Wright Express Corporation Q1 2010 Earnings Call Transcript

Wright Express Corporation Q1 2010 Earnings Call Transcript
By Seeking Alpha ,

Wright Express Corporation (WXS)

Q1 2010 Earnings Call

April 27, 2010 10:00 am ET

Executives

Steve Elder - VP, IR

Mike Dubyak - Chairman, President & CEO

Melissa Smith - CFO and EVP, Finance and Operations

Analysts

Bob Napoli - Piper Jaffray

John Williams - Goldman Sachs

Tom McCrohan - Janney Montgomery Scott

Tien-Tsin Huang - JPMorgan

Robert Dodd – Morgan Keegan

Greg Smith - Duncan Williams

Tim Willi - Wells Fargo

David Parker - Lazard Capital Markets

Paul Bartolai - PB Investments

Presentation

Operator

Compare to:
Previous Statements by WXS
» Wright Express Corporation Q4 2009 Earnings Call Transcript
» Wright Express Corporation Q3 2009 Earnings Conference Call
» Wright Express Corporation Q2 2009 Earnings Call Transcript

Greetings and welcome to the Wright Express Corporation first quarter 2010 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Steve Elder, Vice President of Investor Relations for Wright Express. Thank you. Mr. Elder, you may begin.

Steve Elder

Good morning. With me today is our CEO, Mike Dubyak; and our CFO, Melissa Smith. The financial results press release we issued earlier this morning is posted in the Investor Relations section of our website at www.wrightexpress.com. A copy of the release has also been included in an 8-K we submitted to the SEC.

In the news release, I’d like to call your attention to the summary of first quarter 2010 performance metrics on page two. To allow more time for your question on today’s call, we will not be reviewing the certain metrics listed in the press release in our prepared remarks. As a reminder, we will be discussing a non-GAAP metric, specifically adjusted net income during our call.

For the first quarter of 2010, adjusted net income excludes non-cash mark-to-market adjustments on our fuel price related derivative instruments, the amortization of acquired intangibles and the tax impact of these items. Please see Exhibit 1, included in the press release for an explanation and reconciliation of adjusted net income to GAAP net income and the additional factors that were adjusted in the prior year period.

I’d also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements. As a result of various factors, including those discussed in our press release, most recent Form 10-K and other SEC filings. While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not rely on these forward-looking statements after today.

With that I’ll turn the call over to Mike Dubyak.

Mike Dubyak

Hello everyone, and thanks for joining us. We again posted solid results in this quarter, and see a positive signs in the economy as the year rolls out. Total revenue was up 22% from Q1 last year. Adjusted net income grew 46% and exceeded our guidance. This year-over-year growth was driven by higher fuel prices, continued strong results in our MasterCard program, and lower operating interest expense.

Given the improving economic trends, we believe it will be easier to see the positive impact of organic growth initiatives going forward. Thanks to our continued investment in sales, marketing, and customer service, we’ve been able to sustain our traditionally high customer satisfaction levels and keep our voluntary attrition rates low while adding new fleets to our portfolio.

Fleet fueling activity or same store sales in the first quarter of 2010, were essentially flat with Q1 last year. This marks a significant improvement from the year-over-year declines we’ve seen for the past few quarters. Reflecting trends in the overall economy, we’re continuing to see areas of strength and weakness across our various SIC Codes.

Customer activity in Q1 was decidedly stronger year-over-year in the transportation and manufacturing sectors. It was weaker in the construction sector with business services and other verticals continuing to bounce along the bottom.

Unlike last quarter, there were no significant differences in same store sale patters from region to region. Although we’ve seen stabilization in fueling volume, existing customers are still in the process of reducing the number of vehicles in their fleets. As a result, our total vehicle count was down approximately 200,000 from Q1 last year.

This was despite the fact that we added nearly 500,000 new vehicles in 2009 and another 100,000 vehicles this past quarter. We believe our vehicle count is a lagging indicator of volume, as it takes time for fleet managers to adjust the size of their fleets to the ebb and flow of their businesses.

Looking at the first quarter specifically, the average number of vehicles in our large and mid size fleet portfolio was down 7% year-over-year. In small fleets, our average vehicle count was flat with Q1 last year. Our Wright Express direct channel continued to improve with the average vehicle count up 1% from Q1 of 2009. We experienced stronger results in insight sales and sales of WEXSmart units in the quarter.

Looking forward, as more economic data points come out, we’re becoming increasingly confident in our second half of the year. Based on the modeling, we have done in our customer base to determine the drivers of their behavior along with the expected improvement in the economic environment. We expect to see transaction growth in the second half of the year.

We have several key advantages in driving organic growth, according to a third-party research study of fleet prospects, current customers and competitors’ customers that we commissioned during the fourth quarter of ’09, the Wright Express brand is perceived as the number one fleet card program in the country.

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