Wright Express Corp. (WXS)

Definitive Agreement to Acquire Fleet One Conference Transcript

September 5, 2012 5:00 PM ET


Steve Elder - Chief Financial Officer

Mike Dubyak - Chief Executive Officer


Sanjay Sakhrani - KBW

Greg Smith - Sterne, Agee

Bob Napoli - William Blair

Roman Leal - Goldman Sachs

Tom McCrohan - Janney

Sanjay Singh - Bloomberg Investment

Tien-Tsin Huang - JPMorgan



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Good afternoon. My name is Kimberly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wright Express 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. I would now like to turn the call over to CFO, Steve Elder. Please go ahead, sir.

Steve Elder

Good afternoon, everyone, and thanks for joining us on short notice. Today Wright Express announced that it entered into a definitive agreement to acquire Fleet One, an over-the-road and local retail fueling business from private equity firms LLR Partners and FTV Capital for $369 million in cash. A press release is now posted to the Investor Relations section of our website at wrightexpress.com.

Joining me today on the call to discuss this transaction is our CEO, Mike Dubyak. Mike will walk you through the strategic rational and details behind the transaction, and then we will open up the call for your questions.

As a reminder, we will be discussing a non-GAAP metric, specifically adjusted net income during our call. Please refer to the press release for further explanation of this non-GAAP metric.

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 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.

Mike Dubyak

Good afternoon, everyone, and thanks for joining us. We are pleased to announce our agreement to acquire Fleet One. This transaction represents a unique opportunity for Wright Express for several reasons.

First, the Fleet One’s fuel card products and fleet management information services are very complimentary to our business.

Second, Fleet One has a meaningful presence in both the over-the-road and local fleet markets. As a result, this acquisition materially accelerates our presence in the over-the-road market. In addition, the consolidation of Fleet One and Wright Express’ private label businesses should provide us with greater scale.

Furthermore, Fleet One products and capabilities in the heavy truck market rounds up our existing product suite to service the full spectrum of fleets.

As a growing and profitable business, this transaction will further expand our Americas fleet business, a core tenant of our growth strategy and is expected to be immediately accretive to Wright Express’ adjusted net income.

As the press release provides the key details, I will focus my comments on providing some additional color on the transaction.

I will keep these comments brief, so we can leave time as much as possible for Q&A. Steve and I will do our best to answer your questions within the confines of appropriate disclosure.

First, let me give you some background on Fleet One. Fleet One is a fuel card company with a meaningful presence in both the over-the-road and local markets with approximately 210,000 active cards that are accepted at 60,000 total locations including 6,700 over-the-road locations.

Their heavy truck market is very significant in size with approximately 4 million heavy trucks in commercial and government fleets on U.S. roads today.

Market research from (inaudible) and Company estimates that almost 22 billion gallons of fuel were consumed by U.S. heavy truck fleets with a total spend of more than $65 billion.

The U.S. heavy truck market is roughly evenly split between long-haul fleets and short-haul fleets. Fleet once OTR business has a large installed base of over-the-road trucking fleets and has produced -- has as product set with strong brand recognition.

The acquisition of Fleet One provides a unique opportunity to immediately and materially expand our OTR business in order to more effectively compete in this area of the market, which we view as a growth opportunity going forward.

In addition, Fleet One brings features and functionality to enhance the portfolio of solutions, we currently offer to our existing mixed fleet customers, including cost plus pricing options, cash advance and receivable factoring programs.

We already have a number of customers who operate mixed fleets, which include different types of vehicles ranging from cars and vans to light trucks and in some cases tractor/trailers.

Some of these customers are increasingly seeking these over-the-road features along with the services we traditionally offered. This transaction positions us more strongly to respond to these needs.

At the same time, we expect our combined assets, products and competencies to accelerate the growth in both Fleet One’s over-the-road business, as well as our private-label business, leveraging front-end sales and marketing capabilities should unlock significant growth potential by improving lead flow and close rates in the over-the-road segment.

Additionally, we believe there are strong cross-selling opportunities for Wright Express’ best-in-class product suite into Fleet One’s existing customer base.

Moving on to the financial impact of the deal, as Steve previously mentioned, the purchase price for the acquisition is $369 million in cash. The transaction is expected to generate $100 million in present value of tax benefits for us. For the last 12 months ended June 30, 2012, Fleet One generated revenue in excess of $56 million.

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