FleetCor Reports First Quarter 2015 Financial Results

Source:
FLEETCOR Technologies, Inc.

Adjusted Net Income Per Share Grows 29% Year-Over-Year

Raises 2015 Guidance

NORCROSS, Ga.--(BUSINESS WIRE)--Apr. 30, 2015-- FleetCor Technologies, Inc. (NYSE:FLT), a leading global provider of fuel cards and workforce payment products to businesses, today reported financial results for its first quarter ended March 31, 2015.

“We reported good first quarter results, despite a pretty unfavorable macro-environment. Importantly, our fundamentals were strong, organic revenue growth was approximately 9% in the quarter, on a constant fuel price, currency, and spread basis,” said Ron Clarke, chairman and chief executive officer, FleetCor Technologies, Inc. “We are raising our full year 2015 guidance by $0.05 to reflect our first quarter beat.”

Financial Results for First Quarter 2015:

GAAP Results

  • Total revenues increased 64% to $416.2 million compared to $253.9 million in the first quarter of 2014.
  • The Company reported GAAP net income1 of $94.2 million or $1.00 per diluted share in the first quarter of 2015 compared to GAAP net income of $75.1 million or $0.88 per diluted share in the first quarter of 2014.

Non-GAAP Results

  • Adjusted revenues1 (revenues, net less merchant commissions) increased 65% to $388.8 million compared to $236.3 million in the first quarter of 2014.
  • Adjusted net income1 increased 41% to $135.9 million compared to $96.1 million in the first quarter of 2014.
  • Adjusted net income per diluted share1 increased 29% to $1.45 compared to $1.12 in the first quarter of 2014.

Fiscal Year 2015 Outlook:

“The first quarter of 2015 was another strong quarter for the Company despite the significant macro- economic headwinds around foreign exchange rates and declining fuel prices. In the aggregate, these macro-economic headwinds impacted our business in the first quarter by approximately $30 million in adjusted revenue or $0.16 in adjusted net income per diluted share,” said Eric Dey, chief financial officer FleetCor Technologies, Inc. “We are raising our guidance to reflect our strong first quarter results but continue to be cautious about the remainder of the year.”

For fiscal year 2015 FleetCor Technologies, Inc. is raising its financial guidance for 2015 as follows:

  • Total revenues between $1,600 million and $1,650 million, no change from the prior guidance;
  • Adjusted net income between $565 million and $585 million, up from the previous guidance range of between $560 million and $580 million;
  • Adjusted net income per diluted share between $6.00 and $6.20, up from the previous guidance range of between $5.95 and $6.15.

The Company's fiscal-year guidance assumptions for 2015 are as follows:

  • Weighted fuel prices up slightly to $2.59 average for the balance of the year in the U.S. compared to $2.58 in the prior guidance and compared to $3.56 per gallon average in the U.S. in 2014, down approximately 30%.
  • Market spreads assumptions remain approximately the same as the prior guidance.
  • Foreign exchange rates equal to the average of April 1 through April 13th, a negative impact to revenue of approximately $20 million and to adjusted net income of approximately $0.08 in adjusted net income per diluted share compared to previous guidance.
  • SVS business is retained for the entire second quarter of 2015.
  • Full year tax rate of 31.8% versus 32.1% in previous guidance.
  • Fully diluted shares outstanding of 94.3 million shares.
  • No impact related to acquisitions or material new partnership agreements not already disclosed.

Conference Call

The Company will host a conference call to discuss first quarter 2015 financial results today at 5:00pm ET. Hosting the call will be Ron Clarke, chief executive officer, and Eric Dey, chief financial officer. The conference call can be accessed live over the phone by dialing (877) 407-0784, or for international callers (201) 689-8560. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 13608063. The replay will be available until May 7, 2015. The call will be webcast live from the Company's investor relations website at investor.fleetcor.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about FleetCor's beliefs, expectations and future performance, are forward-looking statements. Forward-looking statements can be identified by the use of words such as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project," "expect," "may," "will," "would," "could" or "should," the negative of these terms or other comparable terminology. Examples of forward-looking statements in this press release include statements relating to revenue and earnings guidance and assumptions underlying financial guidance. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement, such as delays or failures associated with implementation; fuel price and spread volatility; changes in credit risk of customers and associated losses; the actions of regulators relating to payment cards or resulting from investigations; failure to maintain or renew key business relationships; failure to maintain competitive offerings; failure to maintain or renew sources of financing; failure to complete, or delays in completing, anticipated new partnership arrangements or acquisitions and the failure to successfully integrate or otherwise achieve anticipated benefits from such partnerships or acquired businesses; failure to successfully expand business internationally; the impact of foreign exchange rates on operations, revenue and income; the effects of general economic conditions on fueling patterns and the commercial activity of fleets, as well as the other risks and uncertainties identified under the caption "Risk Factors" in FleetCor's Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 2, 2015. FleetCor believes these forward-looking statements are reasonable; however, forward-looking statements are not a guarantee of performance, and undue reliance should not be placed on such statements. The forward-looking statements included in this press release are made only as of the date hereof, and FleetCor does not undertake, and specifically disclaims, any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.

About Non-GAAP Financial Measures

Adjusted revenue is calculated as revenues, net less merchant commissions. Adjusted net income is calculated as net income, adjusted to eliminate (a) non-cash stock-based compensation expense related to share-based compensation awards, (b) amortization of deferred financing costs and intangible assets, (c) amortization of the premium recognized on the purchase of receivables, (d) loss on the early extinguishment of debt, (e) our proportionate share of amortization of intangible assets at our equity method investment, and (f) other non-cash adjustments. The Company uses adjusted revenues as a basis to evaluate the company’s revenues, net of the commissions that are paid to merchants to participate in our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. The Company believes this is a more effective way to evaluate the company’s revenue performance. We prepare adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. Adjusted revenues and adjusted net income are supplemental measures of operating performance that do not represent and should not be considered as an alternative to revenues, net, net income or cash flow from operations, as determined by U.S. generally accepted accounting principles, or U.S. GAAP, and our calculation thereof may not be comparable to that reported by other companies. We believe it is useful to exclude non-cash stock-based compensation expense from adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and stock-based compensation expense is not a key measure of our core operating performance. We also believe that amortization expense can vary substantially from company to company and from period to period depending upon their financing and accounting methods, the fair value and average expected life of their acquired intangible assets, their capital structures and the method by which their assets were acquired; therefore, we have excluded amortization expense from our adjusted net income. We also exclude loss on the early extinguishment of debt from adjusted net income, as this expense is non-cash and is one-time in nature and does not reflect the ongoing operations of the business.

Management uses adjusted revenues and adjusted net income:

  • as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis;
  • for planning purposes, including the preparation of our internal annual operating budget;
  • to allocate resources to enhance the financial performance of our business; and
  • to evaluate the performance and effectiveness of our operational strategies.

We believe adjusted revenues and adjusted net income are key measures used by the Company and investors as supplemental measures to evaluate the overall operating performance of companies in our industry. By providing these non-GAAP financial measures, together with reconciliations, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives.

About FleetCor

FleetCor is a leading global provider of fuel cards and workforce payment products to businesses. FleetCor’s payment programs enable businesses to better control employee spending and provide card-accepting merchants with a commercial customer base that can increase their sales and customer loyalty. FleetCor serves commercial accounts in North America, Latin America, Europe, Australia and New Zealand. For more information, please visit www.fleetcor.com.

1 Reconciliations of GAAP results to non GAAP results are provided in Exhibit 1 attached. Additional supplemental data is provided in Exhibit 2 and segment information is provided in Exhibit 3.

FleetCor Technologies, Inc. and subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
         
Three Months Ended March 31,
2015 2014
(Unaudited) (Unaudited)
 
Revenues, net $ 416,166 $ 253,908
 
Expenses:
Merchant commissions 27,326 17,623
Processing 81,356 36,856
Selling 26,331 17,414
General and administrative 69,297 43,461
Depreciation and amortization   48,082   24,418
Operating income   163,774   114,136
Other expense, net 1,860 544
Equity method investment loss 2,700 -
Interest expense, net   19,566   5,461
Total other expense   24,126   6,005
Income before income taxes 139,648 108,131
Provision for income taxes   45,495   33,022
Net income $ 94,153 $ 75,109
 
Basic earnings per share $ 1.03 $ 0.91
Diluted earnings per share $ 1.00 $ 0.88
 
Weighted average shares outstanding:
Basic shares 91,750 82,737
Diluted shares 93,934 85,695
FleetCor Technologies, Inc. and subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
 
    March 31, 2015   December 31, 2014
(Unaudited)
Assets
 
Current assets:
Cash and cash equivalents $ 379,393 $ 477,069
Restricted cash 129,562 135,144
Accounts receivable (less allowance for doubtful accounts of $21,969 and $23,842, respectively) 773,474 673,797
Securitized accounts receivable - restricted for securitization investors 679,000 675,000
Prepaid expenses and other current assets 70,198 74,889
Deferred income taxes   77,638     101,451  
 
Total current assets   2,109,265     2,137,350  
 
Property and equipment 137,608 135,062
Less accumulated depreciation and amortization   (65,542 )   (61,499 )
 
Net property and equipment 72,066 73,563
 
Goodwill 3,761,378 3,808,262
Other intangibles, net 2,369,922 2,440,967
Equity method investment 124,086 141,933
Other assets   68,007     72,431  
 
Total assets $ 8,504,724   $ 8,674,506  
 
Liabilities and Stockholders’ Equity
 
Current liabilities:
Accounts payable $ 775,929 $ 716,676
Accrued expenses 151,974 178,375
Customer deposits 451,588 492,257
Securitization facility 679,000 675,000
Current portion of notes payable and other obligations 657,108 749,764
Other current liabilities   40,680     84,546  
 
Total current liabilities   2,756,279     2,896,618  
 
Notes payable and other obligations, less current portion 2,139,704 2,168,953
Deferred income taxes 794,381 815,169
Other noncurrent liabilities   34,186     40,629  
 
Total noncurrent liabilities   2,968,271     3,024,751  
 
Commitments and contingencies
 
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized, 119,900,971 shares issued and 91,791,859 shares outstanding at March 31, 2015; and 475,000,000 shares authorized, 119,771,155 shares issued and 91,662,043 shares outstanding at December 31, 2014 120 120
Additional paid-in capital 1,878,383 1,852,442
Retained earnings 1,498,058 1,403,905
Accumulated other comprehensive loss (249,990 ) (156,933 )
Less treasury stock, 28,109,112 shares at March 31, 2015 and December 31, 2014 (346,397 ) (346,397 )
   
Total stockholders’ equity   2,780,174     2,753,137  
 
Total liabilities and stockholders’ equity $ 8,504,724   $ 8,674,506  
FleetCor Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
 
Three Months Ended March 31,
2015   2014
(Unaudited) (Unaudited)
Operating activities
Net income $ 94,153 $ 75,109
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 7,498 4,801
Stock-based compensation 16,951 10,612
Provision for losses on accounts receivable 8,145 5,554
Amortization of deferred financing costs 1,744 531
Amortization of intangible assets 39,771 18,272
Amortization of premium on receivables 813 814
Deferred income taxes (18,738 ) 603
Equity method investment loss 2,700 -
Other operating gain (425 ) -
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash 5,580 1,404
Accounts receivable (114,385 ) (153,184 )
Prepaid expenses and other current assets 1,695 (7,111 )
Other assets (1,835 ) 545
Excess tax benefits related to stock-based compensation (6,418 ) (16,126 )
Accounts payable, accrued expenses and customer deposits   30,154     109,670  
Net cash provided by operating activities   67,403     51,494  
 
 
Investing activities
Acquisitions, net of cash acquired (851 ) (19,292 )
Purchases of property and equipment   (8,105 )   (5,584 )
Net cash used in investing activities   (8,956 )   (24,876 )
 
 
Financing activities
Excess tax benefits related to stock-based compensation 6,418 16,126
Proceeds from issuance of common stock 2,571 4,512
Borrowings on securitization facility, net 4,000 44,500
Deferred financing costs paid - (521 )
Principal payments on notes payable (25,875 ) (6,875 )
Payments on revolver- A Facility (120,736 ) (134,803 )
Payments on foreign revolver- B Facility - (3,601 )
Payments on swing line of credit, net 30,865 15
Payment of contingent consideration (39,808 ) -
Fair value adjustment for contingent consideration arrangements   (76 )   (246 )
Net cash used in financing activities   (142,641 )   (80,893 )
   
Effect of foreign currency exchange rates on cash   (13,482 )   (456 )
 
Net decrease in cash and cash equivalents (97,676 ) (54,731 )
Cash and cash equivalents, beginning of period   477,069     338,105  
Cash and cash equivalents, end of period $ 379,393   $ 283,374  
 
Supplemental cash flow information
Cash paid for interest $ 21,290   $ 6,264  
 
Cash paid for income taxes $ 15,992   $ 20,865  
Exhibit 1
RECONCILIATION OF NON-GAAP MEASURES AND PRO FORMA INFORMATION
(In thousands, except shares and per share amounts)
(Unaudited)
           
  The following table reconciles revenues, net to adjusted revenues:  
 
Three Months Ended March 31,
2015 2014
 
Revenues, net 416,166 253,908
Merchant commissions   27,326     17,623  
Total adjusted revenues $ 388,840   $ 236,285  
 
           
The following table reconciles net income to adjusted net income and adjusted net income per diluted share:
 
Three Months Ended March 31,
2015 2014
Net income $ 94,153 $ 75,109
 
Stock based compensation 16,951 10,612
Amortization of intangible assets 39,771 18,272
Amortization of premium on receivables 813 814
Amortization of deferred financing costs 1,744 531
Amortization of intangibles at equity method investment 2,705 -
   
Total pre-tax adjustments 61,984 30,229
 
Income tax impact of pre-tax adjustments at the effective tax rate (20,193 ) (9,232 )
   
Adjusted net income $ 135,943   $ 96,106  
Adjusted net income per diluted share $ 1.45 $ 1.12
 
Diluted shares 93,934 85,695
Exhibit 2
Transaction Volume, Revenues and Adjusted Revenue, Per Transaction and by Segment
(In thousands except revenues, net per transaction and adjusted revenues per transaction)
(Unaudited)
         
Three Months Ended March 31,
2015 2014 Change % Change
 

NORTH AMERICA

- Transactions2 384,544 40,425 344,119 851.3 %
- Revenues, net per transaction $ 0.78 $ 3.13 $ (2.35 ) -75.1 %
- Revenues, net $ 298,813 $ 126,375 $ 172,438 136.4 %
 

INTERNATIONAL

- Transactions 46,778 47,192 (414 ) -0.9 %
- Revenues, net per transaction $ 2.51 $ 2.70 $ (0.19 ) -7.2 %
- Revenues, net $ 117,353 $ 127,533 $ (10,180 ) -8.0 %
                   
 

FLEETCOR CONSOLIDATED REVENUES

- Transactions2 431,322 87,617 343,705 392.3 %
- Revenues, net per transaction $ 0.96 $ 2.90 $ (1.93 ) -66.7 %
- Revenues, net $ 416,166 $ 253,908 $ 162,258 63.9 %
                   
                   
 

FLEETCOR CONSOLIDATED ADJUSTED REVENUES1

- Transactions2 431,322 87,617 343,705 392.3 %
- Adjusted Revenues per transaction $ 0.90 $ 2.70 $ (1.80 ) -66.6 %
- Adjusted Revenues $ 388,840 $ 236,285 $ 152,555 64.6 %
                   
 
 
1Adjusted revenues is a non-GAAP financial measure defined as revenues, net less merchant commissions. The Company believes this measure is a more effective way to evaluate the Company's revenue performance. Refer to Exhibit 1 for a reconciliation of revenues, net to adjusted revenues.
2Includes approximately 301 million transactions related to our SVS business acquired with Comdata in 2014.
 

Sources of Revenue3

Three Months Ended March 31,
2015 2014 Change % Change
Revenue from customers and partners 62.5 % 56.1 % 6.4 % 11.4 %
Revenue from merchants and networks 37.5 % 43.9 % -6.4 % -14.6 %
 
Revenue tied to fuel-price spreads 14.0 % 13.8 % 0.2 % 1.4 %
Revenue influenced by absolute price of fuel 12.7 % 18.0 % -5.3 % -29.4 %
Revenue from program fees, late fees, interest and other 73.3 % 68.2 % 5.1 % 7.5 %
 
3Expressed as a percentage of consolidated revenue.
Exhibit 3
Segment Results
(In thousands)
(Unaudited)
     
Three Months Ended March 31,
2015 2014
Revenues, net:
North America $ 298,813 $ 126,375
International   117,353   127,533
$ 416,166 $ 253,908
 
Operating income:
North America $ 109,766 $ 56,197
International   54,008   57,939
$ 163,774 $ 114,136
 
Depreciation and amortization:
North America $ 31,922 $ 6,636
International   16,160   17,782
$ 48,082 $ 24,418
 
Capital expenditures:
North America $ 4,224 $ 1,996
International   3,881   3,588
$ 8,105 $ 5,584

Source: FleetCor Technologies, Inc.

Investor Relations
investor@fleetcor.com
770-729-2017


FLEETCOR Technologies, Inc.

Investor Relations
Media Relations