FLEETCOR Reports Second Quarter 2018 Financial Results
Aug. 02, 2018
PEACHTREE CORNERS, Ga.--(BUSINESS WIRE)--Aug 2, 2018--FLEETCOR Technologies, Inc. (NYSE:FLT), a leading global provider of commercial payment solutions, today reported financial results for its second quarter of 2018.
“Our second quarter revenues and profits once again finished above our expectations, with adjusted net income per diluted share growth of 29%. We delivered another solid organic revenue growth quarter of 9% overall, driven by growth rates of more than 20% in the Lodging, Corporate Payments and Tolls business lines. Additionally, we were delighted to join the S&P 500 index, and to be recognized for our consistent performance over a long period of time,” said Ron Clarke, chairman and chief executive officer, FLEETCOR Technologies, Inc.
Financial Results for Second Quarter of 2018:
GAAP ResultsTotal revenues, including the impact of the new revenue recognition standard ASC 606, increased 8% to $585.0 million in the second quarter of 2018, compared to $541.2 million in the second quarter of 2017. Net income increased 35% to $176.9 million in the second quarter of 2018, compared to $131.0 million in the second quarter of 2017. Net income per diluted share increased 37% to $1.91 in the second quarter of 2018, compared to $1.39 per diluted share in the second 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 ended June 30, 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 June 30, 2018, the adoption of ASC 606 reduced revenue by $23.3 million and increased operating income by $0.7 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 June 30, 2018. A comparison of the current presentation under ASC 606 to the prior presentation under ASC 605 is provided below:
Non-GAAP Results 1Revenues under ASC 605 increased 12% to $608.3 million in the second quarter of 2018, compared to $541.2 million in the second quarter of 2017. Adjusted net income 1 increased 27% to $237.8 million in the second quarter of 2018, compared to $187.0 million in the second quarter of 2017. Adjusted net income per diluted share 1 increased 29% to $2.57 in the second quarter of 2018, compared to $1.99 per diluted share in the second quarter of 2017.
Fiscal-Year 2018 Outlook:
“We are raising our 2018 guidance to reflect our strong second quarter results compared to our original outlook, despite the unfavorable macro that we now expect to realize for the remainder of the year. We believe that negative movements in foreign exchange rates, will more than offset the impact of favorable fuel prices, producing an overall unfavorable impact on second half revenue of approximately $30 to $40 million,” said Eric Dey, chief financial officer, FLEETCOR Technologies, Inc. “We currently expect to offset this impact through continued over performance in some of our businesses, lower expenses, and the impact from a lower share count in the second half of the year.”
For fiscal 2018, FLEETCOR Technologies, Inc. updated financial guidance is as follows:Revenues including the adoption of ASC 606, between $2,365 million and $2,415 million; Net income between $720 million and $740 million; Net income per diluted share between $7.75 and $7.95; Revenues under ASC 605 between $2,470 million and $2,520 million; Adjusted net income 1 between $960 million and $980 million; and Adjusted net income per diluted share 1 between $10.32 and $10.52.
FLEETCOR’s guidance assumptions for 2018 are as follows:Weighted fuel prices equal to $2.88 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 equal to the 2017 average; Foreign exchange rates equal to the seven-day average as of July 1, 2018; Interest expense of $135 million; Fully diluted shares outstanding of approximately 93 million shares; A tax rate of 22 to 24%; and No impact related to acquisitions or material new partnership agreements not already disclosed.
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.
The Company will host a conference call to discuss second quarter 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 13681872. The replay will be available until Thursday, August 9, 2018. 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.
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 organic growth rates, impact of the new Tax Act, and estimated impact of these conditions on our operations and financial results, the impact of new asset initiatives, revenue and earnings guidance and assumptions underlying financial guidance, and statements regarding the unauthorized access to the Company’s systems, including the assumptions with respect to the investigation of the incident to date. 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: risks related to the unauthorized access to systems and information; 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 report on form 10-Q for the three months ended March 31, 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 Tax Reform Act, restructuring costs, 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, along with its impact on 2018 guidance in exhibit 6.
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.
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.
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