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How Western Union Benefited from Hedge Gains and Cost Savings

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Nov. 3 2015, Updated 5:07 p.m. ET

Profit margins for Western Union

The gross margin for Western Union (WU) in 3Q15 was 41.59%, compared to 41.67% in 3Q14, and 42.22% in 2Q15. Operating margin in 3Q15 was 21.8% compared to 18.1% in 2Q15, consistent with the margins of 3Q14. Net margin for 3Q15 was 16.6% compared to 13.7% in 2Q15 and 16.3% in 3Q14. Peer companies Fiserv (FISV) and Global Payments (GPN) reported operating margins of 26.1% and 18.4%, respectively.

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Business segment operating margin in 3Q15

Western Union benefited from hedge gains and cost savings that were offset by rises in technology expense and the negative impact of foreign exchange.

Western Union’s consumer-to-consumer segment saw its operating margin rise from 24.9% in 3Q14 to 25.5% in 3Q15. Its consumer-to-business segment’s operating margin rose YoY as well, from 15.4% in 3Q14 to $16.4% in 3Q15, driven by higher revenues and cost saving initiatives that were partially offset by a rise in technology expense.

The firm’s business solutions segment reported an operating loss of $3 million in 3Q15 compared to “break-even” in 3Q14. This was primarily due to raised amortization expense resulting from a write-down related to an anticipated contract termination.

Depreciation and amortization were $20 million in 3Q15 compared to $14 million in 3Q14. EBITDA[1. earnings before interest, tax, depreciation, and amortization] improved from 12.8% in 3Q14 to 17.4% in 3Q15.

Western Union comprises 0.06% of the SPDR S&P 500 ETF Trust (SPY) and the iShares S&P 500 Growth ETF (IYW).

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