Wright Express Reports Fourth-Quarter and Full-Year 2007 Financial Results
SOUTH PORTLAND, Maine--Wright Express Corporation , 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 fourth quarter and year ended December 31, 2007.
Total revenue for the fourth quarter of 2007 increased 28% to $90.7 million from $70.8 million for the fourth quarter of 2006. Net income to common shareholders on a GAAP basis for the fourth quarter of 2007 was $4.6 million, or $0.11 per diluted share, compared with $19.0 million, or $0.46 per diluted share, for the comparable quarter last year. On a non-GAAP basis, the Company’s adjusted net income for the fourth quarter of 2007 was $19.7 million, or $0.49 per diluted share, compared with $13.4 million, or $0.33 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 fourth quarter of 2007, the Company’s GAAP financial results include an unrealized $22.8 million pre-tax, non-cash, mark-to-market loss on these instruments. For the fourth quarter of 2006, the Company reported an unrealized pre-tax, non-cash, mark-to-market gain of $10.0 million.
For the year ended December 31, 2007, net income on a GAAP basis was $51.6 million, or $1.27 per diluted share, compared with $74.6 million, or $1.81 per diluted share, for full-year 2006. On a non-GAAP basis, adjusted net income increased 36% to $76.0 million for full-year 2007 from $55.8 million a year earlier.
Exhibit 1 reconciles adjusted net income for the three- and 12-month periods ended December 31, 2007 and December 31, 2006, 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 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 disclosure in accordance with GAAP.
Fourth-Quarter 2007 Performance Metrics
- Average number of vehicles serviced increased 2% from the fourth quarter of 2006 to approximately 4.5 million.
- Total fuel transactions processed increased 7% from the fourth quarter of 2006 to 63.1 million. Payment processing transactions increased 18% to 53.4 million, and transaction processing transactions decreased 31% to 9.7 million.
- Average expenditure per payment processing transaction increased 29% to $62.69 from $48.69 for the same period last year.
- Average retail fuel price increased 29% to $3.06 per gallon, from $2.37 per gallon for the fourth quarter a year ago.
- Total MasterCard purchase volume grew 45% to $484.3 million, from $332.9 million for the comparable period in 2006.
- Wright Express repurchased approximately 168,000 shares of its common stock at a cost of approximately $6.1 million during the fourth quarter of 2007.
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 December 31, 2007. This table is presented as Exhibit 2.
Management Comments on the Fourth Quarter
“This was a good quarter for Wright Express and the business is performing well as 2008 begins,” said Michael Dubyak, president and chief executive officer. “Our adjusted net income for the fourth quarter was on the high side of our guidance. In a soft economy we were able to grow total transactions 7% from the fourth quarter of 2006 and 4% for the full year. We also performed well in terms of customer credit quality. Consistent with our forecast, the fleet credit loss rate came in flat with the fourth quarter of 2006 and at the mid-point of our historical range for full-year 2007. Our cash flow remains strong and we continued executing on our share repurchase program in the fourth quarter.”
“The new private label relationship we established with Citi in the fourth quarter was a significant milestone for Wright Express, and the integration and product development with Citi are moving forward,” Dubyak said. “Among our other fleet growth initiatives, the pending acquisition of certain assets of Pacific Pride Services, Inc., announced this morning, is the next step in our strategy to increase our presence in the distributor channel. We expect that offering Pacific Pride’s comprehensive value proposition will strengthen our relationships with distributors and the small fleets they serve, accelerating our strategic initiatives in these key markets. In addition, the more than 330 independent fuel distributors in Pacific Pride’s franchise network represent a cross-selling opportunity for our new TelaPoint inventory management product.”
“Our MasterCard business remains very strong, driven by continued demand for our purchasing and single-use account products,” said Dubyak. “MasterCard is a model for future organic growth opportunities in our business. We are applying the customer information capabilities we have developed in MasterCard to different kinds of purchasing activity in verticals that are adjacent to the fleet market. For example, we recently signed our first major partnership focused on the construction vertical: a branded program for Bobcat, the construction equipment company.”
“Our performance in the fourth quarter and the full year 2007 demonstrates that Wright Express has a strong, resilient business model and a great reputation for delivering value to our customers,” Dubyak said. “In a soft economy, we have capitalized on these assets and supplemented growth in our fleet business with solid contributions from MasterCard and other new ventures like TelaPoint. We will continue to work toward our goals of capturing a larger share of total fleet and corporate spend, diversifying our sources of revenue, and pursuing opportunities for alliances, mergers or acquisitions that can accelerate our growth.”
Financial Guidance
Wright Express Corporation is issuing financial guidance for the first quarter and full year 2008. The Company’s guidance excludes the impact of non-cash, mark-to-market adjustments on the Company’s fuel-price-related derivative instruments as well as approximately $700,000 in amortization of purchased intangibles for the first quarter and $2.7 million for the full year. The fuel prices referenced below are based on the applicable NYMEX futures price:
- For the first quarter of 2008, revenue in the range of $87 million to $92 million. This is based on an assumed average retail fuel price of $3.13 per gallon.
- First-quarter 2008 adjusted net income excluding unrealized gain or loss on derivative instruments as well as the amortization of purchased intangibles in the range of $17 million to $18 million, or $0.42 to $0.45 per diluted share, based on approximately 41 million shares outstanding.
- For the full year 2008, revenue in the range of $383 million to $393 million. This is based on an assumed average retail fuel price of $3.06 per gallon.
- For the full year 2008, adjusted net income excluding unrealized gain or loss on derivative instruments as well as the amortization of purchased intangibles in the range of $86 million to $90 million, or $2.11 to $2.21 per diluted share, based on approximately 41 million shares outstanding.
Conference Call Details
In conjunction with this announcement, Wright Express will host a conference call today, February 6, 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) 440-5803 or (719) 325-4884. 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 provider of payment processing and information management services to the U.S. commercial and government vehicle fleet industry. Wright Express provides these services for approximately 300,000 commercial and government fleets containing 4.5 million vehicles. The Company markets its payment processing services directly and is an outsourcing provider for more than 125 strategic relationships, and offers a MasterCard-branded corporate card. The Company employs more than 675 people and maintains its headquarters in South Portland, Maine. For more information about Wright Express, please visit wrightexpress.com.
This press release contains forward-looking statements, including statements regarding: the integration and product development with Citi; our strategy to increase our presence in the distributor channel and expectations for Pacific Pride Services, Inc.’s impact on our distributor and small fleet programs; intention to capture a larger share of total fleet and corporate spend; the ability of our derivatives strategy to enhance earnings stability and visibility; expectations for the share repurchase program and expectations and guidance for first-quarter and full-year 2008 results. These forward-looking statements include a number of risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: consummation of the transaction to acquire Pacific Pride Services, Inc.; achievement of the expected benefits of the acquisition of Pacific Pride Services, Inc.; volatility in fuel prices; first-quarter and full-year 2008 fueling patterns; the effect of the Company’s fuel-price-related derivative instruments; effects of competition; the potential loss of key strategic relationships; decreased demand for fuel and other vehicle products and services and the effects of general economic conditions on the commercial activity of fleets; the Company’s ability to rapidly implement new technology and systems; potential corporate transactions including alliances, mergers, acquisitions and divestitures; changes in interest rates and the other risks and uncertainties included from time to time in the Company’s filings with the Securities and Exchange Commission, including the annual report on Form 10-K filed on February 28, 2007, and the Company’s other periodic and current reports. Wright Express Corporation undertakes no obligation to update these forward-looking statements at any future date or dates.
| WRIGHT EXPRESS CORPORATION | ||||||||||||||||
| CONDENSED CONSOLIDATED RESULTS OF OPERATIONS | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three months ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| Revenues | ||||||||||||||||
| Payment processing revenue | $ | 69,339 | $ | 50,736 | $ | 257,493 | $ | 214,641 | ||||||||
| Transaction processing revenue | 3,641 | 4,274 | 14,452 | 17,528 | ||||||||||||
| Account servicing revenue | 7,344 | 6,060 | 26,767 | 23,999 | ||||||||||||
| Finance fees | 7,523 | 5,713 | 26,885 | 22,351 | ||||||||||||
| Other | 2,834 | 3,973 | 10,531 | 12,728 | ||||||||||||
| Total revenues | 90,681 | 70,756 | 336,128 | 291,247 | ||||||||||||
| Expenses | ||||||||||||||||
| Salary and other personnel | 16,964 | 15,230 | 65,014 | 60,016 | ||||||||||||
| Service fees | 4,199 | 4,795 | 14,987 | 14,525 | ||||||||||||
| Provision for credit losses | 7,963 | 5,477 | 20,569 | 16,695 | ||||||||||||
| Technology leasing and support | 2,121 | 1,950 | 8,738 | 7,823 | ||||||||||||
| Occupancy and equipment | 1,512 | 1,315 | 6,091 | 6,157 | ||||||||||||
| Depreciation and amortization | 4,456 | 3,048 | 15,018 | 10,988 | ||||||||||||
| Operating interest expense | 9,061 | 5,855 | 34,086 | 23,415 | ||||||||||||
| Other | 4,865 | 4,535 | 19,533 | 16,525 | ||||||||||||
| Total operating expenses | 51,141 | 42,205 | 184,036 | 156,144 | ||||||||||||
| Operating income | 39,540 | 28,551 | 152,092 | 135,103 | ||||||||||||
| Financing interest expense | (3,367 | ) | (3,461 | ) | (12,677 | ) | (14,447 | ) | ||||||||
| Loss on extinguishment of debt | (1,572 | ) | ||||||||||||||
| Decrease in amount due to Avis under tax receivable agreement | ||||||||||||||||
| 78,904 | ||||||||||||||||
| Net realized and unrealized (losses) gains on derivative instruments | ||||||||||||||||
| (28,580 | ) | 5,669 | (53,610 | ) | (4,180 | ) | ||||||||||
| Income before income taxes | 7,593 | 30,759 | 163,137 | 116,476 | ||||||||||||
| Provision for income taxes | 2,970 | 11,800 | 111,560 | 41,867 | ||||||||||||
| Net income | $ | 4,623 | $ | 18,959 | $ | 51,577 | $ | 74,609 | ||||||||
| Earnings per share : | ||||||||||||||||
| Basic | $ | 0.12 | $ | 0.47 | $ | 1.29 | $ | 1.85 | ||||||||
| Diluted | $ | 0.11 | $ | 0.46 | $ | 1.27 | $ | 1.81 | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 39,808 | 40,441 | 40,042 | 40,373 | ||||||||||||
| Diluted | 40,425 | 41,604 | 40,751 | 41,553 | ||||||||||||
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WRIGHT EXPRESS CORPORATION |
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CONSOLIDATED BALANCE SHEETS |
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(in thousands, except per share data) |
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(unaudited) |
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| December 31, | |||||||||||
| 2007 | 2006 | ||||||||||
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Assets |
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| Cash and cash equivalents | $ | 43,019 | $ | 35,060 | |||||||
| Accounts receivable (less reserve for credit losses of $9,466 in 2007 and $9,749 in 2006) | 1,070,273 | 802,165 | |||||||||
| Income tax refunds receivable, net | 3,320 | — | |||||||||
| Available-for-sale securities | 9,494 | 8,023 | |||||||||
| Property, equipment and capitalized software, net | 45,537 | 39,970 | |||||||||
| Deferred income taxes, net | 283,092 | 377,276 | |||||||||
| Other intangible assets, net | 20,932 | 2,421 | |||||||||
| Goodwill | 294,365 | 272,861 | |||||||||
| Other assets | 15,044 | 13,239 | |||||||||
| Total assets | $ | 1,785,076 | $ | 1,551,015 | |||||||
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Liabilities and Stockholders' Equity |
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| Accounts payable | $ | 363,189 | $ | 297,102 | |||||||
| Accrued expenses | 35,310 | 26,065 | |||||||||
| Income taxes payable | --- | 813 | |||||||||
| Deposits | 599,089 | 394,699 | |||||||||
| Borrowed federal funds | 8,175 | 65,396 | |||||||||
| Revolving line-of-credit facility | 199,400 | 20,000 | |||||||||
| Term loan, net | --- | 129,760 | |||||||||
| Derivative instruments, at fair value | 41,598 | 4,524 | |||||||||
| Other liabilities | 4,544 | 1,170 | |||||||||
| Amounts due to Avis under tax receivable agreement | 319,512 | 418,359 | |||||||||
| Preferred stock; 10,000 shares authorized: Series A non-voting convertible, redeemable preferred stock; 0.1 shares authorized, issued and outstanding | |||||||||||
| 10,000 | 10,000 | ||||||||||
| Total liabilities | 1,580,817 | 1,367,888 | |||||||||
| Commitments and contingencies | |||||||||||
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Stockholders' Equity |
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| Common stock $0.01 par value; 175,000 shares authorized 40,798 in 2007 and 40,430 in 2006 shares issued and outstanding | |||||||||||
| 408 | 404 | ||||||||||
| Additional paid-in capital | 98,174 | 89,325 | |||||||||
| Retained earnings | 144,839 | 93,262 | |||||||||
| Other comprehensive income, net of tax: | |||||||||||
| Net unrealized (loss) gain on interest rate swaps | (1,417 | ) | 234 | ||||||||
| Net unrealized loss on available-for-sale securities | (49 | ) | (98 | ) | |||||||
| Net foreign currency translation adjustment | 15 | - | |||||||||
| Accumulated other comprehensive income | (1,451 | ) | 136 | ||||||||
| Less treasury stock at cost, 1,173 shares in 2007 and no shares in 2006 | (37,711 | ) | - | ||||||||
| Total stockholders' equity | 204,259 | 183,127 | |||||||||
| Total liabilities and stockholders' equity | $ | 1,785,076 | $ | 1,551,015 | |||||||
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WRIGHT EXPRESS CORPORATION |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(in thousands) |
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(unaudited) |
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| Year ended December 31, | ||||||||||||
| 2007 | 2006 | |||||||||||
| Cash flows from operating activities | ||||||||||||
| Net income | $ | 51,577 | $ | 74,609 | ||||||||
| Adjustments to reconcile net income to net cash (used for) provided by operating activities: | ||||||||||||
| Net unrealized loss (gain) on derivative instruments | 37,074 | (32,186 | ) | |||||||||
| Stock-based compensation | 4,508 | 4,272 | ||||||||||
| Depreciation and amortization | 15,719 | 12,081 | ||||||||||
| Loss on extinguishment of debt | 1,572 | — | ||||||||||
| Gain on sale of investment | --- | (2,188 | ) | |||||||||
| Deferred taxes | 95,117 | 34,409 | ||||||||||
| Provision for credit losses | 20,569 | 16,695 | ||||||||||
| Loss (gain) on disposal and impairment of property and equipment | --- | 59 | ||||||||||
| Changes in operating assets and liabilities, net of effects of acquisition: | ||||||||||||
| Accounts receivable | (286,236 | ) | (79,944 | ) | ||||||||
| Income taxes | (4,147 | ) | 4,113 | |||||||||
| Other assets | (2,163 | ) | (4,214 | ) | ||||||||
| Accounts payable | 66,048 | 42,721 | ||||||||||
| Accrued expenses | 6,756 | 3,868 | ||||||||||
| Other liabilities | 364 | 839 | ||||||||||
| Amounts due to Avis under tax receivable agreement | (98,847 | ) | (14,685 | ) | ||||||||
| Net cash provided by (used for) operating activities | (92,089 | ) | 60,449 | |||||||||
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Cash flows from investing activities |
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| Purchases of property and equipment | (16,624 | ) | (12,474 | ) | ||||||||
| Proceeds from sale of investment | --- | 2,188 | ||||||||||
| Purchases of available-for-sale securities | (2,518 | ) | (2,154 | ) | ||||||||
| Maturities of available-for-sale securities | 1,123 | 14,982 | ||||||||||
| Purchases of fleet card receivables | (1,922 | ) | (86,784 | ) | ||||||||
| Acquisition, net of cash acquired | (40,806 | ) | — | |||||||||
| Net cash used for investing activities | (60,747 | ) | (84,242 | ) | ||||||||
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Cash flows from financing activities |
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| Excess tax benefits from equity instrument share-based payment arrangements | 3,023 | 1,047 | ||||||||||
| Payments in lieu of issuing shares of common stock | (2,188 | ) | (734 | ) | ||||||||
| Proceeds from stock option exercises | 3,459 | 2,229 | ||||||||||
| Net increase in deposits | 204,390 | 56,448 | ||||||||||
| Net (decrease) increase in borrowed federal funds | (57,221 | ) | 26,369 | |||||||||
| Net borrowings on 2007 revolving line of credit facility | 199,400 | — | ||||||||||
| Loan origination fees paid for 2007 revolving line of credit facility | (998 | ) | — | |||||||||
| Net (repayments) borrowings on 2005 revolving line-of-credit facility | (20,000 | ) | (33,000 | ) | ||||||||
| Repayments on term loan | (131,000 | ) | (38,500 | ) | ||||||||
| Repayment of acquired debt | (374 | ) | — | |||||||||
| Purchase of shares of treasury stock | (37,711 | ) | — | |||||||||
| Net cash provided by financing activities | 160,780 | 13,859 | ||||||||||
| Effect of exchange rates on cash and cash equivalents | 15 | — | ||||||||||
| Net change in cash and cash equivalents | 7,959 | (9,934 | ) | |||||||||
| Cash and cash equivalents, beginning of period | 35,060 | 44,994 | ||||||||||
| Cash and cash equivalents, end of period | $ | 43,019 | $ | 35,060 | ||||||||
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Exhibit 1 |
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Wright Express Corporation |
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Reconciliation of Adjusted Net Income to GAAP Net Income |
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Fourth Quarter and Full Year 2007 and 2006 |
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(in thousands) |
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(unaudited) |
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Three months ended
December 31, 2007 |
Three months ended
December 31, 2006 |
Year ended December 31, 2007 | Year ended December 31, 2006 | |||||||||||||
|
Adjusted net income1 |
$ |
19,673 |
$ | 13,441 |
$ |
76,010 | $ | 55,788 | ||||||||
| Non-cash, mark-to-market adjustments on derivative instruments | (22,823 | ) | 10,010 | (37,074 | ) | 32,186 | ||||||||||
| Amortization of purchased intangibles | (681 | ) | -- | (1,089 | ) | -- | ||||||||||
| Tax impact of mark-to-market adjustments and amortization of purchased intangibles | 8,454 | (4,492 | ) | 13,730 | (13,365 | ) | ||||||||||
| GAAP net income | $ | 4,623 | $ | 18,959 |
$ |
51,577 | $ | 74,609 | ||||||||
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 does not affect the 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, operating income or cash flows from operating activities 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.
1 The number of diluted shares for adjusted net income is approximately 40.9 million
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Exhibit 2 |
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Wright Express Corporation |
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Selected Non Financial Metrics |
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| Q4 2007 | Q3 2007 | Q2 2007 | Q1 2007 | Q4 2006 | ||||||||||||
| Fleet Payment Processing Revenue: | ||||||||||||||||
| Payment processing transactions (000's) | 53,379 | 53,595 | 53,181 | 50,559 | 45,075 | |||||||||||
| Gallons per payment processing transaction | 20.5 | 20.6 | 20.3 | 20.3 | 20.6 | |||||||||||
| Payment processing gallons of fuel (000's) | 1,093,510 | 1,103,268 | 1,082,132 | 1,024,847 | 926,605 | |||||||||||
| Average fuel price | $ | 3.06 | 2.88 | 2.95 | 2.43 | 2.37 | ||||||||||
| Payment processing $ of fuel (000's) | $ | 3,346,443 | 3,172,482 | 3,196,224 | 2,493,781 | 2,194,543 | ||||||||||
| Net payment processing rate | 1.91 | % | 1.93 | % | 1.93 | % | 1.99 | % | 2.13 | % | ||||||
| Fleet payment processing revenue (000's) | $ | 64,015 | 61,230 | 61,777 | 49,607 | 46,647 | ||||||||||
| MasterCard Payment Processing Revenue: | ||||||||||||||||
| MasterCard purchase volume (000's) | $ | 484,343 | 510,585 | 464,425 | 385,153 | 332,934 | ||||||||||
| Net interchange rate | 1.10 | % | 1.13 | % | 1.12 | % | 1.19 | % | 1.23 | % | ||||||
| MasterCard payment processing revenue (000's) | $ | 5,323 | 5,757 | 5,197 | 4,587 | 4,089 | ||||||||||
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 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 percentage of the dollar value of each MasterCard transaction that Wright Express records as revenue less any discounts given to customers.