Wright Express Corporation (



Q4 2011 Earnings Call

February 8, 2012 10:00 am ET


Steven Elder - SVP and CFO

Mike Dubyak - Chairman, President and CEO


Sanjay Sakhrani - KBW

Roman Leal - Goldman Sachs

Phil Stiller - Citi

Bob Napoli - William Blair

Greg Smith - Sterne Agee

Tien-Tsin Huang - JPMorgan

Tom McCrohan - Janney

Tim Willi - Wells Fargo

Robert Dodd - Morgan Keegan



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At this time, I'd like to welcome everyone to the Wright Express Corporation's fourth quarter earnings conference call. (Operator Instructions) Mr. Elder, you may begin your conference.

Steven Elder

Good morning. With me today is our CEO, Mike Dubyak. The financial results press release we issued early this morning is posted in the Investor Relations section of our website at wrightexpress.com. A copy of the release has also been included in an 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 fourth quarter, adjusted net income excludes non-cash mark-to-market adjustments on our fuel price related derivative instruments, the amortization of acquired intangible assets and a small adjustment from our tax receivable agreement as well as the related tax impacts. Please see Exhibit 1 included in the press release for an explanation and reconciliation of adjusted net income to GAAP net income.

I would 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 obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today.

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

Mike Dubyak

Good morning, everyone, and thanks for joining us. By all accounts, 2011 was a strong year Wright Express. For the full year, revenue grew 42% and adjusted net income grew 32%. This compares to our initial guidance for 2011 of revenue growth of 30% and adjusted net income growth of 19% at the midpoint of the ranges.

This performance was driven by continued execution against our multi-pronged growth strategy to expand our North American fleet business, diversify our revenue streams and build out our international presence. We experienced transaction growth of 8%, added another large travel client in our Other Payment Solutions segment and had the impact of the acquisitions of Wright Express Australia in 2010 and rapid! PayCard last year.

For the fourth quarter, revenue came in at the top end of our guidance range and earnings exceeded our expectations. Revenue grew 22% to $140 million and adjusted net income increased 33% to $38 million or $0.98 per share.

During the quarter, we once again saw strong growth from our corporate charge card product in our Other Payment Solutions segment and steady growth in our Fleet segment. In addition, we saw improved performance in our credit trends.

We're viewing some key metrics. Consolidated payment processing transactions increased 3% over the prior year. Existing customer gallons domestically or same-store sales was down approximately 0.4%, an improvement from the third quarter. We believe this continues to be reflective of the overall economic picture.

Taking a look at our same-store sales by SIC code, we had mixed results in our two largest concentrations. Business services was slightly negative for the quarter, and construction was slightly positive for the quarter. Also positive, transportation was up 3%, which is generally considered a good indicator for the economy.

By region, we saw a continuation of recent trends. The Southwest was the strongest region, while the Southeast was the weakest region. Overall, we believe these results are basically neutral with continued slight variations and stable trends.

In terms of vehicle growth, the total number of vehicle service averaged $6.6 million, a 14% increase from the same period last year, driven by the launch of BP in Australia and New Zealand, as well as growth within our core fleet business.

In North America, the core fleet business posted steady performance as previously announced signings were implemented in the fourth quarter. In addition, our sales force added new wins in the mid-to-large fleet market in the energy, government, communications and construction industries.

Over the past year, we saw a good momentum in the core North American fleet business. We extended our market share with both large and small fleets by increasing our penetration and signing new private label customers.

Furthermore, our continued focus on innovation led to the introduction of new products, features and applications such as fuel site locator, WEXSMART's Fuel Guard and pump shut-off. These products enhance the value we provide to our customers and increase the efficiency and effectiveness of their fleets.

Internationally, Wright Express Australia continued to meet our expectations. During the quarter, we had continued smaller fleet wins and signed a few existing larger clients to multi-year contract extensions.

Turning to the Other Payment Solutions segment, this segment once again posted strong growth in the fourth quarter, driven by our corporate charge card product. Spend volume increased 66% over the prior year to $2 billion primarily from our single-use electronic product in the online travel vertical. While online travel has been the predominant growth channel for this product, customer and industry diversification has also been an objective for us in this segment.

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