Wright Express Corporation (

WXS

)

Q3 2011 Earnings Conference Call

November 2, 2011 10:00 ET

Executives

Steven Elder – Vice President and Chief Financial Officer

Mike Dubyak – Chief Executive Officer

Analysts

Sanjay Sakhrani – KBW

Robert Napoli – William Blair

Robert Dodd – Morgan Keegan

Tien-tsin Huang – JPMorgan

Greg Smith – Sterne Agee

Presentation

Operator

Compare to:
Previous Statements by WXS
» Wright Express CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Wright Express' CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Wright Express CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Wright Express CEO Discusses Q3 2010 Results – Earnings Call Transcript

Good morning. My name is Jennifer and I will be your conference operator today. At this time, I would like to welcome everyone to the Wright Express Corporation Earnings 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. Elder, you may begin your conference.

Steven Elder – Vice President and Chief Financial Officer

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 third quarter, adjusted net income excludes non-cash mark-to-market adjustments on our fuel price related derivative instruments, a small impact related to our tax receivable agreement, and the amortization of acquired intangible assets 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 rely on these forward-looking statements after today.

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

Mike Dubyak – Chief Executive Officer

Good morning everyone and thanks for joining us. We are very pleased with our results for the third quarter with revenue and adjusted net income exceeding our expectations. Our revenue increased 52% to $152 million and adjusted net income grew 38% to $39 million or $0.99 per share.

We executed well again this quarter with exceptional growth coming from our corporate charge card product in our Other Payment Solutions segment and a solid increase in fleet transactions. But more importantly, our strategy to capitalize on the strategic opportunities in front of us including expanding our core fleet business, diversifying our business and building out our international presence continues to gain momentum. We believe we are in an excellent position to continue to drive performance across our businesses in spite of the challenging macroeconomic environment.

Let me now turn to a few key metrics. Consolidated payment processing transactions increased 14% over the prior year with North America increasing 7%. Existing customer gallons domestically or same-store sales was more or less flat with Q2 down roughly 0.8%. We continue to believe our same-store sales trends which have been relatively consistent reflect the broader macroeconomic landscape. That said we continue to focus on driving new customer wins and acquisitions which has helped contribute to our overall growth.

Breaking down same-store sales by SIC code, our largest concentrations are business services, which was positive for the quarter and construction which was slightly negative for the quarter. Regionally, the Southwest posted strong positive same-store sales growth while the Southeast was the weakest region. In terms of vehicle growth, the total number of vehicle service average $6.5 million, a 29% increase from the same period last year driven by the launch of BP Australia last quarter, the acquisition of Wright Express Australia and fleet wins in North America.

Our core fleet business in North America has performed steadily and we continue to have low voluntary attrition rates at 1.4% for the quarter. This is one of the lowest attrition rates we see since 2008. In North America, our private label channel continues to be a source of opportunity for us and positions us well for future growth. Last quarter, we discussed that we had signed Wawa as the customer and I’m happy to report that they have gone alive during the third quarter and we have begun implementation on the Pep Boys program announced in August.

We expect GoGas which was signed earlier this year to begin implementation in the fourth quarter and we just signed a seven-year extension with Sunoco. And we expect to announce the signing of another regional lower company who has a portfolio to convert is scheduled to go alive next year. This private label programs all provide access to small businesses and a critical mass to our strategy down market.

Looking ahead, we expect to see nice transaction growth in our core fleet business as we increased our penetration down market and take market share from our competitors up market. We also continue to look for ways to capitalize on market opportunities and expand our product offering as we build the business for future growth. As an example in August, we launched our OTR-PRO fuel card program through a strategic alliance with Sky Capital LLC. This program is designed to meet the needs of long haul fleet in truck stop owners, an area where we are currently under-penetrated.

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