FleetCor Reports Third Quarter 2013 Financial Results

Adjusted Net Income Per Share Grows 30%

Raises 2013 Guidance

Business Wire

NORCROSS, Ga.--(BUSINESS WIRE)--

FleetCor Technologies, Inc. (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, 2013.

"We are pleased to report another quarter of strong results, which include adjusted net income per diluted share growth of 30%,” said Ron Clarke, chairman and chief executive officer, FleetCor Technologies, Inc. “We are also delighted to announce the closing of two new acquisitions in October, Epyx in the U.K. and Nextraq in the U.S., along with the closing of the DB Trans acquisition in Brazil, which was previously announced.”

Financial Results for Third Quarter 2013:

GAAP Results

  • Total revenues increased 20% to $225.2 million compared to $186.9 million last year
  • Net income increased 32% to $78.6 million compared to $59.6 million last year
  • Net income per diluted share increased 35% to $0.93 compared to $0.69 last year

Non-GAAP Results1

  • Adjusted revenues1 (revenues, net less merchant commissions) increased 20% to $208.2 million compared to $174.0 million last year
  • Adjusted net income1 increased 28% to $91.4 million compared to $71.6 million last year
  • Adjusted net income per diluted share1 increased 30% to $1.08 compared to $0.83 last year

Included in GAAP net income and adjusted net income for the third quarter of 2013 was the impact of a one-time income tax benefit of $3.8 million or $0.05 per share that resulted from UK legislation passed in the quarter.

2013 Outlook:

FleetCor Technologies, Inc. is raising its financial guidance for 2013 as follows:

  • Revenues, net between $875 million and $880 million;
  • Adjusted net income between $339 million and $341 million;
  • Adjusted net income per diluted share between $4.01 and $4.03.

The Company's full-year guidance assumptions for the remainder of 2013 are as follows:

  • Fuel prices and foreign exchange rates at current levels
  • Market spreads equal to historical average
  • Full year tax rate of 30%
  • Fully diluted shares outstanding of 84.7 million shares
  • Approximately $0.02 of adjusted net income per diluted share related to the Nextraq and Epyx acquisitions announced today, net of deal and integration expenses in the fourth quarter
  • No impact related to acquisitions or material new partnership agreements not already disclosed

“Given the strong performance in the third quarter and recently completed acquisitions, we are raising our 2013 full year adjusted net income per share guidance by $0.12 from $3.90 to $4.02 at the midpoint,” said Eric Dey, chief financial officer, FleetCor Technologies, Inc. "Our full year guidance includes the impact of the acquisitions just announced, net of deal and integration expenses that we expect to incur in the fourth quarter, and a one-time tax benefit of $0.05 recorded in the third quarter related to a reduction in the U.K. corporate tax rate.”

_____________________________

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.

Conference Call

The Company will host a conference call to discuss third quarter 2013 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) 941-2068, or for international callers (480) 629-9712. 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 4645522. The replay will be available until November 6, 2013. 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, assumptions underlying financial guidance, and expectations regarding recent deals. 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, 2012, filed with the Securities and Exchange Commission on March 1, 2013. 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, and (d) loss on the early extinguishment of debt. EBITDA is calculated as net income as reflected in our income statement, adjusted to eliminate (a) interest expense, (b) tax expense, (c) depreciation of long-lived assets (d) amortization of intangible assets and (e) other (income) expense, net. 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. The Company uses EBITDA as a basis to evaluate our operating performance net of the impact of certain items during the period. We believe that EBITDA may be useful to investors for understanding our operating performance on a consistent basis. 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, adjusted net income, and EBITDA:

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

About FleetCor

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

             
FleetCor Technologies, Inc. and subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
 
Three Months Ended September 30, Nine Months Ended September 30,
  2013     2012   2013 2012
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Revenues, net $ 225,150 $ 186,932 $ 639,670 $ 504,917
 
Expenses:
Merchant commissions 16,944 12,930 50,360 40,974
Processing 33,473 30,568 95,426 83,161
Selling 13,859 12,790 38,949 33,239
General and administrative 31,559 31,219 91,774 78,866
Depreciation and amortization   18,060     13,591     48,579   36,920
Operating income   111,255     85,834     314,582   231,757
Other (income) expense, net (156 ) (3 ) 130 519
Interest expense, net   3,756     3,246     10,960   9,627
Total other expense   3,600     3,243     11,090   10,146
Income before income taxes 107,655 82,591 303,492 221,611
Provision for income taxes   29,035     22,943     87,111   65,483
Net income $ 78,620   $ 59,648   $ 216,381 $ 156,128
 
Basic earnings per share $ 0.96 $ 0.71 $ 2.65 $ 1.88
Diluted earnings per share $ 0.93 $ 0.69 $ 2.56 $ 1.82
 
Weighted average shares outstanding:
Basic shares 81,974 84,002

 

81,592 83,260
Diluted shares 84,905 86,224

 

84,446 85,681
 
       
FleetCor Technologies, Inc. and subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
   
September 30, 2013 December 31, 2012*
(Unaudited)
Assets
 
Current assets:
Cash and cash equivalents $ 345,689 $ 283,649
Restricted cash 50,008 53,674
Accounts receivable (less allowance for doubtful accounts of $20,240 and $19,463 respectively) 661,901 525,441
Securitized accounts receivable - restricted for securitization investors 394,000 298,000
Prepaid expenses and other current assets 32,988 28,126
Deferred income taxes   5,938     6,464  
 
Total current assets   1,490,524     1,195,354  
 
Property and equipment 108,288 93,902
Less accumulated depreciation and amortization   (59,491 )   (48,706 )
 
Net property and equipment 48,797 45,196
 
Goodwill 1,241,969 926,609
Other intangibles, net 643,938 463,864
Other assets   49,877     90,847  
 
Total assets $ 3,475,105   $ 2,721,870  
 
Liabilities and Stockholders’ Equity
 
Current liabilities:
Accounts payable $ 567,420 $ 418,609
Accrued expenses 69,054 75,812
Customer deposits 177,511 187,627
Securitization facility 394,000 298,000
Current portion of notes payable and lines of credit 260,890 141,875
Other current liabilities   128,085     20,299  
 
Total current liabilities   1,596,960     1,142,222  
 
Notes payable and other obligations, less current portion 479,082 485,217
Deferred income taxes   225,161     180,609  
 
Total noncurrent liabilities   704,243     665,826  
 
Commitments and contingencies
 
Stockholders’ equity:
 
Common stock, $0.001 par value; 475,000,000 shares authorized, 117,898,939 shares issued and 82,164,447 shares outstanding at September 30, 2013; and 475,000,000 shares authorized, 116,772,324 shares issued and 81,037,832 shares outstanding at December 31, 2012 117 116
Additional paid-in capital 601,577 542,018
Retained earnings 967,078 750,697
Accumulated other comprehensive loss (19,207 ) (3,346 )
 
Less treasury stock, 35,734,492 shares at September 30, 2013 and December 31, 2012   (375,663 )   (375,663 )
Total stockholders’ equity   1,173,902     913,822  
 
Total liabilities and stockholders’ equity $ 3,475,105   $ 2,721,870  
 
*Derived from the audited December 31, 2012 Balance Sheet.
 
       
FleetCor Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
 
Nine Months Ended September 30,
  2013     2012  
(Unaudited)
Operating activities
Net income $ 216,381 $ 156,128
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
Depreciation 12,162 9,831
Stock-based compensation 12,441 14,287
Provision for losses on accounts receivable 14,069 16,788
Amortization of deferred financing costs 2,434 1,596
Amortization of intangible assets 31,535 23,044
Amortization of premium on receivables 2,448 2,449
Deferred income taxes (4,524 ) 2,501
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash 3,666 3,576
Accounts receivable (184,367 ) (178,715 )
Prepaid expenses and other current assets (1,774 ) (4,352 )
Other assets 38,580 (45,291 )
Excess tax benefits related to stock-based compensation (24,319 ) (23,177 )
Accounts payable, accrued expenses and customer deposits   89,279     54,466  
Net cash provided by operating activities   208,011     33,131  
 
 
Investing activities
Acquisitions, net of cash acquired (376,971 ) (189,819 )
Purchases of property and equipment   (15,348 )   (13,634 )
Net cash used in investing activities   (392,319 )   (203,453 )
 
 
Financing activities
Excess tax benefits related to stock-based compensation 24,319 23,177
Proceeds from issuance of common stock 22,800 21,391
Borrowings on securitization facility, net 96,000 75,000
Deferred financing costs paid (1,970 ) (796 )
Principal payments on notes payable (21,250 ) (23,492 )
Payments on US revolver (155,000 ) (250,000 )
Borrowings from US revolver 280,000 330,000
Borrowings on swing line of credit, net 1,000
Borrowings from foreign revolver 53,494
Payments on foreign revolver (44,533 )
Other   (255 )   (129 )
Net cash provided by financing activities   253,605     176,151  
   
Effect of foreign currency exchange rates on cash   (7,257 )   9,073  
 
Net increase in cash and cash equivalents 62,040 14,902
Cash and cash equivalents, beginning of year   283,649     285,159  
Cash and cash equivalents, end of year $ 345,689   $ 300,061  
 
Supplemental cash flow information
Cash paid for interest $ 13,041   $ 10,858  
 
Cash paid for income taxes $ 84,695   $ 29,428  
 
               
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,
  2013     2012     2013     2012  
 
Revenues, net $ 225,150 $ 186,932 $ 639,670 $ 504,917
Merchant commissions   16,944     12,930     50,360     40,974  
Total adjusted revenues $ 208,206   $ 174,002   $ 589,310   $ 463,943  
 
                             
The following table reconciles net income to EBITDA:
 
Three Months Ended September 30, Nine Months Ended September 30,
  2013     2012     2013     2012  
 
Net income $ 78,620 $ 59,648 $ 216,381 $ 156,128
Provision for income taxes 29,035 22,943 87,111 65,483
Interest expense, net 3,756 3,246 10,960 9,627
Depreciation and amortization 18,060 13,591 48,579 36,920
Other (income) expense, net   (156 )   (3 )   130     519  
EBITDA $ 129,315   $ 99,425   $ 363,161   $ 268,677  
 
                             
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,
  2013     2012     2013     2012  
Net income $ 78,620 $ 59,648 $ 216,381 $ 156,128
 
Stock based compensation 4,382 6,494 12,441 14,287
Amortization of intangible assets 12,296 8,687 31,535 23,044
Amortization of premium on receivables 816 816 2,448 2,449
Amortization of deferred financing costs 841 545 2,434 1,596
       
Total pre-tax adjustments 18,335 16,542 48,858 41,376
 
Income tax impact of pre-tax adjustments at the effective tax rate (5,596 ) (4,595 ) (14,639 ) (12,226 )
       
Adjusted net income $ 91,359   $ 71,595   $ 250,600   $ 185,278  
Adjusted net income per diluted share $ 1.08 $ 0.83 $ 2.97 $ 2.16
 
Diluted shares 84,905 86,224 84,446 85,681
 
                   
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,
  2013     2012   Change % Change   2013     2012   Change % Change  
 

NORTH AMERICA

- Transactions 43,291 41,203 2,088 5.1 % 122,691 117,204 5,487 4.7 %
- Revenues, net per transaction $ 2.66 $ 2.46 $ 0.20 8.1 % $ 2.73 $ 2.49 $ 0.25 9.9 %
- Revenues, net $ 115,266 $ 101,495 $ 13,771 13.6 % $ 335,346 $ 291,593 $ 43,753 15.0 %
 

INTERNATIONAL

- Transactions 41,012 38,058 2,954 7.8 % 114,747 108,170 6,577 6.1 %
- Revenues, net per transaction $ 2.68 $ 2.24 $ 0.43 19.4 % $ 2.65 $ 1.97 $ 0.68 34.5 %
- Revenues, net $ 109,884 $ 85,437 $ 24,447 28.6 % $ 304,324 $ 213,324 $ 91,000 42.7 %
                                     
 

FLEETCOR CONSOLIDATED REVENUES

- Transactions 84,303 79,261 5,042 6.4 % 237,438 225,374 12,064 5.4 %
- Revenues, net per transaction $ 2.67 $ 2.36 $ 0.31 13.2 % $ 2.69 $ 2.24 $ 0.45 20.3 %
- Revenues, net $ 225,150 $ 186,932 $ 38,218 20.4 % $ 639,670 $ 504,917 $ 134,753 26.7 %
                                     
                                     
 

FLEETCOR CONSOLIDATED ADJUSTED REVENUES1

- Transactions 84,303 79,261 5,042 6.4 % 237,438 225,374 12,064 5.4 %
- Adjusted Revenues per transaction $ 2.47 $ 2.20 $ 0.27 12.5 % $ 2.48 $ 2.06 $ 0.42 20.6 %
- Adjusted Revenues $ 208,206 $ 174,002 $ 34,204 19.7 % $ 589,310 $ 463,943 $ 125,367 27.0 %
                                     
 
 
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.
 

Sources of Revenue2

Three Months Ended September 30, Nine Months Ended September 30,
  2013     2012   Change % Change   2013     2012   Change % Change
Revenue from customers and partners 54.4 % 50.8 % 3.6 % 7.1 % 52.3 % 46.2 % 6.1 % 13.2 %
Revenue from merchants and networks 45.6 % 49.2 % -3.6 % -7.3 % 47.7 % 53.8 % -6.1 % -11.3 %
 
Revenue tied to fuel-price spreads 14.8 % 14.0 % 0.8 % 5.7 % 16.5 % 17.6 % -1.1 % -6.2 %
Revenue influenced by absolute price of fuel 20.0 % 21.7 % -1.7 % -7.8 % 20.1 % 20.8 % -0.7 % -3.4 %
Revenue from program fees, late fees, interest and other 65.2 % 64.3 % 0.9 % 1.4 % 63.4 % 61.6 % 1.8 % 2.9 %
 
2Expressed as a percentage of consolidated revenue.
 
               
Exhibit 3
Segment Results
(In thousands)
(Unaudited)
 
Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
Revenues, net:
North America $ 115,266 $ 101,495 $ 335,346 $ 291,593
International1   109,884   85,437   304,324   213,324
$ 225,150 $ 186,932 $ 639,670 $ 504,917
 
Operating income:
North America $ 59,093 $ 49,273 $ 168,622 $ 140,984
International1   52,162   36,561   145,960   90,773
$ 111,255 $ 85,834 $ 314,582 $ 231,757
 
Depreciation and amortization:
North America $ 5,159 $ 5,046 $ 15,598 $ 15,064
International1   12,901   8,545   32,981   21,856
$ 18,060 $ 13,591 $ 48,579 $ 36,920
 
Capital expenditures:
North America $ 1,942 $ 1,153 $ 4,298 $ 5,749
International1   3,298   4,050   11,050   7,885
$ 5,240 $ 5,203 $ 15,348 $ 13,634
 

1The results from our Russian business acquired in the second quarter of 2012, CTF Technologies, Inc. acquired during the third quarter of 2012, our Australian business acquired during the first quarter of 2013, New Zealand business acquired during the second quarter of 2013 and VB business acquired during the third quarter of 2013 are reported in our International segment.

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

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