Western Union sees revenue drop but sets out path for growth

Western Union sees revenue drop but sets out path for growth

Western Union’s Q3 2022 results saw revenues decline 15% YoY to $1.09bn, while C2C revenues dropped 11% on a reported basis and transactions dipped 12% YoY. However, the company had outlined a multi-year plan to return to growth at its investor day.

Western Union sees declining revenue, EBITDA margin
Western Union Q3 revenue and EBITDA margin, 2016-2022

Here are the main highlights from Western Union’s Q3 2022 results:

  • Digital money transfer revenues declined 12%, while transactions declined 20%. Digital money transfer represented 24% of total C2C revenues and 34% of transactions in the quarter. However, the company has been working on a new digital customer acquisition model, which launched in the US for customers sending money to Jamaica and Mexico in Q2. It expanded the project in August to the top 50 US outbound corridors, and saw a 26% YoY increase in US outbound new digital customers in September. Prior to the new model, Western Union hadn’t seen positive new digital customer growth in North America in over a year. Its renewal of its Walmart Canada contract also saw it integrate its cross-border money transfer platform into Walmart.ca.
  • Adjusted revenue in the Europe and CIS region was down 16%, with transaction declines of 32%. The Middle East, Africa and South Asia region saw respective declines of 3% and 1%, while APAC saw declines of 11% across both revenue and transactions. However, adjusted revenue growth in the Latin America and Caribbean region was up 4%, with transaction growth of 3%, as the region has started to return to more normalised growth post Covid-19. 
  • The suspension of operations in Russia and Belarus continued to hit the company, negatively impacting revenue by approximately three percentage points, and digital money transfer revenue and transactions by 7% and 22% respectively. C2C revenue and transactions were hit by 3% and 9%.
  • WU has continued to roll out its digital bank and ecosystem in Europe, launching Poland in Q3 and expecting to go live with Italy in Q4. It has already onboarded over 100,000 customers in Germany, Romania and Poland and reports that active digital bank customers are doing 2.5x more transactions than traditional branded digital customers.
  • The company has also agreed to complete the divestiture of its Business Solutions segment in three closings instead of two, the first of which occurred in March. The second closing, which includes the UK, is currently expected to occur in December. The third closing, which includes the EU, is currently expected to occur in the first quarter of 2023.

Western Union also provided guidance on its plans to return to growth at its investor day a few weeks ago.

Western Union outlines plan to return to growth
Western Union revenue and adjusted operating margin, 2019-2025

Providing a three-year financial outlook, CEO Devin McGranahan outlined a new financial strategy that the company expects to begin setting the company on a path towards growth in 2023. It focuses on the following:

  • An improved omnichannel strategy, where retail serves as a gateway to WU as a wider provider, remaining key to customer acquisition before transitioning customers to the company’s digital offering.
  • An increase in digital services, including digital-first experiences and a focus on accessibility. This will see remittances continuing to lead WU’s digital offering, but with an increase in other products and services, like its recently launched digital bank, to expand its range. 
  • An increase in self-service and automated processes, supported by improved technology platforms across its app and website.

Through these focuses, WU aims to stabilise its retail business while returning to strong digital growth. 

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