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Wright Express Reports First Quarter 2009 Financial Results

Results Exceed Top End of Guidance

SOUTH PORTLAND, Maine--(BUSINESS WIRE)--Apr. 29, 2009-- 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, 2009.

Total revenue for the first quarter of 2009 decreased 26% to $69.2 million from $92.9 million for the first quarter of 2008. Net income to common shareholders on a GAAP basis was $11.0 million, or $0.28 per diluted share, compared with $14.5 million, or $0.36 per diluted share, for the comparable quarter a year earlier. On a non-GAAP basis, the Company’s adjusted net income for the first quarter of 2009 was $16.3 million, or $0.42 per diluted share, compared with $17.4 million, or $0.44 per diluted share, for the year-earlier period. In addition to previously excluded items, adjusted net income for the first quarter of 2009 excludes a non-cash asset impairment charge of $421,000 related to internally developed software costs, as well as adjustments to the deferred tax asset and related tax-receivable agreement with the Company’s former parent company.

Wright Express uses fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices. For the first quarter of 2009, the Company’s GAAP financial results include an unrealized $6.5 million pre-tax, non-cash, mark-to-market loss on these instruments. For the first quarter of 2008, the Company reported an unrealized pre-tax, non-cash, mark-to-market loss of $3.6 million.

Exhibit 1 reconciles adjusted net income for the first 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 disclosure in accordance with GAAP.

First Quarter 2009 Performance Metrics

  • Average number of vehicles serviced increased 6% from the first quarter of 2008 to approximately 4.7 million.
  • Total fuel transactions processed declined 2% from the first quarter of 2008 to 63.3 million. Payment processing transactions decreased 7% to 49.3 million, and transaction processing transactions increased 21% to 14.0 million.
  • Average expenditure per payment processing transaction decreased 38% from the first quarter of 2008 to $40.78.
  • Average retail fuel price declined 39% to $2.00 per gallon from $3.26 per gallon in the first quarter of 2008.
  • Total MasterCard purchase volume grew 23% to $649 million, from $526 million for 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, 2009. This table is presented as Exhibit 2.

Management Comments on the First Quarter

“This was a very positive quarter for Wright Express, as we exceeded our guidance for both revenue and adjusted net income,” said Michael Dubyak, Chairman and CEO. “Although we did see the year-over-year erosion in fleet transaction volume that we expected, our collections experience improved significantly in the quarter. As a consequence, fleet credit loss fell back to within the Company’s historic range, significantly improving our results this quarter.”

“At the front end of the business, we continued to perform well in acquiring new customers,” Dubyak said. “In addition, our first-quarter performance metrics reflected the full impact of the federal GSA Fleet portfolio that we added in the fourth quarter of 2008. In the aggregate our MasterCard, TelaPoint, Pacific Pride and WEXSmart telematics businesses continued to grow in the first quarter both in terms of dollars contributed and as a percentage of the overall top line compared to the first quarter of 2008. These businesses have clearly helped Wright Express weather the economic storm this past year by continuing to grow at a time when our fleet customer base activity was contracting.”

“We will continue to consider additional opportunities to diversify our top line and strengthen our business, and are well-positioned with excellent liquidity as we do so,” said Dubyak. “Our business model continues to generate significant cash flow, which enabled us to pay down $34 million in debt this quarter, further reinforcing the Company’s exceptionally strong balance sheet.”

“Wright Express is performing well at a very challenging time because of a unique combination of strengths,” Dubyak said. “These include front-end sales growth: increasingly diversified revenue; low attrition rates overall; strong capital structure, liquidity and cash flow; a promising international business; as well as upside from our fuel hedging strategy. We look forward to further capitalizing on these advantages as the year unfolds.”

Financial Guidance

Wright Express Corporation is issuing financial guidance for the second quarter and raising guidance for the full year 2009. In preparing this guidance, management continues to assume 10% to 15% year-over-year declines 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 full year 2009 will range from 25 to 35 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, and adjustments related to the deferred tax asset and related tax-receivable agreement with the Company’s former parent company. The fuel prices referenced below are based on the applicable NYMEX futures price:

  • For the second quarter of 2009, the Company expects revenue in the range of $66 million to $72 million. This is based on an assumed average retail fuel price of $2.14 per gallon.
  • For the second quarter of 2009, the Company expects adjusted net income in the range of $15 million to $17 million, or $0.38 to $0.43 per diluted share, based on approximately 39 million shares outstanding.
  • For the full year 2009, the Company expects revenue in the range of $277 million to $287 million. This is based on an assumed average retail fuel price of $2.10 per gallon.
  • For the full year 2009, the Company expects adjusted net income in the range of $59 million to $67 million, or $1.50 to $1.70 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, April 29, 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 4.7 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: continuing consideration of additional opportunities to diversify top-line revenue; strengthening the Company’s business; the Company’s liquidity position; cash flow generation; prospects for international business; and, upside from the fuel hedging strategy. These forward-looking statements include a number of risks and uncertainties that could cause actual results to differ materially, including: volatility in fuel prices; second quarter and full year 2009 fueling patterns; risks related to customer and counterparty bankruptcies and credit failures; changes in interest rates; 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; achievement of the expected benefits of the Company’s alliances, mergers and acquisitions; 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 27, 2009, 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

(in thousands, except per share data)

(unaudited)

 
Three months ended
March 31,
    2009   2008
         

Service Revenues

Payment processing revenue $ 44,992 $ 70,611
Transaction processing revenue 4,298 3,980
Account servicing revenue 8,959 7,422
Finance fees 7,064 7,651
Other     2,799       2,725  
 
Total service revenues 68,112 92,389
 
Product Revenues
Hardware and equipment sales     1,064       557  
 
Total revenues 69,176 92,946
 
Expenses
Salary and other personnel 17,853 17,118
Service fees 6,182 4,846
Provision for credit losses 4,235 10,396
Technology leasing and support 2,160 2,172
Occupancy and equipment 2,388 1,852
Depreciation and amortization 5,245 4,491
Operating interest expense 4,816 8,808
Cost of hardware and equipment sold 993 505
Other     5,980       5,690  
 
Total operating expenses     49,852       55,878  
 
Operating income 19,324 37,068
 
Financing interest expense (2,020 ) (3,101 )
Net realized and unrealized gains (losses) on fuel price derivatives 653 (10,574 )
Increase in amount due to Avis under tax-receivable agreement   (570 )      
 
Income before income taxes 17,387 23,393
 
Provision for income taxes     6,410       8,865  
 
Net income 10,977 14,528
 

Changes in available-for-sale securities, net of tax effect of $32 in 2009 and $28 in 2008

57 52

Changes in interest rate swaps, net of tax effect of $406 in 2009 and $(656) in 2008

700 (1,182 )
Foreign currency translation   (24 )     (10 )
 
Comprehensive income   $ 11,710     $ 13,388  
 
Earnings per share:
Basic $ 0.29 $ 0.37
Diluted $ 0.28 $ 0.36
 
Weighted average common shares outstanding:
Basic 38,339 39,312
Diluted 39,177 40,275
                   

WRIGHT EXPRESS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands)

     
    March 31,
2009
(unaudited)
 

December 31, 2008

           

Assets

Cash and cash equivalents $ 22,888 $ 183,117
Accounts receivable (less reserve for credit losses of $10,002 in 2009 and $18,435 in 2008) 698,600 702,225
Income taxes receivable 2,178 7,903
Available-for-sale securities 12,306 12,533
Fuel price derivatives, at fair value 42,823 49,294

Property, equipment and capitalized software (net of accumulated depreciation of $61,739 in 2009 and $57,814 in 2008)

44,771 44,864
Deferred income taxes, net 238,488 239,957
Goodwill 315,230 315,230
Other intangible assets, net 38,642 39,922
Other assets     18,744       16,810  
 
Total assets   $ 1,434,670     $ 1,611,855  
 

Liabilities and Stockholders' Equity

Accounts payable $ 290,719 $ 249,067

Accrued expenses

28,425 34,931
Deposits 350,855 540,146
Revolving line-of-credit facility 136,600 170,600
Other liabilities 1,355 3,083
Amounts due to Avis under tax-receivable agreement 309,936 309,366

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 1,127,890 1,317,193
 
Commitments and contingencies
 

Stockholders' Equity

Common stock $0.01 par value; 175,000 shares authorized, 41,075 in 2009 and 40,966 in 2008 shares issued; 38,352 in 2009 and 38,244 in 2008 shares outstanding

411 410
Additional paid-in capital 100,766 100,359
Retained earnings 283,456 272,479
Other comprehensive loss, net of tax:
Net unrealized loss on available-for-sale securities 4 (53 )
Net unrealized loss on interest rate swaps (1,036 ) (1,736 )
Net foreign currency translation adjustment     (79 )     (55 )
 
Accumulated other comprehensive loss (1,111 ) (1,844 )
 
Less treasury stock at cost, 2,722 shares in 2009 and 2008     (76,742 )     (76,742 )
 
Total stockholders' equity     306,780       294,662  
 
Total liabilities and stockholders' equity   $ 1,434,670     $ 1,611,855  
                 

WRIGHT EXPRESS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 
          Three Months Ended
March 31,
    2009   2008
 
Cash flows from operating activities
Net income $ 10,977 $ 14,528
Adjustments to reconcile net income to net cash provided by operating activities:
Fair value change of fuel price derivatives 6,471 3,575
Stock-based compensation 1,364 1,408
Depreciation and amortization 5,400 4,550
Deferred taxes 1,031 4,723
Provision for credit losses 4,235 10,396
Loss on disposal of property and equipment 58
Impairment of internal-use software 421
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable (606 ) (151,189 )
Other assets (2,091 ) 110
Accounts payable 41,649 125,433
Accrued expenses (5,405 ) (6,179 )
Income taxes 5,195 3,110
Amounts due to Avis under tax-receivable agreement 570
Other liabilities     (1,723 )     (968 )
 
Net cash provided by operating activities 67,488 9,555
 

Cash flows from investing activities

Purchases of property and equipment (4,293 ) (4,256 )
Reinvestment of dividends on available-for-sale securities (40 ) (42 )
Maturities of available-for-sale securities 356 337
Acquisition, net of cash acquired           (31,520 )
 
Net cash used for investing activities (3,977 ) (35,481 )
 

Cash flows from financing activities

Payments of tax withholdings on equity compensation (418 ) (1,271 )
Proceeds from stock option exercises 294
Net decrease in deposits (189,291 ) (65,227 )
Net increase in borrowed federal funds 88,003
Net change in revolving line-of-credit facility (34,000 ) 47,600
Purchase of shares of treasury stock           (29,345 )
 
Net cash (used for) provided by financing activities (223,709 ) 40,054
 
Effect of exchange rate changes on cash and cash equivalents     (31 )     (10 )
 
Net change in cash and cash equivalents (160,229 ) 14,118
Cash and cash equivalents, beginning of period     183,117       43,019  
 
Cash and cash equivalents, end of period   $ 22,888     $ 57,137  
 

Supplemental cash flow information

Interest paid $ 9,751 $ 10,111
Income taxes paid $ 182 $ 1,137
                   

Exhibit 1

Wright Express Corporation

Reconciliation of Adjusted Net Income to GAAP Net Income

First Quarter 2009 and 2008

(in thousands)

(unaudited)

 
 

Three months
ended
March 31,
2009

 

Three months
ended
March 31,
2008

 
Adjusted net income

$

16,252

$ 17,399
Non-cash, mark-to-market adjustments on derivative instruments (6,471 ) (3,575 )
Amortization of purchased intangibles (1,280 ) (870 )
Asset impairment charge (421 ) --
Adjustments related to the deferred tax asset and tax-receivable agreement (570 ) --
Tax impact of foregoing adjustments   3,467       1,574  
GAAP net income $ 10,977     $ 14,528  

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, excludes the amortization of purchased intangibles, excludes a non-cash asset impairment charge and the net impact of tax rate changes on our deferred tax asset and related changes in the Avis tax-receivable agreement. 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;
  • The amortization of purchased intangibles and asset impairment have no impact on the operations of the business; and
  • The impact of tax rate changes on the Company’s deferred tax asset and related Avis tax-receivable agreement largely offset each other and have 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 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 2009   Q4 2008   Q3 2008   Q2 2008   Q1 2008
Fleet Payment Processing Revenue:
Payment processing transactions (000s) 49,297 51,509 55,519 55,940 53,225
Gallons per payment processing transaction 20.3 20.3 20.1 19.9 20.1
Payment processing gallons of fuel (000s) 1,003,189 1,047,627 1,115,908 1,112,153 1,070,829
 
Average fuel price

$

2.00 2.59 4.02 3.96 3.26
 
Payment processing $ of fuel (000s)

$

2,010,123 2,713,812 4,488,293 4,403,377 3,485,857
 
Net payment processing rate 1.94 % 1.86 % 1.71 % 1.82 % 1.87 %
 
Fleet payment processing revenue (000s)

$

38,988 50,407 76,802 80,217 65,075
 
MasterCard Payment Processing Revenue:
 
MasterCard purchase volume (000s)

$

649,048 585,967 670,137 622,844 525,699
Net interchange rate 0.93 % 0.99 % 1.03 % 1.07 % 1.05 %
 
MasterCard payment processing revenue (000s)

$

6,004 5,830 6,883 6,692 5,536

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.

Source: Wright Express Corporation

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