While Western Union is still bracing for an overall decline in 2023, it had several key wins in Q3 23, including a return to digital revenue growth. Revenues during the quarter grew 1% (compared to a 15% decline last year) to $1.1bn, or 7% on an adjusted basis, which excluded the contribution from Western Union’s recently sold Business Solutions segment. As a result the company has slightly lifted its revenue guidance for the year.
The money transfer giant continues to see the benefit of Argentinian inflation (which added three percentage points to revenue growth), as well as a change in Iraq’s monetary policy that led to a wave of money transfers in Q3. Adjusted EBITDA growth was flat to Q3, at $261.5m with no margin given – but its adjusted operating margin did decline by 100 bps to 19.6%. Western Union also returned to digital revenue growth for the first time since Q1 22 and a full quarter ahead of the company’s expectations.
Investors were not enthused by the results, with share prices down in the wake of the call, but it should be noted that the share price is considerably up compared to March this year, when the company announced its FY 22 results.
Western Union consumer business growth drivers in Q3 23
Western Union’s consumer-to-consumer (C2C) revenues grew by 4%, while transactions increased by 5% compared to the prior year, with significant growth in regions outside the company’s biggest markets.
The MEASA region grew substantially, with adjusted revenue increasing 42% due to changes in monetary policy in Iraq that led to 9% transaction growth in Q3, but the company says it expects transaction numbers to decline here going forward. However, even excluding this benefit, the company’s global C2C revenue growth was at 4%, compared to a decline in the same period last year.
The next fastest growing region in terms of adjusted revenue was LACA, which grew by 8% and has been driven by Argentinian inflation and product launches in the region. Revenues for other core markets declined YoY, with North America falling by 3%, APAC by 7% and Europe & CIS falling by 10%.
Western Union CEO Devin McGranahan also said there had been flat transaction growth in Western Union’s global retail business, which had taken a hit from its suspension of services to Russia and Belarus last year. The company has achieved this through various objectives aligned with its Evolve 2025 strategy, such as investment in PoS systems and revising its sales teams.
Growth in cross-border principal
Cross-border principal growth is also up significantly for the company since last year, at around $26bn, with growth at 13% (compared to a -13% decline in Q3 22). McGranahan said that since the company launched its new customer acquisition strategy, it has continued to see double-digit new customer growth in cross border, which in turn has driven transactions.
Return to digital revenue growth
The Evolve 2025 strategy is also driving improvements for digital transactions, which grew 12% in the quarter and led to a 3% rise in branded digital revenues. Digital revenues currently represent 21% of the company’s total C2C revenues and 28% of total transactions. Moreover, digitally initiated payout to account transactions grew by 27% in the third quarter.
This time last year, the company had reported the Russia/Belarus suspension as being a factor leading to a decline in digital transactions, and the company is clearly taking steps in the right direction, even if its growth isn’t as high as some of the younger digital money transfer companies we track.
Going forward, the company has upgraded its revenue projections for the full year, and now expects a 3-4% decline in its full year revenue on a GAAP basis and a 0-1% increase on an adjusted basis (excluding currency impact, Argentinian inflation and its Business Solutions sale).