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Wright Express Reports First-Quarter 2008 Financial Results

Key Financial Metrics and Business Drivers Are In Line with Company's Guidance; Total Transaction Volume Grows 8%

SOUTH PORTLAND, Maine--(BUSINESS WIRE)--April 30, 2008--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 March 31, 2008.

Total revenue for the first quarter of 2008 increased 29% to $92.9 million from $71.8 million for the first quarter of 2007. Net income to common shareholders on a GAAP basis for the first quarter of 2008 was $14.5 million, or $0.36 per diluted share, compared with $8.3 million, or $0.20 per diluted share, for the comparable quarter last year. On a non-GAAP basis, the Company's adjusted net income for the first quarter of 2008 was $17.4 million, or $0.44 per diluted share, compared with $14.8 million, or $0.36 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 first quarter of 2008, the Company's GAAP financial results include an unrealized $3.6 million pre-tax, non-cash, mark-to-market loss on these instruments. For the first quarter of 2007, the Company reported an unrealized pre-tax, non-cash, mark-to-market loss of $10.6 million.

Exhibit 1 reconciles adjusted net income for the first quarters of 2008 and 2007, 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.

First-Quarter 2008 Performance Metrics
  • Average number of vehicles serviced increased 4% from the first quarter of 2007 to approximately 4.5 million. This was not affected by the Pacific Pride acquisition.
  • Total fuel transactions processed increased 8% from the first quarter of 2007 to 64.8 million. Payment processing transactions increased 5% to 53.2 million, and transaction processing transactions increased 23% to 11.6 million.
  • Average expenditure per payment processing transaction increased 33% to $65.49 from $49.32 for the same period last year.
  • Average retail fuel price increased 34% to $3.26 per gallon, from $2.43 per gallon for the first quarter a year ago.
  • Total MasterCard purchase volume grew 36% to $525.7 million, from $385.2 million for the comparable period in 2007.
  • Wright Express repurchased approximately 963,000 shares of its common stock at a cost of approximately $29.3 million during the first 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 March 31, 2008. This table is presented as Exhibit 2.

Management Comments on the First Quarter

"Our business model continued to generate consistent growth and profitability this quarter, and revenue and adjusted net income were in line with our guidance," said Michael Dubyak, president and chief executive officer. "Continued strength in front-end sales and marketing, high customer retention and the acquisition of Pacific Pride contributed to an 8% increase in total transactions from the first quarter of 2007, despite slower fuel purchasing activity in our existing base of customers."

"In a period of heightened concern about credit quality, our fleet credit loss for the first quarter was in line with our internal forecast," said Dubyak. "In addition, the Company's consistently strong cash flow enabled us to continue executing on our share repurchase program. We repurchased 963,000 shares of Wright Express common stock at a cost of $29 million, while continuing to invest in the future growth of our business and maintaining our target leverage ratio range."

"Our long-term strategy is to broaden our revenue base with new businesses like MasterCard and new ventures such as TelaPoint and Pacific Pride," Dubyak said. "While pursuing these growth initiatives, we also will continue to seek opportunities for alliances, mergers or acquisitions that can accelerate our growth. Although we expect the economy to remain challenging, we are confident that our business model will continue to produce solid financial results in the quarters ahead."

Financial Guidance

Wright Express Corporation is issuing financial guidance for the second quarter of 2008 and updating guidance for the 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 $1.2 million in amortization of purchased intangibles for the second quarter and $4.6 million for the full year. The fuel prices referenced below are based on the applicable NYMEX futures price:

  • For the second quarter of 2008, revenue in the range of $100 million to $105 million. This is based on an assumed average retail fuel price of $3.58 per gallon.
  • Second-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 $21 million to $22 million, or $0.53 to $0.56 per diluted share, based on approximately 40 million shares outstanding.
  • For the full year 2008, revenue in the range of $400 million to $410 million. This is based on an assumed average retail fuel price of $3.42 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 $84 million to $87 million, or $2.09 to $2.17 per diluted share, based on approximately 40 million shares outstanding.
Conference Call Details

In conjunction with this announcement, Wright Express will host a conference call today, April 30, 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 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 more than 300 franchisees, and offers a MasterCard-branded corporate card. The Company employs more than 700 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 long-term strategy to broaden the Company's revenue base with new businesses; continuing to seek opportunities for alliances, mergers or acquisitions that can accelerate growth; expectations for the economy to remain challenging; confidence that the Company's business model will continue to produce solid financial results in the future and expectations and guidance for second-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, including: achievement of the expected benefits of the Company's acquisitions; volatility in fuel prices; second-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; risks related to customer bankruptcies and credit failures; 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, 2008, 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 STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                (in thousands, except per share data)
                             (unaudited)

                                                    Three months ended
                                                        March 31,
                                                    ------------------
                                                      2008     2007
                                                    ------------------

Revenues
   Payment processing revenue                       $ 70,611 $ 54,194
   Transaction processing revenue                      3,980    3,475
   Account servicing revenue                           7,422    6,180
   Finance fees                                        7,651    5,566
   Other                                               3,282    2,407
                                                    ------------------

   Total revenues                                     92,946   71,822

Expenses
   Salary and other personnel                         17,118   16,129
   Service fees                                        4,846    3,671
   Provision for credit losses                        10,396    6,263
   Technology leasing and support                      2,172    2,340
   Occupancy and equipment                             1,852    1,594
   Depreciation and amortization                       4,491    3,302
   Operating interest expense                          8,808    6,921
   Other                                               6,195    4,699
                                                    ------------------

     Total operating expenses                         55,878   44,919
                                                    ------------------

Operating income                                      37,068   26,903

Financing interest expense                            (3,101)  (3,130)
Net realized and unrealized losses on fuel price
 derivatives                                         (10,574) (10,690)
                                                    ------------------

Income before income taxes                            23,393   13,083

Provision for income taxes                             8,865    4,746
                                                    ------------------

Net income                                            14,528    8,337

Changes in available-for-sale securities, net of tax
 effect of $28 in 2008 and $5 in 2007                     52        8
Changes in interest rate swaps, net of tax effect of
 $(656) in 2008 and $(120) in 2007                    (1,182)    (173)
Foreign currency translation                              (9)      --
                                                    ------------------

Comprehensive income                                $ 13,389 $  8,172
                                                    ------------------

Earnings per share:
   Basic                                            $   0.37 $   0.21
   Diluted                                          $   0.36 $   0.20

Weighted average common shares outstanding:
   Basic                                              39,312   40,347
   Diluted                                            40,275   41,069
                                                    ------------------


                      WRIGHT EXPRESS CORPORATION
                CONDENSED CONSOLIDATED BALANCE SHEETS
                (in thousands, except per share data)

                                               March 31,  December 31,
                                                  2008        2007
                                              (unaudited)
                                              ------------------------

Assets
   Cash and cash equivalents                  $    57,137  $   43,019
   Accounts receivable (less reserve for
    credit losses of $13,471 in 2008 and
    $9,466 in 2007)                             1,250,462   1,070,273
   Income taxes receivable                             --       3,320
   Available-for-sale securities                    9,279       9,494
   Property, equipment and capitalized
    software (net of accumulated depreciation
    of
   $46,459 in 2008 and $43,384 in 2007)            46,175      45,537
   Deferred income taxes, net                     278,997     283,092
   Goodwill                                       313,233     294,365
   Other intangible assets (net of accumulated
    amortization of $2,010 in 2008 and $1,089
    in 2007)                                       35,862      20,932
   Other assets                                    15,222      15,044
                                              ------------------------

Total assets                                  $ 2,006,367  $1,785,076
                                              ------------------------

Liabilities and Stockholders' Equity
   Accounts payable                           $   530,963  $  363,189
   Accrued expenses                                31,173      35,310
   Income taxes payable                               151          --
   Deposits                                       533,862     599,089
   Borrowed federal funds                          96,178       8,175
   Revolving line-of-credit facility              247,000     199,400
   Fuel price derivatives, at fair value           45,172      41,598
   Other liabilities                                3,591       4,544
   Amounts due to Avis under tax receivable
    agreement                                     319,512     319,512
   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                            1,817,602   1,580,817

   Commitments and contingencies

   Stockholders' Equity
      Common stock $0.01 par value; 175,000
       shares authorized, 40,935 in 2008 and
       40,798 in 2007 shares issued; 38,799 in
       2008 and 39,625 in 2007 shares
       outstanding                                    409         408
      Additional paid-in capital                   98,636      98,174
      Retained earnings                           159,367     144,839
      Other comprehensive (loss) income, net
       of tax:
         Net unrealized gain (loss) on
          available-for-sale securities                 3         (49)
         Net unrealized (loss) gain on
          interest rate swaps                      (2,599)     (1,417)
         Net foreign currency translation
          adjustment                                    5          15
                                              ------------------------

      Accumulated other comprehensive (loss)
       income                                      (2,591)     (1,451)

      Less treasury stock at cost, 2,136
       shares in 2008 and 1,173 shares in 2007    (67,056)    (37,711)
                                              ------------------------

   Total stockholders' equity                     188,765     204,259
                                              ------------------------

Total liabilities and stockholders' equity    $ 2,006,367  $1,785,076
                                              ------------------------
       WRIGHT EXPRESS CORPORATION
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands)
                             (unaudited)

                                                   Three Months Ended
                                                       March 31,
                                                  --------------------
                                                       2008      2007
                                                  --------------------

Cash flows from operating activities
   Net income                                     $  14,528 $   8,337
   Adjustments to reconcile net income to net cash
    provided by (used for) operating activities:
   Net unrealized loss on fuel price derivatives      3,574    10,591
   Stock-based compensation                           1,408     1,001
   Depreciation and amortization                      4,550     3,742
   Deferred taxes                                     4,723     5,737
   Provision for credit losses                       10,396     6,263
   Loss on disposal of property and equipment            58        --
   Changes in operating assets and liabilities,
    net of effects of acquisition:
      Accounts receivable                          (151,189) (115,883)
      Other assets                                      110      (150)
      Accounts payable                              125,433    56,257
      Accrued expenses                               (6,179)   (7,251)
      Income taxes                                    3,120    (1,465)
      Other liabilities                                (967)      623
      Amounts due to Avis under tax receivable
       agreement                                         --    (1,616)
                                                  --------------------

   Net cash provided by (used for) operating
    activities                                        9,565   (33,814)

Cash flows from investing activities
   Purchases of property and equipment               (4,256)   (3,998)
   Purchases of available-for-sale securities           (42)      (35)
   Maturities of available-for-sale securities          337       305
   Acquisition, net of cash acquired                (31,520)       --
                                                  --------------------

   Net cash used for investing activities           (35,481)   (3,728)

Cash flows from financing activities
   Excess tax (deficiencies) benefits from equity
    instrument share-based payment arrangements         (10)      843
   Payments in lieu of issuing shares of common
    stock                                            (1,271)     (809)
   Proceeds from stock option exercises                 294       764
   Net decrease in deposits                         (65,227)   (6,898)
   Net increase in borrowed federal funds            88,003    28,848
   Net borrowings on 2007 revolving line-of-credit
    facility                                         47,600        --
   Net borrowings on 2005 revolving line-of-credit
    facility                                             --    25,000
   Repayments on term loan                               --   (11,000)
   Purchase of shares of treasury stock             (29,345)  (14,158)
                                                  --------------------

   Net cash provided by financing activities         40,044    22,590

Effect of exchange rates on cash and cash
 equivalents                                            (10)       --
                                                  --------------------

Net change in cash and cash equivalents              14,118   (14,952)
Cash and cash equivalents, beginning of period       43,019    35,060
                                                  --------------------

Cash and cash equivalents, end of period          $  57,137 $  20,108
                                                  --------------------

Supplemental cash flow information
   Interest paid                                  $  10,111 $   9,636
   Income taxes paid (received)                   $   1,137 $    (368)

   Significant non-cash transactions:
      Capitalized software licensing agreement    $      -- $   2,840

                              Exhibit 1
                      Wright Express Corporation
       Reconciliation of Adjusted Net Income to GAAP Net Income
                          First Quarter 2008
                            (in thousands)
                             (unaudited)

                                Three months ended Three months ended
                                  March 31, 2008     March 31, 2007

Adjusted net income                 $       17,399      $      14,797
Non-cash, mark-to-market
 adjustments on derivative
 instruments                                (3,575)           (10,591)
Amortization of purchased
 intangibles                                  (870)
Tax impact of mark-to-market
 adjustments and amortization of
 purchased intangibles                       1,574              4,131
                                --------------------------------------
GAAP net income                     $       14,528      $       8,337
                                --------------------------------------

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 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.

                              Exhibit 2
                      Wright Express Corporation
                    Selected Non-Financial Metrics

                      Q1 2008   Q4 2007   Q3 2007   Q2 2007   Q1 2007
                    ---------- --------- --------- --------- ---------
Fleet Payment
 Processing Revenue:
Payment processing
 transactions (000s)    53,225    53,379    53,595    53,181    50,559
Gallons per payment
 processing
 transaction              20.1      20.5      20.6      20.3      20.3
Payment processing
 gallons of fuel
 (000s)              1,070,829 1,093,510 1,103,268 1,082,132 1,024,847
Average fuel price  $     3.26      3.06      2.88      2.95      2.43
Payment processing $
 of fuel (000s)     $3,485,857 3,346,443 3,172,482 3,196,224 2,493,781
Net payment
 processing rate         1.87%     1.91%     1.93%     1.93%     1.99%
Fleet payment
 processing revenue
 (000s)             $   65,075    64,015    61,230    61,777    49,607

MasterCard Payment
 Processing Revenue:
MasterCard purchase
 volume (000s)      $  525,699   484,343   510,585   464,425   385,153
Net interchange rate     1.05%     1.10%     1.13%     1.12%     1.19%
MasterCard payment
 processing revenue
 (000s)             $    5,536     5,323     5,757     5,197     4,587

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.

CONTACT: Wright Express
News media contact:
Jessica Roy, 207-523-6763
Jessica_Roy@wrightexpress.com
or
Investor contact:
Steve Elder, 207-523-7769
Steve_Elder@wrightexpress.com

SOURCE: Wright Express Corporation