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transition taxtit

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the quarterly period ended September 30, 2022

OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the transition period from to

Commission File Number: 001-32903

THE WESTERN UNION COMPANY

(Exact name of registrant as specified in its charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization) |  | 20-4531180 (I.R.S. Employer Identification No.)
| 7001 EAST BELLEVIEW AVENUE Denver, Colorado 80237 (Address of principal executive offices) |

Registrant’s telephone number, including area code: (866) 405-5012

Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading symbol | Name of each exchange on which registered
Common Stock, $0.01 Par Value | WU | The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

As of October 27, 2022, 386,170,808 shares of the registrant’s common stock were outstanding.

Table of Contents

THE WESTERN UNION COMPANY

|  | PAGE NUMBER
PART I FINANCIAL INFORMATION |
Item 1. | Financial Statements (Unaudited) | 3
| Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021 | 3
| Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021 | 4
| Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 | 5
| Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 | 6
| Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 | 8
| Notes to Condensed Consolidated Financial Statements | 10
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 39
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 55
Item 4. | Controls and Procedures | 55
| Review Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) | 56
PART II OTHER INFORMATION |
Item 1. | Legal Proceedings | 57
Item 1A. | Risk Factors | 57
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 57
Item 3. | Defaults Upon Senior Securities | 57
Item 4. | Mine Safety Disclosures | 57
Item 5. | Other Information | 57
Item 6. | Exhibits | 58

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PAR T I

FINANCIAL INFORMATION

Item 1. Financia l Statements

THE WESTERN UNION COMPANY

CONDENSED CONSOLIDA TED STATEMENTS OF INCOME

(Unaudited)

(in millions, except per share amounts)

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenues |  | $ | 1,089.6 |  |  | $ | 1,286.3 |  |  | $ | 3,383.6 |  |  | $ | 3,786.0 |
Expenses: |  |  |  |  |  |  |  |  |  |  |  |
Cost of services |  |  | 637.3 |  |  |  | 720.1 |  |  |  | 1,945.4 |  |  |  | 2,181.1 |
Selling, general, and administrative |  |  | 220.5 |  |  |  | 247.6 |  |  |  | 704.9 |  |  |  | 798.6 |
Total expenses |  |  | 857.8 |  |  |  | 967.7 |  |  |  | 2,650.3 |  |  |  | 2,979.7 |
Operating income |  |  | 231.8 |  |  |  | 318.6 |  |  |  | 733.3 |  |  |  | 806.3 |
Other income/(expense): |  |  |  |  |  |  |  |  |  |  |  |
Gain on divestiture of business (Note 4) |  |  | — |  |  |  | — |  |  |  | 151.4 |  |  |  | — |
Interest income |  |  | 4.9 |  |  |  | 0.4 |  |  |  | 7.3 |  |  |  | 1.1 |
Interest expense |  |  | (25.2 | ) |  |  | (25.7 | ) |  |  | (74.8 | ) |  |  | (79.7 | )
Other income/(expense), net |  |  | (17.8 | ) |  |  | (1.8 | ) |  |  | (25.1 | ) |  |  | 26.8 |
Total other income/(expense), net |  |  | (38.1 | ) |  |  | (27.1 | ) |  |  | 58.8 |  |  |  | (51.8 | )
Income before income taxes |  |  | 193.7 |  |  |  | 291.5 |  |  |  | 792.1 |  |  |  | 754.5 |
Provision for income taxes |  |  | 19.8 |  |  |  | 58.8 |  |  |  | 130.9 |  |  |  | 117.5 |
Net income |  | $ | 173.9 |  |  | $ | 232.7 |  |  | $ | 661.2 |  |  | $ | 637.0 |
Earnings per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.45 |  |  | $ | 0.57 |  |  | $ | 1.70 |  |  | $ | 1.56 |
Diluted |  | $ | 0.45 |  |  | $ | 0.57 |  |  | $ | 1.70 |  |  | $ | 1.55 |
Weighted-average shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 386.5 |  |  |  | 406.3 |  |  |  | 388.8 |  |  |  | 409.1 |
Diluted |  |  | 387.6 |  |  |  | 408.0 |  |  |  | 389.9 |  |  |  | 411.3 |

See Notes to Condensed Consolidated Financial Statements.

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THE WESTERN UNION COMPANY

CONDENSED CONSOLIDAT ED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in millions)

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Net income |  | $ | 173.9 |  |  | $ | 232.7 |  |  | $ | 661.2 |  |  | $ | 637.0 |
Other comprehensive income, net of reclassifications and tax (Note 9): |  |  |  |  |  |  |  |  |  |  |  |
Unrealized losses on investment securities |  |  | (30.0 | ) |  |  | (7.9 | ) |  |  | (105.3 | ) |  |  | (18.7 | )
Unrealized gains on hedging activities |  |  | 25.6 |  |  |  | 18.2 |  |  |  | 54.0 |  |  |  | 44.4 |
Foreign currency translation adjustments |  |  | — |  |  |  | — |  |  |  | (17.8 | ) |  |  | — |
Defined benefit pension plan adjustments |  |  | — |  |  |  | 2.3 |  |  |  | — |  |  |  | 7.1 |
Total other comprehensive income/(loss) |  |  | (4.4 | ) |  |  | 12.6 |  |  |  | (69.1 | ) |  |  | 32.8 |
Comprehensive income |  | $ | 169.5 |  |  | $ | 245.3 |  |  | $ | 592.1 |  |  | $ | 669.8 |

See Notes to Condensed Consolidated Financial Statements.

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THE WESTERN UNION COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in millions, except per share amounts)

|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Assets |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1,176.1 |  |  | $ | 1,208.3 |
Settlement assets |  |  | 3,095.7 |  |  |  | 2,843.5 |
Property and equipment, net of accumulated depreciation of $635.4 and $650.4, respectively |  |  | 112.0 |  |  |  | 129.4 |
Goodwill |  |  | 2,034.6 |  |  |  | 2,034.6 |
Other intangible assets, net of accumulated amortization of $730.4 and $731.8, respectively |  |  | 466.2 |  |  |  | 417.1 |
Other assets (Note 5) |  |  | 1,201.8 |  |  |  | 737.7 |
Assets held for sale (Note 4) |  |  | 814.9 |  |  |  | 1,452.9 |
Total assets |  | $ | 8,901.3 |  |  | $ | 8,823.5 |
Liabilities and stockholders' equity |  |  |  |  |  |
Liabilities: |  |  |  |  |  |
Accounts payable and accrued liabilities |  | $ | 435.7 |  |  | $ | 450.2 |
Settlement obligations |  |  | 3,095.7 |  |  |  | 2,843.5 |
Income taxes payable |  |  | 849.8 |  |  |  | 870.7 |
Deferred tax liability, net |  |  | 161.6 |  |  |  | 203.8 |
Borrowings |  |  | 2,611.0 |  |  |  | 3,008.4 |
Other liabilities (Note 4) |  |  | 668.7 |  |  |  | 269.4 |
Liabilities associated with assets held for sale (Note 4) |  |  | 550.5 |  |  |  | 821.9 |
Total liabilities |  |  | 8,373.0 |  |  |  | 8,467.9 |
Commitments and contingencies (Note 6) |  |  |  |  |  |
Stockholders' equity: |  |  |  |  |  |
Preferred stock, $1.00 par value; 10 shares authorized; no shares issued |  |  | — |  |  |  | — |
Common stock, $0.01 par value; 2,000 shares authorized; 385.9 shares and 393.8 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively |  |  | 3.9 |  |  |  | 3.9 |
Capital surplus |  |  | 983.0 |  |  |  | 941.0 |
Accumulated deficit |  |  | (337.4 | ) |  |  | (537.2 | )
Accumulated other comprehensive loss |  |  | (121.2 | ) |  |  | (52.1 | )
Total stockholders' equity |  |  | 528.3 |  |  |  | 355.6 |
Total liabilities and stockholders' equity |  | $ | 8,901.3 |  |  | $ | 8,823.5 |

See Notes to Condensed Consolidated Financial Statements.

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THE WESTERN UNION COMPANY

CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS

(Unaudited)

(in millions)

|  | Nine Months Ended |
|  | September 30, |
|  | 2022 |  |  | 2021 |
Cash flows from operating activities |  |  |  |  |  |
Net income |  | $ | 661.2 |  |  | $ | 637.0 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Depreciation |  |  | 31.8 |  |  |  | 38.4 |
Amortization |  |  | 105.7 |  |  |  | 121.9 |
Gain on divestiture of business, excluding transaction costs (Note 4) |  |  | (155.8 | ) |  |  | — |
Gain on the sale of noncontrolling interest in a private company (Note 4) |  |  | — |  |  |  | (47.9 | )
Other non-cash items, net |  |  | 54.0 |  |  |  | 124.2 |
Increase/(decrease) in cash, excluding the effects of divestitures, resulting from changes in: |  |  |  |  |  |
Other assets |  |  | (166.4 | ) |  |  | (78.3 | )
Accounts payable and accrued liabilities |  |  | 50.6 |  |  |  | (27.9 | )
Income taxes payable |  |  | (29.6 | ) |  |  | (61.7 | )
Other liabilities |  |  | (29.1 | ) |  |  | (19.7 | )
Net cash provided by operating activities |  |  | 522.4 |  |  |  | 686.0 |
Cash flows from investing activities |  |  |  |  |  |
Payments for capitalized contract costs |  |  | (58.4 | ) |  |  | (94.7 | )
Payments for internal use software |  |  | (68.0 | ) |  |  | (59.1 | )
Purchases of property and equipment |  |  | (21.1 | ) |  |  | (26.4 | )
Purchases of settlement investments |  |  | (663.3 | ) |  |  | (336.4 | )
Proceeds from the sale of settlement investments |  |  | 544.1 |  |  |  | 689.9 |
Maturities of settlement investments |  |  | 131.9 |  |  |  | 172.0 |
Proceeds from the sale of noncontrolling interest in a private company (Note 4) |  |  | — |  |  |  | 50.9 |
Purchase of noncontrolling interest in stc Bank (Note 4) |  |  | — |  |  |  | (200.0 | )
Purchases of non-settlement investments (Note 5) |  |  | (400.0 | ) |  |  | — |
Proceeds from divestiture, net of cash divested (Note 4) |  |  | 896.4 |  |  |  | — |
Other investing activities |  |  | 5.1 |  |  |  | (3.6 | )
Net cash provided by investing activities |  |  | 366.7 |  |  |  | 192.6 |
Cash flows from financing activities |  |  |  |  |  |
Cash dividends and dividend equivalents paid (Note 9) |  |  | (275.5 | ) |  |  | (288.7 | )
Common stock repurchased (Note 9) |  |  | (193.1 | ) |  |  | (235.8 | )
Net proceeds from/(repayments of) commercial paper |  |  | (100.0 | ) |  |  | 40.0 |
Net proceeds from issuance of borrowings |  |  | — |  |  |  | 891.7 |
Principal payments on borrowings |  |  | (300.0 | ) |  |  | (1,150.0 | )
Make-whole premium on early extinguishment of debt |  |  | — |  |  |  | (14.3 | )
Proceeds from exercise of options |  |  | 9.5 |  |  |  | 11.6 |
Net change in settlement obligations |  |  | (31.0 | ) |  |  | (138.3 | )
Other financing activities |  |  | (0.2 | ) |  |  | — |
Net cash used in financing activities |  |  | (890.3 | ) |  |  | (883.8 | )
Net change in cash and cash equivalents, including settlement, and restricted cash |  |  | (1.2 | ) |  |  | (5.2 | )
Cash and cash equivalents, including settlement, and restricted cash at beginning of period |  |  | 2,110.9 |  |  |  | 2,143.1 |
Cash and cash equivalents, including settlement, and restricted cash at end of period |  | $ | 2,109.7 |  |  | $ | 2,137.9 |

See Notes to Condensed Consolidated Financial Statements.

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THE WESTERN UNION COMPANY

SUPPLEMENTAL CASH FLOW INFORMATION

(Unaudited)

(in millions)

|  | September 30, |
|  | 2022 |  |  | 2021 |
Reconciliation of balance sheet cash and cash equivalents to cash flows: |  |  |  |  |  |
Cash and cash equivalents on balance sheet |  | $ | 1,176.1 |  |  | $ | 1,003.4 |
Settlement cash and cash equivalents (Note 8) |  |  | 817.2 |  |  |  | 1,082.9 |
Restricted cash in Other assets |  |  | 52.4 |  |  |  | 8.6 |
Cash and cash equivalents included in Assets held for sale (Note 4) |  |  | 64.0 |  |  |  | 43.0 |
Cash and cash equivalents, including settlement, and restricted cash |  | $ | 2,109.7 |  |  | $ | 2,137.9 |
|  | Nine Months Ended |
|  | September 30, |
|  | 2022 |  |  | 2021 |
Supplemental cash flow information: |  |  |  |  |  |
Interest paid |  | $ | 64.8 |  |  | $ | 69.7 |
Income taxes paid |  | $ | 180.8 |  |  | $ | 156.5 |
Internal use software capitalized but not yet paid |  | $ | — |  |  | $ | 24.1 |
Accrued and unpaid capitalized contract costs |  | $ | 36.0 |  |  | $ | — |

See Notes to Condensed Consolidated Financial Statements.

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THE WESTERN UNION COMPANY

CONDENSED CONSOLIDATED STATEME NTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in millions)

|  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Other |  |  | Total |
|  | Common Stock |  |  | Capital |  |  | Accumulated |  |  | Comprehensive |  |  | Stockholders' |
|  | Shares |  |  | Amount |  |  | Surplus |  |  | Deficit |  |  | Loss |  |  | Equity |
Balance, December 31, 2021 |  |  | 393.8 |  |  | $ | 3.9 |  |  | $ | 941.0 |  |  | $ | (537.2 | ) |  | $ | (52.1 | ) |  | $ | 355.6 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 293.3 |  |  |  | — |  |  |  | 293.3 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 10.7 |  |  |  | — |  |  |  | — |  |  |  | 10.7 |
Common stock dividends and dividend equivalents declared ($0.235 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (92.6 | ) |  |  | — |  |  |  | (92.6 | )
Repurchase and retirement of common shares |  |  | (8.6 | ) |  |  | (0.1 | ) |  |  | — |  |  |  | (158.9 | ) |  |  | — |  |  |  | (159.0 | )
Shares issued under stock-based compensation plans |  |  | 1.9 |  |  |  | 0.1 |  |  |  | 8.8 |  |  |  | — |  |  |  | — |  |  |  | 8.9 |
Other comprehensive loss (Note 9) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (64.1 | ) |  |  | (64.1 | )
Balance, March 31, 2022 |  |  | 387.1 |  |  |  | 3.9 |  |  |  | 960.5 |  |  |  | (495.4 | ) |  |  | (116.2 | ) |  |  | 352.8 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 194.0 |  |  |  | — |  |  |  | 194.0 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 12.3 |  |  |  | — |  |  |  | — |  |  |  | 12.3 |
Common stock dividends and dividend equivalents declared ($0.235 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (89.6 | ) |  |  | — |  |  |  | (89.6 | )
Repurchase and retirement of common shares |  |  | (1.1 | ) |  |  | — |  |  |  | — |  |  |  | (21.1 | ) |  |  | — |  |  |  | (21.1 | )
Shares issued under stock-based compensation plans |  |  | 0.1 |  |  |  | — |  |  |  | 0.5 |  |  |  | — |  |  |  | — |  |  |  | 0.5 |
Other comprehensive loss (Note 9) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (0.6 | ) |  |  | (0.6 | )
Balance, June 30, 2022 |  |  | 386.1 |  |  |  | 3.9 |  |  |  | 973.3 |  |  |  | (412.1 | ) |  |  | (116.8 | ) |  |  | 448.3 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 173.9 |  |  |  | — |  |  |  | 173.9 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 9.6 |  |  |  | — |  |  |  | — |  |  |  | 9.6 |
Common stock dividends and dividend equivalents declared ($0.235 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (91.5 | ) |  |  | — |  |  |  | (91.5 | )
Repurchase and retirement of common shares |  |  | (0.5 | ) |  |  | — |  |  |  | — |  |  |  | (7.7 | ) |  |  | — |  |  |  | (7.7 | )
Shares issued under stock-based compensation plans |  |  | 0.3 |  |  |  | — |  |  |  | 0.1 |  |  |  |  |  |  | — |  |  |  | 0.1 |
Other comprehensive loss (Note 9) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4.4 | ) |  |  | (4.4 | )
Balance, September 30, 2022 |  |  | 385.9 |  |  | $ | 3.9 |  |  | $ | 983.0 |  |  | $ | (337.4 | ) |  | $ | (121.2 | ) |  | $ | 528.3 |

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|  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Other |  |  | Total |
|  | Common Stock |  |  | Capital |  |  | Accumulated |  |  | Comprehensive |  |  | Stockholders' |
|  | Shares |  |  | Amount |  |  | Surplus |  |  | Deficit |  |  | Loss |  |  | Equity |
Balance, December 31, 2020 |  |  | 411.2 |  |  | $ | 4.1 |  |  | $ | 885.1 |  |  | $ | (543.1 | ) |  | $ | (159.5 | ) |  | $ | 186.6 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 181.8 |  |  |  | — |  |  |  | 181.8 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 10.8 |  |  |  | — |  |  |  | — |  |  |  | 10.8 |
Common stock dividends and dividend equivalents declared ($0.235 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (97.9 | ) |  |  | — |  |  |  | (97.9 | )
Repurchase and retirement of common shares |  |  | (3.7 | ) |  |  | — |  |  |  | — |  |  |  | (89.0 | ) |  |  | — |  |  |  | (89.0 | )
Shares issued under stock-based compensation plans |  |  | 2.3 |  |  |  | — |  |  |  | 8.1 |  |  |  | — |  |  |  | — |  |  |  | 8.1 |
Other comprehensive income (Note 9) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 18.4 |  |  |  | 18.4 |
Balance, March 31, 2021 |  |  | 409.8 |  |  |  | 4.1 |  |  |  | 904.0 |  |  |  | (548.2 | ) |  |  | (141.1 | ) |  |  | 218.8 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 222.5 |  |  |  | — |  |  |  | 222.5 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 12.0 |  |  |  | — |  |  |  | — |  |  |  | 12.0 |
Common stock dividends and dividend equivalents declared ($0.235 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (97.0 | ) |  |  | — |  |  |  | (97.0 | )
Repurchase and retirement of common shares |  |  | (3.0 | ) |  |  | — |  |  |  | — |  |  |  | (75.3 | ) |  |  | — |  |  |  | (75.3 | )
Shares issued under stock-based compensation plans |  |  | 0.2 |  |  |  | — |  |  |  | 3.5 |  |  |  | — |  |  |  | — |  |  |  | 3.5 |
Other comprehensive income (Note 9) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1.8 |  |  |  | 1.8 |
Balance, June 30, 2021 |  |  | 407.0 |  |  |  | 4.1 |  |  |  | 919.5 |  |  |  | (498.0 | ) |  |  | (139.3 | ) |  |  | 286.3 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 232.7 |  |  |  | — |  |  |  | 232.7 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 8.4 |  |  |  | — |  |  |  | — |  |  |  | 8.4 |
Common stock dividends and dividend equivalents declared ($0.235 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (95.9 | ) |  |  | — |  |  |  | (95.9 | )
Repurchase and retirement of common shares |  |  | (3.5 | ) |  |  | (0.1 | ) |  |  | — |  |  |  | (75.4 | ) |  |  | — |  |  |  | (75.5 | )
Shares issued under stock-based compensation plans |  |  | 0.1 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Other comprehensive income (Note 9) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 12.6 |  |  |  | 12.6 |
Balance, September 30, 2021 |  |  | 403.6 |  |  | $ | 4.0 |  |  | $ | 927.9 |  |  | $ | (436.6 | ) |  | $ | (126.7 | ) |  | $ | 368.6 |

See Notes to Condensed Consolidated Financial Statements.

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THE WESTERN UNION COMPANY

NOTES TO CONDENSE D CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Business and Basis of Presentation

Business

The Western Union Company ("Western Union" or the "Company") is a leader in global money movement and payment services, providing people and businesses with fast, reliable, and convenient ways to send money and make payments around the world. The Western Union® brand is globally recognized. The Company’s services are available through a network of agent locations in more than 200 countries and territories and also through money transfer transactions conducted and funded through websites and mobile applications marketed under the Company’s brands (“Branded Digital”) and transactions initiated on websites and mobile applications hosted by the Company’s third-party white label or co-branded digital partners (together with Branded Digital, “Digital Money Transfer”). Each location in the Company’s agent network is capable of providing one or more of the Company’s services.

The Western Union business consists of the following segments:

•
Consumer-to-Consumer - The Consumer-to-Consumer operating segment facilitates money transfers which are sent from retail agent locations worldwide or through websites and mobile devices, including Digital Money Transfer services. The Company’s 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.
•
Business Solutions - The Business Solutions operating segment facilitates payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises, and other organizations and individuals. The majority of the Business Solutions business relates to exchanges of currency at spot rates, which enable customers to make cross-currency payments. In addition, in certain countries, the Company writes foreign currency forward and option contracts for customers to facilitate future payments. On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC. During the third quarter of 2022, all parties agreed for the sale to be completed in three closings instead of two. The first closing occurred on March 1, 2022, the second is expected to occur in December 2022, and the third is expected in the first quarter of 2023. See Note 4 for further information regarding this transaction.

All businesses and other services that have not been classified in the above segments are reported as Other, which primarily includes the Company’s bill payment services which facilitate payments from consumers to businesses and other organizations and the Company’s money order services. Certain of the Company's corporate costs such as costs related to strategic initiatives, including costs for the review and closing of mergers, acquisitions, and divestitures, are also included in Other. See Note 14 for further information regarding the Company’s segments.

There are legal or regulatory limitations on transferring certain assets of the Company outside of the countries where these assets are located. However, there are generally no limitations on the use of these assets within those countries. Additionally, the Company must meet minimum capital requirements in some countries in order to maintain operating licenses. As of December 31, 2021, the Company's restricted net assets associated with these asset limitations and minimum capital requirements totaled approximately $460 million.

Various aspects of the Company’s services and businesses are subject to United States federal, state, and local regulation, as well as regulation by foreign jurisdictions, including certain banking and other financial services regulations.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and were prepared in accordance with the instructions for Form 10‑Q and Article 10 of Regulation S-X. In compliance with those instructions, certain information

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted.

The unaudited condensed consolidated financial statements in this quarterly report are presented on a consolidated basis and include the accounts of the Company and its majority-owned subsidiaries. Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts have been eliminated as of September 30, 2022 and December 31, 2021 and for all periods presented.

In the opinion of management, these condensed consolidated financial statements include all the normal recurring adjustments necessary to fairly present the Company’s condensed consolidated results of operations, financial position, and cash flows as of September 30, 2022 and for all periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements within the Company’s Annual Report on Form 10‑K for the year ended December 31, 2021.

Consistent with industry practice, the accompanying Condensed Consolidated Balance Sheets are unclassified due to the short-term nature of the Company’s settlement obligations contrasted with the Company’s ability to invest cash awaiting settlement in long-term investment securities.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

Cash Flow Classification Revision

Beginning in the fourth quarter of 2021, the Company revised its presentation to include changes in settlement cash associated with settlement obligations as a financing activity and changes in settlement cash from purchases, sales, and maturities of settlement investments as an investing activity within its Condensed Consolidated Statements of Cash Flows. Previously, the changes in settlement assets and settlement obligations were presented on a net basis within operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.

Prior period amounts have been revised to conform to this presentation. These changes in presentation have been concluded to be immaterial, having no impact on the Company’s previously reported net income, financial position, or cash flows from operating activities, as changes in the Company’s settlement assets exactly offset changes in its settlement obligations. However, the revised presentation shows all changes associated with settlement cash in the Condensed Consolidated Statements of Cash Flows instead of in the Notes to the Condensed Consolidated Financial Statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents the effects of the changes in presentation of these cash flows, compared to the previously reported Condensed Consolidated Statements of Cash Flows (in millions):

|  | Nine Months Ended September 30, 2021 |
|  | As Previously |  |  |  |  |  |  |
|  | Reported(a) |  |  | Revisions |  |  | As Revised |
Net cash provided by/(used in): |  |  |  |  |  |  |  |  |
Operating activities |  | $ | 686.0 |  |  | $ | — |  |  | $ | 686.0 |
Investing activities(b) |  |  | (332.9 | ) |  |  | 525.5 |  |  |  | 192.6 |
Financing activities(c) |  |  | (745.5 | ) |  |  | (138.3 | ) |  |  | (883.8 | )
Net change in cash and cash equivalents, including settlement, and restricted cash |  | $ | (392.4 | ) |  | $ | 387.2 |  |  | $ | (5.2 | )

(a)
As reported in the Company's Form 10-Q filed with the Securities Exchange Commission on November 2, 2021.
(b)
The financial statement lines included in Investing activities are Purchases of settlement investments, Proceeds from the sale of settlement investments, and Maturities of settlement investments.
(c)
The financial statement line included in Financing activities is Net change in settlement obligations.

2. Revenue

The Company’s 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 principal amount sent, whether the money transfer involves different send and receive currencies, the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market, and speed of service, as applicable. The Company also offers several other services, including foreign exchange and payment services and other bill payment services, for which revenue is impacted by similar factors. For the substantial majority of the Company’s revenues, the Company acts as the principal in transactions and reports revenue on a gross basis, as the Company controls the service at all times prior to transfer to the customer, is primarily responsible for fulfilling the customer contracts, has the risk of loss, and has the ability to establish transaction prices. The Company also provides services to financial institutions and other third parties to enable such entities to offer money transfer services to their own customers under their brands. Generally, in these arrangements, consumers agree to terms and conditions specified by the financial institution or other third party that, among other things, establish pricing paid by the consumer for the service. The Company recognizes revenue on a net basis under these arrangements. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

The Company recognized $1,035.0 million and $1,230.3 million for the three months ended September 30, 2022 and 2021, respectively, and $3,219.1 million and $3,635.7 million for the nine months ended September 30, 2022 and 2021, respectively, in revenues from contracts with customers. There were no material upfront costs incurred to obtain contracts with customers during these same periods. Under the Company’s loyalty programs, which are primarily offered in its money transfer services, the Company must fulfill loyalty program rewards earned by customers. The loyalty program redemption activity has been and continues to be insignificant to the Company’s results of operations, and the Company has immaterial contract liability balances, which primarily relate to its customer loyalty programs and other services. Contract asset balances related to customers were also immaterial as of the periods presented, as the Company typically receives payment of consideration from its customers prior to satisfying performance obligations under the customer contracts. In addition to revenue generated from contracts with customers, the Company recognizes revenue from other sources, including the sale of derivative financial instruments and investment income generated on settlement assets primarily related to money transfer and money order services.

The Company analyzes its different services individually to determine the appropriate basis for revenue recognition, as further described below. Revenues from consumer money transfers are included in the Company’s Consumer-to- Consumer segment, revenues from foreign exchange and payment services are included in the Company’s Business Solutions segment, and revenues from consumer bill payment and other services are not included in the Company’s segments and are reported as Other. See Note 14 for further information on the Company’s segments. On August 4, 2021,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC. During the third quarter of 2022, all parties agreed for the sale to be completed in three closings instead of two. The first closing occurred on March 1, 2022, the second is expected to occur in December 2022, and the third is expected in the first quarter of 2023. See Note 4 for further information regarding this transaction.

Consumer Money Transfers

For the Company’s money transfer services, customers agree to the Company’s terms and conditions at the time of initiating a transaction. In a money transfer, the Company has one performance obligation as the customer engages the Company to perform one integrated service which typically occurs within minutes — collect the customer’s money and make funds available for payment to a designated person in the currency requested. Therefore, the Company recognizes revenue upon completion of the following: (i) the customer’s acknowledgment of the Company’s terms and conditions and payment information has been received by the Company, (ii) the Company has agreed to process the money transfer, (iii) the Company has provided the customer a unique transaction identification number, and (iv) funds are available to be picked up by the customer's designated receiving party. The transaction price is comprised of a transaction fee and the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market, as applicable, both of which are readily determinable at the time the transaction is initiated.

Foreign Exchange and Payment Services

For the Company’s foreign exchange and payment services, customers agree to terms and conditions for all transactions, either at the time of initiating a transaction or signing a contract with the Company to provide payment services on the customer’s behalf. In the majority of the Company’s foreign exchange and payment services, the Company makes payments to the recipient to satisfy its performance obligation to the customer, and therefore, the Company recognizes revenue on foreign exchange and payment services when this performance obligation has been fulfilled. Revenues from foreign exchange and payment services are primarily comprised of the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market.

Consumer Bill Payments and Other

The Company offers bill payment and other services that vary by contractual features, including the types and amounts of fixed charges and with respect to how fees are billed and collected. The identification of the contract with the customer for revenue recognition purposes is consistent with these features for each of the Company’s bill payment and other services. As with consumer money transfers, customers engage the Company to perform one integrated service — collect money from the consumer and process the transaction, thereby providing billers with real-time or near real-time information regarding consumer payments and simplifying the billers’ collection efforts.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Management has determined that the substantial majority of the Company’s revenue is recognized at a point in time. The following tables represent the disaggregation of revenue earned from contracts with customers by product type and region for the three and nine months ended September 30, 2022 and 2021 (in millions). The regional split of revenue shown in the tables below is based upon where transactions are initiated.

|  | Three Months Ended September 30, 2022 |
|  |  |  |  | Foreign |  |  |  |  |  |  |  |  |  |
|  | Consumer |  |  | Exchange |  |  |  |  |  |  |  |  |  |
|  | Money |  |  | and Payment |  |  | Consumer |  |  | Other |  |  |  |
|  | Transfers |  |  | Services(b) |  |  | Bill Payments |  |  | Services |  |  | Total |
Regions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
North America |  | $ | 383.6 |  |  | $ | — |  |  | $ | 17.2 |  |  | $ | 15.2 |  |  | $ | 416.0 |
Europe and CIS |  |  | 251.3 |  |  |  | 26.0 |  |  |  | 6.0 |  |  |  | — |  |  |  | 283.3 |
Middle East, Africa, and South Asia |  |  | 156.6 |  |  |  | — |  |  |  | 0.1 |  |  |  | — |  |  |  | 156.7 |
Latin America and the Caribbean |  |  | 97.0 |  |  |  | — |  |  |  | 23.4 |  |  |  | 2.1 |  |  |  | 122.5 |
East Asia and Oceania |  |  | 56.5 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 56.5 |
Revenues from contracts with customers |  | $ | 945.0 |  |  | $ | 26.0 |  |  | $ | 46.7 |  |  | $ | 17.3 |  |  | $ | 1,035.0 |
Other revenues (a) |  |  | 37.4 |  |  |  | 16.6 |  |  |  | 1.2 |  |  |  | (0.6 | ) |  |  | 54.6 |
Total revenues |  | $ | 982.4 |  |  | $ | 42.6 |  |  | $ | 47.9 |  |  | $ | 16.7 |  |  | $ | 1,089.6 |

|  | Nine Months Ended September 30, 2022 |
|  |  |  |  | Foreign |  |  |  |  |  |  |  |  |  |
|  | Consumer |  |  | Exchange |  |  |  |  |  |  |  |  |  |
|  | Money |  |  | and Payment |  |  | Consumer |  |  | Other |  |  |  |
|  | Transfers |  |  | Services(b) |  |  | Bill Payments |  |  | Services |  |  | Total |
Regions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
North America |  | $ | 1,171.3 |  |  | $ | 17.9 |  |  | $ | 52.7 |  |  | $ | 43.8 |  |  | $ | 1,285.7 |
Europe and Russia/CIS |  |  | 808.2 |  |  |  | 80.4 |  |  |  | 15.1 |  |  |  | 0.1 |  |  |  | 903.8 |
Middle East, Africa, and South Asia |  |  | 477.8 |  |  |  | 0.4 |  |  |  | 0.3 |  |  |  | — |  |  |  | 478.5 |
Latin America and the Caribbean |  |  | 279.2 |  |  |  | 0.5 |  |  |  | 74.8 |  |  |  | 6.5 |  |  |  | 361.0 |
East Asia and Oceania |  |  | 177.1 |  |  |  | 12.5 |  |  |  | 0.5 |  |  |  | — |  |  |  | 190.1 |
Revenues from contracts with customers |  | $ | 2,913.6 |  |  | $ | 111.7 |  |  | $ | 143.4 |  |  | $ | 50.4 |  |  | $ | 3,219.1 |
Other revenues (a) |  |  | 94.7 |  |  |  | 55.7 |  |  |  | 3.6 |  |  |  | 10.5 |  |  |  | 164.5 |
Total revenues |  | $ | 3,008.3 |  |  | $ | 167.4 |  |  | $ | 147.0 |  |  | $ | 60.9 |  |  | $ | 3,383.6 |

|  | Three Months Ended September 30, 2021 |
|  |  |  |  | Foreign |  |  |  |  |  |  |  |  |  |
|  | Consumer |  |  | Exchange |  |  |  |  |  |  |  |  |  |
|  | Money |  |  | and Payment |  |  | Consumer |  |  | Other |  |  |  |
|  | Transfers |  |  | Services |  |  | Bill Payments |  |  | Services |  |  | Total |
Regions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
North America |  | $ | 406.7 |  |  | $ | 30.9 |  |  | $ | 18.0 |  |  | $ | 14.4 |  |  | $ | 470.0 |
Europe and Russia/CIS |  |  | 345.0 |  |  |  | 39.3 |  |  |  | 1.4 |  |  |  | 0.4 |  |  |  | 386.1 |
Middle East, Africa, and South Asia |  |  | 165.8 |  |  |  | 0.5 |  |  |  | 0.2 |  |  |  | — |  |  |  | 166.5 |
Latin America and the Caribbean |  |  | 97.5 |  |  |  | 0.9 |  |  |  | 20.2 |  |  |  | 1.7 |  |  |  | 120.3 |
East Asia and Oceania |  |  | 69.2 |  |  |  | 17.9 |  |  |  | 0.3 |  |  |  | — |  |  |  | 87.4 |
Revenues from contracts with customers |  | $ | 1,084.2 |  |  | $ | 89.5 |  |  | $ | 40.1 |  |  | $ | 16.5 |  |  | $ | 1,230.3 |
Other revenues (a) |  |  | 20.3 |  |  |  | 27.3 |  |  |  | 3.6 |  |  |  | 4.8 |  |  |  | 56.0 |
Total revenues |  | $ | 1,104.5 |  |  | $ | 116.8 |  |  | $ | 43.7 |  |  | $ | 21.3 |  |  | $ | 1,286.3 |

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

|  | Nine Months Ended September 30, 2021 |
|  |  |  |  | Foreign |  |  |  |  |  |  |  |  |  |
|  | Consumer |  |  | Exchange |  |  |  |  |  |  |  |  |  |
|  | Money |  |  | and Payment |  |  | Consumer |  |  | Other |  |  |  |
|  | Transfers |  |  | Services |  |  | Bill Payments |  |  | Services |  |  | Total |
Regions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
North America |  | $ | 1,211.0 |  |  | $ | 75.6 |  |  | $ | 54.6 |  |  | $ | 43.2 |  |  | $ | 1,384.4 |
Europe and Russia/CIS |  |  | 1,047.8 |  |  |  | 107.3 |  |  |  | 3.6 |  |  |  | 1.0 |  |  |  | 1,159.7 |
Middle East, Africa, and South Asia |  |  | 492.2 |  |  |  | 1.5 |  |  |  | 0.4 |  |  |  | — |  |  |  | 494.1 |
Latin America and the Caribbean |  |  | 276.7 |  |  |  | 2.5 |  |  |  | 56.8 |  |  |  | 5.6 |  |  |  | 341.6 |
East Asia and Oceania |  |  | 204.0 |  |  |  | 51.1 |  |  |  | 0.8 |  |  |  | — |  |  |  | 255.9 |
Revenues from contracts with customers |  | $ | 3,231.7 |  |  | $ | 238.0 |  |  | $ | 116.2 |  |  | $ | 49.8 |  |  | $ | 3,635.7 |
Other revenues (a) |  |  | 50.8 |  |  |  | 74.6 |  |  |  | 10.0 |  |  |  | 14.9 |  |  |  | 150.3 |
Total revenues |  | $ | 3,282.5 |  |  | $ | 312.6 |  |  | $ | 126.2 |  |  | $ | 64.7 |  |  | $ | 3,786.0 |

(a)
Includes revenue from the sale of derivative financial instruments, investment income generated on settlement assets primarily related to money transfer and money order services, and other sources.
(b)
On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC. During the third quarter of 2022, all parties agreed for the sale to be completed in three closings instead of two. The first closing occurred on March 1, 2022, the second is expected to occur in December 2022, and the third is expected in the first quarter of 2023. See Note 4 for further information regarding this transaction.

3. Earnings Per Share

The calculation of basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. 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, using the treasury stock method. The treasury stock method assumes proceeds from the exercise price of stock options and the unamortized compensation expense of options and restricted stock are available to acquire shares at an average market price throughout the period, and therefore, reduce the dilutive effect.

Shares excluded from the diluted earnings per share calculation under the treasury stock method, primarily due to outstanding options to purchase shares of Western Union stock and restricted stock units, as the assumed proceeds of the options and restricted stock per unit were above the Company’s average share price during the periods and their effect was anti-dilutive, were 8.1 million and 2.2 million for the three months ended September 30, 2022 and 2021, respectively, and 8.0 million and 1.7 million for the nine months ended September 30, 2022 and 2021, respectively.

The following table provides the calculation of diluted weighted-average shares outstanding (in millions):

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Basic weighted-average shares outstanding |  |  | 386.5 |  |  |  | 406.3 |  |  |  | 388.8 |  |  |  | 409.1 |
Common stock equivalents |  |  | 1.1 |  |  |  | 1.7 |  |  |  | 1.1 |  |  |  | 2.2 |
Diluted weighted-average shares outstanding |  |  | 387.6 |  |  |  | 408.0 |  |  |  | 389.9 |  |  |  | 411.3 |

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. Divestitures and Investment Activities

Assets Held for Sale and Related Divestiture

On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC (collectively, the “Buyer”) for cash consideration of $910.0 million. In the third quarter, the Company and the Buyer agreed to complete the divestiture in three closings instead of two, t he first of which occurred on March 1, 2022 with the entirety of the cash consideration collected at that time and allocated to the closings on a relative fair value basis. The first closing excluded the operations in the European Union and the United Kingdom and resulted in a gain of $151.4 million. In connection with the first closing, the Company reclassified $17.8 million of currency translation gains previously included within Accumulated other comprehensive loss (“AOCL”) as a component of Gain on divestiture of business in the Condensed Consolidated Statements of Income. As of September 30, 2022, the Company has agreed to and paid final working capital adjustments to the Buyer and has classified the proceeds allocated to the European Union and United Kingdom operations of approximately $390 million within Other liabilities in the Condensed Consolidated Balance Sheets. The second closing, which includes the United Kingdom operations, is expected to occur in December 2022, pending required regulatory approvals. The third closing, which includes the European Union operations, is currently expected to occur in the first quarter of 2023, pending required regulatory approvals. The gains associated with the second and third closings are subject to regulatory capital adjustments and will be recognized at the time of each closing. During the period between the first and third closings, the Company will pay to the Buyer a measure of profit of the European Union and United Kingdom operations, while owned by the Company, adjusted for the occupancy charges for employees of the Buyer using Company facilities and other items, as contractually agreed, which was $15.0 million and $25.9 million for the three and nine months ended September 30, 2022, respectively, and was included in Other income/(expense), net in the Condensed Consolidated Statements of Income. The related income tax expense on this income is also passed to the Buyer.

The Company has presented the remaining assets of its Business Solutions business as held for sale, along with the associated liabilities, as the Company believes the completions of the second and third closings are probable. The Buyer has rebranded the sold operations within a new standalone company (now referred to as "Convera").

Business Solutions revenues included in the Condensed Consolidated Statements of Income were $42.6 million and $116.8 million and direct operating expenses, excluding corporate allocations, were $27.0 million and $77.1 million for the three months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022 and 2021, Business Solutions revenues were $167.4 million and $312.6 million, respectively, and direct operating expenses, excluding corporate allocations, were $117.4 million and $244.5 million, respectively. For the three months ended September 30, 2022 and 2021, divestiture costs directly associated with this transaction were $0.4 million and $5.2 million, respectively. For the nine months ended September 30, 2022 and 2021, divestiture costs directly associated with this transaction were $4.4 million and $10.7 million, respectively.

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(Unaudited)

The following table reflects the assets held for sale and associated liabilities of the Business Solutions business in the accompanying Condensed Consolidated Balance Sheets (in millions). These balances are subject to regulatory capital and other requirements which will be finalized upon the third close.

|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Cash and cash equivalents |  | $ | 64.0 |  |  | $ | 37.7 |
Settlement assets |  |  | 230.3 |  |  |  | 566.0 |
Property and equipment, net of accumulated depreciation of $1.7 and $19.3 |  |  | 1.7 |  |  |  | 6.3 |
Goodwill |  |  | 229.2 |  |  |  | 532.0 |
Other intangible assets, net of accumulated amortization of $77.8 and $360.2 |  |  | 9.7 |  |  |  | 50.4 |
Other assets |  |  | 280.0 |  |  |  | 260.5 |
Total assets |  | $ | 814.9 |  |  | $ | 1,452.9 |
Accounts payable and accrued liabilities |  | $ | 81.3 |  |  | $ | 61.6 |
Settlement obligations |  |  | 230.3 |  |  |  | 566.0 |
Other liabilities |  |  | 238.9 |  |  |  | 194.3 |
Total liabilities |  | $ | 550.5 |  |  | $ | 821.9 |

Investment Activities

The Company entered into an agreement in November 2020, which was subsequently amended, to acquire an ownership interest in stc Bank (formerly Saudi Digital Payments Company), a subsidiary of Saudi Telecom Company and one of the Company’s Consumer-to-Consumer digital white label partners. Under the terms of the amended agreement, the Company agreed to invest $200.0 million for a 15% ownership in stc Bank (“Investment”), and this transaction closed in October 2021. In conjunction with the Investment, the Company and stc Bank extended and expanded the terms of their commercial agreement. The Company assigned a value of $36.0 million to certain rights under the commercial agreement that are included in Other assets in the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 and are being amortized over the life of the agreement. The Company is measuring the Investment at cost, less any impairment, adjusted for any changes resulting from observable price changes in orderly transactions for identical or similar investments in stc Bank.

In April 2021, the Company sold a substantial majority of the noncontrolling interest it held in a private company for cash proceeds of $50.9 million. The Company recorded a gain of $47.9 million within Other income/(expense), net, during the nine months ended September 30, 2021. The Company retains an immaterial equity interest in this private company.

5. Fair Value Measurements

Fair value, as defined by the relevant accounting standards, represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For additional information on how the Company measures fair value, refer to the Company’s consolidated financial statements within the Company’s Annual Report on Form 10‑K for the year ended December 31, 2021.

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(Unaudited)

The following tables present the Company’s assets and liabilities, which are measured at fair value on a recurring basis, by category (in millions):

|  | Fair Value Measurement Using |  |  | Total |
September 30, 2022 |  | Level 1 |  |  | Level 2 |  |  | Fair Value |
Assets: |  |  |  |  |  |  |  |  |
Settlement assets: |  |  |  |  |  |  |  |  |
Measured at fair value through net income: |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 1.8 |  |  | $ | — |  |  | $ | 1.8 |
Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income): |  |  |  |  |  |  |  |  |
State and municipal debt securities |  |  | — |  |  |  | 1,012.5 |  |  |  | 1,012.5 |
Corporate debt securities |  |  | — |  |  |  | 110.3 |  |  |  | 110.3 |
State and municipal variable-rate demand notes |  |  | — |  |  |  | 97.5 |  |  |  | 97.5 |
United States government agency mortgage-backed securities |  |  | — |  |  |  | 23.4 |  |  |  | 23.4 |
Other assets: |  |  |  |  |  |  |  |  |
Derivatives |  |  | — |  |  |  | 328.2 |  |  |  | 328.2 |
Total assets |  | $ | 1.8 |  |  | $ | 1,571.9 |  |  | $ | 1,573.7 |
Liabilities: |  |  |  |  |  |  |  |  |
Other liabilities: |  |  |  |  |  |  |  |  |
Derivatives |  | $ | — |  |  | $ | 242.3 |  |  | $ | 242.3 |
Total liabilities |  | $ | — |  |  | $ | 242.3 |  |  | $ | 242.3 |

|  | Fair Value Measurement Using |  |  | Total |
December 31, 2021 |  | Level 1 |  |  | Level 2 |  |  | Fair Value |
Assets: |  |  |  |  |  |  |  |  |
Settlement assets: |  |  |  |  |  |  |  |  |
Measured at fair value through net income: |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 7.9 |  |  | $ | — |  |  | $ | 7.9 |
Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income): |  |  |  |  |  |  |  |  |
State and municipal debt securities |  |  | — |  |  |  | 1,219.9 |  |  |  | 1,219.9 |
State and municipal variable-rate demand notes |  |  | — |  |  |  | 84.8 |  |  |  | 84.8 |
Corporate and other debt securities |  |  | — |  |  |  | 57.8 |  |  |  | 57.8 |
United States government agency mortgage-backed securities |  |  | — |  |  |  | 36.4 |  |  |  | 36.4 |
Other assets: |  |  |  |  |  |  |  |  |
Derivatives |  |  | — |  |  |  | 247.7 |  |  |  | 247.7 |
Total assets |  | $ | 7.9 |  |  | $ | 1,646.6 |  |  | $ | 1,654.5 |
Liabilities: |  |  |  |  |  |  |  |  |
Other liabilities: |  |  |  |  |  |  |  |  |
Derivatives |  | $ | — |  |  | $ | 183.8 |  |  | $ | 183.8 |
Total liabilities |  | $ | — |  |  | $ | 183.8 |  |  | $ | 183.8 |

There were no material, non-recurring fair value adjustments other than approximately $9 million of property and equipment, operating lease right-of-use asset, and other intangible asset impairments associated with the Company's suspension of its operat ions in Russia and Belarus and the first closing of its Business Solutions divestiture in the nine months ended September 30, 2022, as discussed further in Note 14. There were no material, non-recurring fair value adjustments in the three months ended September 30, 2022 and three and nine months ended September 30, 2021 or transfers between Level 1 and Level 2 measurements during the three and nine months ended September 30, 2022 and 2021.

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(Unaudited)

Other Fair Value Measurements

The carrying amounts for many of the Company’s financial instruments, including certain cash and cash equivalents, settlement cash and cash equivalents, and settlement receivables and obligations approximate fair value due to their short maturities. The Company’s borrowings are classified as Level 2 within the valuation hierarchy, and the aggregate fair value of these borrowings was based on quotes from multiple banks. Fixed-rate notes are carried in the Company’s Condensed Consolidated Balance Sheets at their original issuance values as adjusted over time to accrete that value to par. As of September 30, 2022, the carrying value and fair value of the Company’s borrowings were $2,611.0 million and $2,387.1 million, respectively (see Note 11). As of December 31, 2021, the carrying value and fair value of the Company’s borrowings were $3,008.4 million and $3,217.2 million, respectively.

During the nine months ended September 30, 2022, the Company entered into reverse repurchase agreements, a form of secured lending, with broker-dealer affiliates of large U.S. banks, using a portion of the proceeds from the sale of the Company's Business Solutions business. These agreements require the counterparties to pledge marketable securities with a value greater than the amount of cash transferred as collateral, which is held and valued by a third-party custodial bank. These investments generate interest income through the date of repurchase, at which point the purchase price together with the interest due will be paid back to the Company. The Company carries these investments at amortized cost, and as of September 30, 2022, the carrying value of these investments, as reported in Other assets in the Company's Condensed Consolidated Balance Sheets, was $400.0 million, which approximates fair value due to the creditworthiness of the counterparties, the value of the collateral, and the investments' short-term nature and variable interest rate.

6. Commitments and Contingencies

Letters of Credit and Bank Guarantees

The Company had approximately $330 million in outstanding letters of credit and bank guarantees as of September 30, 2022, which were primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements. The Company expects to renew most of its letters of credit and bank guarantees prior to expiration.

Litigation and Related Contingencies

The Company is subject to certain claims and litigation that could result in losses, including damages, fines, and/or civil penalties, which could be significant, and in some cases, criminal charges. The Company regularly evaluates the status of legal matters to assess whether a loss is probable and reasonably estimable in determining whether an accrual is appropriate. Furthermore, in determining whether disclosure is appropriate, the Company evaluates each legal matter to assess if there is at least a reasonable possibility that a material loss or additional material losses may have been incurred. The Company also evaluates whether an estimate of possible loss or range of loss can be made. Unless otherwise specified below, the Company believes that there is at least a reasonable possibility that a loss or additional loss may have been incurred for each of the matters described below.

For those matters that the Company believes there is at least a reasonable possibility that a loss or additional loss may have been incurred and can reasonably estimate the loss or potential loss, the reasonably possible potential litigation losses in excess of the Company’s recorded liability for probable and estimable losses was approximately $30 million as of September 30, 2022. For the remaining matters, management is unable to provide a meaningful estimate of the possible loss or range of loss because, among other reasons: (i) the proceedings are in preliminary stages; (ii) specific damages have not been sought; (iii) damage claims are unsupported and/or unreasonable; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; or (vi) novel legal issues or unsettled legal theories are being asserted.

The outcomes of legal actions are unpredictable and subject to significant uncertainties, and it is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss

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and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Accordingly, actual losses may be in excess of the established liability or the range of reasonably possible loss.

Legal Matters

In October 2015, Consumidores Financieros Asociación Civil para su Defensa, an Argentinian consumer association, filed a purported class action lawsuit in Argentina’s National Commercial Court No. 19 against the Company’s subsidiary Western Union Financial Services Argentina S.R.L. (“WUFSA”). The lawsuit alleges, among other things, that WUFSA’s fees for money transfers sent from Argentina are excessive and that WUFSA does not provide consumers with adequate information about foreign exchange rates. The plaintiff is seeking, among other things, an order requiring WUFSA to reimburse consumers for the fees they paid and the foreign exchange revenue associated with money transfers sent from Argentina, plus punitive damages. The complaint does not specify a monetary value of the claim or a time period. In November 2015, the Court declared the complaint formally admissible as a class action. The notice of claim was served on WUFSA in May 2016, and in June 2016 WUFSA filed a response to the claim and moved to dismiss it on statute of limitations and standing grounds. In April 2017, the Court deferred ruling on the motion until later in the proceedings. The process for notifying potential class members has been completed, and the case is in the evidentiary stage. Due to the stage of this matter, the Company is unable to predict the outcome or the possible loss or range of loss, if any, associated with this matter. WUFSA intends to defend itself vigorously.

In addition to the principal matters described above, the Company is a party to a variety of other legal matters that arise in the normal course of the Company’s business. While the results of these other legal matters cannot be predicted with certainty, management believes that the final outcome of these matters will not have a material adverse effect either individually or in the aggregate on the Company’s financial condition, results of operations, or cash flows.

7. Related Party Transactions

The Company has ownership interests in certain of its agents accounted for under the equity method of accounting. The Company pays these agents commissions for money transfer and other services provided on the Company’s behalf. Commission expense recognized for these agents for the three months ended September 30, 2022 and 2021 totaled $12.2 million and $14.0 million, respectively, and $36.5 million and $41.2 million for the nine months ended September 30, 2022 and 2021, respectively.

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(Unaudited)

8. Settlement Assets and Obligations

Settlement assets represent funds received or to be received from agents and others for unsettled money transfers, money orders, and consumer payments. The Company records corresponding settlement obligations relating to amounts payable under money transfers, money orders, and consumer payment service arrangements. Settlement assets and obligations also include amounts receivable from, and payable to, customers for the value of their cross-currency payment transactions related to the Business Solutions segment.

Settlement assets and obligations consisted of the following (in millions):

|  | September 30, 2022 |
Settlement assets: |  |  |
Cash and cash equivalents |  | $ | 817.2 |
Receivables from agents, Business Solutions customers, and others |  |  | 1,277.2 |
Less: Allowance for credit losses |  |  | (11.9 | )
Receivables from agents, Business Solutions customers, and others, net |  |  | 1,265.3 |
Investment securities |  |  | 1,243.7 |
Less: Allowance for credit losses |  |  | (0.2 | )
Investment securities, net |  |  | 1,243.5 |
Total settlement assets (a) |  | $ | 3,326.0 |
Settlement obligations: |  |  |
Money transfer, money order, and payment service payables |  | $ | 2,695.2 |
Payables to agents |  |  | 630.8 |
Total settlement obligations (a) |  | $ | 3,326.0 |

|  | December 31, 2021 |
Settlement assets: |  |  |
Cash and cash equivalents |  | $ | 835.5 |
Receivables from agents, Business Solutions customers, and others |  |  | 1,198.8 |
Less: Allowance for credit losses |  |  | (23.7 | )
Receivables from agents, Business Solutions customers, and others, net |  |  | 1,175.1 |
Investment securities |  |  | 1,398.9 |
Total settlement assets |  | $ | 3,409.5 |
Settlement obligations: |  |  |
Money transfer, money order, and payment service payables |  | $ | 2,838.9 |
Payables to agents |  |  | 570.6 |
Total settlement obligations |  | $ | 3,409.5 |

(a)
Settlement assets and Settlement obligations include Assets held for sale and Liabilities associated with assets held for sale of $230.3 million and $566.0 million as of September 30, 2022 and December 31, 2021, respectively (see Note 4).

Allowance for Credit Losses

Receivables from agents and others primarily represent funds collected by such agents, but in transit to the Company, and were $1,243.3 million and $1,125.9 million as of September 30, 2022 and December 31, 2021, respectively. Cash received by Western Union agents generally becomes available to the Company within one week after initial receipt by the agent. Western Union has a large and diverse agent base, thereby reducing the credit risk of the Company from any one agent. The Company performs ongoing credit evaluations of its agents’ financial condition and credit worthiness.

Receivables from Business Solutions customers arise from cross-currency payment transactions in the Business Solutions segment. Business Solutions receivables totaled $22.0 million and $49.2 million as of September 30, 2022 and December 31, 2021, respectively. Receivables occur when funds have been paid out to a beneficiary but not yet received

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(Unaudited)

from the customer. Collection of these receivables ordinarily occurs within a few days. To mitigate risk associated with potential Business Solutions customer defaults, the Company performs credit reviews on an ongoing basis.

The Company establishes and monitors an allowance for credit losses related to receivables from agents and others, and Business Solutions customers. The Company has estimated the allowance based on its historical collections experience, adjusted for current conditions and forecasts of future economic conditions based on information known as of September 30, 2022.

The following tables summarize the activity in the allowance for credit losses on receivables from agents and others, and Business Solutions customers (in millions):

|  | Agents and |  |  | Business Solutions |
|  | Others |  |  | Customers |
Allowance for credit losses as of January 1, 2022 |  | $ | 18.0 |  |  | $ | 5.7 |
Current period provision for expected credit losses (a) |  |  | 1.9 |  |  |  | 0.4 |
Write-offs charged against the allowance |  |  | (3.1 | ) |  |  | (0.4 | )
Recoveries of amounts previously written off |  |  | 1.7 |  |  |  | — |
Impacts of foreign currency exchange rates, divestitures, and other |  |  | (0.1 | ) |  |  | (4.2 | )
Allowance for credit losses as of March 31, 2022 |  |  | 18.4 |  |  |  | 1.5 |
Current period provision for expected credit losses (a) |  |  | 1.8 |  |  |  | 2.1 |
Write-offs charged against the allowance |  |  | (1.3 | ) |  |  | (1.4 | )
Recoveries of amounts previously written off |  |  | 1.0 |  |  |  | — |
Impacts of foreign currency exchange rates and other |  |  | (3.0 | ) |  |  | (0.5 | )
Allowance for credit losses as of June 30, 2022 |  |  | 16.9 |  |  |  | 1.7 |
Current period provision for expected credit losses (a) |  |  | 3.4 |  |  |  | 0.5 |
Write-offs charged against the allowance |  |  | (8.1 | ) |  |  | (2.1 | )
Recoveries of amounts previously written off |  |  | 1.8 |  |  |  | — |
Impacts of foreign currency exchange rates and other |  |  | (2.4 | ) |  |  | 0.2 |
Allowance for credit losses as of September 30, 2022 |  | $ | 11.6 |  |  | $ | 0.3 |

|  | Agents and |  |  | Business Solutions |
|  | Others |  |  | Customers |
Allowance for credit losses as of January 1, 2021 |  | $ | 49.3 |  |  | $ | 3.9 |
Current period provision for expected credit losses (a) |  |  | 2.3 |  |  |  | 1.5 |
Write-offs charged against the allowance |  |  | (3.3 | ) |  |  | (0.4 | )
Recoveries of amounts previously written off |  |  | 1.9 |  |  |  | — |
Impacts of foreign currency exchange rates and other |  |  | (0.5 | ) |  |  | (0.1 | )
Allowance for credit losses as of March 31, 2021 |  |  | 49.7 |  |  |  | 4.9 |
Current period provision for expected credit losses (a) |  |  | 3.2 |  |  |  | 1.9 |
Write-offs charged against the allowance |  |  | (34.4 | ) |  |  | (0.4 | )
Recoveries of amounts previously written off |  |  | 0.6 |  |  |  | — |
Impacts of foreign currency exchange rates and other |  |  | (0.6 | ) |  |  | (0.1 | )
Allowance for credit losses as of June 30, 2021 |  |  | 18.5 |  |  |  | 6.3 |
Current period provision for expected credit losses (a) |  |  | 2.3 |  |  |  | 0.5 |
Write-offs charged against the allowance |  |  | (4.0 | ) |  |  | (0.8 | )
Recoveries of amounts previously written off |  |  | 1.4 |  |  |  | — |
Impacts of foreign currency exchange rates and other |  |  | (0.7 | ) |  |  | — |
Allowance for credit losses as of September 30, 2021 |  | $ | 17.5 |  |  | $ | 6.0 |

(a)
Provision does not include losses from chargebacks or fraud associated with transactions initiated through the Company’s digital channels, as these losses are not credit-related. The Company recognized losses that were not credit-related of $10.0 million, $7.7 million, and $10.2 million for the three months ended March 31, 2022, June 30, 2022, and September 30, 2022, respectively, and $13.7 million, $14.5 million, and $13.8 million for the three months ended March 31, 2021, June 30, 2021, and September 30, 2021, respectively.

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In addition, from time to time, the Company makes advances to its agents. The Company generally owes settlement funds payable to these agents that offset these advances. These amounts advanced to agents are included within Other assets in the accompanying Condensed Consolidated Balance Sheets. As of September 30, 2022 and December 31, 2021, amounts advanced to agents were $147.1 million and $146.9 million, respectively, and the related allowances for credit losses were immaterial.

Investment Securities

Investment securities included in Settlement assets in the Company’s Condensed Consolidated Balance Sheets consist primarily of highly-rated state and municipal debt securities, including fixed-rate term notes and variable-rate demand notes. Variable-rate demand note securities can be put (sold at par) typically on a daily basis with settlement periods ranging from the same day to one week but have varying maturities through 2061. These securities may be used by the Company for short-term liquidity needs and held for short periods of time. Investment securities are exposed to market risk due to changes in interest rates and credit risk. The Company is required to hold highly-rated, investment grade securities and such investments are restricted to satisfy outstanding settlement obligations in accordance with applicable regulatory requirements.

The Company’s investment securities are classified as available-for-sale and recorded at fair value. Western Union regularly monitors credit risk and attempts to mitigate its exposure by investing in highly-rated securities and through investment diversification.

Unrealized gains on available-for-sale securities are excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes. Available-for-sale securities with a fair value below the amortized cost basis are evaluated on an individual basis to determine whether the impairment is due to credit-related factors or noncredit-related factors. Factors that could indicate a credit loss exists include but are not limited to: (i) negative earnings performance, (ii) credit rating downgrades, or (iii) adverse changes in the regulatory or economic environment of the asset. Any impairment that is not credit-related is excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes, unless the Company intends to sell the impaired security, or it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis. Credit-related impairments are recognized immediately as an adjustment to earnings, regardless of whether the Company has the ability or intent to hold the security to maturity and are limited to the difference between fair value and the amortized cost basis.

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(Unaudited)

As of September 30, 2022, the Company had the intent to sell certain state and municipal debt securities and recognized an impairment of $4.6 million, which was recorded to Revenues in the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022. The sale of these securities was completed in the first week of October. The Company does not intend to sell the remaining securities and does not expect it will be required to sell the remaining securities prior to recovering their amortized cost basis. The Company’s provision for credit losses on its available-for-sale securities during the three and nine months ended September 30, 2022 and 2021 and the related allowance for credit losses as of September 30, 2022 and December 31, 2021 were immaterial.

The components of investment securities are as follows (in millions):

|  |  |  |  |  |  |  | Gross |  |  | Gross |  |  | Net |
|  | Amortized |  |  | Fair |  |  | Unrealized |  |  | Unrealized |  |  | Unrealized |
September 30, 2022 |  | Cost |  |  | Value |  |  | Gains |  |  | Losses (b) |  |  | Gains/(Losses) |
Settlement assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 1.8 |  |  | $ | 1.8 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State and municipal debt securities (a) |  |  | 1,094.1 |  |  |  | 1,012.5 |  |  |  | — |  |  |  | (81.6 | ) |  |  | (81.6 | )
Corporate debt securities |  |  | 117.9 |  |  |  | 110.3 |  |  |  | — |  |  |  | (7.6 | ) |  |  | (7.6 | )
State and municipal variable-rate demand notes |  |  | 97.5 |  |  |  | 97.5 |  |  |  | — |  |  |  | — |  |  |  | — |
United States government agency mortgage-backed securities |  |  | 24.9 |  |  |  | 23.4 |  |  |  | — |  |  |  | (1.5 | ) |  |  | (1.5 | )
Total available-for-sale securities |  |  | 1,334.4 |  |  |  | 1,243.7 |  |  |  | — |  |  |  | (90.7 | ) |  |  | (90.7 | )
Total investment securities |  | $ | 1,336.2 |  |  | $ | 1,245.5 |  |  | $ | — |  |  | $ | (90.7 | ) |  | $ | (90.7 | )

|  |  |  |  |  |  |  | Gross |  |  | Gross |  |  | Net |
|  | Amortized |  |  | Fair |  |  | Unrealized |  |  | Unrealized |  |  | Unrealized |
December 31, 2021 |  | Cost |  |  | Value |  |  | Gains |  |  | Losses |  |  | Gains/(Losses) |
Settlement assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 7.9 |  |  | $ | 7.9 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State and municipal debt securities (a) |  |  | 1,182.6 |  |  |  | 1,219.9 |  |  |  | 39.8 |  |  |  | (2.5 | ) |  |  | 37.3 |
State and municipal variable-rate demand notes |  |  | 84.8 |  |  |  | 84.8 |  |  |  | — |  |  |  | — |  |  |  | — |
Corporate and other debt securities |  |  | 58.1 |  |  |  | 57.8 |  |  |  | 0.2 |  |  |  | (0.5 | ) |  |  | (0.3 | )
United States government agency mortgage- backed securities |  |  | 35.6 |  |  |  | 36.4 |  |  |  | 0.8 |  |  |  | — |  |  |  | 0.8 |
Total available-for-sale securities |  |  | 1,361.1 |  |  |  | 1,398.9 |  |  |  | 40.8 |  |  |  | (3.0 | ) |  |  | 37.8 |
Total investment securities |  | $ | 1,369.0 |  |  | $ | 1,406.8 |  |  | $ | 40.8 |  |  | $ | (3.0 | ) |  | $ | 37.8 |

(a)
The substantial majority of these securities are fixed-rate instruments.
(b)
As of September 30, 2022, the Company held 430 investment securities that were in an unrealized loss position, 386 of which have a total fair value of $918.2 million and unrealized losses of $77.7 million and have been in a loss position for less than twelve months and 44 of which have a total fair value of $80.5 million and unrealized losses of $13.0 million and have been in a loss position for greater than twelve months. As discussed above, the Company's provision for credit losses on its investment securities for the three and nine months ended September 30, 2022 and the related allowance for credit losses as of September 30, 2022 were immaterial, as the increase in unrealized losses was driven by a rise in U.S. Treasury interest rates over the nine months ended September 30, 2022.

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The following summarizes the contractual maturities of available-for-sale securities within Settlement assets as of September 30, 2022 (in millions):

|  | Fair Value |
Due within 1 year |  | $ | 123.1 |
Due after 1 year through 5 years |  |  | 539.4 |
Due after 5 years through 10 years |  |  | 394.8 |
Due after 10 years |  |  | 186.4 |
Total |  | $ | 1,243.7 |

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations or the Company may have the right to put the obligation prior to its contractual maturity, as with variable-rate demand notes. Variable-rate demand notes, having a fair value of $10.0 million, $10.0 million, and $77.5 million are included in the "Due after 1 year through 5 years," "Due after 5 years through 10 years," and "Due after 10 years" categories, respectively, in the table above.

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9. Stockholders’ Equity

Accumulated Other Comprehensive Loss

The following table details reclassifications out of AOCL and into Net income. All amounts reclassified from AOCL affect the line items as indicated below and the amounts in parentheses indicate decreases to Net income in the Condensed Consolidated Statements of Income.

|  | Amounts Reclassified from AOCL to Net Income |
|  |  |  | Three Months Ended |  |  | Nine Months Ended |
|  | Income Statement |  | September 30, |  |  | September 30, |
Income for the period (in millions) |  | Location |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Accumulated other comprehensive loss components: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gains/(losses) on investment securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale securities |  | Revenues |  | $ | (8.4 | ) |  | $ | 2.5 |  |  | $ | (8.5 | ) |  | $ | 2.3 |
Income tax benefit/(expense) |  | Provision for income taxes |  |  | 1.6 |  |  |  | (0.5 | ) |  |  | 1.6 |  |  |  | (0.5 | )
Total reclassification adjustments related to investment securities, net of tax |  |  |  |  | (6.8 | ) |  |  | 2.0 |  |  |  | (6.9 | ) |  |  | 1.8 |
Gains/(losses) on cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts |  | Revenues |  |  | 17.5 |  |  |  | (0.6 | ) |  |  | 32.4 |  |  |  | (10.0 | )
Interest rate contracts |  | Interest expense |  |  | — |  |  |  | (0.1 | ) |  |  | (0.1 | ) |  |  | (0.5 | )
Interest rate contracts |  | Other income/(expense), net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.7 |
Income tax benefit/(expense) |  | Provision for income taxes |  |  | (0.2 | ) |  |  | 0.1 |  |  |  | (0.2 | ) |  |  | 0.1 |
Total reclassification adjustments related to cash flow hedges, net of tax |  |  |  |  | 17.3 |  |  |  | (0.6 | ) |  |  | 32.1 |  |  |  | (9.7 | )
Foreign currency translation adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation |  | Gain on divestiture of business |  |  | — |  |  |  | — |  |  |  | 17.8 |  |  |  | — |
Total reclassification adjustments related to foreign currency translation adjustments, net of tax |  |  |  |  | — |  |  |  | — |  |  |  | 17.8 |  |  |  | — |
Amortization of components of defined benefit plans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Actuarial loss |  | Other income/(expense), net |  |  | — |  |  |  | (3.0 | ) |  |  | — |  |  |  | (9.1 | )
Income tax benefit |  | Provision for income taxes |  |  | — |  |  |  | 0.7 |  |  |  | — |  |  |  | 2.0 |
Total reclassification adjustments related to defined benefit plans, net of tax |  |  |  |  | — |  |  |  | (2.3 | ) |  |  | — |  |  |  | (7.1 | )
Total reclassifications, net of tax |  |  |  | $ | 10.5 |  |  | $ | (0.9 | ) |  | $ | 43.0 |  |  | $ | (15.0 | )

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables summarize the components of AOCL, net of tax in the accompanying Condensed Consolidated Balance Sheets (in millions):

|  | Investment |  |  | Hedging |  |  | Foreign Currency |  |  |  |
|  | Securities |  |  | Activities |  |  | Translation |  |  | Total |
As of December 31, 2021 |  | $ | 30.4 |  |  | $ | 18.7 |  |  | $ | (101.2 | ) |  | $ | (52.1 | )
Unrealized gains/(losses) |  |  | (63.6 | ) |  |  | 6.2 |  |  |  | — |  |  |  | (57.4 | )
Tax benefit |  |  | 11.9 |  |  |  | — |  |  |  | — |  |  |  | 11.9 |
Amounts reclassified from AOCL into earnings, net of tax |  |  | 0.1 |  |  |  | (0.9 | ) |  |  | (17.8 | ) |  |  | (18.6 | )
As of March 31, 2022 |  |  | (21.2 | ) |  |  | 24.0 |  |  |  | (119.0 | ) |  |  | (116.2 | )
Unrealized gains/(losses) |  |  | (28.7 | ) |  |  | 37.3 |  |  |  | — |  |  |  | 8.6 |
Tax benefit/(expense) |  |  | 5.0 |  |  |  | (0.3 | ) |  |  | — |  |  |  | 4.7 |
Amounts reclassified from AOCL into earnings, net of tax |  |  | — |  |  |  | (13.9 | ) |  |  | — |  |  |  | (13.9 | )
As of June 30, 2022 |  |  | (44.9 | ) |  |  | 47.1 |  |  |  | (119.0 | ) |  |  | (116.8 | )
Unrealized gains/(losses) |  |  | (44.7 | ) |  |  | 43.4 |  |  |  | — |  |  |  | (1.3 | )
Tax benefit/(expense) |  |  | 7.9 |  |  |  | (0.5 | ) |  |  | — |  |  |  | 7.4 |
Amounts reclassified from AOCL into earnings, net of tax |  |  | 6.8 |  |  |  | (17.3 | ) |  |  | — |  |  |  | (10.5 | )
As of September 30, 2022 |  | $ | (74.9 | ) |  | $ | 72.7 |  |  | $ | (119.0 | ) |  | $ | (121.2 | )

|  | Investment |  |  | Hedging |  |  | Foreign Currency |  |  | Defined Benefit |  |  |  |
|  | Securities |  |  | Activities |  |  | Translation |  |  | Pension Plan |  |  | Total |
As of December 31, 2020 |  | $ | 58.3 |  |  | $ | (30.5 | ) |  | $ | (101.2 | ) |  | $ | (86.1 | ) |  | $ | (159.5 | )
Unrealized gains/(losses) |  |  | (16.0 | ) |  |  | 24.2 |  |  |  | — |  |  |  | — |  |  |  | 8.2 |
Tax benefit/(expense) |  |  | 2.9 |  |  |  | (0.9 | ) |  |  | — |  |  |  | — |  |  |  | 2.0 |
Amounts reclassified from AOCL into earnings, net of tax |  |  | 0.1 |  |  |  | 5.6 |  |  |  | — |  |  |  | 2.5 |  |  |  | 8.2 |
As of March 31, 2021 |  |  | 45.3 |  |  |  | (1.6 | ) |  |  | (101.2 | ) |  |  | (83.6 | ) |  |  | (141.1 | )
Unrealized gains/(losses) |  |  | 2.3 |  |  |  | (6.2 | ) |  |  | — |  |  |  | — |  |  |  | (3.9 | )
Tax expense |  |  | (0.2 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (0.2 | )
Amounts reclassified from AOCL into earnings, net of tax |  |  | 0.1 |  |  |  | 3.5 |  |  |  | — |  |  |  | 2.3 |  |  |  | 5.9 |
As of June 30, 2021 |  |  | 47.5 |  |  |  | (4.3 | ) |  |  | (101.2 | ) |  |  | (81.3 | ) |  |  | (139.3 | )
Unrealized gains/(losses) |  |  | (7.3 | ) |  |  | 17.7 |  |  |  | — |  |  |  | — |  |  |  | 10.4 |
Tax benefit/(expense) |  |  | 1.4 |  |  |  | (0.1 | ) |  |  | — |  |  |  | — |  |  |  | 1.3 |
Amounts reclassified from AOCL into earnings, net of tax |  |  | (2.0 | ) |  |  | 0.6 |  |  |  | — |  |  |  | 2.3 |  |  |  | 0.9 |
As of September 30, 2021 |  | $ | 39.6 |  |  | $ | 13.9 |  |  | $ | (101.2 | ) |  | $ | (79.0 | ) |  | $ | (126.7 | )

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

On July 22, 2021, the Company’s Board of Directors approved a plan to terminate and settle the Company’s frozen defined benefit pension plan. In the fourth quarter of 2021, the Company settled its defined benefit pension plan. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 12, Employee Benefit Plans, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for details on the termination and settlement of the Company's frozen defined benefit pension plan.

Cash Dividends Paid

The Company's Board of Directors declared quarterly cash dividends of $0.235 per common share in each of the first three quarters of 2022 and 2021, representing $273.2 million and $287.6 million in total dividends, respectively. $90.7 million was paid on September 30, 2022, $90.8 million was paid on June 30, 2022, $91.7 million was paid on March 31, 2022, $95.1 million was paid on September 30, 2021, $95.9 million was paid on June 30, 2021, and $96.6 million was paid on March 31, 2021.

Share Repurchases

During the nine months ended September 30, 2022 and 2021, 9.6 million and 9.6 million shares were repurchased for $176.8 million and $225.0 million, respectively, excluding commissions, at an average cost of $18.45 and $23.45, respectively, under the share repurchase authorizations approved by the Company's Board of Directors, including one which expired on December 31, 2021. On February 10, 2022, the Company's Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2024. As of September 30, 2022, $823.2 million remained available under this share repurchase authorization. The amounts included in the Common stock repurchased line in the Company’s Condensed Consolidated Statements of Cash Flows represent both shares authorized by the Board of Directors for repurchase under publicly announced authorizations and shares withheld from employees to cover tax withholding obligations on restricted stock units that have vested.

10. Derivatives

The Company is exposed to foreign currency exchange risk resulting from fluctuations in exchange rates, primarily the euro, and, to a lesser degree, the Canadian dollar, the Mexican peso, and other currencies, related to forecasted revenues and settlement assets and obligations, as well as on certain foreign currency denominated cash and other asset and liability positions. The Company is also exposed to risk from derivative contracts, primarily from customer derivatives, arising from its cross-currency Business Solutions payment operations. Additionally, the Company is exposed to interest rate risk related to changes in market rates both prior to and subsequent to the issuance of debt. The Company has used derivatives to: (i) minimize its exposures related to changes in foreign currency exchange rates and interest rates and (ii) facilitate cross-currency Business Solutions payments by writing derivatives to customers.

The Company executes derivatives with established financial institutions; the substantial majority of these financial institutions have a credit rating of "A-" or higher from a major credit rating agency. Customer derivatives written by the Company’s Business Solutions operations primarily involve small and medium size enterprises. The primary credit risk inherent in derivative agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. The Company performs a review of the credit risk of these counterparties at the inception of the contract and on an ongoing basis, while also monitoring the concentration of its contracts with any individual counterparty. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements, but takes action when doubt arises about the counterparties’ ability to perform. These actions may include requiring Business Solutions customers to post or increase collateral, and for all counterparties, the possible termination of the related contracts. The Company’s hedged foreign currency exposures are in liquid currencies; consequently, there is minimal risk that appropriate derivatives to maintain the hedging program would not be available in the future.

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(Unaudited)

Foreign Currency Derivatives

The Company’s policy is to use longer duration foreign currency forward contracts, with maturities of up to 36 months at inception and a targeted weighted-average maturity of approximately one year, to help mitigate some of the risk that changes in foreign currency exchange rates compared to the United States dollar could have on forecasted revenues denominated in other currencies related to its business. As of September 30, 2022, these foreign currency forward contracts had maturities of a maximum of 24 months with a weighted-average maturity of approximately one year. These contracts are accounted for as cash flow hedges of forecasted revenue, with effectiveness assessed based on changes in the spot rate of the affected currencies during the period of designation and thus time value is excluded from the assessment of effectiveness. The initial value of the excluded components is amortized into Revenues within the Company’s Condensed Consolidated Statements of Income.

The Company also uses short duration foreign currency forward contracts, generally with maturities ranging from a few days to one month, to offset foreign exchange rate fluctuations on settlement assets and obligations between initiation and settlement. In addition, forward contracts, typically with maturities of less than one year at inception, are utilized to offset foreign exchange rate fluctuations on certain foreign currency denominated cash and other asset and liability positions. None of these contracts are designated as accounting hedges.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of September 30, 2022 and December 31, 2021 were as follows (in millions):

|  | September 30, 2022 |
Contracts designated as hedges: |  |  |
Euro |  | $ | 364.3 |
Canadian dollar |  |  | 124.1 |
Australian dollar |  |  | 55.4 |
Swiss franc |  |  | 43.3 |
British pound |  |  | 36.0 |
Swedish krona |  |  | 27.5 |
Other (a) |  |  | 24.5 |
Contracts not designated as hedges: |  |  |
Euro |  | $ | 532.8 |
Mexican peso |  |  | 154.6 |
British pound |  |  | 80.7 |
Australian dollar |  |  | 67.4 |
Indian rupee |  |  | 55.9 |
Chinese yuan |  |  | 41.8 |
Canadian dollar |  |  | 32.9 |
Japanese yen |  |  | 32.1 |
Swiss franc |  |  | 28.3 |
Brazilian real |  |  | 25.1 |
Other (a) |  |  | 168.5 |

|  | December 31, 2021 |
Contracts designated as hedges: |  |  |
Euro |  | $ | 399.9 |
Canadian dollar |  |  | 134.0 |
Australian dollar |  |  | 58.4 |
Swiss franc |  |  | 45.9 |
British pound |  |  | 43.8 |
Swedish krona |  |  | 30.7 |
Japanese yen |  |  | 30.4 |
Other (a) |  |  | 0.9 |
Contracts not designated as hedges: |  |  |
Euro |  | $ | 755.7 |
British pound |  |  | 148.1 |
Canadian dollar |  |  | 144.2 |
Australian dollar |  |  | 98.1 |
Mexican peso |  |  | 96.3 |
Philippine peso |  |  | 76.2 |
Indian rupee |  |  | 63.4 |
Japanese yen |  |  | 46.0 |
Russian ruble |  |  | 44.4 |
Chinese yuan |  |  | 31.6 |
New Zealand dollar |  |  | 26.6 |
Swiss franc |  |  | 25.1 |
Swedish krona |  |  | 25.1 |
Other (a) |  |  | 132.7 |

(a)
Comprised of exposures to various currencies; none of these individual currency exposures is greater than $25 million.

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(Unaudited)

Business Solutions Operations

The Company writes derivatives, primarily foreign currency forward contracts and option contracts, mostly with small and medium size enterprises and derives a currency spread from this activity as part of its Business Solutions operations. On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC. During the third quarter of 2022, all parties agreed for the sale to be completed in three closings instead of two. The first closing occurred on March 1, 2022, the second is expected to occur in December 2022, and the third is expected in the first quarter of 2023. See Note 4 for further information regarding this transaction. The Company aggregates its Business Solutions foreign currency exposures arising from customer contracts, including the derivative contracts described above, and hedges the resulting net currency risks by entering into offsetting contracts with Convera through the end of the third closing of the Business Solutions divestiture. The derivatives written are part of the broader portfolio of foreign currency positions arising from the Company’s cross-currency payments operations, which primarily include spot exchanges of currency in addition to forwards and options. Foreign exchange revenues from the total portfolio of positions included in Revenues in the Company’s Condensed Consolidated Statements of Income were $39.3 million and $99.5 million for the three months ended September 30, 2022 and 2021, respectively, and $151.5 million and $271.4 million for the nine months ended September 30, 2022 and 2021, respectively. None of the derivative contracts used in Business Solutions operations are designated as accounting hedges and the majority of these derivative contracts have a duration at inception of less than one year.

The aggregate equivalent United States dollar notional amount of derivative customer contracts held by the Company in its Business Solutions operations was approximately $5.0 billion and $8.0 billion as of September 30, 2022 and December 31, 2021, respectively. The significant majority of customer contracts are written in the following currencies: the United States dollar, euro, and the British pound.

Interest Rate Hedging

Periodically, the Company utilizes interest rate swaps to effectively change the interest rate payments on a portion of its notes from fixed-rate payments to short-term, variable-rate payments in order to manage its overall exposure to interest rate fluctuations. The Company designates these derivatives as fair value hedges. The change in the fair value of the interest rate swaps is offset by a change in the carrying value of the debt being hedged within Borrowings in the Condensed Consolidated Balance Sheets. Interest expense in the Condensed Consolidated Statements of Income has been adjusted to include the effects of interest accrued on the swaps.

The Company terminated two of its treasury locks in the first quarter of 2021, which were associated with the issuance of $600.0 million of aggregate principal amount of 1.350% unsecured notes due March 15, 2026 (“2026 Notes”). The Company received a total of $3.3 million upon termination, of which $2.6 million was deferred as a component of AOCL and will be amortized to Interest expense in the Condensed Consolidated Statements of Income over the term of the 2026 Notes. As a portion of the forecasted interest payments on the 2026 Notes will occur outside the time period originally specified at designation of the treasury locks as cash flow hedges, $0.7 million was recognized in Other income/(expense), net in the Condensed Consolidated Statements of Income, upon termination.

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(Unaudited)

Balance Sheet

The following table summarizes the fair value of derivatives reported in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (in millions):

|  | Derivative Assets |  |  | Derivative Liabilities |
|  |  |  | Fair Value |  |  |  |  | Fair Value |
|  | Balance Sheet |  | September 30, |  |  | December 31, |  |  | Balance Sheet |  | September 30, |  |  | December 31, |
|  | Location |  | 2022 |  |  | 2021 |  |  | Location |  | 2022 |  |  | 2021 |
Derivatives designated as hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency cash flow hedges |  | Other assets |  | $ | 83.2 |  |  | $ | 30.6 |  |  | Other liabilities |  | $ | 0.2 |  |  | $ | 2.6 |
Total derivatives designated as hedges |  |  |  | $ | 83.2 |  |  | $ | 30.6 |  |  |  |  | $ | 0.2 |  |  | $ | 2.6 |
Derivatives not designated as hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Business Solutions operations - foreign currency (a) |  | Assets held for sale |  | $ | 232.9 |  |  | $ | 213.1 |  |  | Liabilities associated with assets held for sale |  | $ | 235.0 |  |  | $ | 174.1 |
Foreign currency |  | Other assets |  |  | 12.1 |  |  |  | 4.0 |  |  | Other liabilities |  |  | 7.1 |  |  |  | 7.1 |
Total derivatives not designated as hedges |  |  |  | $ | 245.0 |  |  | $ | 217.1 |  |  |  |  | $ | 242.1 |  |  | $ | 181.2 |
Total derivatives |  |  |  | $ | 328.2 |  |  | $ | 247.7 |  |  |  |  | $ | 242.3 |  |  | $ | 183.8 |

(a)
In many circumstances, the Company allows its Business Solutions customers to settle part or all of their derivative contracts prior to maturity. However, the offsetting positions entered into with Convera do not allow for similar settlement. To mitigate this, additional foreign currency contracts are entered into with Convera to offset the original economic hedge contracts. This frequently results in changes in the Company’s derivative assets and liabilities that may not directly align with the performance in the underlying derivatives business.

The fair values of derivative assets and liabilities associated with contracts that include netting language that the Company believes to be enforceable have been netted in the following tables to present the Company’s net exposure with these counterparties. The Company’s rights under these agreements generally allow for transactions to be settled on a net basis, including upon early termination, which could occur upon the counterparty’s default, a change in control, or other conditions.

In addition, certain of the Company’s other agreements include netting provisions, the enforceability of which may vary from jurisdiction to jurisdiction, depending on the circumstances. Due to the uncertainty related to the enforceability of these provisions, the derivative balances associated with these agreements are included within "Derivatives that are not or may not be subject to master netting arrangement or similar agreement" in the following tables. In certain circumstances, the Company may require its Business Solutions customers to maintain collateral balances which may mitigate the risk associated with potential customer defaults.

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(Unaudited)

The following tables summarize the gross and net fair value of derivative assets and liabilities as of September 30, 2022 and December 31, 2021 (in millions):

Offsetting of Derivative Assets

|  |  |  |  | Gross |  |  | Net Amounts |  |  | Derivatives |  |  |  |
|  | Gross |  |  | Amounts Offset in |  |  | Presented in |  |  | Not Offset in |  |  |  |
|  | Amounts of |  |  | the Condensed |  |  | the Condensed |  |  | the Condensed |  |  |  |
|  | Recognized |  |  | Consolidated |  |  | Consolidated |  |  | Consolidated |  |  | Net |
September 30, 2022 |  | Assets |  |  | Balance Sheets |  |  | Balance Sheets |  |  | Balance Sheets |  |  | Amounts |
Derivatives subject to a master netting arrangement or similar agreement |  | $ | 176.5 |  |  | $ | — |  |  | $ | 176.5 |  |  | $ | (89.2 | ) |  | $ | 87.3 |
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |  |  | 151.7 |  |  |  |  |  |  |  |  |  |  |  |  |
Total |  | $ | 328.2 |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives subject to a master netting arrangement or similar agreement |  | $ | 163.9 |  |  | $ | — |  |  | $ | 163.9 |  |  | $ | (92.4 | ) |  | $ | 71.5 |
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |  |  | 83.8 |  |  |  |  |  |  |  |  |  |  |  |  |
Total |  | $ | 247.7 |  |  |  |  |  |  |  |  |  |  |  |  |

Offsetting of Derivative Liabilities

|  |  |  |  | Gross |  |  | Net Amounts |  |  | Derivatives |  |  |  |
|  | Gross |  |  | Amounts Offset in |  |  | Presented in |  |  | Not Offset in |  |  |  |
|  | Amounts of |  |  | the Condensed |  |  | the Condensed |  |  | the Condensed |  |  |  |
|  | Recognized |  |  | Consolidated |  |  | Consolidated |  |  | Consolidated |  |  | Net |
September 30, 2022 |  | Liabilities |  |  | Balance Sheets |  |  | Balance Sheets |  |  | Balance Sheets |  |  | Amounts |
Derivatives subject to a master netting arrangement or similar agreement |  | $ | 159.5 |  |  | $ | — |  |  | $ | 159.5 |  |  | $ | (89.2 | ) |  | $ | 70.3 |
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |  |  | 82.8 |  |  |  |  |  |  |  |  |  |  |  |  |
Total |  | $ | 242.3 |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives subject to a master netting arrangement or similar agreement |  | $ | 109.6 |  |  | $ | — |  |  | $ | 109.6 |  |  | $ | (92.4 | ) |  | $ | 17.2 |
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |  |  | 74.2 |  |  |  |  |  |  |  |  |  |  |  |  |
Total |  | $ | 183.8 |  |  |  |  |  |  |  |  |  |  |  |  |

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(Unaudited)

Income Statement

Cash Flow Hedges

The effective portion of the change in fair value of derivatives that qualify as cash flow hedges is recorded in AOCL in the Company’s Condensed Consolidated Balance Sheets. Generally, amounts are recognized in income when the related forecasted transaction affects earnings.

The following table presents the pre-tax amount of unrealized gains/(losses) recognized in other comprehensive income from cash flow hedges for the three and nine months ended September 30, 2022 and 2021 (in millions):

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Foreign currency derivatives (a) |  | $ | 43.4 |  |  | $ | 17.7 |  |  | $ | 86.9 |  |  | $ | 32.4 |
Interest rate derivatives |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3.3 |

(a)
Gains/(losses) of $0.2 million and $(0.2) million for the three months ended September 30, 2022 and 2021, respectively, and $(4.7) million and $(1.2) million for the nine months ended September 30, 2022 and 2021, respectively, represent amounts excluded from the assessment of effectiveness and recognized in other comprehensive income, for which an amortization approach is applied.

The following table presents the location and amounts of pre-tax net gains/(losses) from cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021 (in millions):

|  | Three Months Ended September 30,
|  | 2022 |  |  | 2021
|  | Revenues |  |  | Interest Expense |  |  | Revenues |  |  | Interest Expense |  |
Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded |  | $ | 1,089.6 |  |  | $ | (25.2 | ) |  | $ | 1,286.3 |  |  | $ | (25.7 | ) |
Gain/(loss) on cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |
Gains/(losses) reclassified from AOCL into earnings |  |  | 17.5 |  |  |  | — |  |  |  | (0.6 | ) |  |  | — |  |
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |  |  | 1.5 |  |  |  | — |  |  |  | 1.4 |  |  |  | — |  |
Interest rate derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |
Losses reclassified from AOCL into earnings |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (0.1 | ) |

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(Unaudited)

|  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |
|  | Revenues |  |  | Interest Expense |  |  | Revenues |  |  | Interest Expense |  |  | Other income/(expense), net |
Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded |  | $ | 3,383.6 |  |  | $ | (74.8 | ) |  | $ | 3,786.0 |  |  | $ | (79.7 | ) |  | $ | 26.8 |
Gain/(loss) on cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gains/(losses) reclassified from AOCL into earnings |  |  | 32.4 |  |  |  | — |  |  |  | (10.0 | ) |  |  | — |  |  |  | — |
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |  |  | 4.0 |  |  |  | — |  |  |  | 4.9 |  |  |  | — |  |  |  | — |
Interest rate derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gains/(losses) reclassified from AOCL into earnings |  |  | — |  |  |  | (0.1 | ) |  |  | — |  |  |  | (0.5 | ) |  |  | 0.7 |

Undesignated Hedges

The following table presents the location and amount of pre-tax net gains/(losses) from undesignated hedges in the Condensed Consolidated Statements of Income on derivatives for the three and nine months ended September 30, 2022 and 2021 (in millions):

|  |  |  | Three Months Ended |  |  | Nine Months Ended |
|  |  |  | September 30, |  |  | September 30, |
Derivatives (a) |  | Location |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Foreign currency derivatives (b) |  | Selling, general, and administrative |  | $ | 42.6 |  |  | $ | 23.4 |  |  | $ | 97.6 |  |  | $ | 41.3 |

(a)
The Company uses foreign currency forward and option contracts as part of its Business Solutions payments operations. These derivative contracts are excluded from this table as they are managed as part of a broader currency portfolio that includes non-derivative currency exposures. The gains and losses on these derivatives are included as part of the broader disclosure of portfolio revenue for this business discussed above.
(b)
The Company uses foreign currency forward contracts to offset foreign exchange rate fluctuations on settlement assets and obligations as well as certain foreign currency denominated positions. Foreign exchange losses on settlement assets and obligations, cash balances, and other assets and liabilities, not including amounts related to derivative activity as displayed above and included in Selling, general, and administrative in the Condensed Consolidated Statements of Income, were $40.6 million and $25.7 million for the three months ended September 30, 2022 and 2021, respectively, and $90.4 million and $50.7 million for the nine months ended September 30, 2022 and 2021, respectively.

All cash flows associated with derivatives are included in Cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.

Based on September 30, 2022 foreign exchange rates, an accumulated other comprehensive pre-tax gain of $59.8 million related to the foreign currency forward contracts is expected to be reclassified into Revenues within the next 12 months.

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THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

11. Borrowings

The Company’s outstanding borrowings consisted of the following (in millions):

|  | September 30, 2022 |  |  | December 31, 2021 |
Commercial paper (a) |  | $ | 175.0 |  |  | $ | 275.0 |
Notes: |  |  |  |  |  |
4.250% notes due 2023 (b) |  |  | 300.0 |  |  |  | 300.0 |
2.850% notes due 2025 (b) |  |  | 500.0 |  |  |  | 500.0 |
1.350% notes due 2026 (b) |  |  | 600.0 |  |  |  | 600.0 |
2.750% notes due 2031 (b) |  |  | 300.0 |  |  |  | 300.0 |
6.200% notes due 2036 (b) |  |  | 500.0 |  |  |  | 500.0 |
6.200% notes due 2040 (b) |  |  | 250.0 |  |  |  | 250.0 |
Term loan facility borrowing (c) |  |  | — |  |  |  | 300.0 |
Total borrowings at par value |  |  | 2,625.0 |  |  |  | 3,025.0 |
Debt issuance costs and unamortized discount, net |  |  | (14.0 | ) |  |  | (16.6 | )
Total borrowings at carrying value (d) |  | $ | 2,611.0 |  |  | $ | 3,008.4 |

(a)
Pursuant to the Company’s commercial paper program, the Company may issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of borrowings outstanding on the Company’s revolving credit facility. The commercial paper notes may have maturities of up to 397 days from date of issuance. The Company’s commercial paper borrowings as of September 30, 2022 had a weighted-average annual interest rate of approximately 3.4% and a weighted-average term of approximately 3 days.
(b)
The difference between the stated interest rate and the effective interest rate is not significant.
(c)
See Term Loan Facility section below for further discussion.
(d)
As of September 30, 2022, the Company’s weighted-average effective rate on total borrowings was approximately 3.8%.

Term Loan Facility

On December 18, 2018, the Company entered into an amended and restated term loan facility providing for up to $950.0 million in borrowings and extending the final maturity of the facility to January 2024 (the "Term Loan Facility"). Proceeds from the 2026 Notes and $300.0 million of aggregate principal amount of 2.750% unsecured notes due March 15, 2031 ("2031 Notes"), and cash, including cash generated from operations, were used to repay $650.0 million of the Term Loan Facility in the first quarter of 2021 and $500.0 million of the aggregate principal amount of 3.600% unsecured notes due in March 2022 in the second quarter of 2021. On January 4, 2022, the Company repaid all remaining borrowings owed under the Term Loan Facility for total consideration of $300.0 million, using proceeds from commercial paper and cash, including cash generated from operations. The Company is no longer able to borrow money under this facility.

The following summarizes the Company’s maturities of its notes at par value as of September 30, 2022 (in millions):

Due within 1 year |  | $ | 300.0 |
Due after 1 year through 2 years |  |  | — |
Due after 2 years through 3 years |  |  | 500.0 |
Due after 3 years through 4 years |  |  | 600.0 |
Due after 4 years through 5 years |  |  | — |
Due after 5 years |  |  | 1,050.0 |
Total |  | $ | 2,450.0 |

The Company’s obligations with respect to its outstanding borrowings, as described above, rank equally.

12. Income Taxes

The Company’s effective tax rates on pre-tax income were 10.2% and 20.2% for the three months ended September 30, 2022 and 2021, respectively, and 16.5% and 15.6% for the nine months ended September 30, 2022 and

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THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

2021, respectively. The decrease in the Company's effective tax rate for the three months ended September 30, 2022 compared to the corresponding period in the prior year was primarily due to discrete tax expenses in the prior period and discrete tax benefits in the current period related to the completion of the examination of the Company's consolidated federal income tax returns for 2017 and 2018 (the "IRS Examination"), discussed below, partially offset by the sale of the Company's Business Solutions business and the Company's decision to suspend its operations in Russia and Belarus. The increase in the Company's effective tax rate for the nine months ended September 30, 2022 compared to the corresponding period in the prior year was primarily due to the sale of the Company's Business Solutions business and the Company's decision to suspend its operations in Russia and Belarus, partially offset by discrete tax expenses in the prior period and discrete tax benefits in the current period related to the completion of the IRS Examination. The impact of the sale of the Company's Business Solutions business is included in the Company's estimated annual effective rate, the ongoing effects of which are expected to continue throughout the year.

Unrecognized tax benefits are reflected in Income taxes payable in the Condensed Consolidated Balance Sheets. The total amount of unrecognized tax benefits as of September 30, 2022 and December 31, 2021 was $356.1 million and $376.3 million, respectively, including interest and penalties. As previously disclosed in Part II, Item 8, Financial Statements and Supplementary Data, Note 11, Income Taxes, in the Company's Annual Report on Form 10-K, the Company continues to believe that it is reasonably possible that its total unrecognized tax benefits could decrease by December 31, 2022, in connection with various matters which may be resolved.

The Company’s tax filings are subject to examination by U.S. federal, state, and various non-United States jurisdictions. The conclusion of the IRS Examination resulted in both agreed and unagreed adjustments. The agreed adjustments have been reflected in the Company's financial statements for the three months ended September 30, 2022. The Company is contesting the unagreed adjustments at the IRS Appeals level and believes its reserves for these unagreed adjustments are adequate. The statute of limitations for the U.S. federal returns for 2017 and 2018 has been extended to March 31, 2024.

13. Stock-Based Compensation Plans

For the three months ended September 30, 2022 and 2021, the Company recognized stock-based compensation expense of $9.6 million and $8.4 million, respectively, resulting primarily from stock options, restricted stock units, and performance-based restricted stock units in the Condensed Consolidated Statements of Income. For the nine months ended September 30, 2022 and 2021, the Company recognized stock-based compensation expense of $32.6 million and $31.2 million, respectively.

During the nine months ended September 30, 2022, the Company granted 0.6 million options at a weighted-average exercise price of $18.62 and 3.6 million performance-based restricted stock units and restricted stock units at a weighted-average grant date fair value of $19.94. As of September 30, 2022, the Company had 6.4 million outstanding options at a weighted-average exercise price of $18.68, of which 3.6 million options were exercisable at a weighted-average exercise price of $19.16. The Company had 6.9 million outstanding performance-based restricted stock units (based on target performance) and restricted stock units at a weighted-average grant date fair value of $21.43 as of September 30, 2022.

14. Segments

As further described in Note 1, the Company classifies its business into two segments: Consumer-to-Consumer and Business Solutions. Operating segments are defined as components of an enterprise that engage in business activities, about which separate financial information is available that is evaluated regularly by the Company’s Chief Operating Decision Maker ("CODM") in allocating resources and assessing performance.

The Consumer-to-Consumer operating segment facilitates money transfers between two consumers. The segment includes five geographic regions whose functions are primarily related to generating, managing, and maintaining agent relationships and localized marketing activities. The Company includes Digital Money Transfer transactions in its regions, including transactions from the Company’s arrangements with financial institutions and other third parties to enable such entities to offer money transfer services to their own customers under their brands. By means of common processes and

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THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

systems, these regions, including Digital Money Transfer transactions, create one interconnected global network for consumer transactions, thereby constituting one Consumer-to-Consumer money transfer business and one operating segment.

The Business Solutions operating segment facilitates payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises, and other organizations and individuals. On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC. During the third quarter of 2022, all parties agreed for the sale to be completed in three closings instead of two. The first closing occurred on March 1, 2022, the second is expected to occur in December 2022, and the third is expected in the first quarter of 2023. See Note 4 for further information regarding this transaction.

All businesses and other services that have not been classified in the above segments are reported as Other, which primarily includes the Company’s bill payment services which facilitate payments from consumers to businesses and other organizations and the Company’s money order services.

Corporate costs, including stock-based compensation and other overhead, are allocated to the segments primarily based on a percentage of the segments’ revenue compared to total revenue. Effective January 1, 2022, the Company stopped allocating corporate costs to its Business Solutions segment, given its agreement to sell this business, as discussed further in Note 4.

The following table presents the Company’s segment results for the three and nine months ended September 30, 2022 and 2021 (in millions):

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |
Consumer-to-Consumer |  | $ | 982.4 |  |  | $ | 1,104.5 |  |  | $ | 3,008.3 |  |  | $ | 3,282.5 |
Business Solutions (a) |  |  | 42.6 |  |  |  | 116.8 |  |  |  | 167.4 |  |  |  | 312.6 |
Other |  |  | 64.6 |  |  |  | 65.0 |  |  |  | 207.9 |  |  |  | 190.9 |
Total consolidated revenues |  | $ | 1,089.6 |  |  | $ | 1,286.3 |  |  | $ | 3,383.6 |  |  | $ | 3,786.0 |
Operating income: |  |  |  |  |  |  |  |  |  |  |  |
Consumer-to-Consumer |  | $ | 193.7 |  |  | $ | 268.2 |  |  | $ | 626.5 |  |  | $ | 708.1 |
Business Solutions (a) |  |  | 15.9 |  |  |  | 38.4 |  |  |  | 51.7 |  |  |  | 61.9 |
Other |  |  | 21.6 |  |  |  | 12.0 |  |  |  | 73.4 |  |  |  | 36.3 |
Total segment operating income |  |  | 231.2 |  |  |  | 318.6 |  |  |  | 751.6 |  |  |  | 806.3 |
Russia/Belarus exit costs (b) |  |  | 0.6 |  |  |  | — |  |  |  | (10.6 | ) |  |  | — |
Business Solutions exit costs (b) |  |  | — |  |  |  | — |  |  |  | (7.7 | ) |  |  | — |
Total consolidated operating income |  | $ | 231.8 |  |  | $ | 318.6 |  |  | $ | 733.3 |  |  | $ | 806.3 |

(a)
On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to the Buyer. The sale will be completed in three closings, the first of which occurred on March 1, 2022. The second is expected to occur in December 2022, with the third expected in the first quarter of 2023. The operations of the Business Solutions business to be sold in the second and third closings continue to be included in Revenues and Operating income after the first closing. During the period between the first and third closings, the Company will pay to the Buyer a measure of profit of the European Union and United Kingdom operations, while owned by the Company, adjusted for the occupancy charges for employees of the Buyer using Company facilities and other items, as contractually agreed, and this expense is recognized in Other income/(expense), net in the Condensed Consolidated Statements of Income. The related income tax expense on this income is also passed to the Buyer.
(b)
Represents the exit costs incurred in connection with the Company's suspension of its operations in Russia and Belarus and the divestiture of the Business Solutions business, primarily related to severance and non-cash impairments of property and equipment, an operating lease right-of-use asset, and other intangible assets. While certain of the expenses are identifiable to the Company's segments, the expenses are not included in the measurement of segment operating income provided to the CODM for purposes of performance assessment and resource allocation. These expenses are therefore excluded from the Company's segment operating income results.

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THE WESTERN UNION COMPANY

MANAGEMENT’S DISCUSSION AND AN ALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2.

The following discussion should be read in conjunction with the condensed consolidated financial statements and the notes to those statements included elsewhere in this report on Form 10-Q. This report on Form 10‑Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as "expects," "intends," "targets," "anticipates," "believes," "estimates," "guides," "provides guidance," "provides outlook," “projects,” “designed to,” and other similar expressions or future or conditional verbs such as "may," "will," "should," "would," "could," and "might" are intended to identify such forward-looking statements. Readers of the Form 10‑Q of The Western Union Company (the "Company," "Western Union," "we," "our," or "us") should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed in the Risk Factors section and throughout the Annual Report on Form 10‑K for the year ended December 31, 2021. The statements are only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement.

Possible events or factors that could cause results or performance to differ materially from those expressed in our forward-looking statements include the following: (i) events related to our business and industry, such as: changes in general economic conditions and economic conditions in the regions and industries in which we operate, including global economic downturns and trade disruptions, or significantly slower growth or declines in the money transfer, payment service, and other markets in which we operate, including downturns or declines related to interruptions in migration patterns or other events, such as public health emergencies, epidemics, or pandemics, such as COVID-19, civil unrest, war, terrorism, natural disasters, or non-performance by our banks, lenders, insurers, or other financial services providers; failure to compete effectively in the money transfer and payment service industry, including among other things, with respect to price or customer experience, with global and niche or corridor money transfer providers, banks and other money transfer and payment service providers, including digital, mobile and internet-based services, card associations, and card-based payment providers, and with digital currencies and related exchanges and protocols, and other innovations in technology and business models; geopolitical tensions, political conditions, and related actions, including trade restrictions and government sanctions, which may adversely affect our business and economic conditions as a whole, including interruptions of United States or other government relations with countries in which we have or are implementing significant business relationships with agents, clients, or other partners; deterioration in customer confidence in our business, or in money transfer and payment service providers generally; failure to maintain our agent network and business relationships under terms consistent with or more advantageous to us than those currently in place; our ability to adopt new technology and develop and gain market acceptance of new and enhanced services in response to changing industry and consumer needs or trends; mergers, acquisitions, and the integration of acquired businesses and technologies into our Company, divestitures, and the failure to realize anticipated financial benefits from these transactions, and events requiring us to write down our goodwill; decisions to change our business mix; changes in, and failure to manage effectively, exposure to foreign exchange rates, including the impact of the regulation of foreign exchange spreads on money transfers and payment transactions; changes in tax laws, or their interpretation, any subsequent regulation, and potential related state income tax impacts, and unfavorable resolution of tax contingencies; any material breach of security, including cybersecurity, or safeguards of or interruptions in any of our systems or those of our vendors or other third parties; cessation of or defects in various services provided to us by third-party vendors; our ability to realize the anticipated benefits from restructuring-related initiatives, which may include decisions to downsize or to transition operating activities from one location to another, and to minimize any disruptions in our workforce that may result from those initiatives; failure to manage credit and fraud risks presented by our agents, clients, and consumers; adverse rating actions by credit rating agencies; our ability to protect our trademarks, patents, copyrights, and other intellectual property rights, and to defend ourselves against potential intellectual property infringement claims; our ability to attract and retain qualified key employees and to manage our workforce successfully; material changes in the market value or liquidity of securities that we hold; restrictions imposed by our debt obligations; (ii) events related to our regulatory and litigation environment, such as: liabilities or loss of business resulting from a failure by us, our agents, or

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their subagents to comply with laws and regulations and regulatory or judicial interpretations thereof, including laws and regulations designed to protect consumers, or detect and prevent money laundering, terrorist financing, fraud, and other illicit activity; increased costs or loss of business due to regulatory initiatives and changes in laws, regulations, and industry practices and standards, including changes in interpretations, in the United States and abroad, affecting us, our agents or their subagents, or the banks with which we or our agents maintain bank accounts needed to provide our services, including related to anti-money laundering regulations, anti-fraud measures, our licensing arrangements, customer due diligence, agent and subagent due diligence, registration and monitoring requirements, consumer protection requirements, remittances, and immigration; liabilities, increased costs or loss of business and unanticipated developments resulting from governmental investigations and consent agreements with or enforcement actions by regulators; liabilities resulting from litigation, including class-action lawsuits and similar matters, and regulatory enforcement actions, including costs, expenses, settlements, and judgments; failure to comply with regulations and evolving industry standards regarding consumer privacy, data use, the transfer of personal data between jurisdictions, and information security, including with respect to the General Data Protection Regulation in the European Union and the California Consumer Privacy Act; failure to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as regulations issued pursuant to it and the actions of the Consumer Financial Protection Bureau and similar legislation and regulations enacted by other governmental authorities in the United States and abroad related to consumer protection and derivative transactions; effects of unclaimed property laws or their interpretation or the enforcement thereof; failure to maintain sufficient amounts or types of regulatory capital or other restrictions on the use of our working capital to meet the changing requirements of our regulators worldwide; changes in accounting standards, rules and interpretations, or industry standards affecting our business; and (iii) other events, such as: catastrophic events; and management’s ability to identify and manage these and other risks.

Overview

We are a leading provider of money movement and payment services, operating in two business segments:

•
Consumer-to-Consumer - Our Consumer-to-Consumer operating segment facilitates money transfers, which are sent from our retail agent locations worldwide or through websites and mobile devices, including our money transfer transactions conducted and funded through websites and mobile applications marketed under our brands (“Branded Digital”) and transactions initiated on websites and mobile applications hosted by our third-party white label or co-branded digital partners (together with Branded Digital, “Digital Money Transfer”). 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.
•
Business Solutions - Our Business Solutions operating segment facilitates payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises and other organizations and individuals. The majority of the segment’s business relates to exchanges of currency at spot rates, which enable customers to make cross-currency payments. In addition, in certain countries, we write foreign currency forward and option contracts for customers to facilitate future payments. On August 4, 2021, we entered into an agreement to sell our Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC. During the third quarter of 2022, all parties agreed for the sale to be completed in three closings instead of two. The first closing occurred on March 1, 2022, the second is expected to occur in December 2022, and the third is expected in the first quarter of 2023. See below for additional information regarding this transaction.

All businesses and other services that have not been classified in the above segments are reported as Other, which primarily includes our bill payment services which facilitate payments from consumers to businesses and other organizations and our money order services. Certain of our corporate costs such as costs related to strategic initiatives, including costs for the review and closing of mergers, acquisitions, and divestitures, are also included in Other. Additional information on our segments is provided in the Segment Discussion below.

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Results of Operations

The following discussion of our consolidated results of operations and segment results refers to the three and nine months ended September 30, 2022 compared to the same periods in 2021. The results of operations should be read in conjunction with the discussion of our segment results of operations, which provide more detailed discussions concerning certain components of the Condensed 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.

Our revenues and operating income for the three and nine months ended September 30, 2022 were impacted by fluctuations in the United States dollar compared to foreign currencies. Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in decreases to revenues of $60.8 million and $136.1 million for the three and nine months ended September 30, 2022, respectively, relative to the corresponding periods in the prior year. Fluctuations in the United States dollar compared to foreign currencies negatively impacted operating income by $0.6 million for the three months ended September 30, 2022 and positively impacted operating income by $7.5 million for the nine months ended September 30, 2022, relative to the corresponding periods in the prior year.

On August 4, 2021, we entered into an agreement to sell our Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC (collectively, the “Buyer”) for cash consideration of $910.0 million. During the third quarter of 2022, we agreed with the Buyer to complete the divestiture in three closings instead of two, the first of which occurred on March 1, 2022 with the entirety of the cash consideration collected and allocated to the closings on a relative fair value basis. The first closing excluded the operations in the European Union and the United Kingdom and resulted in a gain of $151.4 million. The second closing, which includes the United Kingdom operations, is expected to occur in December 2022, pending required regulatory approvals. The third closing, which includes the European Union operations, is expected to occur in the first quarter of 2023, pending required regulatory approvals. The gains associated with the second and third closings are subject to regulatory capital adjustments and will be recognized at the time of each closing. The Buyer has rebranded the sold operations within a new standalone company (now referred to as "Convera"). Refer to Part I, Item 1, Financial Statements, Note 4, Divestitures and Investment Activities for further discussion.

Business Solutions revenues included in our Condensed Consolidated Statements of Income were $42.6 million and $116.8 million and direct operating expenses, excluding corporate allocations, were $27.0 million and $77.1 million for the three months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022 and 2021, Business Solutions revenues were $167.4 million and $312.6 million, respectively, and direct operating expenses, excluding corporate allocations, were $117.4 million and $244.5 million, respectively. For the three months ended September 30, 2022 and 2021, divestiture costs directly associated with this transaction were $0.4 million and $5.2 million, respectively. For the nine months ended September 30, 2022 and 2021, divestiture costs directly associated with this transaction were $4.4 million and $10.7 million, respectively.

In March 2022, we suspended our operations in Russia and Belarus, which are included in our Consumer-to-Consumer segment, due to the Russia/Ukraine conflict (the "Conflict"). Revenues associated with the Russia and Belarus operations, including transactions sent from, into, and within these countries for the three months ended September 30, 2021 were approximately $40 million, and for the nine months ended September 30, 2022 and 2021 and the year ended December 31, 2021, were approximately $28 million, $106 million, and $145 million, respectively. The Conflict has had and is expected to continue to have broader implications to our overall business, including reduced transaction activity in Ukraine. We expect that our results of operations will continue to be negatively impacted by this Conflict for the remainder of 2022 and likely thereafter.

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The following table sets forth our consolidated results of operations for the three and nine months ended September 30, 2022 and 2021:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions, except per share amounts) |  | 2022 |  | 2021 |  | % Change |  | 2022 |  | 2021 |  | % Change
Revenues |  | $1,089.6 |  | $1,286.3 |  | (15)% |  | $3,383.6 |  | $3,786.0 |  | (11)%
Expenses: |  |  |  |  |  |  |  |  |  |  |  |
Cost of services |  | 637.3 |  | 720.1 |  | (12)% |  | 1,945.4 |  | 2,181.1 |  | (11)%
Selling, general, and administrative |  | 220.5 |  | 247.6 |  | (11)% |  | 704.9 |  | 798.6 |  | (12)%
Total expenses |  | 857.8 |  | 967.7 |  | (11)% |  | 2,650.3 |  | 2,979.7 |  | (11)%
Operating income |  | 231.8 |  | 318.6 |  | (27)% |  | 733.3 |  | 806.3 |  | (9)%
Other income/(expense): |  |  |  |  |  |  |  |  |  |  |  |
Gain on divestiture of business |  | — |  | — |  | (a) |  | 151.4 |  | — |  | (a)
Interest income |  | 4.9 |  | 0.4 |  | (a) |  | 7.3 |  | 1.1 |  | (a)
Interest expense |  | (25.2) |  | (25.7) |  | (2)% |  | (74.8) |  | (79.7) |  | (6)%
Other income/(expense), net |  | (17.8) |  | (1.8) |  | (a) |  | (25.1) |  | 26.8 |  | (a)
Total other income/(expense), net |  | (38.1) |  | (27.1) |  | 41% |  | 58.8 |  | (51.8) |  | (a)
Income before income taxes |  | 193.7 |  | 291.5 |  | (34)% |  | 792.1 |  | 754.5 |  | 5%
Provision for income taxes |  | 19.8 |  | 58.8 |  | (66)% |  | 130.9 |  | 117.5 |  | 11%
Net income |  | $173.9 |  | $232.7 |  | (25)% |  | $661.2 |  | $637.0 |  | 4%
Earnings per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $0.45 |  | $0.57 |  | (21)% |  | $1.70 |  | $1.56 |  | 9%
Diluted |  | $0.45 |  | $0.57 |  | (21)% |  | $1.70 |  | $1.55 |  | 10%
Weighted-average shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | 386.5 |  | 406.3 |  |  |  | 388.8 |  | 409.1 |  |
Diluted |  | 387.6 |  | 408.0 |  |  |  | 389.9 |  | 411.3 |  |

(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 principal amount sent, whether the money transfer involves different send and receive currencies, the difference between the exchange rate we set to the customer and the rate available in the wholesale foreign exchange market, and speed of service, as applicable. We also offer several other services, including foreign exchange and payment services and other bill payment 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 results assume foreign revenues are translated from foreign currencies to the United States dollar, net of the effect of foreign currency hedges, at rates consistent with those in the prior year. We have also disclosed the impact of our 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 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 three and nine months ended September 30, 2022 compared to the corresponding periods in 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 three and nine months ended September 30, 2022 and 2021:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(dollars in millions) |  | 2022 |  | 2021 |  | % Change |  | 2022 |  | 2021 |  | % Change
Revenues, as reported (GAAP) |  | $1,089.6 |  | $1,286.3 |  | (15)% |  | $3,383.6 |  | $3,786.0 |  | (11)%
Foreign currency impact (a) |  |  |  |  |  | 4% |  |  |  |  |  | 4%
Divestitures impact (b) |  |  |  |  |  | 5% |  |  |  |  |  | 3%
Revenue change, constant currency adjusted, excluding Business Solutions (Non-GAAP) |  |  |  |  |  | (6)% |  |  |  |  |  | (4)%

(a)
Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in decreases to revenues of $60.8 million and $136.1 million for the three and nine months ended September 30, 2022, respectively, when compared to foreign currency rates in the corresponding periods in the prior year.
(b)
In March 2022, we completed the first closing of the sale of our Business Solutions business, as discussed above. Business Solutions revenues included in our results were $42.6 million and $116.8 million for the three months ended September 30, 2022 and 2021, respectively, and $167.4 million and $312.6 million for the nine months ended September 30, 2022 and 2021, respectively.

For the three and nine months ended September 30, 2022, revenues decreased 15% and 11%, respectively, when compared to the corresponding periods in the prior year due to a transaction decline in our Consumer-to-Consumer segment, including as a result of the suspension of our operations in Russia and Belarus, as well as the first closing of the divestiture of our Business Solutions business, as described above. Fluctuations in the exchange rates between the United States dollar and foreign currencies negatively impacted revenue by 4% for the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year.

Operating Expenses Overview

Operational efficiency program

On October 20, 2022, we announced an operational efficiency program which aims to redeploy approximately $150 million in expenses in our current cost base over the next 5 years, accomplished through optimizations in vendor management, our real estate footprint, marketing, and people costs. We believe these changes will allow us to invest in strategic initiatives. The timing and pace of this redeployment may vary, and we believe that we will continue to refine aspects of the program during the remainder of 2022 and into 2023.

Enhanced Regulatory Compliance

The financial services industry, including money services businesses, continues to be subject to increasingly strict legal and regulatory requirements, and we continue to focus on and regularly review our compliance programs. In connection with these reviews, and in light of growing and rapidly evolving regulatory complexity and heightened attention of, and increased dialogue with, governmental and regulatory authorities related to our compliance activities, we have made, and continue to make, enhancements to our processes and systems designed to detect and prevent money laundering, terrorist financing, and fraud and other illicit activity, and enhancements designed to improve consumer protection. Some of these changes have had, and we believe will continue to have, an adverse effect on our business, financial condition, and results of operations.

Cost of Services

Cost of services primarily consists of agent commissions, which represented approximately 60% of total cost of services for both the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2022, Cost of services decreased compared to the corresponding periods in the prior year due to a decrease in Consumer-to-Consumer money transfer agent commissions, which generally vary with revenues and a decrease associated with the Business Solutions divestiture, as discussed above. In addition, for the nine months ended September 30, 2022 compared to the corresponding prior period, Cost of services decreased due to timing of investments in information technology and reductions in chargebacks and other losses.

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Selling, General, and Administrative

Selling, general, and administrative expenses decreased for the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year due to a decrease associated with the Business Solutions divestiture, as discussed above, and fluctuations between the United States dollar and foreign currencies. For the three months ended September 30, 2022 compared to the corresponding period in the prior year, the decrease was partially offset by increased marketing costs. For the nine months ended September 30, 2022 compared to the corresponding period in the prior year, the decrease was also due to decreases in employee-related expenses, partially offset by exit costs associated with the suspension of our Russian and Belarus operations and the Business Solutions divestiture, as discussed below.

Total Other Income/(Expense), Net

Total other income/(expense), net during the three months ended September 30, 2022 when compared to the corresponding period in the prior year was impacted by the expense associated with payment obligations to the Buyer of the Business Solutions business for a measure of the profits, as contractually agreed, from the European Union and United Kingdom operations subsequent to the first closing, which will continue until the third closing. Total other income/(expense), net for the nine months ended September 30, 2022, when compared to the corresponding period in the prior year benefited from the gain on the first closing of the Business Solutions divestiture, debt extinguishment costs incurred in the prior period, and a reduction in net periodic pension costs due to the termination of our U.S. defined benefit pension plan in the fourth quarter of 2021. This was partially offset by a prior year gain of $47.9 million recorded from the sale of a substantial majority of shares we held as a noncontrolling investor in a private company and the measure of profits paid to the Buyer of Business Solutions.

Income Taxes

Our effective tax rates on pre-tax income were 10.2% and 20.2% for the three months ended September 30, 2022 and 2021, respectively, and 16.5% and 15.6% for the nine months ended September 30, 2022 and 2021, respectively. The decrease in our effective tax rate for the three months ended September 30, 2022 compared to the corresponding period in the prior year was primarily due to discrete tax expenses in the prior period and discrete tax benefits in the current period related to the completion of the examination of our consolidated federal income tax returns for 2017 and 2018 (the "IRS Examination"), partially offset by the sale of our Business Solutions business and our decision to suspend operations in Russia and Belarus. The increase in our effective tax rate for the nine months ended September 30, 2022 compared to the corresponding period in the prior year was primarily due to the sale of our Business Solutions business and our decision to suspend operations in Russia and Belarus, partially offset by discrete tax expenses in the prior period and discrete tax benefits in the current period related to the completion of the IRS Examination. The impact of the sale of our Business Solutions business is included in our estimated annual effective rate, the ongoing effects of which are expected to continue throughout the year.

As of September 30, 2022, the total amount of tax contingency reserves was $302.4 million, including accrued interest and penalties, net of related items. As previously disclosed in Part II, Item 8, Financial Statements and Supplementary Data, Note 11, Income Taxes, in our Annual Report on Form 10-K, we continue to believe that it is reasonably possible that our total unrecognized tax benefits could decrease by December 31, 2022, in connection with various matters which may be resolved.

Earnings Per Share

During the three months ended September 30, 2022 and 2021, both basic and diluted earnings per share were $0.45 and $0.57, respectively. During the nine months ended September 30, 2022 and 2021, basic earnings per share were $1.70 and $1.56, respectively, and diluted earnings per share were $1.70 and $1.55, 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. For the three months ended September 30, 2022 and 2021 there were 8.1 million and 2.2 million, respectively, and for the nine months ended September 30, 2022 and 2021, there were 8.0 million and 1.7 million, respectively, of shares excluded from the diluted earnings per share calculation under the treasury stock method, primarily due to outstanding options to purchase shares of Western Union stock and restricted stock units, as the assumed

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proceeds of the options and restricted stock per unit were above our average share price during the periods and their effect was anti-dilutive.

Earnings per share for both the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year were impacted by the previously described factors impacting net income and a lower number of shares outstanding. The lower number of shares outstanding was due to stock repurchases exceeding stock issuances under our stock compensation programs.

Segment Discussion

We manage our business around the consumers and businesses we serve and the types of services we offer. Each of our segments addresses a different combination of consumer groups, distribution networks, and services offered. Our segments are Consumer-to-Consumer and Business Solutions. On August 4, 2021, we entered into an agreement to sell our Business Solutions business and completed the first closing on March 1, 2022. During the third quarter of 2022, we agreed with the Buyer to complete the divestiture in three closings instead of two. The operations of the Business Solutions business to be sold in the second and third closings continue to be included in Revenues and Operating income after the first closing. However, between the first and third closings, we will pay the Buyer a measure of the profits from these operations, adjusted for other charges, and this expense is recognized in Other income/(expense), net in the Condensed Consolidated Statements of Income.

During the nine months ended September 30, 2022, we incurred $10.6 million and $7.7 million of exit costs associated with the suspension of our Russia and Belarus operations and the Business Solutions divestiture, respectively. These exit costs are primarily related to severance and non-cash impairments of property and equipment, an operating lease right-of-use asset, and other intangible assets. While certain of the 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 for purposes of performance assessment and resource allocation. These expenses are therefore excluded from our segment operating income results.

The following table sets forth the components of segment revenues as a percentage of the consolidated totals for the three and nine months ended September 30, 2022 and 2021:

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Consumer-to-Consumer |  |  | 90 | % |  |  | 86 | % |  |  | 89 | % |  |  | 87 | %
Business Solutions |  |  | 4 | % |  |  | 9 | % |  |  | 5 | % |  |  | 8 | %
Other |  |  | 6 | % |  |  | 5 | % |  |  | 6 | % |  |  | 5 | %
|  |  | 100 | % |  |  | 100 | % |  |  | 100 | % |  |  | 100 | %

Consumer-to-Consumer Segment

The following table sets forth our Consumer-to-Consumer segment results of operations for the three and nine months ended September 30, 2022 and 2021:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(dollars and transactions in millions) |  | 2022 |  | 2021 |  | % Change |  | 2022 |  | 2021 |  | % Change
Revenues |  | $982.4 |  | $1,104.5 |  | (11)% |  | $3,008.3 |  | $3,282.5 |  | (8)%
Operating income |  | $193.7 |  | $268.2 |  | (28)% |  | $626.5 |  | $708.1 |  | (12)%
Operating income margin |  | 20% |  | 24% |  |  |  | 21% |  | 22% |  |
Key indicator: |  |  |  |  |  |  |  |  |  |  |  |
Consumer-to-Consumer transactions |  | 66.9 |  | 76.6 |  | (12)% |  | 204.8 |  | 227.6 |  | (10)%

Our Consumer-to-Consumer money transfer service facilitates money transfers sent from our retail agent locations worldwide and our Digital Money Transfer services. The segment includes five geographic regions whose functions are primarily related to generating, managing, and maintaining agent relationships and localized marketing activities. We include Digital Money Transfer transactions in our regions, including transactions from our arrangements with financial institutions and other third parties to enable such entities to offer money transfer services to their own customers under

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their brands. By means of common processes and systems, these regions, including Digital Money Transfer transactions, create one interconnected global network for consumer transactions, thereby constituting one Consumer-to-Consumer money transfer business and one operating segment.

Transaction volume is the primary generator of revenue in our Consumer-to-Consumer segment. A Consumer-to-Consumer 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, including Digital Money Transfer transactions, 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 Digital Money Transfer transactions for the three and nine months ended September 30, 2022 and 2021. Where reported separately in the discussion below, Digital Money Transfer, and its subset Branded Digital, consist of 100% of the transactions conducted and funded through those respective channels.

The table below sets forth revenue and transaction changes by geographic region compared to the same period in the prior year. Additionally, due to the significance of our Consumer-to-Consumer segment to our overall results, we have also provided constant currency results for our Consumer-to-Consumer segment revenues. Consumer-to-Consumer segment constant currency revenue growth/(decline) is a non-GAAP financial measure, as further discussed in Revenues Overview above.

|  | Three Months Ended September 30, 2022 |  | Nine Months Ended September 30, 2022
|  | Revenue Decline as Reported (GAAP) |  | Foreign Exchange Translation Impact |  | Constant Currency Revenue Growth / (Decline)(a) (Non-GAAP) |  | Transaction Growth / (Decline) |  | Revenue Growth / (Decline) as Reported (GAAP) |  | Foreign Exchange Translation Impact |  | Constant Currency Revenue Growth / (Decline)(a) (Non-GAAP) |  | Transaction Growth / (Decline)
Consumer-to-Consumer regional growth/(decline): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
North America (United States & Canada) ("NA") |  | (5)% |  | 0% |  | (5)% |  | (5)% |  | (3)% |  | 0% |  | (3)% |  | (6)%
Europe and Russia/CIS ("EU & CIS") |  | (23)% |  | (7)% |  | (16)% |  | (32)% |  | (20)% |  | (6)% |  | (14)% |  | (23)%
Middle East, Africa, and South Asia ("MEASA") |  | (5)% |  | (2)% |  | (3)% |  | (1)% |  | (2)% |  | (1)% |  | (1)% |  | 0%
Latin America and the Caribbean ("LACA") |  | 0% |  | (4)% |  | 4% |  | 3% |  | 1% |  | (4)% |  | 5% |  | 3%
East Asia and Oceania ("APAC") |  | (16)% |  | (5)% |  | (11)% |  | (11)% |  | (11)% |  | (4)% |  | (7)% |  | (12)%
Total Consumer-to-Consumer segment: |  | (11)% |  | (3)% |  | (8)% |  | (12)% |  | (8)% |  | (2)% |  | (6)% |  | (10)%
Digital Money Transfer(b) |  | (12)% |  | (3)% |  | (9)% |  | (20)% |  | (4)% |  | (2)% |  | (2)% |  | (13)%
Branded Digital(b) |  | (8)% |  | (3)% |  | (5)% |  | (1)% |  | (2)% |  | (3)% |  | 1% |  | (1)%

(a)
Constant currency revenue growth 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 corresponding prior period.
(b)
Digital Money Transfer revenues have been included in the regions above. As noted above, Branded Digital is a subset of Digital Money Transfer and is included in the regions and Digital Money Transfer revenues.

The table below sets forth regional revenues as a percentage of our Consumer-to-Consumer revenue for the three and nine months ended September 30, 2022 and 2021:

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Consumer-to-Consumer revenue as a percentage of segment revenue: |  |  |  |  |  |  |  |  |  |  |  |
NA |  |  | 40 | % |  |  | 37 | % |  |  | 39 | % |  |  | 37 | %
EU & CIS |  |  | 28 | % |  |  | 32 | % |  |  | 29 | % |  |  | 33 | %
MEASA |  |  | 16 | % |  |  | 15 | % |  |  | 16 | % |  |  | 15 | %
LACA |  |  | 10 | % |  |  | 9 | % |  |  | 10 | % |  |  | 9 | %
APAC |  |  | 6 | % |  |  | 7 | % |  |  | 6 | % |  |  | 6 | %

Digital Money Transfer, which is included in the regional percentages above, represented approximately 24% of our Consumer-to-Consumer revenues for the three months ended September 30, 2022 and 2021 and 25% and 24% for the nine months ended September 30, 2022 and 2021, respectively.

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Our consumers transferred $24.1 billion and $27.7 billion in Consumer-to-Consumer principal for the three months ended September 30, 2022 and 2021, of which $23.0 billion and $26.5 billion related to cross-border principal for the same corresponding periods described above, respectively. Our consumers transferred $73.4 billion and $81.3 billion in Consumer-to-Consumer principal for the nine months ended September 30, 2022 and 2021, of which $70.2 billion and $77.6 billion related to cross-border principal for the same corresponding periods described above, respectively. The decrease in principal and cross-border principal transferred during the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year was primarily attributable to a decline in Consumer-to-Consumer transactions, including as a result of the suspension of our operations in Russia and Belarus, as discussed above, as well as fluctuations in exchange rates between the United States dollar and foreign currencies. Consumer-to-Consumer principal is the amount of consumer funds transferred to the designated recipient. 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-to-Consumer principal and cross-border principal are metrics 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.

Revenues

Consumer-to-Consumer money transfer revenue and transactions decreased 11% and 12%, respectively, for the three months ended September 30, 2022 compared to the corresponding period in the prior year, and decreased 8% and 10%, respectively, for the nine months ended September 30, 2022, compared to the corresponding period in the prior year, including due to the suspension of our operations in Russia and Belarus. Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, negatively impacted revenue by 3% and 2% for the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in the prior year.

In our Consumer-to-Consumer regions, the decrease in NA revenue for the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year was primarily due to decreases in transactions sent from the United States. The EU & CIS region experienced transaction volume and revenue declines in Russia and Belarus, France, Germany, and the United Kingdom and was also impacted by promotional pricing. Our revenues associated with Digital Money Transfer, including white label partnerships, were negatively impacted by our suspension of operations in Russia and Belarus in the three and nine months ended September 30, 2022 and will be negatively impacted for the year ending December 31, 2022 and likely thereafter. These white label transactions had lower revenues per transaction, causing a greater decrease to EU & CIS transactions, as compared to revenues.

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. We believe that revenues could be adversely impacted in connection with promotional pricing we recently implemented for Branded Digital transactions, including those sent from the United States.

Operating Income

Consumer-to-Consumer operating income decreased 28% and 12% for the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year, primarily due to the decreases in revenues, as discussed above, partially offset by decreases in agent commissions, which generally vary with revenues. For the three months ended September 30, 2022 compared to the corresponding period in the prior year, the decrease was also a result of increased marketing costs. In addition, for the nine months ended September 30, 2022 compared to the corresponding prior period, the decrease in operating income was partially offset by reductions in employee-related expenses, the timing of investments in information technology, and decreased chargebacks and other losses.

Business Solutions

The following table sets forth our Business Solutions segment results of operations for the three and nine months ended September 30, 2022 and 2021:

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|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(dollars in millions) |  | 2022 |  | 2021 |  | % Change |  | 2022 |  | 2021 |  | % Change
Revenues |  | $42.6 |  | $116.8 |  | (63)% |  | $167.4 |  | $312.6 |  | (46)%
Operating income |  | $15.9 |  | $38.4 |  | (59)% |  | $51.7 |  | $61.9 |  | (17)%
Operating income margin |  | 37% |  | 33% |  |  |  | 31% |  | 20% |  |

Revenues

Business Solutions revenue decreased 63% and 46% for the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in the prior year primarily due to the first closing of the sale of our Business Solutions business, which occurred on March 1, 2022, as described further above. Fluctuations in the exchange rates between the United States dollar and foreign currencies negatively impacted revenue by 6% and 4% for the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in the prior year.

Operating Income

For the three and nine months ended September 30, 2022, operating income when compared to the corresponding periods in the prior year was impacted by the first closing of the sale of our Business Solutions business, partially offset by a reduction in depreciation and amortization expenses, including as a result of classifying our Business Solutions business as held for sale in August 2021. In addition, for the nine months ended September 30, 2022 compared to the corresponding period in the prior year, operating income was impacted by decreases in employee-related expenses, including incentive compensation.

Effective January 1, 2022, we stopped allocating corporate costs to our Business Solutions segment, given our agreement to sell this business.

Other

Other primarily consists of our cash-based bill payments businesses in Argentina and the United States, in addition to our money order services.

The following table sets forth Other results for the three and nine months ended September 30, 2022 and 2021:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(dollars in millions) |  | 2022 |  | 2021 |  | % Change |  | 2022 |  | 2021 |  | % Change
Revenues |  | $64.6 |  | $65.0 |  | 0% |  | $207.9 |  | $190.9 |  | 9%
Operating income |  | $21.6 |  | $12.0 |  | 82% |  | $73.4 |  | $36.3 |  | (a)
Operating income margin |  | 33% |  | 18% |  |  |  | 35% |  | 19% |  |

(a)
Calculation not meaningful.

Revenues

For the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year, Other revenues remained consistent and increased, respectively, primarily due to transaction growth in our cash-based bill payments services offered at retail locations in Argentina, as well as growth in our business-to-consumer payments, partially offset by the strengthening of the United States dollar against the Argentine peso and investment losses.

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Operating Income

Other operating income increased for the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year due to the reimbursement of expenses associated with transition services provided after the first closing of the sale of our Business Solutions business and decreased costs associated with strategic initiatives, including for the review of mergers, acquisitions, and divestitures. Additionally, for the nine months ended September 30, 2022 compared to the corresponding period in the prior year, Other operating income increased due to increased revenues, as discussed above.

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. 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. These payments are typically due in the second quarter of each year through 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. In connection with our decision to suspend operations in Russia and Belarus, as well as the ongoing nature of the conflict and recent related restrictions imposed on our Russian subsidiary, we have classified approximately $17 million of our cash balance held in Russia as restricted and are continuing to pursue the distribution of this amount to the parent.

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 $1.5 billion revolving credit facility ("Revolving Credit Facility"), which expires in January 2025 and supports our commercial paper program. Our commercial paper program enables us to issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of any borrowings outstanding on our Revolving Credit Facility. As of September 30, 2022, we had no outstanding borrowings on our Revolving Credit Facility and $175.0 million of outstanding borrowings on the 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 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 September 30, 2022 and December 31, 2021, we had Cash and cash equivalents of $1,240.1 million and $1,246.0 million, which includes $64.0 million and $37.7 million related to Business Solutions, respectively. As described in Part I, Item 1, Financial Statements, Note 4, Divestitures and Investment Activities, we collected the entirety of the cash

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consideration related to the sale of our Business Solutions business, subject to regulatory approval and other closing conditions. We invested a portion of these proceeds temporarily in reverse repurchase agreements, as discussed in Part 1, Item 1, Financial Statements, Note 5, Fair Value Measurements. We believe that the longer-term use of the Business Solutions proceeds will be consistent with our objective to maintain strong liquidity and a capital structure consistent with investment-grade credit ratings, as further described below.

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 Condensed 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.

Investment securities, classified within Settlement assets on the Condensed Consolidated Balance Sheets, were $1,243.5 million and $1,398.9 million as of September 30, 2022 and December 31, 2021, respectively, and consist primarily of highly-rated state and municipal debt securities, including fixed-rate term notes and variable-rate demand notes. 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.

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 September 30, 2022, 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 decreased to $522.4 million during the nine months ended September 30, 2022, from $686.0 million in the corresponding period in the prior year. Excluding the gain on the sale of the Business Solutions business, as the pre-tax proceeds from this divestiture are reflected in Cash provided by investing activities, net income would have decreased during the nine months ended September 30, 2022, which resulted in the decrease to cash provided by operating activities. Cash provided by operating activities is also impacted by fluctuations in our working capital balances, among other factors.

Financing Resources

On December 18, 2018, we entered into an amended and restated term loan facility providing for up to $950.0 million in borrowings and extending the final maturity of the facility to January 2024 (the "Term Loan Facility"). In the first quarter of 2021, we repaid $650.0 million of the Term Loan Facility. On January 4, 2022, we repaid all remaining borrowings owed under the Term Loan Facility for total consideration of $300.0 million, using proceeds from our commercial paper and cash, including cash generated from operations. We are no longer able to borrow money under this facility.

On March 9, 2021, we issued $600.0 million and $300.0 million of aggregate principal amount of 1.350% and 2.750% unsecured notes due March 15, 2026 (“2026 Notes”) and March 15, 2031 (“2031 Notes”), respectively. Interest with respect to these notes is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2021. If a change of control triggering event occurs, holders of the 2026 Notes and 2031 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. We may redeem the 2026 Notes and the 2031 Notes, in whole or in part, at any time prior to February 15, 2026 and December 15, 2030, respectively, at the greater of par or a price based on the applicable treasury rate plus 15 and 25 basis points, respectively. We may redeem the 2026 Notes and the 2031 Notes at any time after February 15, 2026 and December 15, 2030, respectively, at a price equal to par, plus accrued interest.

Proceeds from the 2026 Notes and 2031 Notes and cash, including cash generated from operations, were used to repay $650.0 million of the term loan facility in the first quarter of 2021 and $500.0 million of the aggregate principal amount of 3.600% unsecured notes due in March 2022 in the second quarter of 2021.

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As of September 30, 2022, we have outstanding borrowings at par value of $2,625.0 million. The substantial majority of these outstanding borrowings consist of unsecured fixed-rate notes with maturities ranging from 2023 to 2040.

Our Revolving Credit Facility provides for unsecured financing facilities in an aggregate amount of $1.5 billion, including a $250.0 million letter of credit sub-facility. Interest due under the Revolving Credit Facility is fixed for the term of each borrowing and is payable according to the terms of that borrowing. Generally, interest is calculated using a selected LIBOR rate plus an interest rate margin of 110 basis points. A facility fee is also payable quarterly at an annual rate of 15 basis points on the total facility, regardless of usage. Both the interest rate margin and facility fee percentage are based on certain of our credit ratings. While we have not drawn on our Revolving Credit Facility since its inception, during the fourth quarter of 2022, we amended our Revolving Credit Facility to allow us to draw loans payable based upon the Secured Overnight Financing Rate, the Euro Interbank Offered Rate, or the Sterling Overnight Index Average.

The purpose of our Revolving Credit Facility, which is diversified through a group of 19 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 $1.5 billion is approximately 11%. As of September 30, 2022, we had no outstanding borrowings under our Revolving Credit 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.

Pursuant to our commercial paper program, we may issue unsecured commercial paper notes in an amount not to exceed $1.5 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. We had $175.0 million of commercial paper borrowings outstanding as of September 30, 2022. Our commercial paper borrowings as of September 30, 2022 had a weighted-average annual interest rate of approximately 3.4% and a weighted-average term of approximately 3 days. During the nine months ended September 30, 2022, the average commercial paper balance outstanding was $200.6 million, and the maximum balance outstanding was $725.0 million. Proceeds from our commercial paper borrowings were used for general corporate purposes and working capital needs.

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 in our Annual Report on Form 10‑K for the year ended December 31, 2021.

Capital Expenditures

The total aggregate amount paid for contract costs, purchases of property and equipment, and purchased and developed software was $147.5 million and $180.2 million for the nine months ended September 30, 2022 and 2021, respectively. 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. Other capital expenditures during these periods included investments in our information technology infrastructure.

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Share Repurchases and Dividends

During the nine months ended September 30, 2022 and 2021, 9.6 million and 9.6 million shares were repurchased for $176.8 million and $225.0 million, respectively, excluding commissions, at an average cost of $18.45 and $23.45, respectively, under the share repurchase authorizations approved by our Board of Directors, including one which expired on December 31, 2021. On February 10, 2022, our Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2024. As of September 30, 2022, $823.2 million remained available under this share repurchase program.

Our Board of Directors declared a quarterly cash dividend of $0.235 per common share in each of the first three quarters of 2022, representing $273.2 million in total dividends.

Material Cash Requirements

Debt Service Requirements

Our 2022 and future debt service requirements will include payments on all outstanding indebtedness, including any borrowings under our commercial paper program. Our next scheduled principal payment on our outstanding notes is in 2023.

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, of which approximately $478 million remained as of September 30, 2022. We have elected to pay this liability in periodic installments through 2025. Under the terms of the law, we are required to pay the remaining installment payments as summarized in the Capital Resources and Liquidity discussion located in 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, 2021. These payments have affected and will continue to adversely affect our cash flows and liquidity and may adversely affect future share repurchases.

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 13, Leases, in our Annual Report on Form 10-K for the year ended December 31, 2021 for details on our leasing arrangements, including future maturities of our operating lease liabilities.

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 $330 million in outstanding letters of credit and bank guarantees as of September 30, 2022 primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements. We expect to renew many of our letters of credit and bank guarantees prior to expiration.

As of September 30, 2022, our total amount of unrecognized income tax benefits was $356.1 million, including associated interest and penalties. The timing of any related cash payments for substantially all of these liabilities is inherently uncertain because the ultimate amount and timing of such liabilities are affected by factors which are variable and outside our control.

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements and accompanying notes. Actual results could differ from those estimates. Our Critical Accounting Policies and Estimates disclosed in 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, 2021, for which there were no material changes, included:

•
Income taxes, including income tax contingencies
•
Derivative financial instruments
•
Goodwill
•
Other intangible assets
•
Legal contingencies

Risk Management

We are exposed to market risks arising from changes in market rates and prices, including changes in foreign currency exchange rates and interest rates and credit risk related to our agents and customers. A risk management program is in place to manage these risks.

Foreign Currency Exchange Rates

We provide our services primarily through a network of agent locations in more than 200 countries and territories. We manage foreign exchange risk through the structure of the business and an active risk management process. We currently settle with the significant majority of our agents in United States dollars, Mexican pesos, or euros, requiring those agents to obtain local currency to pay recipients, and we generally do not rely on international currency markets to obtain and pay illiquid currencies. However, in certain circumstances, we settle in other currencies. The foreign currency exposure that does exist is limited by the fact that the majority of transactions are paid by the next day after they are initiated, and agent settlements occur within a few days in most instances. To mitigate this risk further, we enter into short duration foreign currency forward contracts, generally with maturities ranging from a few days to one month, to offset foreign exchange rate fluctuations between transaction initiation and settlement. We also have exposure to certain foreign currency denominated cash and other asset and liability positions and may utilize foreign currency forward contracts, typically with maturities of less than one year at inception, to offset foreign exchange rate fluctuations on these positions. In certain consumer money transfer, bill payment, and Business Solutions transactions involving different send and receive currencies, we generate revenue based on the difference between the exchange rate set by us to the consumer or business and the rate available in the wholesale foreign exchange market, helping to provide protection against currency fluctuations. We attempt to promptly buy and sell foreign currencies as necessary to cover our net payables and receivables which are denominated in foreign currencies.

We use longer-term foreign currency forward contracts to help mitigate risks associated with changes in foreign currency exchange rates on revenues denominated primarily in the euro, and, to a lesser degree, the Canadian dollar, the Mexican peso, and other currencies. We use contracts with maturities of up to 36 months at inception to mitigate some of the impact that changes in foreign currency exchange rates could have on forecasted revenues, with a targeted weighted-average maturity of approximately one year. We believe the use of longer-term foreign currency forward contracts provides predictability of future cash flows from our international operations.

We have additional foreign exchange risk and associated foreign exchange risk management requirements due to the nature of our Business Solutions business. Our Business Solutions business writes derivatives as part of the broader portfolio of foreign currency positions arising from our cross-currency payments operations, which primarily include spot exchanges of currency in addition to forwards and options in certain countries. The majority of these derivative contracts have a duration at inception of less than one year. Business Solutions aggregates its foreign exchange exposures arising

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from customer contracts, including the derivative contracts described above, and hedges the resulting net currency risks by entering into offsetting contracts with Convera through the end of the third closing of the Business Solutions divestiture.

As of September 30, 2022, a hypothetical uniform 10% strengthening or weakening in the value of the United States dollar relative to all other currencies in which our net income is generated would have resulted in a decrease/increase to pre-tax annual income of approximately $15 million, based on our forecast of unhedged exposure to foreign currency at that date. There are inherent limitations in this sensitivity analysis, primarily due to the following assumptions: (i) foreign exchange rate movements are linear and instantaneous, (ii) fixed exchange rates between certain currency pairs are retained, (iii) the unhedged exposure is static, and (iv) we would not hedge any additional exposure. As a result, the analysis is unable to reflect the potential effects of more complex market changes that could arise, which may positively or negatively affect income.

Interest Rates

We invest in several types of interest-bearing assets, with a total value as of September 30, 2022 of approximately $3.0 billion. Approximately $2.0 billion of these assets bear interest at floating rates. Our interest-bearing assets primarily include cash in banks, money market instruments, state and municipal variable-rate securities, and reverse repurchase agreements and are included in our Condensed Consolidated Balance Sheets within Cash and cash equivalents, Settlement assets, and Other assets. To the extent these assets are held in connection with money transfers and other related payment services awaiting redemption, they are classified as Settlement assets. Earnings on these investments will increase and decrease with changes in the underlying short-term interest rates.

The remainder of our interest-bearing assets primarily consists of highly-rated state and municipal debt securities, which are fixed-rate term notes. These investments may include investments made from cash received from our money order services, money transfer business, and other related payment services awaiting redemption and are classified within Settlement assets in the Condensed Consolidated Balance Sheets. As interest rates rise, the fair value of these fixed-rate interest-bearing securities will decrease; conversely, a decrease to interest rates would result in an increase to the fair value of the securities. We have classified these investments as available-for-sale within Settlement assets in the Condensed Consolidated Balance Sheets, and accordingly, recorded these instruments at their fair value with the net unrealized gains and losses, net of the applicable deferred income tax effect, being added to or deducted from our Total stockholders’ equity in our Condensed Consolidated Balance Sheets.

Borrowings under our commercial paper program mature in such a short period that the financing is effectively floating rate. As of September 30, 2022, there were $175.0 million in outstanding borrowings under our commercial paper program.

We review our overall exposure to floating and fixed rates by evaluating our net asset or liability position and the duration of each individual position. We manage this mix of fixed versus floating exposure in an attempt to minimize risk, reduce costs, and improve returns. Our exposure to interest rates can be modified by changing the mix of our interest-bearing assets as well as adjusting the mix of fixed versus floating rate debt. The latter is accomplished primarily through the use of interest rate swaps and the decision regarding terms of any new debt issuances (i.e., fixed versus floating). From time to time, we use interest rate swaps designated as hedges to vary the percentage of fixed to floating rate debt, subject to market conditions. As of September 30, 2022, our weighted-average effective rate on total borrowings was approximately 3.8%.

At September 30, 2022, a hypothetical 100 basis point increase/decrease in interest rates would result in a decrease/increase to pre-tax income for the next twelve months of approximately $2 million based on borrowings that are sensitive to interest rate fluctuations, net of the impact of hedges. The same 100 basis point increase/decrease in interest rates, if applied to our cash and investment balances on September 30, 2022 that bear interest at floating rates, would result in an offsetting increase/decrease to pre-tax income for the next twelve months of approximately $20 million. There are inherent limitations in the sensitivity analysis presented, primarily due to the assumptions that interest rate changes would be instantaneous and consistent across all geographies in which our interest-bearing assets are held and our liabilities are payable. As a result, the analysis is unable to reflect the potential effects of more complex market changes, including changes in credit risk regarding our investments, which may positively or negatively affect income. In addition, the mix of fixed versus floating rate debt and investments and the level of assets and liabilities will change over time, including the impact from commercial paper borrowings that may be outstanding in future periods.

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Credit Risk

To manage our exposures to credit risk with respect to investment securities, money market fund investments, derivatives, and other credit risk exposures resulting from our relationships with banks and financial institutions, we regularly review investment concentrations, trading levels, credit spreads, and credit ratings, and we attempt to diversify our investments among global financial institutions.

We are also exposed to credit risk related to receivable balances from agents in the money transfer, walk-in bill payment, and money order settlement process. We perform a credit review before each agent signing and conduct periodic analyses of agents and certain other parties we transact with directly. In addition, we are exposed to losses directly from consumer transactions, particularly through our digital channels, where transactions are originated through means other than cash and are therefore subject to "chargebacks," insufficient funds or other collection impediments, such as fraud, which are anticipated to increase as digital channels become a greater proportion of our money transfer business.

We are exposed to credit risk in our Business Solutions business relating to: (i) derivatives written by us, primarily to our customers, and (ii) the extension of trade credit when transactions are paid to recipients prior to our receiving cleared funds from the sending customers. For the derivatives, the duration of these contracts at inception is generally less than one year. The credit risk associated with our derivative contracts increases when foreign currency exchange rates move against our customers, possibly impacting their ability to honor their obligations to deliver currency to us or to maintain appropriate collateral with us. For those receivables where we have extended trade credit, collection ordinarily occurs within a few days. To mitigate the risk associated with potential customer defaults, we perform credit reviews of the customer on an ongoing basis, and, for our derivatives, we may require certain customers to post or increase collateral.

Our losses have been less than 2% of our consolidated revenues in all periods presented.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information under Risk Management in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report is incorporated herein by reference.

Item 4. Controls an d Procedures

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of the Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our controls and procedures related to our reporting and disclosure obligations (as defined by Rules 13a-15(e) and 15d-15(e) within the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2022, which is the end of the period covered by this Quarterly Report on Form 10‑Q. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that, as of September 30, 2022, the disclosure controls and procedures were effective to ensure that information required to be disclosed by us, including our consolidated subsidiaries, in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported, as applicable, within the time periods specified in the rules and forms of the Securities and Exchange Commission, and are designed to ensure that information required to be disclosed by us in the reports that we file or submit is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10‑Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Review Report of Independen t Registered Public Accounting Firm

The Board of Directors and Stockholders of The Western Union Company

Results of Review of Interim Financial Statements

We have reviewed the condensed consolidated balance sheet of The Western Union Company (the Company) as of September 30, 2022, the related condensed consolidated statements of income, comprehensive income, and stockholders’ equity for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity for the year then ended, and the related notes and schedule (not presented herein); and in our report dated February 24, 2022, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

| /s/ Ernst & Young LLP
Denver, Colorado |
November 1, 2022 |

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PA RT II

OTHER INFORMATION

Item 1. Leg al Proceedings

The information required by this Item 1 is incorporated herein by reference to the discussion in Part I, Item 1, Financial Statements, Note 6, Commitments and Contingencies.

Item 1A. Ri sk Factors

There have been no material changes to the risk factors described in our Annual Report on Form 10‑K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth stock repurchases for each of the three months of the quarter ended September 30, 2022:

|  |  |  |  |  |  |  |  |  |  | Approximate Dollar |
|  |  |  |  |  |  |  | Total Number of Shares |  |  | Value of Shares that |
|  |  |  |  |  |  |  | Purchased as Part of |  |  | May Yet Be Purchased |
|  | Total Number of |  |  | Average Price |  |  | Publicly Announced |  |  | Under the Plans or |
Period |  | Shares Purchased (a) |  |  | Paid per Share |  |  | Plans or Programs (b) |  |  | Programs (in millions) |
July 1 - 31 |  |  | 357,544 |  |  | $ | 16.69 |  |  |  | 350,788 |  |  | $ | 823.2 |
August 1 - 31 |  |  | 88,425 |  |  | $ | 16.95 |  |  |  | — |  |  | $ | 823.2 |
September 1 - 30 |  |  | 14,213 |  |  | $ | 14.37 |  |  |  | — |  |  | $ | 823.2 |
Total |  |  | 460,182 |  |  |  |  |  |  | 350,788 |  |  |  |

(a)
These amounts represent both shares authorized by our Board of Directors for repurchase under a publicly announced authorization, as described below, as well as shares withheld from employees to cover tax withholding obligations on restricted stock units that have vested.
(b)
On February 10, 2022, our Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2024, of which $823.2 million remained available as of September 30, 2022. In certain instances, management has historically established and may continue to establish prearranged written plans pursuant to Rule 10b5‑1. A Rule 10b5‑1 plan permits us to repurchase shares at times when we may otherwise be unable to do so, provided the plan is adopted when we are not aware of material non-public information.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safet y Disclosures

Not applicable.

Item 5. Ot her Information

None.

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Item 6. Exhibits

See Exhibit Index for documents filed or furnished herewith and incorporated herein by reference.

EXHIBIT INDEX

Exhibit Number |  | Description
10.1 |  | Amendment No. 2 to the Amended and Restated Credit Agreement, dated as of October 31, 2022, between The Western Union Company and Citibank, N.A. as administrative agent for the Banks
15 |  | Letter from Ernst & Young LLP Regarding Unaudited Interim Financial Information
31.1 |  | Certification of Chief Executive Officer of The Western Union Company Pursuant to Rule 13a‑14(a) under the Securities Exchange Act of 1934
31.2 |  | Certification of Chief Financial Officer of The Western Union Company Pursuant to Rule 13a‑14(a) under the Securities Exchange Act of 1934
32 |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
101.INS |  | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 |  | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | The Western Union Company (Registrant)
Date: November 1, 2022 |  | By: | /s/ Devin B. McGranahan
|  |  | Devin B. McGranahan
|  |  | President and Chief Executive Officer (Principal Executive Officer)
Date: November 1, 2022 |  | By: | /s/ Matthew Cagwin
|  |  | Matthew Cagwin
|  |  | Interim Chief Financial Officer (Principal Financial Officer)
Date: November 1, 2022 |  | By: | /s/ Mark Hinsey
|  |  | Mark Hinsey
|  |  | Chief Accounting Officer and Controller (Principal Accounting Officer)

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