Wright Express Reports Third Quarter 2009 Financial Results
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Third Quarter Results Exceed Top End of Guidance; Consistent Vehicle Growth and Stability in Credit Portfolio Position Company to Benefit from Economic Recovery
SOUTH PORTLAND, Maine--(BUSINESS WIRE)-- Wright Express Corporation (NYSE: WXS), a leading provider of payment processing and information management services to the U.S. commercial and government fleet industry, today reported financial results for the three months ended September 30, 2009.
Total revenue for the third quarter of 2009 decreased 20% to $86.6 million from $108.5 million for the third quarter of 2008. Net income to common shareholders on a GAAP basis was $23.4 million, or $0.60 per diluted share, compared with $72.3 million, or $1.82 per diluted share, for the same period last year. On a non-GAAP basis, the Company's adjusted net income for the third quarter of 2009 was $24.9 million, or $0.63 per diluted share, compared with $21.8 million, or $0.55 per diluted share, for the year-earlier period.
Wright Express uses fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices. For the third quarter of 2009, the Company's GAAP financial results include an unrealized $100,000 pre-tax, non-cash, mark-to-market loss on these instruments. For the third quarter of 2008, the Company reported an unrealized pre-tax, non-cash, mark-to-market gain on these instruments of $82.4 million.
Exhibit 1 reconciles adjusted net income for the third quarters of 2009 and 2008, which has not been determined in accordance with GAAP, to net income as determined in accordance with GAAP.
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.
Third Quarter 2009 Performance Metrics
-- Average number of vehicles serviced increased 3% from the third quarter
of 2008 to approximately 4.6 million.
-- Total fuel transactions processed declined 7% from the third quarter of
2008 to 67.1 million. Payment processing transactions decreased 4% to
53.0 million, and transaction processing transactions decreased 17% to
14.1 million.
-- Average expenditure per payment processing transaction decreased 35%
from the third quarter of 2008 to $52.50.
-- Average retail fuel price declined 36% to $2.58 per gallon from $4.02
per gallon in the third quarter of 2008.
-- Total MasterCard purchase volume grew 31% to $876 million, from $670
million for the third quarter of 2008.
To provide investors with additional insight into its operational performance, Wright Express has included in this news release a table of selected non-financial metrics for the five quarters ended September 30, 2009. This table is presented as Exhibit 2.
Management Comments on the Third Quarter
"Maintaining focus on growth while managing our business effectively enabled Wright Express to continue delivering strong financial results this quarter, despite economic conditions that remained less than ideal," said Michael Dubyak, Chairman and CEO. "Revenue and adjusted net income both exceeded the top end of our guidance range."
"New business again helped offset the contraction in transactions from our existing customer base, and fleet transaction volume was in line with our forecast," Dubyak said. "Several factors contributed to the positive results this quarter. On the revenue side, we benefited from higher-than-expected MasterCard purchase volumes, fuel prices and late fee income. At the same time, we have continued to be successful in managing credit loss and other operating expenses."
"Although the macro economy may be showing signs of modest improvement, the current trends in fleet fueling activity suggest that the recovery has not yet extended to many of our existing customers," said Dubyak. "When it does, the consistent net growth we have achieved in our total vehicle count sets the stage for a solid rebound in transaction volume. In the meantime, we will remain focused on providing greater value to our customers, continuing to gain market share, and deploying our solid cash flow to further strengthen and diversify our business."
Financial Guidance
Wright Express Corporation is issuing financial guidance for the fourth quarter and raising guidance for the full year 2009. In preparing this guidance, for the fourth quarter of 2009 management is assuming a 5% to 7% year-over-year decline in transaction volume within the Company's installed base of customers due to weak economic conditions. The guidance below further assumes that credit loss for the fourth quarter of 2009 will range from 25 to 30 basis points. The guidance below does not reflect the impact of any stock repurchases that may occur in 2009.
In addition, the Company's guidance excludes the impact of non-cash, mark-to-market adjustments on its fuel-price-related derivative instruments, the amortization of purchased intangibles, asset impairment charges and adjustments related to the deferred tax asset and related tax-receivable agreement. The guidance below also excludes the second quarter gain associated with the settlement of a portion of the liability under the tax receivable agreement. The fuel prices referenced below are based on the applicable NYMEX futures price:
-- For the fourth quarter of 2009, the Company expects revenue in the range
of $76.5 million to $81.5 million. This is based on an assumed average
retail fuel price of $2.53 per gallon.
-- For the fourth quarter of 2009, the Company expects adjusted net income
in the range of $20 million to $22 million, or $0.50 to $0.55 per
diluted share, based on approximately 39 million shares outstanding.
-- For the full year 2009, the Company expects revenue in the range of $311
million to $316 million. This is based on an assumed average retail fuel
price of $2.36 per gallon.
-- For the full year 2009, the Company expects adjusted net income in the
range of $83 million to $85 million, or $2.12 to $2.17 per diluted
share, based on approximately 39 million shares outstanding.
Conference Call Details
In conjunction with this announcement, Wright Express will host a conference call today, October 28, 2009, at 10:00 a.m. (ET). The conference call will be webcast live on the Internet, and can be accessed at the Investor Relations section of the Wright Express website, www.wrightexpress.com. The live conference call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. A replay of the webcast will be available on the Company's website for approximately three months.
About Wright Express
Wright Express is a leading global provider of payment processing and information management services. Wright Express captures and combines transaction information from its proprietary network with specialized analytical tools and purchasing control capabilities in a suite of solutions that enable fleets to manage their vehicles more effectively. The Company's charge cards are used by commercial and government fleets to purchase fuel and maintenance services for approximately 4.6 million vehicles. Wright Express markets its services directly to fleets and as an outsourcing partner for its strategic relationships and franchisees. The Company's business portfolio includes a MasterCard-branded corporate card as well as TelaPoint, a provider of supply chain software solutions for petroleum distributors and retailers, and Pacific Pride, an independent fuel distributor franchisee network, as well as international subsidiaries. For more information about Wright Express, please visit www.wrightexpress.com.
This press release contains forward-looking statements, including statements regarding: anticipated increases in transaction volume; focus on providing value to our customers; gaining market share; deploying cash flow to further strengthen and diversify our business; and, earnings guidance. These forward-looking statements include a number of risks and uncertainties that could cause actual results to differ materially, including: 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 bank regulators, or possible changes in banking regulations impacting the Company's industrial loan bank and the Company as the corporate parent; the uncertainties of litigation; the effects of general economics on fueling patterns and the commercial activity of fleets, as well as other risks and uncertainties identified in Item 1A of the Company's Annual Report for the year ended December 31, 2008, filed on Form 10-K with the Securities and Exchange Commission on February 27, 2009 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 or disposition. The forward-looking statements speak only as of the date of this press 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.
WRIGHT EXPRESS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Service
Revenues
Payment
processing $ 59,871 $ 83,685 $ 158,657 $ 241,205
revenue
Transaction
processing 4,538 5,326 13,199 14,561
revenue
Account
servicing 9,540 7,645 27,807 22,656
revenue
Finance fees 8,790 8,109 23,133 23,179
Other 3,193 2,958 8,930 8,704
Total service 85,932 107,723 231,726 310,305
revenues
Product
Revenues
Hardware and 710 808 2,718 2,410
equipment sales
Total revenues 86,642 108,531 234,444 312,715
Expenses
Salary and 18,680 14,604 54,792 50,038
other personnel
Service fees 7,291 4,923 19,447 15,629
Provision for 5,667 9,325 12,469 30,544
credit losses
Technology
leasing and 2,424 2,100 6,821 6,478
support
Occupancy and 1,960 1,933 6,317 5,783
equipment
Depreciation
and 5,359 5,216 15,942 14,642
amortization
Operating
interest 2,759 9,581 10,889 27,667
expense
Cost of
hardware and 638 668 2,394 2,101
equipment sold
Other 5,518 5,779 17,331 17,415
Total operating 50,296 54,129 146,402 170,297
expenses
Operating 36,346 54,402 88,042 142,418
income
Financing
interest (1,355 ) (3,006 ) (5,423 ) (9,123 )
expense
Loss on foreign
currency (16 ) -- (28 ) --
transactions
Gain on settlement of
portion of amounts due under -- -- 136,485 --
tax receivable agreement
Net realized and unrealized
gains (losses) on fuel price 3,687 66,034 (13,770 ) (31,876 )
derivatives
Increase in amount due under -- (9,159 ) (570 ) (9,159 )
tax receivable agreement
Income before 38,662 108,271 204,736 92,260
income taxes
Income taxes 15,299 35,927 77,206 29,771
Net income 23,363 72,344 127,530 62,489
Changes in
available-for-sale
securities, net of tax
effect of $(42) and
$(63) in 2009
and $10 and $ 78 19 115 (42 )
(24) in 2008
Changes in interest rate
swaps, net of tax effect of
$(96) and $(912)
in 2009 and
$277 and $210 167 495 1,575 367
in 2008
Foreign currency translation 197 (15 ) 23 (23 )
Comprehensive $ 23,805 $ 72,843 $ 129,243 $ 62,791
income
Earnings per
share:
Basic $ 0.61 $ 1.86 $ 3.33 $ 1.60
Diluted $ 0.60 $ 1.82 $ 3.25 $ 1.57
Weighted
average common
shares
outstanding:
Basic 38,217 38,831 38,324 38,999
Diluted 39,351 39,730 39,359 39,920
WRIGHT EXPRESS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
September 30, December 31,
2009 2008
Assets
Cash and cash equivalents $ 15,904 $ 183,117
Accounts receivable (less reserve for credit 911,455 702,225
losses of $9,113 in 2009 and $18,435 in 2008)
Income taxes receivable -- 7,903
Available-for-sale securities 10,938 12,533
Fuel price derivatives, at fair value 20,149 49,294
Property, equipment and capitalized software
(net of accumulated depreciation of
$68,556 in 2009 and $57,814 in 2008) 45,385 44,864
Deferred income taxes, net 182,816 239,957
Goodwill 315,244 315,230
Other intangible assets, net 36,101 39,922
Other assets 17,869 16,810
Total assets $ 1,555,861 $ 1,611,855
Liabilities and Stockholders' Equity
Accounts payable $ 348,883 $ 249,067
Accrued expenses 28,506 34,931
Income taxes payable 160 --
Deposits 421,982 540,146
Borrowed federal funds 40,300 --
Revolving line-of-credit facility 165,700 170,600
Other liabilities 1,696 3,083
Amounts due under tax receivable agreement 110,460 309,366
Preferred stock; 10,000 shares authorized:
Series A non-voting convertible, redeemable
preferred stock;
0.1 shares issued and outstanding 10,000 10,000
Total liabilities 1,127,687 1,317,193
Commitments and contingencies
Stockholders' Equity
Common stock $0.01 par value; 175,000 shares
authorized, 41,102 in 2009
and 40,966 in 2008 shares issued; 38,131 in 411 410
2009 and 38,244 in 2008 shares outstanding
Additional paid-in capital 110,895 100,359
Retained earnings 400,009 272,479
Other comprehensive loss, net of tax:
Net unrealized loss on available-for-sale 62 (53 )
securities
Net unrealized loss on interest rate swaps (161 ) (1,736 )
Net foreign currency translation adjustment (32 ) (55 )
Accumulated other comprehensive loss (131 ) (1,844 )
Less treasury stock at cost, 2,971 shares in (83,010 ) (76,742 )
2009 and 2,722 shares in 2008
Total stockholders' equity 428,174 294,662
Total liabilities and stockholders' equity $ 1,555,861 $ 1,611,855
WRIGHT EXPRESS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine months ended
September 30,
2009 2008
Cash flows from operating activities
Net income $ 127,530 $ 62,489
Adjustments to reconcile net income to net cash
(used for) provided by operating activities:
Fair value change of fuel price derivatives 29,145 (4,652 )
Stock-based compensation 4,339 3,914
Depreciation and amortization 16,413 14,950
Loss on sale of available for sale securities 15 --
Gain on settlement of portion of amounts due under (136,485 ) --
tax receivable agreement
Deferred taxes 56,166 5,594
Provision for credit losses 12,470 30,544
Loss on disposal of property and equipment 45 66
Impairment of internal-use software 421 --
Changes in operating assets and liabilities, net of
effects of acquisitions in 2008:
Accounts receivable (221,619 ) (293,517 )
Other assets (1,530 ) (3,192 )
Accounts payable 99,795 193,593
Accrued expenses (3,990 ) (1,621 )
Income taxes 14,964 2,057
Other liabilities (1,409 ) (1,356 )
Amounts due under tax receivable agreement (62,421 ) (4,502 )
Net cash (used for) provided by operating (66,151 ) 4,367
activities
Cash flows from investing activities
Purchases of property and equipment (13,129 ) (12,339 )
Purchase of available-for-sale securities (120 ) (4,259 )
Maturities of available-for-sale securities 1,871 927
Sale of available-for-sale securities 7 --
Purchase of trade name -- (44 )
Acquisitions, net of cash acquired -- (41,526 )
Net cash used for investing activities (11,371 ) (57,241 )
Cash flows from financing activities
Excess tax benefits from equity instrument -- 140
share-based payment arrangements
Repurchase of share-based awards to satisfy tax (921 ) (2,076 )
withholdings
Proceeds from stock option exercises 212 415
Net (decrease) increase in deposits (118,164 ) 66,650
Net increase in borrowed federal funds 40,300 23,305
Net change in revolving line-of-credit facility (4,900 ) 12,800
Loan origination fees paid for revolving -- (1,556 )
line-of-credit facility
Purchase of shares of treasury stock (6,268 ) (31,391 )
Net cash (used for) provided by financing (89,741 ) 68,287
activities
Effect of exchange rate changes on cash and cash 50 (23 )
equivalents
Net change in cash and cash equivalents (167,213 ) 15,390
Cash and cash equivalents, beginning of period 183,117 43,019
Cash and cash equivalents, end of period $ 15,904 $ 58,409
Supplemental cash flow information
Interest paid $ 24,978 $ 34,890
Income taxes paid $ 6,075 $ 22,222
Exhibit 1
Wright Express Corporation
Reconciliation of Adjusted Net Income to GAAP Net Income
Third Quarter 2009
(in thousands)
(unaudited)
Three months ended Three months ended
September 30, 2009 September 30, 2008
Adjusted net income $ 24,898 $ 21,786
Unrealized gains (losses) on fuel price (100 ) 82,372
derivatives
Amortization of acquired intangible (1,264 ) (1,313 )
assets
Tax impact (171 ) (30,501 )
GAAP net income $ 23,363 $ 72,344
Although adjusted net income is not calculated in accordance with generally accepted accounting principles (GAAP), this measure is integral to the Company's reporting and planning processes. The Company considers this measure integral because it eliminates the non-cash volatility associated with the derivative instruments, and excludes the amortization of purchased intangibles. Specifically, in addition to evaluating the Company's performance on a GAAP basis, management evaluates the Company's performance on a basis that excludes the above items because:
-- Exclusion of the non-cash, mark-to-market adjustments on 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 has no impact on the
day-to-day operations of the business.
For the same reasons, Wright Express believes that adjusted net income may also be useful to investors as one means of evaluating the Company's performance. However, because adjusted net income is a non-GAAP measure, it should not be considered as a substitute for, or superior to, net income as determined in accordance with GAAP. In addition, adjusted net income as used by Wright Express may not be comparable to similarly titled measures employed by other companies.
Exhibit 2
Wright Express Corporation
Selected Non-Financial Metrics
Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008
Fleet Payment
Processing
Revenue:
Payment
processing 53,036 51,579 49,297 51,509 55,519
transactions
(000s)
Gallons per
payment 20.4 20.4 20.3 20.3 20.1
processing
transaction
Payment
processing 1,080,678 1,050,835 1,003,189 1,047,627 1,115,908
gallons of
fuel (000s)
Average fuel $ 2.58 2.33 2.00 2.59 4.02
price
Payment
processing $ $ 2,784,619 2,443,482 2,010,123 2,713,812 4,488,293
of fuel
(000s)
Net payment
processing 1.80 % 1.85 % 1.94 % 1.86 % 1.71 %
rate
Fleet payment
processing $ 50,211 45,205 38,988 50,407 76,802
revenue
(000s)
MasterCard
Payment
Processing
Revenue:
MasterCard
purchase $ 875,752 771,469 649,048 585,967 670,137
volume (000s)
Net
interchange 1.10 % 1.11 % 0.93 % 0.99 % 1.03 %
rate
MasterCard
payment
processing $ 9,660 8,589 6,004 5,830 6,883
revenue
(000s)
Definitions:
Payment processing transactions represents the total number of purchases made by fleets that have a payment processing relationship with Wright Express.
Payment processing gallons of fuel represents the total number of gallons of fuel purchased by fleets that have a payment processing relationship with Wright Express.
Payment processing $ of fuel represents the total dollar value of the fuel purchased by fleets that have a payment processing relationship with Wright Express.
Net payment processing rate represents the average percentage of the dollar value of each payment processing transaction that Wright Express records as revenue from merchants less any discounts given to fleets or strategic relationships.
MasterCard purchase volume represents the total dollar value of all transactions that use a Wright Express MasterCard-branded product.
Net interchange rate represents the average percentage of the dollar value of each MasterCard transaction that Wright Express records as revenue less any discounts given to customers.
Source: Wright Express Corporation
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