FleetCor Reports Fourth Quarter and Fiscal-Year 2015 Financial Results

Source:
FLEETCOR Technologies, Inc.

Fourth Quarter and Fiscal-Year 2015 Adjusted Net Income Per Share Grows 22% Year-Over-Year

NORCROSS, Ga.--(BUSINESS WIRE)--Feb. 4, 2016-- FleetCor Technologies, Inc. (NYSE:FLT), a leading global provider of fuel cards and workforce payment products to businesses, today reported financial results for its fourth quarter ended December 31, 2015.

“We posted another 20% plus adjusted net income growth quarter, despite a pretty challenging macro environment,” said Ron Clarke, chairman and chief executive officer, FleetCor Technologies, Inc. “For full year 2015, total revenue grew 42%, organic revenue grew approximately 10%, and adjusted net income per share grew 22%.”

Financial Results for Fourth Quarter 2015:

GAAP Results

  • Total revenues increased 14% to $430.6 million in the fourth quarter of 2015 compared to $376.7 million in the fourth quarter of 2014.
  • GAAP net income 1 decreased 52% to $52.8 million or $0.56 per diluted share in the fourth quarter of 2015 compared to GAAP net income of $109.5 million or $1.21 per diluted share in the fourth quarter of 2014. Included in GAAP net income for the quarter was a $40.0 million non-cash impairment charge related to our minority investment in Masternaut and a $34.4 million increase in non-cash stock based compensation expense compared to 2014.

Non-GAAP Results

  • Adjusted revenues1 (revenues, net less merchant commissions) increased 17% to $403.1 million in the fourth quarter of 2015 compared to $343.4 million in the fourth quarter of 2014.
  • Adjusted net income1 increased 27% to $160.2 million in the fourth quarter of 2015 compared to $125.8 million in the fourth quarter of 2014.
  • Adjusted net income per diluted share1 increased 22% to $1.70 in the fourth quarter of 2015 compared to $1.39 in the fourth quarter of 2014.

Financial Results for Fiscal-Year 2015:

GAAP Results

  • Total revenues increased 42% to $1,702.9 million in 2015 compared to $1,199.4 million in 2014.
  • GAAP net income1 decreased 2% to $362.4 million or $3.85 per diluted share in 2015 compared to GAAP net income of $368.7 million or $4.24 per diluted share in 2014. Included in GAAP net income in 2015 was a $40.0 million non-cash impairment charge related to a minority investment in Masternaut and a $52.5 million increase in non-cash stock based compensation expense compared to 2014.

Non-GAAP Results

  • Adjusted revenues1 (revenues, net less merchant commissions) increased 45% to $1,594.6 million in 2015 compared to $1,103.1 million in 2014.
  • Adjusted net income per diluted share1 increased 22% to $6.30 in 2015 compared to $5.15 in 2014.

____________

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.

 

Fiscal Year 2016 Outlook:

“For 2016, we again have a number of macro-economic headwinds impacting our business, primarily foreign exchange rates and fuel prices,” said Eric Dey, chief financial officer FleetCor Technologies, Inc. “In aggregate, we are estimating that the macro-economic environment creates an approximate $100 million revenue headwind and an approximate $0.70 adjusted net income per diluted share headwind versus 2015. Despite these headwinds, we like our fundamentals, and are guiding to year-over-year organic revenue growth of approximately 10% at constant fuel prices, currency, and market spreads. Our adjusted net income per share guidance at the midpoint of the range of $6.50 would have been approximately $7.20 for 2016 at constant fuel price, currency, and markets spread margins.”

For fiscal-year 2016, FleetCor Technologies, Inc. financial guidance and assumptions are as follows:

  • Total revenues between $1,730 million and $1,780 million;
  • Adjusted net income1 between $605 million and $625 million; and
  • Adjusted net income per diluted share1 between $6.40 and $6.60.

FleetCor’s fiscal-year guidance assumptions for 2016 are as follows:

  • Weighted fuel prices equal to $1.91 per gallon average for 2016 in the U.S. compared to $2.56 per gallon average in the U.S. in 2015, down approximately 25%.
  • Market spreads returning to normalized levels for 2016, down approximately $15 million versus 2015.
  • Foreign exchange rates equal to the seven day average ended January 15, 2016.
  • SVS business is retained for 2016.
  • Continued weakness in the Company’s Brazilian and Russian businesses
  • Fully diluted shares outstanding of 94.7 million shares.
  • Full year tax rate of approximately 32.2%.
  • No impact related to acquisitions or material new partnership agreements not already disclosed.

Conference Call

The company will host a conference call to discuss fourth quarter and fiscal-year 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 13629029. The replay will be available until February 11, 2016. 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 macro- economic conditions and estimated impact of these conditions on our operations and financial results, 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 fuel price and spread volatility; 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; 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, 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, (f) non-cash impairment charges, and (g) 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 and impairment charges from adjusted net income, as these expenses are non-cash and are one-time in nature and do not reflect the ongoing operations of the business. Reconciliations of GAAP results to non-GAAP results are provided in the attached Exhibit 1.

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 high volume customer base that can increase their sales and customer loyalty. FleetCor serves commercial accounts in North America, Latin America, Europe, and Australia/New Zealand. For more information, please visit www.FLEETCOR.com.

 
FleetCor Technologies, Inc. and subsidiaries
Unaudited Consolidated Statements of Income
(In thousands, except per share amounts)
                 
Three Months Ended December 31, Year Ended December 31,
2015 2014 2015 2014
(Unaudited) (Unaudited) (Unaudited)
 
Revenues, net $ 430,601 $ 376,697 $ 1,702,865

$

1,199,390

 
Expenses:
Merchant commissions 27,480 33,290 108,257 96,254
Processing 84,194 56,185 331,073 173,337
Selling 28,064 22,642 109,075 75,527
General and administrative 100,938 83,659 297,715 205,963
Depreciation and amortization 48,018 37,800 193,453 112,361
Other operating, net   (4,242 )   (29,501 )   (4,242 )   (29,501 )
Operating income   146,149     172,622     667,534     565,449  
Equity method investment loss 43,742 4,897 57,668 8,586
Other expense (income), net 178 (1,570 ) 2,523 (700 )
Interest expense, net 16,521 13,228 71,339 28,856
Loss on early extinguishment of debt   -     15,764     -     15,764  
Total other expense   60,441     32,319     131,530     52,506  
Income before income taxes 85,708 140,303 536,004 512,943
Provision for income taxes   32,878     30,763     173,573     144,236  
Net income $ 52,830   $ 109,540   $ 362,431   $ 368,707  
 
Basic earnings per share $ 0.57 $ 1.25 $ 3.94 $ 4.37
Diluted earnings per share $ 0.56 $ 1.21 $ 3.85 $ 4.24
 
Weighted average shares outstanding:
Basic shares 92,321 87,877 92,023 84,317
Diluted shares 94,350 90,240 94,139 86,982
 
 
FleetCor Technologies, Inc. and subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
 
  December 31, 2015   December 31, 2014
(Unaudited)
Assets
 
Current assets:
Cash and cash equivalents $ 447,152 $ 477,069
Restricted cash 167,492 135,144
Accounts receivable (less allowance for doubtful accounts of $21,903 and $23,842, respectively) 637,539 673,797
Securitized accounts receivable - restricted for securitization investors 614,000 675,000
Prepaid expenses and other current assets 58,066 74,889
Deferred income taxes   8,913     101,451  
 
Total current assets   1,933,162     2,137,350  
 
Property and equipment 163,569 135,062
Less accumulated depreciation and amortization   (82,809 )   (61,499 )
 
Net property and equipment 80,760 73,563
 
Goodwill 3,721,518 3,811,862
Other intangibles, net 2,268,320 2,437,367
Equity method investment 76,568 141,933
Other assets   70,334     72,431  
 
Total assets $ 8,150,662   $ 8,674,506  
 
Liabilities and Stockholders’ Equity
 
Current liabilities:
Accounts payable $ 669,528 $ 716,676
Accrued expenses 156,277 178,375
Customer deposits 507,233 492,257
Securitization facility 614,000 675,000
Current portion of notes payable and other obligations 261,647 749,764
Other current liabilities   44,936     84,546  
 
Total current liabilities   2,253,621     2,896,618  
 
Notes payable and other obligations, less current portion 2,061,415 2,168,953
Deferred income taxes 733,593 815,169
Other noncurrent liabilities   31,942     40,629  
 
Total noncurrent liabilities   2,826,950     3,024,751  
 
Commitments and contingencies
 
Stockholders’ equity:

Common stock, $0.001 par value; 475,000,000 shares authorized, 120,539,041 shares
issued and 92,376,334 shares outstanding at December 31, 2015; and 475,000,000
shares authorized, 119,771,155 shares issued and 91,662,043 shares outstanding at
December 31, 2014

121 120
Additional paid-in capital 1,988,917 1,852,442
Retained earnings 1,766,336 1,403,905
Accumulated other comprehensive loss (330,767 ) (156,933 )
Less treasury stock, 28,162,706 and 28,109,112 shares at December 31, 2015 and 2014, respectively   (354,516 )   (346,397 )
 
Total stockholders’ equity   3,070,091     2,753,137  
 
Total liabilities and stockholders’ equity $ 8,150,662   $ 8,674,506  
 
 
FleetCor Technologies, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(In Thousands)
 
      Year Ended December 31,
2015     2014
(Unaudited)
Operating activities
Net income $ 362,431 $ 368,707
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 30,462 21,097
Stock-based compensation 90,122 37,649
Provision for losses on accounts receivable 24,629 24,412
Amortization of deferred financing costs and discounts 7,049 2,796
Loss on extinguishment of debt - 15,764
Amortization of intangible assets 159,740 86,149
Amortization of premium on receivables 3,250 3,259
Deferred income taxes (30,626 ) (41,716 )
Equity method investment loss 57,668 8,586
Other non-cash operating expenses (4,242 ) (27,501 )
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash (32,348 ) 6,625
Accounts receivable 72,406 246,465
Prepaid expenses and other current assets (6,391 ) 2,820
Other assets (1,602 ) 12,455
Excess tax benefits related to stock-based compensation (26,427 ) (56,790 )
Accounts payable, accrued expenses and customer deposits   47,099     (102,443 )
Net cash provided by operating activities   753,220     608,334  
 
 
Investing activities
Acquisitions, net of cash acquired (57,539 ) (2,567,017 )
Purchases of property and equipment   (41,875 )   (27,070 )
Net cash used in investing activities   (99,414 )   (2,594,087 )
 
 
Financing activities
Excess tax benefits related to stock-based compensation 26,427 56,790
Proceeds from issuance of common stock 19,926 29,641
Borrowings on securitization facility, net (61,000 ) 326,000
Deferred financing costs paid - (43,943 )
Proceeds from notes payable - 2,320,000
Principal payments on notes payable (103,500 ) (546,875 )
Borrowings from revolver- A Facility - 807,330
Payments on revolver- A Facility (486,818 ) (783,600 )
Payments on foreign revolver- B Facility - (7,337 )
Net (payments) borrowings on swing line of credit (546 ) 4,990
Payment of contingent consideration (42,177 ) -
Other   (377 )   (731 )
Net cash (used in) provided by financing activities   (648,065 )   2,162,265  
   
Effect of foreign currency exchange rates on cash   (35,658 )   (37,548 )
 
Net (decrease) increase in cash and cash equivalents (29,917 ) 138,964
Cash and cash equivalents, beginning of period   477,069     338,105  
Cash and cash equivalents, end of period $ 447,152   $ 477,069  
 
Supplemental cash flow information
Cash paid for interest $ 72,537   $ 29,098  
 
Cash paid for income taxes $ 83,380   $ 79,124  
 
 
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 December 31, Year Ended December 31,
2015 2014 2015 2014
 
Revenues, net $ 430,601 $ 376,697 $ 1,702,865 $ 1,199,390
Merchant commissions   27,480     33,290     108,257     96,254  
Total adjusted revenues $ 403,121   $ 343,407   $ 1,594,608   $ 1,103,136  
 
                 
The following table reconciles net income to adjusted net income and adjusted net income per diluted share:
 
Three Months Ended December 31, Year Ended December 31,
2015 2014 2015 2014
Net income $ 52,830 $ 109,540 $ 362,431 $ 368,707
 
Stock based compensation 45,735 11,357 90,122 37,649
Amortization of intangible assets 39,685 30,412 159,740 86,149
Amortization of premium on receivables 811 814 3,250 3,259
Amortization of deferred financing costs and discounts 1,754 1,197 7,049 2,796
Amortization of intangibles at equity method investment 2,261 2,824 10,665 7,982
Loss on extinguishment of debt - 15,764 - 15,764
Other non-cash adjustments - (28,869 ) - (28,869 )
Impairment of equity method investment   40,000     -     40,000     -  
 
Total pre-tax adjustments 130,246 33,499 310,826 124,730
 
Income tax impact of pre-tax adjustments at the effective tax rate (22,874 )

1

(17,217 ) (80,632 ) (45,767 )
       
Adjusted net income $ 160,201   $ 125,822   $ 592,625   $ 447,670  
Adjusted net income per diluted share $ 1.70 $ 1.39 $ 6.30 $ 5.15
 
Diluted shares 94,350 90,240 94,139 86,982
 
1 Effective tax rate utilized excludes the impact of a one time tax benefit recognized during the three months and year ended December 31, 2015 of approximately $0.8 million, as well as adjustments related to our equity method investment. Furthermore, the effective tax rate used to calculate the income tax impact of pre-tax adjustments during the three months and year ended December 31, 2014 excludes the impact of a $9.5 million discrete tax benefit, as well as other non-cash adjustments and their related income tax expense.
 
 
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 December 31, Year Ended December 31,
2015 2014 Change % Change 2015 2014 Change % Change
 

NORTH AMERICA

- Transactions2 522,275 331,242 191,033 57.7 % 1,667,534 459,955 1,207,579 262.5 %
- Revenues, net per transaction $ 0.60 $ 0.74 $ (0.14 ) -19.4 % $ 0.74 $ 1.45 $ (0.71 ) -49.2 %
- Revenues, net $ 313,624

$

246,749

$ 66,875 27.1 % $ 1,231,957 $ 668,328 $ 563,629 84.3 %
 

INTERNATIONAL

- Transactions 45,816 48,623 (2,807 ) -5.8 % 183,856 192,489 (8,633 ) -4.5 %
- Revenues, net per transaction $ 2.55 $ 2.67 $ (0.12 ) -4.5 % $ 2.56 $ 2.76 $ (0.20 ) -7.2 %
- Revenues, net $ 116,977

$

129,948

$ (12,971 ) -10.0 % $ 470,908 $ 531,062 $ (60,154 ) -11.3 %
                                   
 

FLEETCOR CONSOLIDATED REVENUES

- Transactions2 568,091 379,865 188,226 49.6 % 1,851,390 652,444 1,198,946 183.8 %
- Revenues, net per transaction $ 0.76 $ 0.99 $ (0.23 ) -23.6 % $ 0.92 $ 1.84 $ (0.92 ) -50.0 %
- Revenues, net $ 430,601

$

376,697

$ 53,904 14.3 % $ 1,702,865 $ 1,199,390 $ 503,475 42.0 %
                                   
                                   
 

FLEETCOR CONSOLIDATED ADJUSTED REVENUES1

- Transactions2 568,091 379,865 188,226 49.6 % 1,851,390 652,444 1,198,946 183.8 %
- Adjusted revenues per transaction $ 0.71 $ 0.90 $ (0.19 ) -21.5 % $ 0.86 $ 1.69 $ (0.83 ) -49.1 %
  - Adjusted revenues   $ 403,121  

$

343,407

  $ 59,714     17.4 %  

$

1,594,608

  $ 1,103,136   $ 491,472     44.6 %
 
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 429 million and 270 million transactions for the three months ended December 31, 2015 and 2014, respectively, and 1.3 billion and 270 million transactions for the years ended December 31, 2015 and 2014, respectively, related to our SVS business acquired with Comdata in the fourth quarter of 2014.
 

Sources of Revenue3

  Three Months Ended December 31,   Year Ended December 31,
2015   2014   Change   % Change 2015   2014   Change   % Change
Revenue from customers and partners 66.0% 54.8% 11.2% 20.4% 64.8% 54.9% 9.9% 18.0%
Revenue from merchants and networks 34.0% 45.2% -11.2% -24.8% 35.2% 45.1% -9.9% -22.0%
 

Revenue directly tied to fuel-price spreads

12.3% 19.7% -7.4% -37.6% 12.4% 16.5% -4.1% -24.8%

Revenue directly influenced by absolute price of fuel

14.6% 14.6% 0.0% 0.0% 15.1% 17.0% -1.9% -11.2%
Revenue from program fees, late fees, interest and other 73.1% 65.7% 7.4% 11.3% 72.5% 66.5% 6.0% 9.0%
 

3 Expressed as a percentage of consolidated revenue.

 
 
Exhibit 3
Segment Results
(In thousands)
(Unaudited)
                 
Three Months Ended December 31, Year Ended December 31,
2015 2014 2015 2014
Revenues, net:
North America $ 313,624 $ 246,749 $ 1,231,957 $ 668,328
International   116,977   129,948   470,908   531,062
$ 430,601 $ 376,697 $ 1,702,865

$

1,199,390

 
Operating income:
North America $ 90,274 $ 83,992 $ 442,052 $ 287,303
International   55,875   88,630   225,482   278,146
$ 146,149 $ 172,622 $ 667,534 $ 565,449
 
Depreciation and amortization:
North America $ 31,663 $ 19,628 $ 127,863 $ 39,275
International   16,355   18,172   65,590   73,086
$ 48,018 $ 37,800 $ 193,453 $ 112,361
 
Capital expenditures:
North America $ 5,373 $ 4,010 $ 19,883 $ 9,407
International   6,976   4,781   21,992   17,663
$ 12,349 $ 8,791 $ 41,875 $ 27,070
 

Source: FleetCor Technologies, Inc.

FleetCor Technologies, Inc.
Investor Relations
770-729-2017
investor@fleetcor.com


FLEETCOR Technologies, Inc.

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