Wright Express CEO Discusses Q3 2010 Results – Earnings Call Transcript

Wright Express Corporation (

WXS

)

Q3 2010 Earnings Conference Call

November 4, 2010 10:00 AM ET

Executives

Steve Elder – IR

Mike Dubyak – Chairman, President and CEO

Melissa Smith – CFO, EVP – Finance and Operations

Analysts

John Williams – Goldman Sachs

Greg Smith – Duncan Williams

Bob Napoli – Piper Jaffray

David Parker – Lazard Capital Markets

Tien-Tsin Huang – J.P. Morgan

Reggie [ph] – J.P. Morgan

Tim Willi – Wells Fargo

Chandra Singh [ph] – Bloomberg

Leonard Deprospro – Janney Montgomery Scott

Marshall Jaffe – Henry Armstrong Associates

Presentation

Operator

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Previous Statements by WXS
» Wright Express Corporation Q2 2010 Earnings Call Transcript
» Wright Express Corporation Q1 2010 Earnings Call Transcript
» Wright Express Corporation Q4 2009 Earnings Call Transcript
» Wright Express Corporation Q3 2009 Earnings Conference Call

Good morning. My Suzette and I will be your conference operator today. At this time, I would like to welcome everyone to the Wright Express third quarter 2010 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. (Operator Instructions) Thank you. Mr. Steve Elder, you may begin your conference.

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 writeexpress.com. A copy of the release has also been included in 8-K we submitted to the SEC.

As a reminder, we will be discussing a non-GAAP metric, specifically adjusted net income during our call. For this year’s third quarter, adjusted net income excludes non cash mark to market adjustments on our fuel price related derivative instruments, small impact related to our tax receivable agreement, and the amortization of acquired intangible asset as well as the related tax impacts. Please see Exhibit One included in the press release for an explanation and reconciliation of adjusted net income to GAAP net income.

We will also be discussing the acquisition of the Australian Fuel and Pre-paid business from Retail Decision. While all of the revenue and expense numbers we are discussing today include the two weeks of their activity, the performance metrics data such as the number of vehicles, does not include their activity.

I’d also like to remind you that we’ll 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

Good morning everyone and thanks for joining us. During my prepared remarks this morning I will focus on a few key areas. First, I will briefly review our results for the quarter including key performance metrics, trends and customer wins.

Second, I will talk about some of the recent advancements we have made in our long-term strategy to expand our international presence. And finally, I will wrap up with our near-term capital allocation priorities.

Overall, the third quarter was a solid quarter. The momentum we experienced in Q2 continued through the end of September and we are pleased to report results that exceeded both our top and bottom line guidance.

In addition, the performance metrics we track continue to improve. Our diversified businesses are posting solid growth and we had some exciting developments on the international front. Total revenue rose 17% to $100 million, primarily driven by elevated fuel prices, increased MasterCard spend and fueling activity.

We also report adjusted net income of $28.1 million or $0.72 per diluted share, representing a 13% increase over the same period last year.

Importantly, we continue to see improving trends across our business. Fleet fueling volume in our install base or same store sales grew 3.7% over the prior year. Although this has moderated slightly from the second quarter, quarterly fluctuations in volumes are to be expected to a certain degree in this economic environment.

We also saw continued improvement across the majority of our SIC codes, specifically, the construction sector, posted its first quarter of year over year improvement in several years, while transportation, manufacturing and business services continued to trend upwards.

Regionally, we also saw similar trends to the second quarter in terms of fueling activity as the southwest continued to outperform all other regions.

Payment processing transactions in the U.S. were up 3.3% during the quarter, which marks the first time in over two years we have experienced consecutive quarters of year over year growth. In addition, transaction processing activity was up slightly over the previous year after five quarters of decline.

Lastly, we saw the number of vehicles serviced during the quarter continue to rise. Our total number of vehicles serviced grew 3.7% year over year to 4.8 million vehicles, which was driven in large part by BP coming online in New Zealand in September.

Our solid results, improving KPI trends and record low attrition levels both voluntary and involuntary, continue to underscore the strength of our value proposition to customers. To that end, we announced that we have signed a five year agreement to provide private label fleet card services for Conoco Phillips.

The program will include a competitive discount offer funded by Conoco Phillips through a branded, proprietary fleet card accepted only at Conoco, Phillip 66 and 76 locations, as well as a new co-branded universal card which will be accepted at over 190,000 fuel and service locations throughout the United States.

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