments in our business, make acquisitions, return capital to shareholders, including through dividends and share repurchases, and service our debt and tax obligations will depend on our ability to continue to generate excess operating cash through our operating subsidiaries and to continue to receive dividends from those operating subsidiaries, our ability to obtain adequate financing, and our ability to identify acquisitions that align with our long-term strategy. For additional information, please refer to Part II, Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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Capital Expenditures
The total aggregate amount paid for purchased and developed software, contract costs, and purchases of property and equipment was $130.6 million and $147.8 million in 2024 and 2023, respectively. Capital expenditures during these periods included investments in our information technology infrastructure. Amounts paid for new and renewed agent contracts vary depending on the terms of existing contracts as well as the timing of new and renewed contract signings.
Share Repurchases and Dividends
During the years ended December 31, 2024 and 2023, 13.9 million and 24.3 million shares, respectively, were repurchased for $177.3 million and $300.0 million, respectively, excluding commissions, at an average cost of $12.75 and $12.35, respectively, under the share repurchase authorization approved by our Board of Directors which expired on December 31, 2024. On December 13, 2024, our Board of Directors authorized $1.0 billion of common stock repurchases with no expiration date.
Our Board of Directors declared quarterly cash dividends of $0.235 per common share in all four quarters of 2024 and 2023, representing $318.3 million and $346.1 million in total dividends, respectively. These amounts were paid to shareholders of record in the respective quarter the dividend was declared.
On February 4, 2025, the Board of Directors declared a quarterly cash dividend of $0.235 per common share payable on March 31, 2025.
Material Cash Requirements
Debt Service Requirements
Our 2025 and future debt service requirements will include payments on all outstanding indebtedness, including any borrowings under our commercial paper program. On January 10, 2025, we repaid our notes due in 2025 using proceeds from our Term Loan Facility borrowings.
As of December 31, 2024, the total projected interest payments on outstanding borrowings were $812.8 million, of which $114.2 million is expected to be paid in the next 12 months. We have estimated our future interest payments based on the assumption that no debt issuances or renewals will occur upon the maturity dates of our notes. However, we may refinance all or a portion of our borrowings in future periods, and we expect to continue to borrow under our commercial paper program for general corporate purposes and working capital needs. Estimated interest payments on floating-rate debt are calculated by utilizing the effective rate and forward rates as of December 31, 2024 for our current and future interest rates, respectively.
2017 United States Federal Tax Liability
The Tax Act imposed a tax on certain of our previously undistributed foreign earnings. This tax charge, combined with our other 2017 United States taxable income and tax attributes, resulted in a 2017 United States federal tax liability of approximately $800 million. We elected to pay this liability in periodic installments through 2025 and in the second quarter of 2024, we made an installment payment of $159 million towards this liability. Under the terms of the law, we are required to pay the final installment of approximately $221 million in the second quarter of 2025. These payments have affected and will continue to adversely affect our cash flows and liquidity and may adversely affect future share repurchases.
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Operating Leases
We lease real properties for use as administrative and sales offices, in addition to transportation, office, and other equipment. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 11, Leases for details on our leasing arrangements, including future maturities of our operating lease liabilities.
Purchase Obligations
A purchase obligation is an agreement to purchase goods or services that is enforceable, legally binding, and specifies all significant terms. As of December 31, 2024, we had approximately $150 million of outstanding purchase obligations, of which approximately $100 million is expected to be paid in the next 12 months. Many of our contracts contain clauses that allow us to terminate the contract with notice and with a termination penalty. Termination penalties are generally an amount less than the original obligation. Obligations under certain contracts are usage-based and are, therefore, estimated in the above amounts. Historically, we have not had any significant defaults on our contractual obligations or incurred significant penalties for termination of our contractual obligations.
We have no material off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
Other Commercial Commitments
We had approximately $60 million in outstanding letters of credit and bank guarantees as of December 31, 2024 primarily held in connection with regulatory requirements, lease arrangements, and certain agent agreements. We expect to renew many of our letters of credit and bank guarantees prior to expiration.
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Critical Accounting Policies and Estimates
Management’s discussion and analysis of results of operations and financial condition is based on our consolidated financial statements that have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires that management make estimates and assumptions that affect the amounts reported for revenues, expenses, assets, liabilities, and other related disclosures. Actual results may or may not differ from these estimates. Our significant accounting policies are discussed in Part II, Item 8, Financial Statements and Supplementary Data, Note 2, Summary of Significant Accounting Policies.
Our critical accounting policies and estimates, described below, are very important to the portrayal of our financial condition and our results of operations, and applying them requires our management to make difficult, subjective, and complex judgments. We believe that the understanding of these key accounting policies and estimates is essential in achieving more insight into our operating results and financial condition.
Income Taxes
Income taxes, as reported in our consolidated financial statements, represent the net amount of income taxes we expect to pay to various taxing jurisdictions in connection with our operations. We provide for income taxes based on amounts that we believe we will ultimately owe after applying the required analyses and judgments.
The determination of our worldwide provision for income taxes requires significant judgment. We routinely receive, and may in the future receive, questions from taxing authorities on various tax-related assertions. In many of these instances, the ultimate tax determination is uncertain, given the complexities in interpreting tax laws and applying our facts and circumstances to these laws in many jurisdictions throughout the world.
We recognize the tax benefit from an uncertain tax position only when it is more likely than not, based on the technical merits of the position, that the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.
We have established contingency reserves for a variety of tax exposures. Our tax reserves reflect our judgment as to the resolution of the issues involved if subject to judicial review or other settlement. While we believe that our reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a financial cost that does not exceed our related reserve. With respect to these reserves, our income tax expense would include: (i) any changes in tax reserves arising from material changes in facts and circumstances (i.e., new information) surrounding a tax issue during the period and (ii) any difference from our tax position as recorded in the consolidated financial statements and the final resolution of a tax issue during the period.
Our tax contingency reserves for our uncertain tax positions as of December 31, 2024 were $17.9 million, including accrued interest and penalties, net of related items. While we believe that our reserves are adequate to cover reasonably expected tax risks, in the event that the ultimate resolution of our uncertain tax positions differs from our estimates, we may be exposed to material increases in income tax expense, which could materially impact our financial condition, results of operations, and cash flows. Furthermore, the timing of any related cash payments for these tax liabilities is inherently uncertain and is affected by variable factors outside our control.
Goodwill
Goodwill represents the excess of purchase price over the fair value of tangible and other intangible assets acquired less liabilities assumed, arising from business combinations. An impairment assessment of goodwill is conducted annually during our fourth quarter at the reporting unit level. This assessment of goodwill is performed more frequently if events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. Reporting units are determined by the level at which management reviews segment operating results. That level may be the operating segment, or it may be one level below the operating segment.
Our impairment assessment typically begins with a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. The initial qualitative assessment includes
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comparing the overall financial performance of the reporting unit against the planned results. Additionally, each reporting unit’s fair value is assessed based on current and expected events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity-specific events. Periodically, we perform a quantitative assessment, as described below, for each of our reporting units, regardless of the results of prior qualitative assessments.
If we determine in the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then we estimate the fair value of the reporting unit using discounted cash flows and compare the estimated fair value to its carrying value. If the carrying value exceeds the fair value of the reporting unit, then an impairment is recognized for the difference. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 2, Summary of Significant Accounting Policies, for further discussion regarding our accounting policies for goodwill and any related impairments.
The determination of the reporting units and which reporting units to include in the qualitative assessment requires significant judgment. Also, all of the assumptions used in the qualitative assessment require judgment. Additionally, for the quantitative goodwill impairment test, we calculate the fair value of reporting units through discounted cash flow analyses which require us to make estimates and assumptions including, among other items, revenue growth rates, operating margins, and capital expenditures based on our budgets and business plans. Development of such estimates and assumptions and the resultant fair value takes into consideration expected regulatory, marketplace, and other economic factors as well as relevant discount rates and terminal values.
We could be required to evaluate the recoverability of goodwill if we experience disruptions to the business, unexpected significant declines in operating results, a divestiture of a significant component of our business, or other triggering events. In addition, as our business or the way we manage our business changes, our reporting units may also change. If an event described above occurs and causes us to recognize a goodwill impairment charge, it would impact our reported earnings in the period such charge occurs.
The carrying value of goodwill as of December 31, 2024 was $2,059.6 million, which represented approximately 25% of our consolidated assets. As of December 31, 2024, goodwill of $1,983.3 million resides in our Consumer Money Transfer reporting unit, while the remaining $76.3 million resides in Consumer Services. For the years ended December 31, 2024 and 2023, we did not record any goodwill impairments. For the Consumer Money Transfer and Consumer Services reporting units, the fair values of the businesses significantly exceed their carrying amounts.
Other Intangible Assets
We capitalize software, certain initial payments for new and renewed agent contracts, and acquired intangible assets. We evaluate such intangible assets for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. In such reviews, estimated undiscounted cash flows associated with these assets or operations are compared with their carrying amounts to determine if a write-down to fair value (normally measured by the present value technique) is required.
The capitalization of software costs incurred during the application development stage, as well as costs incurred to acquire, install, and customize software for internal use, is subject to accounting policy criteria which requires management judgment to determine the stage of development, the amount of costs eligible to be capitalized, and the related period of benefit. For developed software, we capitalize the eligible costs (predominantly detailed design, development, and testing) incurred during the application development stage, and all other costs are expensed as incurred. Once the software is ready for its intended use, the capitalized costs are amortized over the software’s estimated useful life. The capitalization of initial payments for new and renewed agent contracts is subject to strict accounting policy criteria and requires management judgment as to the amount to capitalize and the related period of benefit. Our accounting policy is to limit the amount of capitalized costs for a given agent contract to the lesser of the estimated future cash flows from the contract or the termination fees we would receive in the event of early termination of the contract.
Disruptions to contractual relationships, significant actual or expected declines in cash flows or transaction volumes associated with contracts or software applications, or the discontinued use of a software application would cause us to evaluate the recoverability of the asset and could result in an impairment charge. Additionally, evaluating future cash flows
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associated with each asset requires us to make estimates and assumptions, including, among other things, revenue growth rates and operating margins based on our budgets and business plans.
The net carrying value of our other intangible assets as of December 31, 2024 was $315.4 million. During the year ended December 31, 2024, we recorded immaterial impairments related to other intangible assets. During the year ended December 31, 2023, we recorded impairments of approximately $9 million to other intangible assets primarily related to software no longer in use.
Recent Accounting Pronouncements
Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 2, Summary of Significant Accounting Policies for further discussion.