FLEETCOR Reports Fourth Quarter and Fiscal-Year 2018 Financial Results

PEACHTREE CORNERS, Ga.–(BUSINESS WIRE)–FLEETCOR Technologies, Inc. (NYSE:FLT), a leading global provider of
commercial payment solutions, today reported financial results for its
fourth quarter and year ended December 31, 2018.

“Our Q4 revenues and profits finished the year on a high note with
revenue up 11% and adjusted net income per diluted share up 15% compared
to the fourth quarter of 2017. These results were driven by strong
execution across all lines of business resulting in organic growth of
11%, and record sales up 20% year over year in the fourth quarter.
Fiscal year 2018 was another great year, driven by increases in revenues
of 13% and adjusted net income per diluted share, which increased 23%,”
said Ron Clarke, chairman and chief executive officer, FLEETCOR
Technologies, Inc. “For 2019, we expect each of our four primary product
categories – fuel, toll, lodging, and corporate payments – to continue
to drive our Company’s growth as we focus relentlessly on execution in
order to win new clients, open up new geographies, and provide improved
value over a broader range of spend categories.”

Financial Results for Fourth Quarter of 2018

GAAP Results

  • Total revenues, including the impact of the new revenue recognition
    standard ASC 606, increased 5% to $643.4 million in the fourth quarter
    of 2018, compared to $610.0 million in the fourth quarter of 2017.
  • Net incomeincreased 7% to $302.0 million in the fourth
    quarter of 2018, compared to $282.7 million in the fourth quarter of
    2017. Included in the fourth quarter of 2018, was a gain of
    approximately $153 million from the sale of the Chevron portfolio.
    Included in the fourth quarter of 2017 was the favorable impact of
    adoption of the Tax Reform Act of $127.5 million.
  • Net incomeper diluted share increased 9% to $3.33 in the
    fourth quarter of 2018, compared to $3.05 per diluted share in the
    fourth quarter of 2017.

On January 1, 2018, the Company adopted FASB ASC Topic 606, “Revenue
from Contracts with Customers” (“ASC 606”) and related cost
capitalization guidance, using the modified retrospective method by
recognizing the cumulative effect of initially applying ASC 606 as an
adjustment to opening retained earnings at January 1, 2018. As such, the
Company is not required to restate comparative financial information
prior to the adoption of ASC 606 and, therefore, such information for
the three months and year ended December 31, 2017 continues to be
reported under FASB ASC Topic 605, “Revenue Recognition” (“ASC 605”).
The adoption of ASC 606 did not materially impact the Company’s
financial position. For the three months ended December 31, 2018, the
adoption of ASC 606 reduced revenue by $36.4 million and increased
operating income by $2.5 million. The adoption of ASC 606 did not have a
material impact on net income or net income per diluted share for the
three months ended December 31, 2018. A comparison of the current
presentation under ASC 606 to the prior presentation under ASC 605 is
provided below for the three months ended December 31, 2018:

2018 Reported
under ASC 606

 

2018 Impact of
ASC 606

 

2018 Excluding
Impact of Adoption
of
ASC 606

(millions)    
Revenue $643.4 $36.4 $679.9
 
Operating Expense $358.7 $38.9 $397.6
 
Operating Income $284.7 ($2.5) $282.3
 

The above table presents the U.S. GAAP financial measures of
Revenue, Operating Expense and Operating Income as reported, as
well as the impact of the adoption of ASC 606 on these measures
for the period presented. The impact of the adoption of ASC 606 on
net income and net income per diluted share was not material.

Non-GAAP Results1

  • Revenues under ASC 605 increased 11% to $679.9 million in the fourth
    quarter of 2018, compared to $610.0 million in the fourth quarter of
    2017.
  • Adjusted net income1 increased 12% to $252.0 million in the
    fourth quarter of 2018, compared to $224.1 million in the fourth
    quarter of 2017.
  • Adjusted net income per diluted share1 increased 15% to
    $2.78 in the fourth quarter of 2018, compared to $2.42 per diluted
    share in the fourth quarter of 2017.

Financial Results for Fiscal Year 2018

GAAP Results

  • Total revenues increased 8% to $2,433.5 million in 2018, compared to
    $2,249.5 million in 2017.
  • Net incomeincreased 10% to $811.5 million in 2018,
    compared to $740.2 million in 2017. Included in 2018 is the gain from
    the sale of the Chevron portfolio of approximately $153 million.
    Included in 2017 is the favorable impact of adoption of the Tax Reform
    Act of $127.5 million and a gain on the sale of Nextraq of $109.2
    million.
  • Net incomeper diluted share increased 11% to $8.81 in
    2018, compared to $7.91 per diluted share in 2017.

Non-GAAP Results1

  • Revenues under ASC 605 increased 13% to 2,545.5 million in 2018,
    compared to $2,249.5 million in 2017.
  • Adjusted net income1 increased 21% to $969.8 million in
    2018, compared to $798.9 million in 2017.
  • Adjusted net income per diluted share1 increased 23% to
    $10.53 in 2018, compared to $8.54 in 2017.

Fiscal Year 2019 Outlook

“Our outlook for 2019 is for organic revenue growth to be in the 9-11%
range, consistent with our performance over the last several years. We
expect this performance to be partially offset by a challenging macro
environment, with fuel prices expected to be below 2018 levels, and
unfavorable foreign exchange rates driven by a strong dollar,
particularly in the first half of the year. The combined unfavorable
revenue impact from these factors is expected to be approximately $50
million in 2019. As a result, we are guiding adjusted net income per
diluted share to $11.55, at the midpoint, which represents a 10% growth
from prior year,” said Eric Dey, chief financial officer, FLEETCOR
Technologies, Inc.”

For fiscal year 2019, FLEETCOR Technologies, Inc. updated financial
guidance is as follows:

  • Total revenues to be between $2,570 million and $2,630 million;
  • GAAP net income between $800 million and $830 million;
  • GAAP net income per diluted share between $9.05 and $9.35;
  • Adjusted net income to be between $1,015 million and $1,045 million;
    and
  • Adjusted net income per diluted share to be between $11.40 and $11.70.

FLEETCOR’s guidance assumptions for 2019 are as follows:

  • Weighted fuel prices equal to $2.60 per gallon average in the U.S. for
    those businesses sensitive to the movement in the retail price of fuel
    for the balance of the year;
  • Market spreads slightly below the 2018 average;
  • Foreign exchange rates equal to the seven-day average as of February
    3, 2019;
  • Interest expense of $160 million;
  • Fully diluted shares outstanding of approximately 89.0 million shares;
  • An adjusted tax rate of 23% to 24%; and
  • No impact related to acquisitions or material new partnership
    agreements not already disclosed.

Fiscal First Quarter of 2019 Outlook

FLEETCOR experiences some seasonality and typically the first quarter is
the lowest in terms of both revenue and profit. First quarter
seasonality is impacted by weather, holidays in the U.S., and lower
business levels in Brazil, due to summer break and the Carnival
celebration that occurs in the first quarter. Also, the first quarter
revenue will be impacted by unfavorable foreign exchange rates when
compared to the first quarter of 2018, as well as the divestiture of the
Chevron portfolio.

With that said, the Company is expecting first quarter adjusted net
income per diluted share to be between $2.55 and $2.651.
Additionally, volumes should build throughout the year, and new asset
initiatives are also expected to gain momentum throughout the year
resulting in higher revenue and earnings per share in the second through
fourth quarters.

_______________________________________

1 Reconciliations of GAAP results to non-GAAP results are
provided in Exhibit 1 attached. Additional supplemental data is provided
in Exhibits 2-3 and 5, and segment information is provided in Exhibit 4.
A reconciliation of GAAP guidance to non-GAAP guidance is provided in
Exhibit 6. A reconciliation of the impact of the adoption of ASC 606 is
provided in exhibit 7.

Subsequent Events

On January 14, 2019, FLEETCOR entered into an interest rate swap
agreement to fix $2 billion of floating rate debt at 2.55%, on
borrowings as of January 31, 2019. This action is expected to limit the
risk from future interest rate hikes by reducing the portion of our debt
that is exposed to floating rates. Also, on January 23, 2019, the
FLEETCOR Board of Directors authorized an additional $500 million in
share repurchases under the existing Share Repurchase Program, bringing
the total current repurchase authorization to $551 million.

Conference Call

The Company will host a conference call to discuss fourth quarter and
full year 2018 financial results today at 5:00 pm ET. Hosting the call
will be Ron Clarke, chief executive officer, Eric Dey, chief financial
officer and Jim Eglseder, investor relations. The conference call can be
accessed live over the phone by dialing (877) 407-0784, or for
international callers (201) 689-8560. A replay will be available one
hour after the call and can be accessed by dialing (844) 512-2921
or (412) 317-6671 for international callers; the conference ID is
13687023. The replay will be available until Wednesday, February 13,
2019. The call will be webcast live from the Company’s investor
relations website at http://investor.fleetcor.com.
Prior to the conference call, the Company will post supplemental
financial information that will be discussed during the call and live
webcast.

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 macro- economic conditions, expected growth opportunities
and strategies, and estimated impact of these conditions on our
operations and financial results, revenue and earnings guidance and
assumptions underlying financial guidance. 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 fuel price and spread volatility; 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; 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 customer arrangements or
acquisitions and the failure to successfully integrate or otherwise
achieve anticipated benefits from such customer arrangements or acquired
businesses; failure to successfully expand business internationally,
risks related to litigation; 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, 2017 and
FLEETCOR’s quarterly reports on Form 10-Q for the three months ended
March 31, 2018, June 30, 2018, and September 30, 2018. 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 except as specifically stated in this press
release or to the extent required by law.

About Non-GAAP Financial Measures

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,
discounts and intangible assets, amortization of the premium recognized
on the purchase of receivables, and our proportionate share of
amortization of intangible assets at our equity method investment, (c)
other non-recurring items, including the impact of the 2017 Tax Cuts and
Jobs Act, impairment charges, asset write-offs, restructuring costs,
gains due to disposition of assets and a business, loss on
extinguishment of debt, legal settlements, and the unauthorized access
impact. We calculate adjusted net income to eliminate the effect of
items that we do not consider indicative of our core operating
performance. Adjusted net income is a supplemental measure of operating
performance that does not represent and should not be considered as an
alternative to 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 believe one-time non-recurring gains, losses, and
impairment charges do not necessarily reflect how our investments and
business are performing. Reconciliations of GAAP results to non-GAAP
results are provided in the attached exhibit 1. A reconciliation of GAAP
to non-GAAP product revenue organic growth calculation is provided in
the attached exhibit 5. A reconciliation of GAAP to non-GAAP guidance is
provided in the attached exhibit 6. Furthermore, a reconciliation of the
impact of the Company’s adoption of the new revenue standard, ASC 606,
is provided in exhibit 7.

Management uses adjusted net income:

  • as measurement of operating performance because it assists 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 net income and adjusted net income per diluted share
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 Technologies (NYSE: FLT) is a leading global provider of
commercial payment solutions. The Company helps businesses of all sizes
better control, simplify and secure payment of their fuel, toll, lodging
and other general payables. With its proprietary payment acceptance
networks, FLEETCOR provides affiliated merchants with incremental sales
and loyalty. FLEETCOR serves businesses, partners and merchants in North
America, Latin America, Europe, and Australasia. For more information,
please visit www.FLEETCOR.com.

FLEETCOR Technologies, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
       
Three Months Ended December 31, Year Ended December 31,
2018(1) 2017 2018(1) 2017
(Unaudited) (Unaudited) (Unaudited)
Revenues, net $ 643,422 $ 609,991 $ 2,433,492 $ 2,249,538
 
Expenses:
Merchant commissions 30,443 113,133
Processing 131,609 113,184 487,695 429,613
Selling 46,667 47,863 182,593 170,717
General and administrative 104,453 112,648 389,172 387,694
Depreciation and amortization 67,230 65,829 274,609 264,560
Other operating, net   8,725     12     8,725     61  
Operating income   284,738     240,012     1,090,698     883,760  
Investment loss 667 7,147 53,164
Other (income) expense, net (152,630 ) 190 (152,166 ) (173,436 )
Interest expense, net 38,207 30,825 138,494 107,146
Loss on extinguishment of debt   2,098         2,098     3,296  
Total other (income) expense   (112,325 )   31,682     (4,427 )   (9,830 )
Income before income taxes 397,063 208,330

1,095,125

893,590
Provision for income taxes   95,063     (74,366 )   283,642     153,390  
Net income $ 302,000   $ 282,696   $ 811,483   $ 740,200  
 
Basic earnings per share $ 3.45 $ 3.15 $ 9.14 $ 8.12
Diluted earnings per share $ 3.33 $ 3.05 $ 8.81 $ 7.91
 
Weighted average shares outstanding:
Basic shares 87,636 89,676 88,750 91,129
Diluted shares 90,703 92,623 92,151 93,594
 
1 Reflects the impact of the Company’s adoption of
Accounting Standards Update 2014-09, Revenue from Contracts with
Customers (Topic 606) (ASC 606)
and related cost capitalization
guidance,which was adopted by the Company on January 1, 2018
using the modified retrospective transition method. The adoption of
ASC 606 resulted in an adjustment to retained earnings in our
consolidated balance sheet for the cumulative effect of applying the
standard, which included costs incurred to obtain a contract, as
well as presentation changes in our statements of income, including
the classification of certain amounts previously classified as
merchant commissions and processing expense net with revenues. As a
result of the application of the modified retrospective transition
method, the Company’s prior period results within its Form 10-K and
quarterly reports on Form 10-Q will not be restated to reflect ASC
606. See exhibit 7 for a reconciliation of the impact of adoption of
ASC 606.
FLEETCOR Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
 
December 31, 20181   December 31, 2017
(Unaudited)
Assets
 
Current assets:
Cash and cash equivalents $ 1,034,521 $ 913,595
Restricted cash 313,379 217,275
Accounts and other receivables (less allowance for doubtful accounts
of $59,963 at December 31, 2018 and $46,031 at December 31, 2017,
respectively)
1,422,439 1,420,011
Securitized accounts receivable – restricted for securitization
investors
886,000 811,000
Prepaid expenses and other current assets   199,278     187,820  
 
Total current assets   3,855,617     3,549,701  
 
Property and equipment, net 186,201 180,057
Goodwill 4,542,074 4,715,823
Other intangibles, net 2,407,910 2,724,957
Investments 42,674 32,859
Other assets   147,632     114,962  
 
Total assets $ 11,182,108   $ 11,318,359  
 
Liabilities and Stockholders’ Equity
 
Current liabilities:
Accounts payable $ 1,117,649 $ 1,437,314
Accrued expenses 261,594 238,472
Customer deposits 906,316 732,171
Securitization facility 886,000 811,000
Current portion of notes payable and lines of credit 1,184,616 805,512
Other current liabilities   118,669     71,033  
 
Total current liabilities   4,474,844     4,095,502  
 
Notes payable and other obligations, less current portion 2,748,431 2,902,104
Deferred income taxes 491,946 518,912
Other noncurrent liabilities   126,707     125,319  
 
Total noncurrent liabilities   3,367,084     3,546,335  
 
Commitments and contingencies
 
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized;
123,035,859 shares issued and 85,845,344 shares outstanding at
December 31, 2018; and 122,083,059 shares issued and 89,803,982
shares outstanding at December 31, 2017
123 122
Additional paid-in capital 2,306,843 2,214,224
Retained earnings 3,817,656 2,958,921
Accumulated other comprehensive loss (913,858 ) (551,857 )
Less treasury stock, 37,190,515 shares at December 31, 2018 and
32,279,077 shares at December 31, 2017
(1,870,584 ) (944,888 )
   
Total stockholders’ equity   3,340,180     3,676,522  
 
Total liabilities and stockholders’ equity $ 11,182,108   $ 11,318,359  
 
1 Reflects the impact of the Company’s adoption of ASC
606 and related cost capitalization guidance, which was adopted by
the Company on January 1, 2018 using the modified retrospective
transition method. The adoption of ASC 606 resulted in an adjustment
to retained earnings in our consolidated balance sheet for the
cumulative effect of applying the standard, which included costs
incurred to obtain a contract, as well as presentation changes in
our statements of income, including the classification of certain
amounts previously classified as merchant commissions and processing
expense net with revenues. As a result of the application of the
modified retrospective transition method, the Company’s prior period
results within its Form 10-K and quarterly reports on Form 10-Q will
not be restated to reflect ASC 606. See exhibit 7 for a
reconciliation of the impact of adoption of ASC 606.
FLEETCOR Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
 
Year Ended December 31,
2018(1)   2017(1)
(Unaudited)
Operating activities
Net income $ 811,483 $ 740,200
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 52,936 46,599
Stock-based compensation 69,939 93,297
Provision for losses on accounts receivable 64,377 44,857
Amortization of deferred financing costs and discounts 5,342 6,952
Amortization of intangible assets 216,330 211,849
Amortization of premium on receivables 5,343 6,112
Loss on extinguishment of debt 2,098 3,296
Loss on write-off of fixed assets 8,793
Deferred income taxes 23,608 (247,712 )
Investment loss 7,147 53,164
Gain on sale of assets/business (152,750 ) (174,983 )
Other non-cash operating income (186 ) (61 )
Changes in operating assets and liabilities (net of
acquisitions/dispositions):
Accounts and other receivables (155,648 ) (431,003 )
Prepaid expenses and other current assets (27,650 ) 26,102
Other assets (25,432 ) (20,957 )
Accounts payable, accrued expenses and customer deposits   (19,341 )   322,346  
Net cash provided by operating activities   886,389     680,058  
 
 
Investing activities
Acquisitions, net of cash acquired (20,843 ) (705,257 )
Purchases of property and equipment (81,387 ) (70,093 )
Proceeds from disposal of assets/business 98,735 316,501
Other   (22,775 )   (38,953 )
Net cash used in investing activities   (26,270 )   (497,802 )
 
 
Financing activities
Proceeds from issuance of common stock 55,680 44,690
Repurchase of common stock (958,696 ) (402,393 )
Borrowings on securitization facility, net 75,000 220,000
Deferred financing costs paid and debt discount (4,927 ) (12,908 )
Proceeds from issuance of notes payable 467,503 780,656
Principal payments on notes payable (602,378 ) (423,156 )
Borrowings from revolver 1,404,019 1,100,000
Payments on revolver (1,009,968 ) (1,031,722 )
Payments on swing line of credit, net (4,935 ) (23,686 )
Other   887     457  
Net cash (used in) provided by financing activities   (577,815 )   251,938  
 
Effect of foreign currency exchange rates on cash   (65,274 )   52,906  
 
Net increase in cash and cash equivalents and restricted cash

217,030

487,100
Cash and cash equivalents and restricted cash, beginning of year   1,130,870     643,770  
Cash and cash equivalents and restricted cash, end of year $

1,347,900

  $ 1,130,870  
 
Supplemental cash flow information
Cash paid for interest $ 156,749   $ 113,416  
 
Cash paid for income taxes $ 207,504   $ 392,192  
 
Non cash investing activity, notes assumed in acquisitions $   $ 29,341  
 

1 Reflects the impact of the Company’s adoption of Accounting
Standards Update 2016-18, Statement of Cash Flows (Topic 230),
which was adopted by the Company on January 1, 2018 and applied
retrospectively to results for 2017.  The adoption of Topic 230
resulted in the statement of cash flows presenting the changes in
the total of cash, cash equivalents and restricted cash.  As a
result, the Company will no longer present transfers between cash
and cash equivalents and restricted cash in the statement of cash
flows.

Contacts

Investor Relations
Jim Eglseder, 770-417-4697
[email protected]

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