FleetCor Reports Third Quarter 2015 Financial Results

Source:
FLEETCOR Technologies, Inc.

Adjusted Net Income Per Share Grows 22% Year-Over-Year

NORCROSS, Ga.--(BUSINESS WIRE)--Nov. 4, 2015-- FleetCor Technologies, Inc. (NYSE:FLT), a leading global provider of fuel cards and workforce payment products to businesses, today reported financial results for its third quarter ended September 30, 2015.

“We reported solid third quarter results, despite the continuation of an unfavorable macro-environment. Importantly, our fundamentals were strong, organic revenue growth was approximately 9% in the quarter, on a constant fuel price, spread and foreign exchange rate basis, excluding SVS,” said Ron Clarke, chairman and chief executive officer, FleetCor Technologies, Inc. “We are maintaining our full year 2015 guidance range of $6.18 - $6.26 in adjusted net income per share.”

Financial Results for Third Quarter 2015:

GAAP Results

  • Total revenues increased 53% to $451.5 million in the third quarter of 2015 compared to $295.3 million in the third quarter of 2014.
  • GAAP net income1 increased 22% to $116.8 million or $1.24 per diluted share in the third quarter of 2015 compared to GAAP net income of $95.5 million or $1.11 per diluted share in the third quarter of 2014.

Non-GAAP Results

  • Adjusted revenues1 (revenues, net less merchant commissions) increased 55% to $419.8 million in the third quarter of 2015 compared to $270.3 million in the third quarter of 2014.
  • Adjusted net income1 increased 34% to $157.6 million in the third quarter of 2015 compared to $117.6 million in the third quarter of 2014.
  • Adjusted net income per diluted share1 increased 22% to $1.67 in the third quarter of 2015 compared to $1.37 in the third quarter of 2014.

Fiscal Year 2015 Outlook:

“During the third quarter of 2015, unfavorable macro-economic headwinds negatively impacted our business by approximately $0.28 in adjusted net income per diluted share compared to the third quarter of last year. Also, in the third quarter we recorded a net favorable tax adjustment which added approximately $0.06 to $0.07 in adjusted net income per diluted share on top of our previous guidance for the third quarter,” said Eric Dey, chief financial officer, FleetCor Technologies, Inc. “Our fiscal year 2015 guidance assumes that the impact of declining fuel prices and foreign exchange rates will continue in the fourth quarter and provide an additional unfavorable impact of approximately $0.05 to $0.07 in adjusted net income per diluted share versus the guidance we provided on the second quarter earnings call.”

For fiscal year 2015, FleetCor Technologies, Inc. financial guidance and assumptions are as follows:

  • Total revenues between $1,680 million and $1,720 million;
  • Adjusted net income between $580 million and $590 million; and
  • Adjusted net income per diluted share between $6.18 and $6.26;

FleetCor’s fiscal-year guidance assumptions for 2015 are as follows:

  • Weighted average fuel prices of approximately $2.45 for the fourth quarter of 2015 in the U.S. compared to approximately $3.30 per gallon average in the U.S. in the fourth quarter of 2014, down approximately 25%.
  • Market spreads lower in the fourth quarter of 2015 compared to the record spreads in the fourth quarter of 2014.
  • Foreign exchange rates equal to the October 1 through October 12 average, a negative impact to revenue of approximately $15 million to $18 million compared to the fourth quarter of 2014.
  • SVS business is retained for the remainder of the year.
  • Fully diluted shares outstanding of 94.3 million shares.
  • Full year tax rate of approximately 31.5% to 32.0%.
  • No impact related to acquisitions or material new partnership agreements not already disclosed.

Conference Call

The company will host a conference call to discuss third quarter 2015 financial results today at 5:00pm ET. Hosting the call will be Ron Clarke, chief executive officer, and Eric Dey, chief financial officer. The conference call can be accessed live over the phone by dialing (877) 407-0784, or for international callers (201) 689-8560. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 13623462. The replay will be available until November 11, 2015. The call will be webcast live from the company's investor relations website at investor.fleetcor.com.

Forward-Looking Statements

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

About Non-GAAP Financial Measures

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

Management uses adjusted revenues and adjusted net income:

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

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

About FleetCor

FleetCor is a leading global provider of fuel cards and workforce payment products to businesses. FleetCor's payment programs enable businesses to better control employee spending and provide card-accepting merchants with a 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.

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
Unaudited Consolidated Statements of Income
(In thousands, except per share amounts)
 
  Three Months Ended September 30,   Nine Months Ended September 30,

2015

 

2014

2015

 

2014

 
Revenues, net $ 451,493 $ 295,283 $ 1,272,264 $ 822,693
 
Expenses:
Merchant commissions 31,726 25,014 80,777 62,964
Processing 90,959 41,451 246,879 117,152
Selling 27,383 17,950 81,011 52,885
General and administrative 64,439 40,947 196,777 122,304
Depreciation and amortization   48,526     25,714     145,435     74,561  
Operating income   188,460     144,207     521,385     392,827  
Equity method investment loss 6,108 2,200 13,926 3,689
Other (income) expense, net (168 ) 594 2,345 870
Interest expense, net   17,163     4,859     54,818     15,628  
Total other expense   23,103     7,653     71,089     20,187  
Income before income taxes 165,357 136,554 450,296 372,640
Provision for income taxes   48,587     41,045     140,695     113,473  
Net income $ 116,770   $ 95,509   $ 309,601   $ 259,167  
 
Basic earnings per share $ 1.27 $ 1.14 $ 3.37 $ 3.12
Diluted earnings per share $ 1.24 $ 1.11 $ 3.29 $ 3.02
 
Weighted average shares outstanding:
Basic shares 92,110 83,611 91,923 83,118
Diluted shares 94,157 86,134 94,069 85,688
 
FleetCor Technologies, Inc. and subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
 
  September 30, 2015   December 31, 2014
(Unaudited)
Assets
 
Current assets:
Cash and cash equivalents $ 422,390 $ 477,069
Restricted cash 129,446 135,144
Accounts receivable (less allowance for doubtful accounts of $22,543 and $23,842, respectively) 731,957 673,797
Securitized accounts receivable - restricted for securitization investors 665,000 675,000
Prepaid expenses and other current assets 51,669 74,889
Deferred income taxes   33,081     101,451  
 
Total current assets   2,033,543     2,137,350  
 
Property and equipment 154,987 135,062
Less accumulated depreciation and amortization   (79,127 )   (61,499 )
 
Net property and equipment 75,860 73,563
 
Goodwill 3,712,326 3,811,862
Other intangibles, net 2,270,524 2,437,367
Equity method investment 125,176 141,933
Other assets   67,704     72,431  
 
Total assets $ 8,285,133   $ 8,674,506  
 
Liabilities and Stockholders’ Equity
 
Current liabilities:
Accounts payable $ 760,413 $ 716,676
Accrued expenses 178,974 178,375
Customer deposits 461,958 492,257
Securitization facility 665,000 675,000
Current portion of notes payable and other obligations 336,624 749,764
Other current liabilities   38,290     84,546  
 
Total current liabilities   2,441,259     2,896,618  
 
Notes payable and other obligations, less current portion 2,086,664 2,168,953
Deferred income taxes 759,871 815,169
Other noncurrent liabilities   34,768     40,629  
 
Total noncurrent liabilities   2,881,303     3,024,751  
 
Commitments and contingencies
 
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized, 120,323,916 shares issued and 92,161,210 shares outstanding at September 30, 2015; and 475,000,000 shares authorized, 119,771,155 shares issued and 91,662,043 shares outstanding at December 31, 2014 120 120
Additional paid-in capital 1,935,262 1,852,442
Retained earnings 1,713,506 1,403,905
Accumulated other comprehensive loss (332,610 ) (156,933 )
Less treasury stock, 28,162,706 and 28,109,112 shares at September 30, 2015 and December 31, 2014, respectively (353,707 ) (346,397 )
   
Total stockholders’ equity   2,962,571     2,753,137  
 
Total liabilities and stockholders’ equity $ 8,285,133   $ 8,674,506  
 
FleetCor Technologies, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(In Thousands)
 
  Nine Months Ended September 30,
2015   2014
 
Operating activities
Net income $ 309,601 $ 259,167
Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation 22,941 14,780
Stock-based compensation 44,387 26,292
Provision for losses on accounts receivable 18,287 18,109
Amortization of deferred financing costs and discounts 5,295 1,599
Amortization of intangible assets 120,055 55,737
Amortization of premium on receivables 2,439 2,445
Deferred income taxes (27,640 ) (1,280 )
Equity method investment loss 13,926 3,689
Other non-cash operating expenses (4,739 ) -
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash 5,697 6,109
Accounts receivable (71,310 ) (137,942 )
Prepaid expenses and other current assets 2,724 (3,036 )
Other assets (3,297 ) 460
Excess tax benefits related to stock-based compensation (24,455 ) (53,251 )
Accounts payable, accrued expenses and customer deposits   108,278     124,614  
Net cash provided by operating activities   522,189     317,492  
 
 
Investing activities
Acquisitions, net of cash acquired (17,021 ) (261,919 )
Purchases of property and equipment   (29,526 )   (18,279 )
Net cash used in investing activities   (46,547 )   (280,198 )
 
 
Financing activities
Excess tax benefits related to stock-based compensation 24,455 53,251
Proceeds from issuance of common stock 13,977 21,922
Borrowings on securitization facility, net (10,000 ) 44,600
Deferred financing costs paid - (546 )
Principal payments on notes payable (77,625 ) (20,625 )

Borrowings from revolver- A Facility

- 182,330

Payments on revolver- A Facility

(411,818 ) (381,385 )
Payments on foreign revolver- B Facility - (7,337 )
Borrowings on swing line of credit, net (601 ) 52,059
Payment of contingent consideration (40,310 ) -
Other   1,921     (462 )
Net cash used in financing activities   (500,001 )   (56,193 )
   
Effect of foreign currency exchange rates on cash   (30,320 )   (15,097 )
 
Net decrease in cash and cash equivalents (54,679 ) (33,996 )
Cash and cash equivalents, beginning of period   477,069     338,105  
Cash and cash equivalents, end of period $ 422,390   $ 304,109  
 
Supplemental cash flow information
Cash paid for interest $ 55,959   $ 19,238  
 
Cash paid for income taxes $ 47,339   $ 63,553  
 
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 September 30, Nine Months Ended September 30,
2015   2014 2015   2014
 
Revenues, net $ 451,493 $ 295,283 $ 1,272,264 $ 822,693
Merchant commissions   31,726     25,014     80,777     62,964  
Total adjusted revenues $ 419,767   $ 270,269   $ 1,191,487   $ 759,729  
 
 
The following table reconciles net income to adjusted net income and adjusted net income per diluted share:
 
Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Net income $ 116,770 $ 95,509 $ 309,601 $ 259,167
 
Stock based compensation 13,887 7,993 44,387 26,292
Amortization of intangible assets 39,869 19,255 120,055 55,737
Amortization of premium on receivables 812 815 2,439 2,445
Amortization of deferred financing costs and discounts 1,778 537 5,295 1,599
Amortization of intangibles at equity method investment 3,032 3,021 8,404 5,158
       
Total pre-tax adjustments 59,378 31,621 180,580 91,231
 
Income tax impact of pre-tax adjustments at the effective tax rate (18,579 ) (1) (9,505 ) (57,758 ) (27,781 )
       
Adjusted net income $ 157,570   $ 117,625   $ 432,424   $ 322,617  
Adjusted net income per diluted share $ 1.67 $ 1.37 $ 4.60 $ 3.77
 
Diluted shares 94,157 86,134 94,069 85,688
 

1 Effective tax rate utilized excludes the impact of a one time tax benefit recognized during the three months ended September 30, 2015 of approximately $7.9 million.

 
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 September 30,   Nine Months Ended September 30,
2015   2014   Change   % Change 2015   2014   Change   % Change
 

NORTH AMERICA

- Transactions2 371,518 45,252 326,266 721.0 % 1,145,259 128,394 1,016,865 792.0 %
- Revenues, net per transaction $ 0.90 $ 3.45 $ (2.55 ) -73.9 % $ 0.80 $ 3.28 $ (2.48 ) -75.6 %
- Revenues, net $ 334,944 $ 156,343 $ 178,601 114.2 % $ 918,333 $ 421,579 $ 496,754 117.8 %
 

INTERNATIONAL

- Transactions 45,588 49,150 (3,562 ) -7.2 % 138,041 143,866 (5,825 ) -4.0 %
- Revenues, net per transaction $ 2.56 $ 2.83 $ (0.27 ) -9.6 % $ 2.56 $ 2.79 $ (0.22 ) -8.0 %
- Revenues, net $ 116,549 $ 138,940 $ (22,391 ) -16.1 % $ 353,931 $ 401,114 $ (47,183 ) -11.8 %
 
 

FLEETCOR CONSOLIDATED REVENUES

- Transactions2 417,106 94,402 322,704 341.8 % 1,283,300 272,260 1,011,040 371.4 %
- Revenues, net per transaction $ 1.08 $ 3.13 $ (2.05 ) -65.4 % $ 0.99 $ 3.02 $ (2.03 ) -67.2 %
- Revenues, net $ 451,493 $ 295,283 $ 156,210 52.9 % $ 1,272,264 $ 822,693 $ 449,571 54.6 %
 
 
 

FLEETCOR CONSOLIDATED ADJUSTED REVENUES1

- Transactions2 417,106 94,402 322,704 341.8 % 1,283,300 272,260 1,011,040 371.4 %
- Adjusted revenues per transaction $ 1.01 $ 2.86 $ (1.86 ) -64.8 % $ 0.93 $ 2.79 $ (1.86 ) -66.7 %
- Adjusted revenues $ 419,767 $ 270,269 $ 149,498 55.3 % $ 1,191,487 $ 759,729 $ 431,758 56.8 %
 
 
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 274 million and 872 million transactions for the three and nine months ended September 30, 2015, respectively, related to our SVS business acquired with Comdata in the fourth quarter of 2014.
 

Sources of Revenue3

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 Change % Change 2015 2014 Change % Change
Revenue from customers and partners 64.8 % 53.8 % 11.0 % 20.4 % 64.5 % 54.9 % 9.6 % 17.5 %
Revenue from merchants and networks 35.2 % 46.2 % -11.0 % -23.8 % 35.5 % 45.1 % -9.6 % -21.3 %
 
Revenue tied to fuel-price spreads 13.0 % 16.7 % -3.7 % -22.2 % 12.4 % 15.1 % -2.7 % -17.9 %
Revenue influenced by absolute price of fuel 15.1 % 17.8 % -2.7 % -15.2 % 15.2 % 18.2 % -3.0 % -16.5 %
Revenue from program fees, late fees, interest and other 71.9 % 65.5 % 6.4 % 9.8 % 72.4 % 66.7 % 5.7 % 8.5 %
 
3Expressed as a percentage of consolidated revenue.
 
Exhibit 3
Segment Results
(In thousands)
(Unaudited)
 
  Three Months Ended September 30,   Nine Months Ended September 30,

2015

 

2014

2015

 

2014

Revenues, net:
North America $ 334,944 $ 156,343 $ 918,333 $ 421,579
International   116,549     138,940     353,931     401,114  
$ 451,493   $ 295,283   $ 1,272,264   $ 822,693  
 
Operating income:
North America $ 132,428 $ 78,797 $ 351,778 $ 203,311
International   56,032     65,410     169,607     189,516  
$ 188,460   $ 144,207   $ 521,385   $ 392,827  
 
Depreciation and amortization:
North America $ 32,257 $ 6,635 $ 96,200 $ 19,647
International   16,269     19,079     49,235     54,914  
$ 48,526   $ 25,714   $ 145,435   $ 74,561  
 
Capital expenditures:
North America $ 6,493 $ 1,561 $ 14,510 $ 5,397
International   6,799     5,166     15,016     12,882  
$ 13,292   $ 6,727   $ 29,526   $ 18,279  

Source: FleetCor Technologies, Inc.

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


FLEETCOR Technologies, Inc.

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