FleetCor Reports Second Quarter 2013 Financial Results

FleetCor Technologies, Inc. (NYSE: FLT), a leading global provider of fuel cards and workforce payment products to businesses, today reported financial results for its second quarter ended June 30, 2013.

"We are extremely pleased with our second quarter results which include adjusted revenue growth of 31% and adjusted net income per share growth of 35%,” said Ron Clarke, chairman and chief executive officer, FleetCor Technologies, Inc. “We are also delighted to announce the signing of two new partner agreements, Husky Oil of Canada and Visa Europe, along with an expansion of our Shell relationship to the U.S.”

Financial Results for Second Quarter 2013:

GAAP Results
  • Total revenues increased 29% to $220.9 million compared to $171.8 million last year
  • Net income increased 34% to $73.1 million compared to $54.4 million last year
  • Net income per diluted share increased 36% to $0.87 compared to $0.63 last year

Non-GAAP Results
  • Adjusted revenues1 (revenues, net less merchant commissions) increased 31% to $201.3 million compared to $154.2 million last year
  • Adjusted net income1 increased 33% to $84.0 million compared to $63.0 million last year
  • Adjusted net income per diluted share1 increased 35% to $1.00 compared to $0.73 last year

2013 Outlook:

FleetCor Technologies, Inc. is raising its financial guidance for 2013 as follows:
  • Revenues, net between $825 million and $835 million, up from our previous guidance range of $810 million to $820 million
  • Adjusted net income between $322 million and $327 million, up from our previous guidance range of $310 million to $320 million; and
  • Adjusted net income per diluted share between $3.82 and $3.87, up from our previous guidance range of $3.70 to $3.80

The Company's full-year guidance assumptions for the remainder of 2013 are as follows:
  • Fuel prices and foreign exchange rates at July levels
  • Market spreads equal to historical average
  • Full year tax rate of 30.0%
  • Fully diluted shares outstanding of 84.7 million shares
  • No impact related to acquisitions or material new partnership agreements not already disclosed

“Given our strong second quarter results and business trends, we are raising our financial guidance for 2013, despite the greater than expected currency headwinds,” said Eric Dey, chief financial officer, FleetCor Technologies, Inc. "Also, our updated financial guidance at the mid-point of the range represents a 29% increase in adjusted net income per diluted share versus prior year.”

Conference Call

The Company will host a conference call to discuss second quarter 2013 financial results today at 5:00pm ET. Hosting the call will be Ron Clarke, chief executive officer, and Eric Dey, chief financial officer. The conference call can be accessed live over the phone by dialing (877) 941-4776, or for international callers (480) 629-9714. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 4631420. The replay will be available until August 8, 2013. The call will be webcast live from the Company's investor relations website at investor.fleetcor.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about FleetCor's beliefs, expectations and future performance, are forward-looking statements. Forward-looking statements can be identified by the use of words such as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project," "expect," "may," "will," "would," "could" or "should," the negative of these terms or other comparable terminology. Examples of forward-looking statements in this press release include statements relating to revenue and earnings guidance, assumptions underlying financial guidance, and expectations regarding recent deals. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement, such as delays or failures associated with implementation; fuel price and spread volatility; changes in credit risk of customers and associated losses; the actions of regulators relating to payment cards or resulting from investigations; failure to maintain or renew key business relationships; failure to maintain competitive offerings; failure to maintain or renew sources of financing; failure to complete, or delays in completing, anticipated new partnership arrangements or acquisitions and the failure to successfully integrate or otherwise achieve anticipated benefits from such partnerships or acquired businesses; failure to successfully expand business internationally; the impact of foreign exchange rates on operations, revenue and income; the effects of general economic conditions on fueling patterns and the commercial activity of fleets, as well as the other risks and uncertainties identified under the caption "Risk Factors" in FleetCor's Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on March 1, 2013. FleetCor believes these forward-looking statements are reasonable; however, forward-looking statements are not a guarantee of performance, and undue reliance should not be placed on such statements. The forward-looking statements included in this press release are made only as of the date hereof, and FleetCor does not undertake, and specifically disclaims, any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.

About Non-GAAP Financial Measures

Adjusted revenue is calculated as revenues, net less merchant commissions. Adjusted net income is calculated as net income, adjusted to eliminate (a) non-cash stock-based compensation expense related to share-based compensation awards, (b) amortization of deferred financing costs and intangible assets, (c) amortization of the premium recognized on the purchase of receivables, and (d) loss on the early extinguishment of debt. EBITDA is calculated as net income as reflected in our income statement, adjusted to eliminate (a) interest expense, (b) tax expense, (c) depreciation of long-lived assets (d) amortization of intangible assets and (e) other (income) expense, net. The company uses adjusted revenues as a basis to evaluate the company’s revenues, net of the commissions that are paid to merchants to participate in our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. The company believes this is a more effective way to evaluate the company’s revenue performance. The company uses EBITDA as a basis to evaluate our operating performance net of the impact of certain items during the period. We believe that EBITDA may be useful to investors for understanding our operating performance on a consistent basis. We prepare adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. Adjusted revenues and adjusted net income are supplemental measures of operating performance that do not represent and should not be considered as an alternative to revenues, net, net income or cash flow from operations, as determined by U.S. generally accepted accounting principles, or U.S. GAAP, and our calculation thereof may not be comparable to that reported by other companies. We believe it is useful to exclude non-cash stock-based compensation expense from adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and stock-based compensation expense is not a key measure of our core operating performance. We also believe that amortization expense can vary substantially from company to company and from period to period depending upon their financing and accounting methods, the fair value and average expected life of their acquired intangible assets, their capital structures and the method by which their assets were acquired; therefore, we have excluded amortization expense from our adjusted net income. We also exclude loss on the early extinguishment of debt from adjusted net income, as this expense is non-cash and is one-time in nature and does not reflect the ongoing operations of the business.

Management uses adjusted revenues, adjusted net income, and EBITDA:

  • as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis;
  • for planning purposes, including the preparation of our internal annual operating budget;
  • to allocate resources to enhance the financial performance of our business; and
  • to evaluate the performance and effectiveness of our operational strategies.

We believe adjusted revenues, adjusted net income and EBITDA are key measures used by the Company and investors as supplemental measures to evaluate the overall operating performance of companies in our industry. By providing these non-GAAP financial measures, together with reconciliations, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives.

About FleetCor

FleetCor is a leading global provider of fuel cards and workforce payment products to businesses. FleetCor’s payment programs enable businesses to better control employee spending and provide card-accepting merchants with a commercial customer base that can increase their sales and customer loyalty. FleetCor serves commercial accounts in North America, Latin America, Europe, Australia and New Zealand. For more information, please visit www.fleetcor.com.

1 Reconciliations of GAAP results to non GAAP results are provided in Exhibit 1 attached. Additional supplemental data is provided in Exhibit 2 and segment information is provided in Exhibit 3.
FleetCor Technologies, Inc. and subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
           
Three Months Ended June 30, Six Months Ended June 30,
2013   2012   2013 2012
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Revenues, net $ 220,869 $ 171,820 $ 414,520 $ 317,985
 
Expenses:
Merchant commissions 19,555 17,651 33,416 28,044
Processing 32,010 27,014 61,953 52,593
Selling 13,386 10,274 25,090 20,449
General and administrative 30,954 23,824 60,215 47,647
Depreciation and amortization   15,890     11,609     30,519   23,329
Operating income   109,074     81,448     203,327   145,923
Other (income) expense, net (6 ) (66 ) 286 522
Interest expense, net   3,756     2,818     7,204   6,381
Total other expense   3,750     2,752     7,490   6,903
Income before income taxes 105,324 78,696 195,837 139,020
Provision for income taxes   32,225     24,295     58,076   42,540
Net income $ 73,099   $ 54,401   $ 137,761 $ 96,480
 
Basic earnings per share $ 0.90 $ 0.65 $ 1.69 $ 1.16
Diluted earnings per share $ 0.87 $ 0.63 $ 1.64 $ 1.13
 
Weighted average shares outstanding:
Basic shares 81,573 83,294 81,398 82,929
Diluted shares 84,461 85,737 84,212 85,451
FleetCor Technologies, Inc. and subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
 
    June 30, 2013   December 31, 2012*
(Unaudited)
Assets
 
Current assets:
Cash and cash equivalents $ 292,905 $ 283,649
Restricted cash 48,474 53,674
Accounts receivable (less allowance for doubtful accounts of $20,240 and $19,463 respectively) 627,675 525,441
Securitized accounts receivable - restricted for securitization investors 402,000 298,000
Prepaid expenses and other current assets 27,122 28,126
Deferred income taxes   7,642     6,464  
 
Total current assets   1,405,818     1,195,354  
 
Property and equipment 101,373 93,902
Less accumulated depreciation and amortization   (54,719 )   (48,706 )
 
Net property and equipment 46,654 45,196
 
Goodwill 994,648 926,609
Other intangibles, net 515,702 463,864
Other assets   50,267     90,847  
 
Total assets $ 3,013,089   $ 2,721,870  
 
Liabilities and Stockholders’ Equity
 
Current liabilities:
Accounts payable $ 528,161 $ 418,609
Accrued expenses 65,865 75,812
Customer deposits 158,459 187,627
Securitization facility 402,000 298,000
Current portion of notes payable and other obligations   146,091     162,174  
 
Total current liabilities   1,300,576     1,142,222  
 
Notes payable and other obligations, less current portion 485,997 485,217
Deferred income taxes   176,502     180,609  
 
Total noncurrent liabilities   662,499     665,826  
 
Commitments and contingencies
 
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized, 117,444,296 shares issued and 81,709,804 shares outstanding at June 30, 2013; and 475,000,000 shares authorized, 116,772,324 shares issued and 81,037,832 shares outstanding at December 31, 2012 117 116
Additional paid-in capital 574,602 542,018
Retained earnings 888,458 750,697
Accumulated other comprehensive loss (37,500 ) (3,346 )
Less treasury stock, 35,734,492 shares at June 30, 2013 and December 31, 2012 (375,663 ) (375,663 )
   
Total stockholders’ equity   1,050,014     913,822  
 
Total liabilities and stockholders’ equity $ 3,013,089   $ 2,721,870  
 
 
*Derived from the audited December 31, 2012 Balance Sheet.
FleetCor Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
Six Months Ended June 30,
2013     2012  
(Unaudited)
Operating activities
Net income $ 137,761 $ 96,480
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation 8,054 6,288
Stock-based compensation 8,059 7,793
Provision for losses on accounts receivable 9,199 10,953
Amortization of deferred financing costs 1,593 1,051
Amortization of intangible assets 19,239 14,357
Amortization of premium on receivables 1,632 1,633
Deferred income taxes (2,598 ) (167 )
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash 5,199 5,635
Accounts receivable (190,998 ) (117,325 )
Prepaid expenses and other current assets 1,392 2,808
Other assets 39,322 (42,268 )
Excess tax benefits related to stock-based compensation (12,016 ) (14,750 )
Accounts payable, accrued expenses and customer deposits   56,874     (9,286 )
Net cash provided by (used in) operating activities   82,712     (36,798 )
 
 
Investing activities
Acquisitions, net of cash acquired (156,956 ) (35,490 )
Purchases of property and equipment   (10,108 )   (8,431 )
Net cash used in investing activities   (167,064 )   (43,921 )
 
 
Financing activities
Excess tax benefits related to stock-based compensation 12,016 14,750
Proceeds from issuance of common stock 12,511 11,584
Borrowings on securitization facility, net 104,000 45,000
Deferred financing costs paid (1,967 ) (795 )
Principal payments on notes payable (14,375 ) (7,500 )
Payments on US revolver (70,000 ) (185,000 )
Borrowings from US revolver 55,000 145,000
Borrowings on swing line of credit, net 26,862
Borrowings from foreign revolver 26,895
Payments on foreign revolver (13,821 )
Other   (175 )    
Net cash provided by financing activities   110,084     49,901  
   
Effect of foreign currency exchange rates on cash   (16,476 )   1,238  
 
Net increase (decrease) in cash and cash equivalents 9,256 (29,580 )
Cash and cash equivalents, beginning of year   283,649     285,159  
Cash and cash equivalents, end of year $ 292,905   $ 255,579  
 
Supplemental cash flow information
Cash paid for interest $ 8,262   $ 7,209  
 
Cash paid for income taxes $ 60,120   $ 24,164  
Exhibit 1
RECONCILIATION OF NON-GAAP MEASURES AND PRO FORMA INFORMATION
(In thousands, except shares and per share amounts)
(Unaudited)
                   
  The following table reconciles revenues, net to adjusted revenues:      
 
Three Months Ended June 30, Six Months Ended June 30,
2013   2012   2013   2012  
 
Revenues, net $ 220,869 $ 171,820 $ 414,520 $ 317,985
Merchant commissions   19,555     17,651     33,416     28,044  
Total adjusted revenues $ 201,314   $ 154,169   $ 381,104   $ 289,941  
 
                   
The following table reconciles net income to EBITDA:
 
Three Months Ended June 30, Six Months Ended June 30,
2013   2012   2013   2012  
 
Net income $ 73,099 $ 54,401 $ 137,761 $ 96,480
Provision for income taxes 32,225 24,295 58,076 42,540
Interest expense, net 3,756 2,818 7,204 6,381
Depreciation and amortization 15,890 11,609 30,519 23,329
Other (income) expense, net   (6 )   (66 )   286     522  
EBITDA $ 124,964   $ 93,057   $ 233,846   $ 169,252  
 
                   
The following table reconciles net income to adjusted net income and adjusted net income per diluted share:
 
Three Months Ended June 30, Six Months Ended June 30,
2013   2012   2013   2012  
Net income $ 73,099 $ 54,401 $ 137,761 $ 96,480
 
Stock based compensation 3,897 3,960 8,059 7,793
Amortization of intangible assets 10,217 7,081 19,239 14,357
Amortization of premium on receivables 816 817 1,632 1,633
Amortization of deferred financing costs 833 541 1,593 1,051
       
Total pre-tax adjustments 15,763 12,399 30,523 24,834
 
Income tax impact of pre-tax adjustments at the effective tax rate (4,823 ) (3,828 ) (9,052 ) (7,599 )
       
Adjusted net income $ 84,039   $ 62,972   $ 159,232   $ 113,715  
Adjusted net income per diluted share $ 1.00 $ 0.73 $ 1.89 $ 1.33
 
Diluted shares 84,461 85,737 84,212 85,451
Exhibit 2
Transaction Volume, Revenues and Adjusted Revenue, Per Transaction and by Segment
(In thousands except revenues, net per transaction and adjusted revenues per transaction)
(Unaudited)
               
Three Months Ended June 30, Six Months Ended June 30,
  2013     2012   Change % Change   2013     2012   Change % Change  
 

NORTH AMERICA

- Transactions
41,138 39,336 1,802 4.6 % 79,400 76,001 3,399 4.5 %
- Revenues, net per transaction $ 2.90 $ 2.73 $ 0.17 6.2 % $ 2.77 $ 2.50 $ 0.27 10.8 %
- Revenues, net $ 119,486 $ 107,286 $ 12,200 11.4 % $ 220,080 $ 190,098 $ 29,982 15.8 %
 

INTERNATIONAL

- Transactions
37,836 34,903 2,933 8.4 % 73,734 70,112 3,622 5.2 %
- Revenues, net per transaction $ 2.68 $ 1.85 $ 0.83 44.9 % $ 2.64 $ 1.82 $ 0.82 45.1 %
- Revenues, net $ 101,383 $ 64,534 $ 36,849 57.1 % $ 194,440 $ 127,887 $ 66,553 52.0 %
                                     
 

FLEETCOR CONSOLIDATED REVENUES

- Transactions
78,974 74,239 4,735 6.4 % 153,134 146,113 7,021 4.8 %
- Revenues, net per transaction $ 2.80 $ 2.31 $ 0.49 21.2 % $ 2.71 $ 2.18 $ 0.53 24.3 %
- Revenues, net $ 220,869 $ 171,820 $ 49,049 28.5 % $ 414,520 $ 317,985 $ 96,535 30.4 %
                                     
                                     
 

FLEETCOR CONSOLIDATED ADJUSTED REVENUES1

- Transactions
78,974 74,239 4,735 6.4 % 153,134 146,113 7,021 4.8 %
- Adjusted Revenues per transaction $ 2.55 $ 2.08 $ 0.47 22.6 % $ 2.49 $ 1.98 $ 0.51 25.8 %
- Adjusted Revenues $ 201,314 $ 154,169 $ 47,145 30.6 % $ 381,104 $ 289,941 $ 91,163 31.4 %
                                     
 
 
1Adjusted revenues is a non-GAAP financial measure defined as revenues, net less merchant commissions. The Company believes this measure is a more effective way to evaluate the Company's revenue performance. Refer to Exhibit 1 for a reconciliation of revenues, net to adjusted revenues.
 

Sources of Revenue3
Three Months Ended June 30, Six Months Ended June 30,
  2013     2012   Change % Change   2013     2012   Change % Change  
Revenue from customers and partners 50.9 % 38.5 % 12.4 % 32.2 % 51.1 % 43.4 % 7.7 % 17.7 %
Revenue from merchants and networks 49.1 % 61.5 % -12.4 % -20.2 % 48.9 % 56.6 % -7.7 % -13.6 %
 
Revenue tied to fuel-price spreads 18.7 % 23.5 % -4.8 % -20.4 % 17.4 % 19.7 % -2.3 % -11.7 %
Revenue influenced by absolute price of fuel 19.6 % 21.5 % -1.9 % -8.8 % 20.1 % 20.4 % -0.3 % -1.5 %
Revenue from program fees, late fees, interest and other 61.7 % 55.0 % 6.7 % 12.2 % 62.5 % 59.9 % 2.6 % 4.3 %
 
3Expressed as a percentage of consolidated revenue.
Exhibit 3
Segment Results
(In thousands)
(Unaudited)
         
Three Months Ended June 30, Six Months Ended June 30,
2013 2012 2013 2012
Revenues, net:
North America $ 119,486 $ 107,286 $ 220,080 $ 190,098
International1   101,383   64,534   194,440   127,887
$ 220,869 $ 171,820 $ 414,520 $ 317,985
 
Operating income:
North America $ 60,103 $ 53,598 $ 109,529 $ 91,711
International1   48,971   27,850   93,798   54,212
$ 109,074 $ 81,448 $ 203,327 $ 145,923
 
Depreciation and amortization:
North America $ 5,267 $ 5,024 $ 10,439 $ 10,018
International1   10,623   6,585   20,080   13,311
$ 15,890 $ 11,609 $ 30,519 $ 23,329
 
Capital expenditures:
North America $ 1,292 $ 2,501 $ 2,356 $ 4,596
International1   4,054   2,367   7,752   3,835
$ 5,346 $ 4,868 $ 10,108 $ 8,431
 
1The results from our Russian business acquired in the second quarter of 2012, CTF Technologies, Inc. acquired during the third quarter of 2012, our Australian business acquired during the first quarter of 2013 and New Zealand business acquired during the second quarter of 2013 are reported in our International segment.

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