Western Union 2007 Annual Report Download - page 34

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WESTERN UNION 2007 Annual Report
December 31, 2007 and 2006, respectively. Revenue growth for
the year ended December 31, 2007 compared to the same period
in 2006, excluding Pago Fácil, was 4%. Transaction growth, exclud-
ing Pago Fácil, was 1% during the year ended December 31,
2007, compared to the same period in 2006.
For the year ended December 31, 2007, other consumer-to-
business segment revenue increased compared to the corre-
sponding period in 2006 due to higher investment income on
settlement asset balances as well as higher enrollment fees from
increased participation in our recurring mortgage payment
service program.
2006 COMPARED TO 2005
Transaction and revenue growth in the year ended December
31, 2006 compared to the same period in 2005 also resulted
from strong transaction growth in electronic bill payments, and
to a lesser extent, the acquisition of Pago Fácil described above.
The growth rates in 2006 compared to 2005 also benefi ted from
cash bill payments experiencing a slight revenue growth for the
year ended December 31, 2006 versus a decline in 2005 as our
Western Union Convenience Pay® or “Convenience Pay” business
benefi ted from the addition of a large new biller client in the
third quarter of 2005 which had a positive impact to transaction
and revenue growth rates for the year ended December 31, 2006
compared to the same period in 2005.
Other consumer-to-business segment revenue increased for
the year ended December 31, 2006 compared to the year ended
December 31, 2005 due to higher enrollment fees from increased
participation in our recurring mortgage payment service program,
and higher investment income on settlement asset balances.
Operating income
Operating income for the consumer-to-business segment was
unchanged for the year ended December 31, 2007 compared
to the same period in 2006 because of the impact of Pago Fácil
and revenue growth in the segment’s electronic-based services
businesses, and was offset by incremental public company
expenses and the accelerated stock compensation charge taken
in connection with the change in control of First Data. Operating
income for the period grew at a lower rate than revenues as Pago
Fácil and the electronic-based services have lower operating
margins compared to those in the segment’s other services, as
well as the incremental public company expenses and acceler-
ated stock compensation charge noted above.
For the year ended December 31, 2006, operating income
increased at a slower rate than revenue growth over the same
period in 2005. The shift in the United States to electronic-based
products, as discussed above, negatively impacted operating
income. Also negatively impacting operating income were
incremental public company expenses, stock compensation
expenses incurred in connection with the adoption of SFAS No.
123R, and higher employee incentive compensation expenses
in 2006 than in 2005.
Other
The following table sets forth other results for the years ended December 31, 2007, 2006 and 2005.
Year Ended December 31, % Change
2007 2006
(in millions) 2007 2006 2005 vs. 2006 vs. 2005
Revenues $87.2 $89.1 $108.5 (2)% (18)%
Operating income $20.0 $18.4 $0.9 9% *
Operating income margin 23% 21% 1%
* Calculation not meaningful
Revenues
Our money order and prepaid services businesses, including
prepaid services acquired through our acquisition of Pago Fácil,
accounted for 100%, 94% and 70% of “Other” revenue in 2007,
2006 and 2005, respectively. We previously operated internet
auction payments, messaging and international prepaid cellular
top-up businesses, which were shut down or disposed of in 2005
and early 2006. Revenue remained relatively constant for the
year ended December 31, 2007, due to moderate growth in our
money order and prepaid services businesses, offset by the loss
of revenue from our shut-down or disposed of businesses, which
generated revenue for a portion of 2006, while none of those
businesses generated revenue in 2007. The decline in revenue
for these shut down businesses also contributed to the decrease
in the year ended December 31, 2006 compared to 2005 as these
businesses contributed to the entire year in 2005, but only a
portion of the year in 2006.
First Data, through its subsidiary Integrated Payment Systems,
issues our Western Union branded money orders. We do not
believe First Data’s announcement of its plan to exit its offi cial
check and money order business will have a signifi cant impact
on us, as First Data has a money order processing contract with
us through 2011. We believe we have adequate time to replace
the services currently provided by First Data.