FLEETCOR Reports Fourth Quarter and Fiscal-Year 2018 Financial Results

Source:
Business Wire

PEACHTREE CORNERS, Ga.--(BUSINESS WIRE)--Feb. 6, 2019-- FLEETCOR Technologies, Inc.(NYSE:FLT), a leading global provider of commercial payment solutions, today reported financial results for its fourth quarter and year ended December 31, 2018.

“Our Q4 revenues and profits finished the year on a high note with revenue up 11% and adjusted net income per diluted share up 15% compared to the fourth quarter of 2017. These results were driven by strong execution across all lines of business resulting in organic growth of 11%, and record sales up 20% year over year in the fourth quarter. Fiscal year 2018 was another great year, driven by increases in revenues of 13% and adjusted net income per diluted share, which increased 23%,” said Ron Clarke, chairman and chief executive officer, FLEETCOR Technologies, Inc. “For 2019, we expect each of our four primary product categories – fuel, toll, lodging, and corporate payments – to continue to drive our Company’s growth as we focus relentlessly on execution in order to win new clients, open up new geographies, and provide improved value over a broader range of spend categories.”

Financial Results for Fourth Quarter of 2018

GAAP Results

  • Total revenues, including the impact of the new revenue recognition standard ASC 606, increased 5% to $643.4 million in the fourth quarter of 2018, compared to $610.0 million in the fourth quarter of 2017.
  • Net incomeincreased 7% to $302.0 million in the fourth quarter of 2018, compared to $282.7 million in the fourth quarter of 2017. Included in the fourth quarter of 2018, was a gain of approximately $153 million from the sale of the Chevron portfolio. Included in the fourth quarter of 2017 was the favorable impact of adoption of the Tax Reform Act of $127.5 million.
  • Net incomeper diluted share increased 9% to $3.33 in the fourth quarter of 2018, compared to $3.05 per diluted share in the fourth quarter of 2017.

On January 1, 2018, the Company adopted FASB ASC Topic 606, "Revenue from Contracts with Customers" ("ASC 606") and related cost capitalization guidance, using the modified retrospective method by recognizing the cumulative effect of initially applying ASC 606 as an adjustment to opening retained earnings at January 1, 2018. As such, the Company is not required to restate comparative financial information prior to the adoption of ASC 606 and, therefore, such information for the three months and year ended December 31, 2017continues to be reported under FASB ASC Topic 605, "Revenue Recognition" ("ASC 605"). The adoption of ASC 606 did not materially impact the Company’s financial position. For the three months ended December 31, 2018, the adoption of ASC 606 reduced revenue by $36.4 million and increased operating income by $2.5 million. The adoption of ASC 606 did not have a material impact on net income or net income per diluted share for the three months ended December 31, 2018. A comparison of the current presentation under ASC 606 to the prior presentation under ASC 605 is provided below for the three months ended December 31, 2018:

 

2018 Reported
under ASC 606

 

2018 Impact of
ASC 606

 

2018 Excluding
Impact of Adoption
of ASC 606

(millions)          
Revenue $643.4   $36.4   $679.9
           
Operating Expense $358.7   $38.9   $397.6
           
Operating Income $284.7   ($2.5)   $282.3
           

The above table presents the U.S. GAAP financial measures of Revenue, Operating Expense and Operating Income as reported, as well as the impact of the adoption of ASC 606 on these measures for the period presented. The impact of the adoption of ASC 606 on net income and net income per diluted share was not material.

Non-GAAP Results1

  • Revenues under ASC 605 increased 11% to $679.9 million in the fourth quarter of 2018, compared to $610.0 million in the fourth quarter of 2017.
  • Adjusted net income1 increased 12% to $252.0 million in the fourth quarter of 2018, compared to $224.1 million in the fourth quarter of 2017.
  • Adjusted net income per diluted share1 increased 15% to $2.78 in the fourth quarter of 2018, compared to $2.42 per diluted share in the fourth quarter of 2017.

Financial Results for Fiscal Year 2018

GAAP Results

  • Total revenues increased 8% to $2,433.5 million in 2018, compared to $2,249.5 million in 2017.
  • Net incomeincreased 10% to $811.5 million in 2018, compared to $740.2 million in 2017. Included in 2018 is the gain from the sale of the Chevron portfolio of approximately $153 million. Included in 2017 is the favorable impact of adoption of the Tax Reform Act of $127.5 million and a gain on the sale of Nextraq of $109.2 million.
  • Net incomeper diluted share increased 11% to $8.81 in 2018, compared to $7.91 per diluted share in 2017.

Non-GAAP Results1

  • Revenues under ASC 605 increased 13% to 2,545.5 million in 2018, compared to $2,249.5 million in 2017.
  • Adjusted net income1 increased 21% to $969.8 million in 2018, compared to $798.9 million in 2017.
  • Adjusted net income per diluted share1 increased 23% to $10.53 in 2018, compared to $8.54 in 2017.

Fiscal Year 2019 Outlook

“Our outlook for 2019 is for organic revenue growth to be in the 9-11% range, consistent with our performance over the last several years. We expect this performance to be partially offset by a challenging macro environment, with fuel prices expected to be below 2018 levels, and unfavorable foreign exchange rates driven by a strong dollar, particularly in the first half of the year. The combined unfavorable revenue impact from these factors is expected to be approximately $50 million in 2019. As a result, we are guiding adjusted net income per diluted share to $11.55, at the midpoint, which represents a 10% growth from prior year,” said Eric Dey, chief financial officer, FLEETCOR Technologies, Inc.”

For fiscal year 2019, FLEETCOR Technologies, Inc. updated financial guidance is as follows:

  • Total revenues to be between $2,570 million and $2,630 million;
  • GAAP net income between $800 million and $830 million;
  • GAAP net income per diluted share between $9.05 and $9.35;
  • Adjusted net income to be between $1,015 million and $1,045 million; and
  • Adjusted net income per diluted share to be between $11.40 and $11.70.

FLEETCOR’s guidance assumptions for 2019 are as follows:

  • Weighted fuel prices equal to $2.60 per gallon average in the U.S. for those businesses sensitive to the movement in the retail price of fuel for the balance of the year;
  • Market spreads slightly below the 2018 average;
  • Foreign exchange rates equal to the seven-day average as of February 3, 2019;
  • Interest expense of $160 million;
  • Fully diluted shares outstanding of approximately 89.0 million shares;
  • An adjusted tax rate of 23% to 24%; and
  • No impact related to acquisitions or material new partnership agreements not already disclosed.

Fiscal First Quarter of 2019 Outlook

FLEETCOR experiences some seasonality and typically the first quarter is the lowest in terms of both revenue and profit. First quarter seasonality is impacted by weather, holidays in the U.S., and lower business levels in Brazil, due to summer break and the Carnival celebration that occurs in the first quarter. Also, the first quarter revenue will be impacted by unfavorable foreign exchange rates when compared to the first quarter of 2018, as well as the divestiture of the Chevron portfolio.

With that said, the Company is expecting first quarter adjusted net income per diluted share to be between $2.55 and $2.651. Additionally, volumes should build throughout the year, and new asset initiatives are also expected to gain momentum throughout the year resulting in higher revenue and earnings per share in the second through fourth quarters.

_______________________________________

1 Reconciliations of GAAP results to non-GAAP results are provided in Exhibit 1 attached. Additional supplemental data is provided in Exhibits 2-3 and 5, and segment information is provided in Exhibit 4. A reconciliation of GAAP guidance to non-GAAP guidance is provided in Exhibit 6. A reconciliation of the impact of the adoption of ASC 606 is provided in exhibit 7.

Subsequent Events

On January 14, 2019, FLEETCOR entered into an interest rate swap agreement to fix $2 billion of floating rate debt at 2.55%, on borrowings as of January 31, 2019. This action is expected to limit the risk from future interest rate hikes by reducing the portion of our debt that is exposed to floating rates. Also, on January 23, 2019, the FLEETCOR Board of Directors authorized an additional $500 million in share repurchases under the existing Share Repurchase Program, bringing the total current repurchase authorization to $551 million.

Conference Call

The Company will host a conference call to discuss fourth quarter and full year 2018 financial results today at 5:00 pm ET. Hosting the call will be Ron Clarke, chief executive officer, Eric Dey, chief financial officer and Jim Eglseder, investor relations. 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 (844)512-2921 or (412) 317-6671 for international callers; the conference ID is 13687023. The replay will be available until Wednesday, February 13, 2019. The call will be webcast live from the Company's investor relations website at http://investor.fleetcor.com. Prior to the conference call, the Company will post supplemental financial information that will be discussed during the call and live webcast.

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, expected growth opportunities and strategies, 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 customer arrangements or acquisitions and the failure to successfully integrate or otherwise achieve anticipated benefits from such customer arrangements or acquired businesses; failure to successfully expand business internationally, risks related to litigation; 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, 2017 and FLEETCOR’s quarterly reports on Form 10-Q for the three months ended March 31, 2018, June 30, 2018, and September 30, 2018. 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 except as specifically stated in this press release or to the extent required by law.

About Non-GAAP Financial Measures

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, discounts and intangible assets, amortization of the premium recognized on the purchase of receivables, and our proportionate share of amortization of intangible assets at our equity method investment, (c) other non-recurring items, including the impact of the 2017 Tax Cuts and Jobs Act, impairment charges, asset write-offs, restructuring costs, gains due to disposition of assets and a business, loss on extinguishment of debt, legal settlements, and the unauthorized access impact. We calculate adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. Adjusted net income is a supplemental measure of operating performance that does not represent and should not be considered as an alternative to 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 believe one-time non-recurring gains, losses, and impairment charges do not necessarily reflect how our investments and business are performing. Reconciliations of GAAP results to non-GAAP results are provided in the attached exhibit 1. A reconciliation of GAAP to non-GAAP product revenue organic growth calculation is provided in the attached exhibit 5. A reconciliation of GAAP to non-GAAP guidance is provided in the attached exhibit 6. Furthermore, a reconciliation of the impact of the Company’s adoption of the new revenue standard, ASC 606, is provided in exhibit 7.

Management uses adjusted net income:

  • as measurement of operating performance because it assists 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 net income and adjusted net income per diluted share 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 Technologies (NYSE: FLT) is a leading global provider of commercial payment solutions. The Company helps businesses of all sizes better control, simplify and secure payment of their fuel, toll, lodging and other general payables. With its proprietary payment acceptance networks, FLEETCOR provides affiliated merchants with incremental sales and loyalty. FLEETCOR serves businesses, partners and merchants in North America, Latin America, Europe, and Australasia. For more information, please visit www.FLEETCOR.com.

FLEETCOR Technologies, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
                 
    Three Months Ended December 31,   Year Ended December 31,
    2018(1)   2017   2018(1)   2017
    (Unaudited)   (Unaudited)   (Unaudited)    
Revenues, net   $ 643,422     $ 609,991     $ 2,433,492     $ 2,249,538  
                 
Expenses:                
Merchant commissions     -       30,443       -       113,133  
Processing     131,609       113,184       487,695       429,613  
Selling     46,667       47,863       182,593       170,717  
General and administrative     104,453       112,648       389,172       387,694  
Depreciation and amortization     67,230       65,829       274,609       264,560  
Other operating, net     8,725       12       8,725       61  
Operating income     284,738       240,012       1,090,698       883,760  
Investment loss     -       667       7,147       53,164  
Other (income) expense, net     (152,630 )     190       (152,166 )     (173,436 )
Interest expense, net     38,207       30,825       138,494       107,146  
Loss on extinguishment of debt     2,098       -       2,098       3,296  
Total other (income) expense     (112,325 )     31,682       (4,427 )     (9,830 )
Income before income taxes     397,063       208,330      

1,095,125

      893,590  
Provision for income taxes     95,063       (74,366 )     283,642       153,390  
Net income   $ 302,000     $ 282,696     $ 811,483     $ 740,200  
                 
Basic earnings per share   $ 3.45     $ 3.15     $ 9.14     $ 8.12  
Diluted earnings per share   $ 3.33     $ 3.05     $ 8.81     $ 7.91  
                 
Weighted average shares outstanding:                
Basic shares     87,636       89,676       88,750       91,129  
Diluted shares     90,703       92,623       92,151       93,594  
                 
1 Reflects the impact of the Company's adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (ASC 606) and related cost capitalization guidance,which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effect of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606. See exhibit 7 for a reconciliation of the impact of adoption of ASC 606.
FLEETCOR Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
 
    December 31, 20181   December 31, 2017
    (Unaudited)      
Assets          
           
Current assets:          
Cash and cash equivalents   $ 1,034,521       $ 913,595  
Restricted cash     313,379         217,275  
Accounts and other receivables (less allowance for doubtful accounts of $59,963 at December 31, 2018 and $46,031 at December 31, 2017, respectively)   1,422,439         1,420,011  
Securitized accounts receivable - restricted for securitization investors     886,000         811,000  
Prepaid expenses and other current assets     199,278         187,820  
           
Total current assets     3,855,617         3,549,701  
           
Property and equipment, net     186,201         180,057  
Goodwill     4,542,074         4,715,823  
Other intangibles, net     2,407,910         2,724,957  
Investments     42,674         32,859  
Other assets     147,632         114,962  
           
Total assets   $ 11,182,108       $ 11,318,359  
           
Liabilities and Stockholders’ Equity          
           
Current liabilities:          
Accounts payable   $ 1,117,649       $ 1,437,314  
Accrued expenses     261,594         238,472  
Customer deposits     906,316         732,171  
Securitization facility     886,000         811,000  
Current portion of notes payable and lines of credit     1,184,616         805,512  
Other current liabilities     118,669         71,033  
           
Total current liabilities     4,474,844         4,095,502  
           
Notes payable and other obligations, less current portion     2,748,431         2,902,104  
Deferred income taxes     491,946         518,912  
Other noncurrent liabilities     126,707         125,319  
           
Total noncurrent liabilities     3,367,084         3,546,335  
           
Commitments and contingencies          
           
Stockholders’ equity:          
Common stock, $0.001 par value; 475,000,000 shares authorized; 123,035,859 shares issued and 85,845,344 shares outstanding at December 31, 2018; and 122,083,059 shares issued and 89,803,982 shares outstanding at December 31, 2017   123         122  
Additional paid-in capital     2,306,843         2,214,224  
Retained earnings     3,817,656         2,958,921  
Accumulated other comprehensive loss     (913,858 )       (551,857 )
Less treasury stock, 37,190,515 shares at December 31, 2018 and 32,279,077 shares at December 31, 2017   (1,870,584 )       (944,888 )
           
Total stockholders’ equity     3,340,180         3,676,522  
           
Total liabilities and stockholders’ equity   $ 11,182,108       $ 11,318,359  
           
1 Reflects the impact of the Company's adoption of ASC 606 and related cost capitalization guidance, which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effect of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606. See exhibit 7 for a reconciliation of the impact of adoption of ASC 606.
FLEETCOR Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
 
    Year Ended December 31,
    2018(1)   2017(1)
    (Unaudited)    
Operating activities        
Net income   $ 811,483     $ 740,200  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation     52,936       46,599  
Stock-based compensation     69,939       93,297  
Provision for losses on accounts receivable     64,377       44,857  
Amortization of deferred financing costs and discounts     5,342       6,952  
Amortization of intangible assets     216,330       211,849  
Amortization of premium on receivables     5,343       6,112  
Loss on extinguishment of debt     2,098       3,296  
Loss on write-off of fixed assets     8,793       -  
Deferred income taxes     23,608       (247,712 )
Investment loss     7,147       53,164  
Gain on sale of assets/business     (152,750 )     (174,983 )
Other non-cash operating income     (186 )     (61 )
Changes in operating assets and liabilities (net of acquisitions/dispositions):        
Accounts and other receivables     (155,648 )     (431,003 )
Prepaid expenses and other current assets     (27,650 )     26,102  
Other assets     (25,432 )     (20,957 )
Accounts payable, accrued expenses and customer deposits     (19,341 )     322,346  
Net cash provided by operating activities     886,389       680,058  
         
         
Investing activities        
Acquisitions, net of cash acquired     (20,843 )     (705,257 )
Purchases of property and equipment     (81,387 )     (70,093 )
Proceeds from disposal of assets/business     98,735       316,501  
Other     (22,775 )     (38,953 )
Net cash used in investing activities     (26,270 )     (497,802 )
         
         
Financing activities        
Proceeds from issuance of common stock     55,680       44,690  
Repurchase of common stock     (958,696 )     (402,393 )
Borrowings on securitization facility, net     75,000       220,000  
Deferred financing costs paid and debt discount     (4,927 )     (12,908 )
Proceeds from issuance of notes payable     467,503       780,656  
Principal payments on notes payable     (602,378 )     (423,156 )
Borrowings from revolver     1,404,019       1,100,000  
Payments on revolver     (1,009,968 )     (1,031,722 )
Payments on swing line of credit, net     (4,935 )     (23,686 )
Other     887       457  
Net cash (used in) provided by financing activities     (577,815 )     251,938  
         
Effect of foreign currency exchange rates on cash     (65,274 )     52,906  
         
Net increase in cash and cash equivalents and restricted cash    

217,030

      487,100  
Cash and cash equivalents and restricted cash, beginning of year     1,130,870       643,770  
Cash and cash equivalents and restricted cash, end of year   $

1,347,900

    $ 1,130,870  
         
Supplemental cash flow information        
Cash paid for interest   $ 156,749     $ 113,416  
         
Cash paid for income taxes   $ 207,504     $ 392,192  
         
Non cash investing activity, notes assumed in acquisitions   $ -     $ 29,341  
         

1 Reflects the impact of the Company's adoption of Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230), which was adopted by the Company on January 1, 2018 and applied retrospectively to results for 2017.  The adoption of Topic 230 resulted in the statement of cash flows presenting the changes in the total of cash, cash equivalents and restricted cash.  As a result, the Company will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows.

Exhibit 1
RECONCILIATION OF NON-GAAP MEASURES
(In thousands, except shares and per share amounts)
(Unaudited)
                   
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,
      2018     2017     2018       2017  
Net income   $ 302,000     $ 282,696       $ 811,483     $ 740,200  
                   
Stock based compensation     15,732       24,400         69,939       93,297  
Amortization of intangible assets, premium on receivables, deferred financing costs and discounts   53,776       55,893         227,015       233,280  
Impairment of investment     -       -         7,147       44,600  
Net gain on disposition of assets/business     (152,750 )     -         (152,750 )     (109,205 )
Loss on write-off of fixed assets     8,793       -         8,793       -  
Loss on extinguishment of debt     2,098       -         2,098       3,296  
Non recurring loss due to merger of entities     -       -         -       2,028  
Legal settlements     5,500       11,000         5,500       11,000  
Restructuring costs     1,052       1,043         4,969       1,043  
Unauthorized access impact     -       -         2,065       -  
Total pre-tax adjustments     (65,799 )     92,336         174,777       279,339  
                   
Income tax impact of pre-tax adjustments at the effective tax rate     15,753       (23,453 )

(1)

    (39,151 )     (93,164 )
Impact of tax reform     -       (127,466 )       22,731       (127,466 )
                   
Adjusted net income   $ 251,954     $ 224,113       $ 969,839     $ 798,909  
Adjusted net income per diluted share   $ 2.78     $ 2.42       $

10.53

    $ 8.54  
                   
Diluted shares     90,703       92,623         92,151       93,594  
                   
                   
1 Excludes the results of the Company's investments on our effective tax rate, as results from our investments are reported within the consolidated statements of income on a post-tax basis and no tax-over-book outside basis differences related to our investments reversed during 2017. Excludes impact of tax reform adjustments during the period included in our effective tax rate. Also excludes the net gain realized upon our disposition of Nextraq, representing a pretax gain of $175.0 million and tax on gain of $65.8 million. The tax on the gain is included in "Net gain on disposition of assets/business".
* Columns may not calculate due to rounding.
 
Exhibit 2
Transaction Volume and Revenues Per Transaction by Segment and by Product Category, on a GAAP Basis and Pro Forma and Macro Adjusted

and Pro Forma and Macro Adjusted

(In millions except revenues, net per transaction)
(Unaudited)
The following table presents revenue and revenue per transaction, by segment.*
                                 
    As Reported   As Reported and Pro Forma for Impact of

Adoption of ASC 606

    Three Months Ended December 31,   Three Months Ended December 31,
      2018(1 )     2017   Change % Change     2018(1 )     2017(1 )   Change   % Change  
                                 

NORTH AMERICA

                               
- Transactions     531.7       541.3     (9.7 )   (2 %)     531.7       541.3       (9.7 )   (2 %)
- Revenues, net per transaction   $ 0.80     $ 0.72   $ 0.08     11 %   $ 0.80     $ 0.68     $ 0.12     18 %
- Revenues, net   $ 423.4     $ 387.8   $ 35.7     9 %   $ 423.4     $ 365.5     $ 58.0     16 %
                                 
INTERNATIONAL                                
- Transactions2     288.4       286.5     2.0     1 %     288.4       286.5       2.0     1 %
- Revenues, net per transaction   $ 0.76     $ 0.78   $ (0.01 )   (2 %)   $ 0.76     $ 0.76     $ 0.01     1 %
- Revenues, net   $ 220.0     $ 222.2   $ (2.2 )   (1 %)   $ 220.0     $ 217.0     $ 3.0     1 %
                                 
                                 

FLEETCOR CONSOLIDATED REVENUES

                             
- Transactions     820.1       827.8     (7.7 )   (1 %)     820.1       827.8       (7.7 )   (1 %)
- Revenues, net per transaction   $ 0.78     $ 0.74   $ 0.05     6 %   $ 0.78     $ 0.70     $ 0.08     12 %
- Revenues, net   $ 643.4     $ 610.0   $ 33.4     5 %   $ 643.4     $ 582.5     $ 61.0     10 %
                                 
The following table presents revenue and revenue per transaction, by product category.*
    As Reported   Pro Forma and Macro Adjusted4
    Three Months Ended December 31,   Three Months Ended December 31,
      2018(1 )     2017   Change % Change     2018(1 )     2017(1 )   Change   % Change  
                                 

FUEL

                               
- Transactions     121.3       119.0     2.3     2 %     121.3       119.0       2.3     2 %
- Revenues, net per transaction   $ 2.40     $ 2.36   $ 0.04     2 %   $ 2.27     $ 2.12     $ 0.15     7 %
- Revenues, net   $ 291.4     $ 281.4   $ 10.1     4 %   $ 275.7     $ 252.3     $ 23.5     9 %
                                 

CORPORATE PAYMENTS

                               
- Transactions     13.6       10.8     2.8     26 %     13.6       10.8       2.8     26 %
- Revenues, net per transaction   $ 8.54     $ 8.58   $ (0.04 )   (0 %)   $ 8.61     $ 8.77     $ (0.16 )   (2 %)
- Revenues, net   $ 116.0     $ 92.6   $ 23.4     25 %   $ 116.9     $ 94.7     $ 22.2     24 %
                                 

TOLLS

                               
- Transactions2     229.8       234.6     (4.8 )   (2 %)     229.8       234.6       (4.8 )   (2 %)
- Revenues, net per transaction   $ 0.38     $ 0.39   $ (0.00 )   (1 %)   $ 0.45     $ 0.39     $ 0.06     16 %
- Revenues, net   $ 88.2     $ 91.1   $ (2.9 )   (3 %)   $ 103.4     $ 91.1     $ 12.3     13 %
                                 

LODGING

                               
- Transactions     4.5       6.3     (1.8 )   (29 %)     4.5       6.4       (1.9 )   (30 %)
- Revenues, net per transaction   $ 9.71     $ 6.44   $ 3.27     51 %   $ 9.71     $ 6.51     $ 3.21     49 %
- Revenues, net   $ 43.4     $ 40.7   $ 2.7     7 %   $ 43.4     $ 41.7     $ 1.7     4 %
                                 

GIFT

                               
- Transactions     432.3       438.5     (6.2 )   (1 %)     432.3       438.5       (6.2 )   (1 %)
- Revenues, net per transaction   $ 0.11     $ 0.11   $ (0.00 )   (2 %)   $ 0.11     $ 0.11     $ (0.00 )   (2 %)
- Revenues, net   $ 48.0     $ 49.6   $ (1.6 )   (3 %)   $ 48.0     $ 49.6     $ (1.6 )   (3 %)
                                 

OTHER3

                               
- Transactions     18.7       18.6     0.1     1 %     18.7       18.6       0.1     1 %
- Revenues, net per transaction   $ 3.01     $ 2.93   $ 0.08     3 %   $ 3.12     $ 2.90     $ 0.22     8 %
- Revenues, net   $ 56.3     $ 54.6   $ 1.8     3 %   $ 58.5     $ 54.1     $ 4.4     8 %
                                 
                                 

FLEETCOR CONSOLIDATED REVENUES

                             
- Transactions     820.1       827.8     (7.7 )   (1 %)     820.1       827.9       (7.8 )   (1 %)
- Revenues, net per transaction   $ 0.78     $ 0.74   $ 0.05     6 %   $ 0.79     $ 0.70     $ 0.08     12 %
- Revenues, net   $ 643.4     $ 610.0   $ 33.4     5 %   $ 646.0     $ 583.5     $ 62.5     11 %
                                 

1 Reflects the impact of the Company's adoption of ASC 606 and related cost capitalization guidance, which was adopted by the Company on January 1, 2018 using the modified retrospective transition method.  The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effect of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues.  As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606.  For  purposes of comparability, 2017 revenue has been recast in this exhibit and is reconciled to GAAP in Exhibit 5, which includes certain estimates and assumptions made by the Company for the impact of ASC 606 on 2017 revenues, as the Company did not apply a full retrospective adoption. 

2 Reflects adjustments from previously disclosed amounts for the prior period to conform to current presentation.

3 Other includes telematics, maintenance, food, and transportation related businesses.


4 See Exhibit 5 for a reconciliation of Pro forma and Macro Adjusted revenue by product, non gaap measures, to the gaap equivalent.


* Columns may not calculate due to rounding.

Exhibit 3
Revenues by Geography, Product and Source
(In millions)
(Unaudited)
                                   

Revenue by Geography*

  Three Months Ended December 31,   Year Ended December 31,
      2018(1)   %     2017   %     2018(1)   %     2017   %  
                                   
  US   $ 400     62 %   $ 370   61 %   $ 1,482     61 %   $ 1,401   62 %
  Brazil     104     16 %     108   18 %     400     16 %     395   18 %
  UK     65     10 %     63   10 %     258     11 %     237   11 %
  Other     74     12 %     70   11 %     294     12 %     218   10 %
                                   
  Consolidated Revenues, net   $ 643     100 %   $ 610   100 %   $ 2,433     100 %   $ 2,250   100 %
* Columns may not calculate due to rounding.
                                   

Revenue by Product Category*

  Three Months Ended December 31,   Year Ended December 31,
      2018(1)   %     2017   %     2018(1)   %     2017   %  
                                   
  Fuel   $ 291     45 %   $ 281   46 %   $ 1,097     45 %   $ 1,096   49 %
  Corporate Payments     116     18 %     93   15 %     416     17 %     262   12 %
  Tolls     88     14 %     91   15 %     339     14 %     327   15 %
  Lodging     43     7 %     41   7 %     176     7 %     127   6 %
  Gift     48     7 %     50   8 %     187     8 %     194   9 %
  Other     56     9 %     55   9 %     220     9 %     244   11 %
                                   
  Consolidated Revenues, net   $ 643     100 %   $ 610   100 %   $ 2,433     100 %   $ 2,250   100 %
* Columns may not calculate due to rounding.
                                   

Major Sources of Revenue9

  Three Months Ended December 31,   Year Ended December 31,
      2018(1)   %     2017   %     2018(1)   %     2017   %  
                                   
  Processing and Program Revenue2   $ 320     50 %   $ 313   51 %   $ 1,253     51 %   $ 1,093   49 %
  Late Fees and Finance Charges3     43     7 %     36   6 %     152     6 %     141   6 %
  Miscellaneous Fees4     42     7 %     32   5 %     155     6 %     129   6 %
  Discount Revenue (Fuel)5     94     15 %     80   13 %     351     14 %     303   13 %
  Discount Revenue (NonFuel)6     55     9 %     45   7 %     194     8 %     175   8 %
  Tied to Fuel-Price Spreads7     35     5 %     54   9 %     120     5 %     220   10 %
  Merchant Program Revenue8     55     9 %     50   8 %     209     9 %     189   8 %
Consolidated Revenues, net   $ 643     100 %   $ 610   100 %   $ 2,433     100 %   $ 2,250   100 %
                                   
                                   
1 Reflects the impact of the Company's adoption of ASC 606and related cost capitalization guidancewhich was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effect of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606. See exhibit 7 for a reconciliation of the impact of adoption of ASC 606.
2 Includes revenue from customers based on accounts, cards, devices, transactions, load amounts and/or purchase amounts, etc. for participation in our various fleet and workforce related programs; as well as, revenue from partners (e.g., major retailers, leasing companies, oil companies, petroleum marketers, etc.) for processing and network management services. Primarily represents revenue from North American trucking, lodging, prepaid benefits, telematics, gift cards and toll related businesses.
3 Fees for late payment and interest charges for carrying a balance charged to a customer.
4 Non-standard fees charged to customers based on customer behavior or optional participation, primarily including high credit risk surcharges, over credit limit charges, minimum processing fees, printing and mailing fees, environmental fees, etc.
5Interchange revenue directly influenced by the absolute price of fuel and other interchange related to fuel products.
6 Interchange revenue related to nonfuel products.
7 Revenue derived from the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction.
8 Revenue derived primarily from the sale of equipment, software and related maintenance to merchants.
9 We may not be able to precisely calculate revenue by source, as certain estimates were made in these allocations. Columns may not calculate due to rounding.
Exhibit 4
Segment Results2
(In thousands)
                 
                 
    Three Months Ended December 31,   Year Ended December 31,
    2018(1)   2017   2018(1)   2017
    (Unaudited)   (Unaudited)   (Unaudited)    
Revenues, net:                
North America   $ 423,432     $ 387,762   $ 1,571,466     $ 1,428,711
International     219,990       222,229     862,026       820,827
    $ 643,422     $ 609,991   $ 2,433,492     $ 2,249,538
                 
Operating income:                
North America   $ 178,772     $ 147,220   $ 673,868     $ 541,598
International     105,966       92,792     416,830       342,162
    $ 284,738     $ 240,012   $ 1,090,698     $ 883,760
                 
Depreciation and amortization:                
North America   $ 38,364     $ 34,458   $ 154,405     $ 139,418
International     28,866       31,371     120,204       125,142
    $ 67,230     $ 65,829   $ 274,609     $ 264,560
                 
Capital expenditures:                
North America   $ 3,814     $ 9,846   $ 36,514     $ 40,747
International     21,261       10,788     44,873       29,346
    $ 25,075     $ 20,634   $ 81,387     $ 70,093
                 
                 
1 Reflects the impact of the Company's adoption of ASC 606 and related cost capitalization guidance,which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effect of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606. See exhibit 7 for a reconciliation of the impact of adoption of ASC 606.
2The results from our Cambridge business acquired in the third quarter of 2017 are reported in our North America segment.
Exhibit 5
Reconciliation of Non-GAAP Revenue and Transactions by Product to GAAP
(In millions)
(Unaudited)
                   
      Revenue   Transactions
      Three Months Ended December 31, Three Months Ended December 31,
      2018*   2017*   2018*   2017*
                   
 

FUEL

               
  Pro forma and macro adjusted   $ 275.7     $ 252.3     121.3   119.0  
  Impact of acquisitions/dispositions     -       -     -   -  
  Impact of fuel prices/spread     22.1       -     -   -  
  Impact of foreign exchange rates     (6.4 )     -     -   -  
  Impact of adoption of ASC 606     -       29.1     -   -  
  As reported   $ 291.4     $ 281.4     121.3   119.0  
                   
 

CORPORATE PAYMENTS

               
  Pro forma and macro adjusted   $ 116.9     $ 94.7     13.6   10.8  
  Impact of acquisitions/dispositions     -       -     -   -  
  Impact of fuel prices/spread     0.1       -     -   -  
  Impact of foreign exchange rates     (1.0 )     -     -   -  
  Impact of adoption of ASC 606     -       (2.1 )   -   -  
  As reported   $ 116.0     $ 92.6     13.6   10.8  
                   
 

TOLLS

               
  Pro forma and macro adjusted   $ 103.4     $ 91.1     229.8   234.6  
  Impact of acquisitions/dispositions     -       -     -   -  
  Impact of fuel prices/spread     -       -     -   -  
  Impact of foreign exchange rates     (15.2 )     -     -   -  
  Impact of adoption of ASC 606     -       -     -   -  
  As reported   $ 88.2     $ 91.1     229.8   234.6  
                   
 

LODGING

               
  Pro forma and macro adjusted   $ 43.4     $ 41.7     4.5   6.4  
  Impact of acquisitions/dispositions     -       (1.0 )   -   (0.1 )
  Impact of fuel prices/spread     -       -     -   -  
  Impact of foreign exchange rates     -       -     -   -  
  Impact of adoption of ASC 606     -       -     -   -  
  As reported   $ 43.4     $ 40.7     4.5   6.3  
                   
 

GIFT

               
  Pro forma and macro adjusted   $ 48.0     $ 49.6     432.3   438.5  
  Impact of acquisitions/dispositions     -       -     -   -  
  Impact of fuel prices/spread     -       -     -   -  
  Impact of foreign exchange rates     -       -     -   -  
  Impact of adoption of ASC 606     -       -     -   -  
  As reported   $ 48.0     $ 49.6     432.3   438.5  
                   
 

OTHER1

               
  Pro forma and macro adjusted   $ 58.5     $ 54.1     18.7   18.6  
  Impact of acquisitions/dispositions     -       -     -   -  
  Impact of fuel prices/spread     -       -     -   -  
  Impact of foreign exchange rates     (2.2 )     -     -   -  
  Impact of adoption of ASC 606     -       0.5     -   -  
  As reported   $ 56.3     $ 54.6     18.7   18.6  
                   
                   
 

FLEETCORCONSOLIDATED REVENUES

               
  Pro forma and macro adjusted   $ 646.0     $ 583.5     820.1   827.9  
  Impact of acquisitions/dispositions     -       (1.0 )   -   (0.1 )
  Impact of fuel prices/spread     22.2       -     -   -  
  Impact of foreign exchange rates     (24.7 )     -     -   -  
  Impact of adoption of ASC 606     -       27.5     -   -  
  As reported   $ 643.4     $ 610.0     820.1   827.8  
                   
* Columns may not calculate due to rounding.
1 Other includes telematics, maintenance and transportation related businesses.
Exhibit 6
RECONCILIATION OF NON-GAAP GUIDANCE MEASURES
(In millions, except per share amounts)
(Unaudited)        
           
The following tables reconcile first quarter and full year 2019 financial guidance for net income to adjusted net income and adjusted net income per diluted share, at both ends of the range.
           
      Q1 2019 GUIDANCE
      Low*   High*
Net income   $ 170     $ 180  
Net income per diluted share   $ 1.93     $ 2.03  
           
Stock based compensation     18       18  
Amortization of intangible assets, premium on receivables, deferred financing costs and discounts     54       54  
Total pre-tax adjustments     72       72  
           
Income tax impact of pre-tax adjustments at the effective tax rate     (17 )     (17 )
Adjusted net income   $ 225     $ 235  
Adjusted net income per diluted share   $ 2.55     $ 2.65  
           
Diluted shares     89       89  
           
      2019 GUIDANCE
      Low*   High*
Net income   $ 800     $ 830  
Net income per diluted share   $ 9.05     $ 9.35  
           
Stock based compensation     70       70  
Amortization of intangible assets, premium on receivables, deferred financing costs and discounts     209       209  
Total pre-tax adjustments     279       279  
           
Income tax impact of pre-tax adjustments at the effective tax rate     (64 )     (64 )
Adjusted net income   $ 1,015     $ 1,045  
Adjusted net income per diluted share   $ 11.40     $ 11.70  
           
Diluted shares     89       89  
           
* Columns may not calculate due to rounding.        
         
Exhibit 7
Reconciliation of Impact of Adoption of ASC 606 to the Consolidated Statement of Income
(In thousands)
(Unaudited)
             
    Three Months Ended December 31,
    2018 As Reported1   Impact of ASC 606  

2018 Prior to
Adoption

             
Revenues, net   $ 643,422     $ 36,444     $ 679,866  
             
Expenses:            
Merchant commissions     -       42,650       42,650  
Processing     131,609       (5,681 )     125,928  
Selling     46,667       1,927       48,594  
General and administrative     104,453       -       104,453  
Depreciation and amortization     67,230       -       67,230  
Other operating, net     8,725       -       8,725  
Operating income     284,738       (2,452 )     282,286  
Total other income     (112,325 )     -       (112,325 )
Income before income taxes     397,063       (2,452 )     394,611  
Provision for income taxes     95,063       (697 )     94,366  
Net income   $ 302,000     $ (1,755 )   $ 300,245  
             
1 Reflects the impact of the Company's adoption of ASC 606 and related cost capitalization guidancewhich was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effect of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606.

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