WEX Inc. (NYSE: WXS), a leading provider of corporate card payment solutions, today reported financial results for the three months ended December 31, 2012. Fourth Quarter Financial Results Total revenue for the fourth quarter of 2012 increased 21% to $169 million from $140.0 million for the fourth quarter of 2011. Net income to common shareholders on a GAAP basis was $29.1 million, or $0.74 per diluted share, compared with $32.8 million, or $0.84 per diluted share, for the fourth quarter last year. The current quarter’s net income on a GAAP basis reflected several items related to the acquisition of Fleet One, including an $8.9 million charge related to the discontinuation of WEX’s OTR platform and a $1.7 million expense related to the termination of Fleet One’s MasterCard business. These items are excluded from adjusted net income. On a non-GAAP basis, the Company's adjusted net income for the fourth quarter of 2012 increased 9% to $41.8 million, or $1.07 per diluted share, from $38.4 million, or $0.98 per diluted share, for the same period a year ago. As previously announced, fourth quarter GAAP net income and adjusted net income both included $4.8 million of deal and integration related costs associated with the acquisition of Fleet One. For the full year 2012, revenue increased 13% to $623 million from $553 million in 2011. Net income to common shareholders on a GAAP basis was $2.48 per diluted share in 2012 compared to $3.43 per diluted share in 2011. In addition to the expenses outlined above, full year 2012 GAAP net income included an impairment charge in the third quarter related to the Company’s Australian prepaid business. On a non-GAAP basis, adjusted net income increased 12% to $4.06 per diluted share from $3.64 per diluted share in 2011. For the full year 2012, adjusted net income included a charge related to a retroactive change in Australian tax law that was enacted in the third quarter, as well as deal and integration costs associated with the Company’s acquisition of Fleet One.
WEX uses fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices in North America. For the fourth quarter of 2012, the Company's GAAP financial results include an unrealized gain of $0.1 million dollar pre-tax, non-cash, mark-to-market gain on these instruments. See Exhibit 1 for a full reconciliation of adjusted net income.“2012 was a great year for WEX as illustrated by our financial results. Over the past year, we made great strides in executing against our multi-pronged strategy, setting the stage for strong potential revenue expansion in 2013,” said Michael E. Dubyak, WEX chairman, president and chief executive officer. “As we look to the upcoming year, there are a number of emerging opportunities across our business to drive our future growth including global prospects for our successful virtual card product. Given our track record of targeting investments to yield strong performance, we plan to accelerate the level and timing of our strategic investments to maximize the potential of our businesses. Overall, we believe these actions will better position WEX for the long-term while also advancing our status as a comprehensive business partner for fleet, virtual and paycard solutions,” concluded Mr. Dubyak. Fourth Quarter 2012 Performance Metrics Where applicable, the performance metrics listed below include activity from Fleet One, acquired October 4, 2012, which positively impacted metrics for the fourth quarter.
- Average number of vehicles serviced worldwide was approximately 7.6 million, an increase of 14% from the fourth quarter of 2011.
- Total fuel transactions processed increased 12.1% from the fourth quarter of 2011 to 89.7 million. Payment processing transactions increased 15.7% to 70.1 million; transaction processing transactions increased 1.1% to 19.6 million.
- Average expenditure per domestic payment processing transaction increased 23.4% from the fourth quarter of 2011 to $86.53.
- Domestic retail fuel price increased 5.9% to $3.74 per gallon from $3.53 per gallon in the fourth quarter of 2011.
- Total corporate card purchase volume grew 23.6% to $2.5 billion, from $2.0 billion for the fourth quarter of 2011.
- For the first quarter of 2013, WEX expects revenue in the range of $158 million to $165 million and adjusted net income in the range of $34 million to $37 million, or $0.89 to $0.96 per diluted share.
- For the full year 2013, the Company expects revenue in the range of $721 million to $741 million and adjusted net income to be in the range of $168 million to $176 million, or $4.30 to $4.50 per diluted share.
The Company's guidance also assumes that first quarter 2013 domestic fleet credit loss will range between 9 and 14 basis points, and that domestic fleet credit loss for full year 2013 will range between 9 to 14 basis points.The Company's guidance does not reflect the impact of any future stock repurchases that may occur in 2013, any potential write-offs related to refinancing our credit facility or the impact of the resolution of the pending MasterCard merchant litigation. In addition, this guidance excludes the impact of non-cash, mark-to-market adjustments on the Company's fuel-price-related derivative instruments and the amortization of purchased intangibles as well as the related tax impacts. Additional Information Exhibit 1 reconciles adjusted net income, which has not been determined in accordance with GAAP, to net income as determined in accordance with GAAP for the three months and years ended December 31, 2012 and 2011. Management uses the non-GAAP measures presented within this news release to evaluate the Company's performance on a comparable basis, to eliminate the volatility associated with its derivative instruments and to measure the amount of cash that is available for making payments on the Company's financing debt and for discretionary purposes. Management believes that investors may find these measures useful for the same purposes, but cautions that they should not be considered a substitute for, or superior to, disclosure in accordance with GAAP. To provide investors with additional insight into its operational performance, WEX has included in this news release a table of selected non-financial metrics for the five quarters ended December 31, 2012. This table is presented as Exhibit 2. The Company is also providing selected segment review information for the three months and years ended December 31, 2012 and 2011 in Exhibit 3. Conference Call Details In conjunction with this announcement, WEX will host a conference call today, February 6, 2013, at 10:00 a.m. (ET). As previously announced, the conference call will be webcast live on the Internet, and can be accessed at the Investor Relations section of the WEX website, http://www.wexinc.com. The live conference call also can be accessed by dialing (866) 334-7066 or (973) 935-8463. A replay of the webcast will be available on the Company's website. About WEX Inc. WEX Inc. (NYSE: WXS) is a leading provider of corporate card payment solutions. From its roots as a pioneer in fleet card payments in 1983, WEX now provides its 7.6 million cardholders with exceptional payment security and control across a wide spectrum of business sectors. The Company’s operations include WEX Bank, Fleet One, Pacific Pride, rapid! PayCard, Wright Express Prepaid Cards Australia, Wright Express Fuel Cards Australia, Wright Express New Zealand and CorporatePay Limited, England, as well as a majority equity position in UNIK S.A., Brazil. WEX and its subsidiaries employ more than 1,300 associates. For more information about WEX, please visit WEXInc.com. Forward Looking Statement This news release contains forward-looking statements, including statements regarding: financial guidance; assumptions underlying the Company's financial guidance; management’s expectations for the impact of recent acquisitions and equity investments; the Company’s positioning for future growth; planned investments in growth opportunities; and, confidence in future performance. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. When used in this earnings release, the words "may," "could," "anticipate," "plan," "continue," "project," "intend," "estimate," "believe," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including: the effects of general economic conditions on fueling patterns and the commercial activity of fleets; the effects of the Company’s business expansion and acquisition efforts; the Company’s failure to successfully integrate the businesses it has acquired; the failure of corporate investments to result in anticipated strategic value; the impact and range of credit losses; breaches of the Company’s technology systems and any resulting negative impact on our reputation, liability, or loss of relationships with customers or merchants; fuel price volatility; the Company’s failure to maintain or renew key agreements; failure to expand the Company’s technological capabilities and service offerings as rapidly as the Company’s competitors; the actions of regulatory bodies, including banking and securities regulators, or possible changes in banking regulations impacting the Company’s industrial bank and the Company as the corporate parent; the impact of foreign currency exchange rates on the Company’s operations, revenue and income; changes in interest rates; the impact of the Company’s outstanding bonds on its operations; financial loss if the Company determines it necessary to unwind its derivative instrument position prior to the expiration of a contract; the incurrence of impairment charges if our assessment of the fair value of certain of our reporting units changes; the uncertainties of litigation; as well as other risks and uncertainties identified in Exhibit 99.2 of the Company's current report on Form 8-K furnished to the Securities and Exchange Commission on January 22, 2013 and the Company's subsequent periodic and current reports. The Company's forward-looking statements and these factors do not reflect the potential future impact of any alliance, merger, acquisition, disposition or stock repurchases. The forward-looking statements speak only as of the date of this news release and undue reliance should not be placed on these statements. The Company disclaims any obligation to update any forward-looking statements as a result of new information, future events or otherwise.
|CONDENSED CONSOLIDATED STATEMENTS OF|
|(in thousands, except per share data)|
|Three months endedDecember 31,||For the year endedDecember 31,|
|Fleet payment solutions||$||128,882||107,468||$||470,591||$||436,704|
|Other payment solutions||40,116||32,368||152,560||116,372|
|Salary and other personnel||35,879||25,118||123,380||104,610|
|Provision for credit losses||7,665||7,063||22,539||27,527|
|Technology leasing and support||4,819||3,572||18,537||15,423|
|Occupancy and equipment||12,202||2,957||21,264||11,803|
|Depreciation and amortization||15,769||11,725||66,360||45,369|
|Operating interest expense||1,560||1,265||4,990||5,453|
|Cost of hardware and equipment sold||877||722||3,147||3,764|
|Total operating expenses||119,499||79,103||401,532||319,752|
|Financing interest expense||(3,556||)||(2,589||)||(10,433||)||(11,676||)|
|Gain (loss) on foreign currency transactions||13||(96||)||(299||)||(459||)|
|Net realized and unrealized (loss) on fuel price derivatives||(319||)||(6,878||)||(12,365||)||(11,869||)|
|Decrease in tax refund due to former shareholder of RD Card Holdings Australia||—||9,750||—|
|Increase in amount due under tax receivable agreement||(2,089||)||160||(2,089||)||(715||)|
|Income before income taxes||43,548||51,330||206,183||208,605|
|Net income before noncontrolling interest||28,854||32,792||96,709||133,622|
|Less: Net earnings from noncontrolling interest||(199||)||—||(213||)||—|
|Net earnings attributable to WEX Inc.||29,053||32,792||96,922||133,622|
|Changes in available-for-sale securities, net of tax effect of $(71) and $(3) in 2012 and $(24) and $66 in 2011||(117||)||(36||)||(3||)||108|
|Changes in interest rate swaps, net of tax effect of $— and $35 in 2012 and $33 and $179 in 2011||—||56||60||308|
|Foreign currency translation||(455||)||13,974||6,734||2,567|
|Comprehensive income attributable to WEX Inc.||$||28,481||46,786||$||103,713||$||136,605|
|Net earnings attributable to WEX Inc. per share:|
|Weighted average common shares outstanding:|
|CONSOLIDATED BALANCE SHEETS|
|(in thousands, except per share data)|
|Cash and cash equivalents||$||197,662||$||25,791|
|Accounts receivable (less reserve for credit losses of $11,709 in 2012 and $11,526 in 2011)||1,555,814||1,323,915|
|Income taxes receivable||—||7,755|
|Fuel price derivatives, at fair value||—||410|
|Property, equipment and capitalized software, net||60,097||62,078|
|Deferred income taxes, net||100,128||143,524|
|Other intangible assets, net||241,810||109,656|
|Liabilities and Stockholders' Equity|
|Income taxes payable||10,151||—|
|Borrowed federal funds||48,400||6,900|
|Revolving line-of-credit facilities and term loan||621,000||295,300|
|Amounts due under tax receivable agreement||86,550||92,763|
|Fuel price derivatives, at fair value||1,729||415|
|Commitments and contingencies|
|Redeemable noncontrolling interest||21,662||—|
|Common stock $0.01 par value; 175,000 shares authorized; 42,586 in 2012 and 42,252 in 2011 shares issued; 38,908 in 2012 and 38,765 in 2011 shares outstanding||426||423|
|Additional paid-in capital||162,470||146,282|
|Other comprehensive income (loss), net of tax:|
|Net unrealized gain on available-for-sale securities||197||200|
|Net unrealized loss on interest rate swaps||—||(60||)|
|Net foreign currency translation adjustment||37,182||30,448|
|Accumulated other comprehensive income||37,379||30,588|
|Less treasury stock at cost; 3,766 shares in 2012 and 3,566 in 2011||(112,655||)||(101,367||)|
|Total stockholders' equity||817,931||709,315|
|Total liabilities and stockholders' equity||$||3,106,684||$||2,278,060|
|Reconciliation of Adjusted Net Income to GAAP Net Earnings|
|Fourth Quarter and Full Year Ended 2012 and 2011|
|Three months endedDecember 31,||Year endedDecember 31,|
|Total adjusted net income WEX Inc.||$||41,843||$||38,374||$||158,524||$||141,792|
|Unrealized gains (losses) on fuel price derivatives||116||(2,913||)||(1,724||)||10,872|
|Amortization of acquired intangible assets||(7,987||)||(5,690||)||(23,468||)||(22,412||)|
|Change in tax refund due to former shareholders of RD CardHoldings Australia||—||—||9,750||—|
|Non-cash adjustment related to the tax receivable agreement||(2,089||)||160||(2,089||)||(715||)|
|Impairment and other charges related to Fleet One acquisition||(10,550||)||—||(10,550||)||—|
|Net earnings attributable to noncontrolling interest||228||—||305||—|
|Net earnings attributable to WEX Inc.||$||29,053||$||32,792||$||96,922||$||133,622|
- Exclusion of the non-cash, mark-to-market adjustments on fuel-price related derivative instruments helps management identify and assess trends in the Company's underlying business that might otherwise be obscured due to quarterly non-cash earnings fluctuations associated with fuel-price derivative contracts;
- The non-cash, mark-to-market adjustments on derivative instruments are difficult to forecast accurately, making comparisons across historical and future quarters difficult to evaluate; and
- The amortization of purchased intangibles, goodwill impairment, asset impairment and other charges related to the acquisition of Fleet One, the net impact of tax rate changes on the Company's deferred tax asset and related tax refund due to former shareholders of RD Card Holdings Australia have no impact on the ongoing operations of the business.
The tax impact of the foregoing adjustments is the difference between the Company’s GAAP tax provision and a pro forma tax provision based upon the Company’s adjusted net income before taxes. The methodology utilized for calculating the Company’s adjusted net income tax provision is the same methodology utilized in calculating the Company’s GAAP tax provision.
|Selected Non-Financial Metrics|
|Q4 2012||Q3 2012||Q2 2012||Q1 2012||Q4 2011|
|Fleet Payment Solutions – Payment Processing Revenue:|
|Payment processing transactions (000s)||70,091||66,155||63,912||60,557||60,598|
|Gallons per payment processing transaction||22.7||19.3||19.5||19.5||19.6|
|Payment processing gallons of fuel (000s)||1,592,347||1,274,798||1,243,466||1,178,090||1,185,522|
|Average US fuel price (US$ / gallon)||$||3.74||3.74||3.79||3.72||3.53|
|Average Australian fuel price (US$ / gallon)||$||5.82||5.42||5.60||5.80||5.45|
|Payment processing $ of fuel (000s)||$||6,083,379||4,868,631||4,823,656||4,503,698||4,304,150|
|Net payment processing rate||1.40||%||1.62||%||1.63||%||1.64||%||1.66||%|
|Fleet payment processing revenue (000s)||$||85,371||78,803||78,451||73,855||71,276|
|Other Payment Solutions – PaymentProcessing Revenue:*|
|Payment solutions purchase volume (000s)||$||2,494,508||3,182,032||2,822,657||2,189,578||2,018,097|
|Net interchange rate||0.94||%||0.90||%||0.90||%||0.90||%||0.98||%|
|Payment solutions processing revenue (000s)||$||23,322||28,544||25,417||19,747||19,845|
Definitions and explanations:Payment processing transactions represents the total number of purchases made by fleets that have a payment processing relationship with WEX. Payment processing gallons of fuel represents the total number of gallons of fuel purchased by fleets that have a payment processing relationship with WEX. Payment processing $ of fuel represents the total dollar value of the fuel purchased by fleets that have a payment processing relationship with WEX. Net payment processing rate represents the percentage of the dollar value of each payment processing transaction that WEX records as revenue from merchants less any discounts given to fleets or strategic relationships. Payment solutions purchase volume represents the total dollar value of all transactions that use corporate charge card products including single use account products. Net interchange rate represents the percentage of the dollar value of each transaction that WEX records as revenue less any discounts given to customers.
|Segment Revenue Information|
|Fourth Quarter and Full Year Ended 2012 and 2011|
|Fleet Payment Solutions|
|(in thousands)||Three months endedDecember 31,||Increase (decrease)||Year endedDecember 31,||Increase (decrease)|
|Other Payment Solutions|
|Three months endedDecember 31,||Increase (decrease)||Year endedDecember 31,||Increase (decrease)|