FleetCor Reports Second Quarter 2012 Financial Results

Source:
FLEETCOR Technologies, Inc.

Adjusted Net Income Increases 32% Versus Prior Year

FleetCor Raises 2012 Guidance

NORCROSS, Ga.--(BUSINESS WIRE)--Aug. 8, 2012-- FleetCor Technologies, Inc. (NYSE: FLT), a leading independent global provider of fuel cards and workforce payment products to businesses, today reported financial results for its second quarter ended June 30, 2012.

"We are extremely pleased with our second quarter results which include revenue growth of 28% and adjusted net income growth of 32%," said Ron Clarke, chairman, and chief executive officer, FleetCor Technologies, Inc. "In addition, we are pleased to have recently expanded to the Brazilian market with our acquisition of CTF Technologies as well as completing another acquisition in Russia. Both acquisitions further demonstrate our commitment to developing markets.”

Financial results for the second quarter of 2012:

GAAP Results

  • Total revenues, net in the second quarter of 2012 increased 28% to $171.8 million compared to $134.2 million in the second quarter of 2011
  • Net income in the second quarter of 2012 increased 48% to $54.4 million, or $0.63 per diluted share, compared to $36.7 million, or $0.44 per diluted share in the second quarter of 2011

Non-GAAP Results

  • Adjusted revenues1 (revenues, net less merchant commissions) in the second quarter of 2012 increased 29% to $154.3 million compared to $119.3 million in the second quarter of 2011
  • Adjusted net income1 in the second quarter of 2012 increased 32% to $63.0 million, or $0.73 per diluted share, compared to $47.8 million, or $0.57 per diluted share in the second quarter of 2011

2012 Outlook:

FleetCor Technologies, Inc. is raising its financial guidance for 2012 as follows:

  • Revenues, net between $665 million and $675 million, up from our previous guidance range of $615 million to $625 million
  • Adjusted net income1 between $235 million and $240 million, up from our previous guidance range of $217 million to $222 million; and
  • Adjusted net income1 per diluted share between $2.74 and $2.78, up from our previous guidance range of $2.55 to $2.60

The assumptions included in the guidance are as follows:

  • Fuel prices flat to current levels
  • Market spreads to return to their historic normal levels
  • A 0.4% decrease in our effective tax rate from 30.1% in 2011 to 29.7% in 2012
  • Foreign exchange rates to remain at current levels
  • An increase in fully diluted shares outstanding to 86.2 million shares
  • No impact related to future acquisitions or material new partnership agreements

“Given our strong results for the first half of the year and our recently completed acquisitions we are raising our financial guidance for 2012,” said Eric Dey, chief financial officer, FleetCor Technologies, Inc. “As we said previously, we expect our two recent acquisitions, in Brazil and Russia, to be accretive to both revenue and profit in 2012, and expect the acquisitions to add at least $0.06 to $0.07 in adjusted net income per share, including deal and restructuring costs, for the remainder of 2012.”

Conference Call

The Company will host a conference call to discuss second quarter of 2012 financial results on August 8th 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 877-941-2069, or for international callers 480-629-9713. 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 4556767. The replay will be available until Wednesday, August 15, 2012. 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" or "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, assumptions underlying financial guidance, and management's expectations regarding accretion from completed acquisitions. 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, 2011, filed with the Securities and Exchange Commission on February 29, 2012. 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 revenues, net are calculated as revenues 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 and, (d) loss on the early extinguishment of debt. 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 expenses 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 used by 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, and Europe. 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)
(Unaudited)
                       
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Revenues, net $ 171,820 $ 134,213 $ 317,985 $ 245,218
 
Expenses:
Merchant commissions 17,651 14,881 28,044 23,158
Processing 27,014 19,775 52,593 37,707
Selling 10,274 9,003 20,449 16,790
General and administrative 23,824 22,074 47,647 39,989
Depreciation and amortization   11,609     8,588     23,329   17,195  
Operating income   81,448     59,892     145,923   110,379  
Other (income) expense, net (66 ) (56 ) 522 (90 )
Interest expense, net 2,818 3,451 6,381 6,814
Loss on extinguishment of debt   -     2,669     -   2,669  
Total other expense   2,752     6,064     6,903   9,393  
Income before income taxes 78,696 53,828 139,020 100,986
Provision for income taxes   24,295     17,113     42,540   31,937  
Net income $ 54,401   $ 36,715   $ 96,480 $ 69,049  
 
Basic earnings per share $ 0.65 $ 0.46 $ 1.16 $ 0.86
Diluted earnings per share $ 0.63 $ 0.44 $ 1.13 $ 0.83
 
Weighted average shares outstanding:
Basic shares 83,294 80,151 82,929 80,044
Diluted shares 85,737 83,548 85,451 83,464
 
 

FleetCor Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets
(In thousands, except share and par value amounts)
                 
 
June 30,

2012

December 31, 20111
(Unaudited)
Assets
 
Current assets:
Cash and cash equivalents $ 255,579 $ 285,159
Restricted cash 50,127 55,762
Accounts receivable (less allowance for doubtful accounts of $17,959 and $15,315, respectively) 545,796 481,791
Securitized accounts receivable - restricted for securitization investors 325,000 280,000
Prepaid expenses and other current assets 17,505 15,416
Deferred income taxes   4,310     4,797  
 
Total current assets   1,198,317     1,122,925  
 
Property and equipment 101,875 93,380
Less accumulated depreciation and amortization   (66,198 )   (60,656 )
 
Net property and equipment 35,677 32,724
 
Goodwill 775,749 760,872
Other intangibles, net 408,731 379,907
Other assets   86,215     45,834  
 
Total assets $ 2,504,689   $ 2,342,262  
 
Liabilities and Stockholders’ Equity
 
Current liabilities:
Accounts payable $ 474,837 $ 478,882
Accrued expenses 34,857 41,565
Customer deposits 170,640 180,269
Securitization facility 325,000 280,000
Current portion of notes payable and other obligations   129,873     140,354  
 
Total current liabilities   1,135,207     1,121,070  
 
Notes payable and other obligations, less current portion 285,950 278,429
Deferred income taxes   141,612     131,327  
 
Total noncurrent liabilities   427,562     409,756  
 
Commitments and contingencies
 
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized, 115,390,487 shares issued and 83,508,817 shares outstanding at June 30, 2012; and 475,000,000 shares authorized, 113,741,883 shares issued and 81,860,213 shares outstanding at December 31, 2011 115 114
Additional paid-in capital 500,331 466,203
Retained earnings 630,978 534,498
Accumulated other comprehensive loss (13,841 ) (13,716 )
Less treasury stock, 31,881,670 shares at June 30, 2012 and December 31, 2011 (175,663 ) (175,663 )
   
Total stockholders’ equity   941,920     811,436  
 
Total liabilities and stockholders’ equity $ 2,504,689   $ 2,342,262  
 

1 Certain prior period amounts have been recast in connection with ASC 805, Business Combinations.

 
 
FleetCor Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
       
Six Months Ended June 30,
2012 2011
Operating activities
Net income $ 96,480 $ 69,049
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation 6,288 5,531
Stock-based compensation 7,793 11,983
Provision for losses on accounts receivable 10,953 8,771
Amortization of deferred financing costs 1,051 843
Amortization of intangible assets 14,357 9,187
Amortization of premium on receivables 1,633 1,634
Deferred income taxes (167 ) (765 )
Loss on extinguishment of debt - 2,669
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash 5,635 (667 )
Accounts receivable (117,325 ) (154,408 )
Prepaid expenses and other current assets 2,808 (4,608 )
Other assets (42,268 ) (1,114 )
Excess tax benefits related to stock-based compensation (14,750 ) (1,821 )
Accounts payable, accrued expenses and customer deposits   (9,286 )   56,170  
Net cash (used in) provided by operating activities   (36,798 )   2,454  
 
Investing activities
Acquisitions, net of cash acquired (35,490 ) (785 )
Purchases of property and equipment   (8,431 )   (5,916 )
Net cash used in investing activities   (43,921 )   (6,701 )
 
Financing activities
Excess tax benefits related to stock-based compensation 14,750 1,821
Borrowings on securitization facility, net 45,000 18,000
Deferred financing costs paid (795 ) (7,736 )
Proceeds from issuance of common stock 11,584 855
Principal payments on notes payable (7,500 ) (331,465 )
Borrowings on notes payable - 300,000
Borrowings from revolver 145,000 -
Payments on revolver, net (185,000 ) -
Borrowings on swing line of credit, net 26,862 -
Other   -     (179 )
Net cash provided by (used in) financing activities   49,901     (18,704 )
   
Effect of foreign currency exchange rates on cash   1,238     9,347  
 
Net increase in cash and cash equivalents (29,580 ) (13,604 )
Cash and cash equivalents, beginning of period 285,159 114,804
   
Cash and cash equivalents, end of period $ 255,579   $ 101,200  
 
Supplemental cash flow information
Cash paid for interest $ 7,209   $ 4,335  
 
Cash paid for income taxes $ 24,164   $ 20,284  
 
 
Exhibit 1
RECONCILIATION OF NON-GAAP MEASURES
(In thousands, except per share amounts)
(Unaudited)
                               
  The following table reconciles revenues, net to adjusted revenues:
               
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
 
Revenues, net $ 171,820 $ 134,213 $ 317,985 $ 245,218
Merchant commissions   17,561     14,881     28,044     23,158  
Total adjusted revenues $ 154,259   $ 119,332   $ 289,941   $ 222,060  
 
                               
The following table reconciles net income to adjusted net income and adjusted net income per diluted share:
 
Three Months Ended June 30, Six Months Ended June 30, Year Ended
2012 2011 2012 2011 2011
Net income $ 54,401 $ 36,715 $ 96,480 $ 69,049 $ 147,335
 
Stock based compensation 3,960 7,842 7,793 11,983 21,743
Amortization of intangible assets 7,081 4,587 14,357 9,187 19,590
Amortization of premium on receivables 817 818 1,633 1,634 3,266
Amortization of deferred financing costs 541 377 1,051 843 1,864
Loss on extinguishment of debt   -     2,669     -     2,669     2,669  
Total pre-tax adjustments 12,399 16,293 24,834 26,316 49,132
 
Income tax impact of pre-tax adjustments at the effective tax rate (3,828 ) (5,180 ) (7,599 ) (8,322 ) (14,805 )
         
Adjusted net income $ 62,972   $ 47,828   $ 113,715   $ 87,043   $ 181,662  
Adjusted net income per diluted share $ 0.73 $ 0.57 $ 1.33 $ 1.04 $ 2.17
 
Diluted shares 85,737 83,548 85,451 83,464 83,654
 
 
Exhibit 2
Key Operating Metrics
(In thousands, except revenues, net per transaction and adjusted revenues per transaction)
(Unaudited)
                             

Transaction Volume, Revenues and Adjusted Revenue, Per Transaction and by Segment

 
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 Change % Change 2012 2011 Change % Change
 

NORTH AMERICA

- Transactions 39,336 38,625 711 1.8 % 76,001 74,782 1,219 1.6 %
- Revenues, net per transaction $ 2.73 $ 2.40 $ 0.33 13.8 % $ 2.50 $ 2.20 $ 0.30 13.6 %
- Revenues, net $ 107,286 $ 92,865 $ 14,421 15.5 % $ 190,098 $ 164,449 $ 25,649 15.6 %
 

INTERNATIONAL2

- Transactions2 34,903 11,108 23,795 214.2 % 70,112 21,920 48,192 219.9 %
- Revenues, net per transaction2 $ 1.85 $ 3.72 $ (1.87 ) -50.3 % $ 1.82 $ 3.68 $ (1.86 ) -50.5 %
- Revenues, net $ 64,534 $ 41,348 $ 23,186 56.1 % $ 127,887 $ 80,769 $ 47,118 58.3 %
                                                 
 

FLEETCOR CONSOLIDATED REVENUES2

- Transactions2 74,239 49,733 24,506 49.3 % 146,113 96,702 49,411 51.1 %
- Revenues, net per transaction2 $ 2.31 $ 2.70 $ (0.39 ) -14.4 % $ 2.18 $ 2.54 $ (0.36 ) -14.2 %
- Revenues, net $ 171,820 $ 134,213 $ 37,607 28.0 % $ 317,985 $ 245,218 $ 72,767 29.7 %
                                                 
                                                 
 

FLEETCOR CONSOLIDATED ADJUSTED REVENUES1,2

- Transactions2 74,239 49,733 24,506 49.3 % 146,113 96,702 49,411 51.1 %
- Adjusted Revenues per transaction2 $ 2.08 $ 2.40 $ (0.32 ) -13.3 % $ 1.98 $ 2.30 $ (0.32 ) -13.9 %
- Adjusted Revenues $ 154,259 $ 119,332 $ 34,927 29.3 % $ 289,941 $ 222,060 $ 67,881 30.6 %
                                                 
 

1 Adjusted 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.

 

2 The presentation of prior quarters presented herein has been conformed to the current period presentation that eliminates certain intercompany transactions.

 

Sources of Revenue3

Three Months Ended June 30, Six Months Ended June 30,
2012 2011 Change % Change 2012 2011 Change % Change
Revenue from customers and partners 40.8 % 47.3 % -6.5 % -13.7 % 44.7 % 51.0 % -6.3 % -12.4 %
Revenue from merchants and networks 59.2 % 52.7 % 6.5 % 12.3 % 55.3 % 49.0 % 6.3 % 12.9 %
 
Revenue tied to fuel-price spreads 23.5 % 21.5 % 2.0 % 9.3 % 19.7 % 19.2 % 0.5 % 2.6 %
Revenue influenced by absolute price of fuel 19.2 % 25.6 % -6.4 % -25.0 % 19.2 % 24.0 % -4.8 % -20.0 %
Revenue from program fees, late fees, interest and other 57.3 % 52.9 % 4.4 % 8.3 % 61.1 % 56.8 % 4.3 % 7.6 %
 

3 Expressed as a percentage of consolidated revenue.

 
             
Exhibit 3
GAAP Segment Results
(In thousands)
(Unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Revenues, net:
North America $ 107,286 $ 92,865 $ 190,098 $ 164,449
International1   64,534   41,348   127,887   80,769
$ 171,820 $ 134,213 $ 317,985 $ 245,218
 
Operating income:
North America $ 53,598 $ 40,471 $ 91,711 $ 71,990
International1   27,850   19,421   54,212   38,389
$ 81,448 $ 59,892 $ 145,923 $ 110,379
 
Depreciation and amortization:
North America $ 5,024 $ 4,889 $ 10,018 $ 9,831
International1   6,585   3,699   13,311   7,364
$ 11,609 $ 8,588 $ 23,329 $ 17,195
 
Capital expenditures:
North America $ 2,501 $ 1,347 $ 4,596 $ 2,834
International1   2,367   1,975   3,835   3,082
$ 4,868 $ 3,322 $ 8,431 $ 5,916
 

1 The results from our Mexican business acquired during the third quarter of 2011, Allstar business acquired during the fourth quarter of 2011 and Russian business acquired in the second quarter of 2012 are reported in our International segment.

Source: FleetCor Technologies, Inc.

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


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