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Wright Express Reports Fourth Quarter 2011 Financial Results

Broad based strength across Fleet and Other Payment Solutions Segments drives full year revenue and earnings

SOUTH PORTLAND, Maine--(BUSINESS WIRE)--Feb. 8, 2012-- Wright Express Corporation (NYSE: WXS), a leading provider of value-based business payment processing and information management solutions, today reported financial results for the three months ended December 31, 2011.

Fourth Quarter Financial Results

Total revenue for the fourth quarter of 2011 increased 22% to $139.8 million from $114.9 million for the fourth quarter of 2010. Net income to common shareholders on a GAAP basis was $32.8 million, or $0.84 per diluted share, compared with $18.5 million, or $0.47 per diluted share, for the fourth quarter last year.

On a non-GAAP basis, the Company's adjusted net income for the fourth quarter of 2011 increased 33% to $38.4 million, or $0.98 per diluted share, from $28.8 million, or $0.74 per diluted share, for the same period a year ago.

For the full year 2011, revenue increased 42% to $553 million from $390 million in 2010. Net income to common shareholders on a GAAP basis was $3.43 per diluted share in 2011 compared to $2.25 per diluted share in 2010. On a non-GAAP basis, adjusted net income increased 32% to $3.64 per diluted share from $2.75 per diluted share in 2010.

Wright Express uses fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices in North America. The Company's GAAP financial results include an unrealized pre-tax, non-cash, mark-to-market loss of $2.9 million dollars for the fourth quarter of 2011 and a $10.9 million dollar gain for the full year of 2011 on these instruments. See Exhibit 1 for a full reconciliation of adjusted net income.

Michael Dubyak, Chairman, President and Chief Executive Officer, commented, “2011 was another great year for Wright Express as we experienced continued strength across our business and considerably surpassed our expectations. These results demonstrate further progression against our multi-pronged strategy to grow our North American fleet business, diversify our revenue streams and build out our international presence. The fourth quarter was no exception as we experienced robust performance in our other payments solutions with our corporate charge card product, and steady growth in our core fleet business.”

Mr. Dubyak continued, “As we enter 2012 and think about the year ahead, our strategy remains the same. We are committed to maintaining our investments in the business to accelerate the development of our new products, while also supporting sustainable future growth both domestically and internationally.”

Fourth Quarter 2011 Performance Metrics

  • Average number of vehicles serviced worldwide was approximately 6.6 million, an increase of 14% from the fourth quarter of 2010.
  • Total fuel transactions processed increased 8% from the fourth quarter of 2010 to 80.0 million. Payment processing transactions increased 3% to 60.6 million; transaction processing transactions increased 31% to 19.4 million.
  • Average expenditure per domestic payment processing transaction increased 20% from the fourth quarter of 2010 to $70.10.
  • Domestic retail fuel price increased 19% to $3.53 per gallon from $2.96 per gallon in the fourth quarter of 2010.
  • Total corporate card purchase volume grew 66% to $2.0 billion, from $1.2 billion for the fourth quarter of 2010.

Financial Guidance and Assumptions

“Our actions over the past year put us on solid footing to generate and deliver solid performance across our business in 2012. For the first quarter and full year, our guidance reflects our expectation for continued steady growth in our Fleet Segment, considerable strength in our Other Payment Solutions Segment and increased investments across our business to support future growth,” said Steve Elder, Senior Vice President and Chief Financial Officer.

Wright Express Corporation is introducing financial guidance for the first quarter of 2012 and full-year 2012.

  • For the first quarter of 2012, Wright Express expects revenue in the range of $134 million to $139 million and adjusted net income in the range of $34 million to $36 million, or $0.87 to $0.93 per diluted share.
  • For the full year 2012, the Company expects revenue in the range of $590 million to $610 million and adjusted net income to be in the range of $160 million to $168 million, or $4.10 to $4.30 per diluted share.

First quarter 2012 guidance is based on an assumed average U.S. retail fuel price of $3.56 per gallon, and approximately 39 million shares outstanding. Full-year 2012 guidance is based on an assumed average U.S. retail fuel price of $3.59 per gallon and approximately 39 million shares outstanding. In addition, the fuel prices referenced above are based on the applicable NYMEX futures price. We are assuming the exchange rate of the Australian dollar will remain at a premium to the US dollar. The Company's guidance also assumes that 2012 domestic credit loss for the first quarter and the full year will range between 13 and 18 basis points.

The Company's guidance does not reflect the impact of any stock repurchases that may occur in 2012. In addition, this guidance excludes the impact of non-cash, mark-to-market adjustments on the Company's fuel-price-related derivative instruments and the amortization of purchased intangibles.

Additional Information

Exhibit 1 reconciles adjusted net income, which has not been determined in accordance with GAAP, to net income as determined in accordance with GAAP for the fourth quarters of 2011 and 2010.

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.

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, 2011. This table is presented as Exhibit 2. We are also providing selected segment review information for the three and twelve months ending December 31 2010 and 2011 in Exhibit 3.

Conference Call Details

In conjunction with this announcement, Wright Express will host a conference call today, February 8, 2012, at 10:00 a.m. (ET). As previously announced, the conference call will be webcast live on the Internet, and can be accessed at the Investor Relations section of the Wright Express website, http://www.wrightexpress.com. The live conference call also can be accessed by dialing (866) 334-7066 or (973) 935-8463. A replay of the webcast will be available on the Company's website.

About Wright Express

Wright Express (NYSE:WXS) is a leading provider of value-based, business payment processing and information management solutions. The company’s fleet, corporate and prepaid payment solutions provide its more than 350,000 customers with unparalleled security and control across a wide spectrum of business sectors. The company’s subsidiaries include Wright Express Financial Services, Pacific Pride,Wright Express Prepaid Cards Australia and Wright Express Fuel Cards Australia. Wright Express and its subsidiaries employ more than 850 associates in six countries. For more information about Wright Express, please visit wrightexpress.com.

Forward Looking Statement

This press release contains forward-looking statements, including statements regarding: financial guidance; assumptions underlying the Company's financial guidance; management’s expectations for the Company’s performance in 2012 and beyond; management’s expectations for future performance against corporate strategy; expectations for efforts to continue growth; and, confidence in future performance. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. When used in this earnings release, the words "may," "could," "anticipate," "plan," "continue," "project," "intend," "estimate," "believe," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including: the effects of general economic conditions, on fueling patterns and the commercial activity of fleets; the effects of the Company’s international business expansion efforts and any failure of those efforts; the impact and range of credit losses; the Company’s failure to successfully integrate the businesses it has acquired; 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 banking and securities regulators, or possible changes in banking regulations impacting the Company’s industrial loan bank and the Company as the corporate parent; the impact of foreign currency exchange rates on the Company’s operations, revenue and income; changes in interest rates; financial loss if the Company determines it necessary to unwind its derivative instrument position prior to the expiration of a contract; the uncertainties of litigation; as well as other risks and uncertainties identified in Item 1A of the Company's Annual Report for the year ended December 31, 2010, filed on Form 10-K with the Securities and Exchange Commission on February 28, 2011 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, disposition or stock repurchases. 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
December 31,
  Year ended
December 31,
    2011 2010   2011 2010
 
Revenues
Fleet payment solutions $ 107,468 $ 93,930 $ 436,704 $ 329,239
Other payment solutions     32,368     20,966       116,372     61,167  
 
Total revenues 139,836 114,896 553,076 390,406
 
Expenses
Salary and other personnel 25,118 23,551 104,610 87,364
Service fees 18,224 13,353 70,202 46,368
Provision for credit losses 7,063 7,194 27,527 19,838
Technology leasing and support 3,572 3,477 15,423 12,881
Occupancy and equipment 2,957 2,386 11,803 8,654
Depreciation and amortization 11,725 11,531 45,369 29,893
Operating interest expense 1,265 1,244 5,453 5,370
Cost of hardware and equipment sold 722 836 3,764 2,481
Other     8,457     8,344       35,601     26,848  
 
Total operating expenses     79,103     71,916       319,752     239,697  
 
Operating income 60,733 42,980 233,324 150,709
 
Financing interest expense (2,589 ) (2,411 ) (11,676 ) (5,314 )
Net (loss) gain on foreign currency transactions (96 ) 87 (459 ) 7,145
Net realized and unrealized losses on fuel price derivatives (6,878 ) (11,053 ) (11,869 ) (7,244 )
Increase in amount due under tax receivable agreement     160           (715 )   (214 )
 
Income before income taxes 51,330 29,603 208,605 145,082
 
Income taxes     18,538     11,135       74,983     57,453  
 
Net income 32,792 18,468 133,622 87,629
 

Changes in available-for-sale securities, net of tax effect of $(24) and $66 in 2011 and $(33) and $41 in 2010

(36 ) (57 ) 108 69

Changes in interest rate swaps, net of tax effect of $33 and $179 in 2011 and $89 and $(111) in 2010

56 152 308 (192 )
Foreign currency translation     13,974     14,558       2,567     28,015  
 
Comprehensive income   $ 46,786   $ 33,121     $ 136,605   $ 115,521  
 
Earnings per share:
Basic $ 0.85 $ 0.48 $ 3.45 $ 2.28
Diluted $ 0.84 $ 0.47 $ 3.43 $ 2.25
 
Weighted average common shares outstanding:
Basic 38,759 38,408 38,686 38,486
Diluted 39,015 38,922 38,998 39,052
 
 
 

WRIGHT EXPRESS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

                   
    December 31,
      2011       2010  
 
Assets
Cash and cash equivalents $ 25,791 $ 18,045
Accounts receivable (less reserve for credit losses of $11,526 in 2011 and $10,237 in 2010) 1,323,915 1,160,482
Income taxes receivable 9,706
Available-for-sale securities 17,044 9,202
Fuel price derivatives, at fair value 410
Property, equipment and capitalized software, net 62,078 60,785
Deferred income taxes, net 141,573 161,156
Goodwill 549,504 537,055
Other intangible assets, net 109,656 124,727
Other assets     38,383       26,499  
 
Total assets   $ 2,278,060     $ 2,097,951  
 
Liabilities and Stockholders' Equity
Accounts payable $ 409,226 $ 379,855
Accrued expenses 54,738 41,133
Income taxes payable 3,638
Deposits 693,654 529,800
Borrowed federal funds 6,900 59,484
Revolving line-of-credit facilities and term loan 295,300 407,300
Amounts due under tax receivable agreement 92,763 100,145
Fuel price derivatives, at fair value 415 10,877
Other liabilities     15,749       6,712  
 
Total liabilities 1,568,745 1,538,944
 
 
Stockholders' Equity

Common stock $0.01 par value; 175,000 shares authorized; 42,252 in 2011 and 41,924 in 2010 shares issued; 38,765 in 2011 and 38,437 in 2010 shares outstanding

423 419
Additional paid-in capital 146,282 132,583
Retained earnings 633,389 499,767
Other comprehensive income (loss), net of tax:
Net unrealized gain on available-for-sale securities 200 92
Net unrealized loss on interest rate swaps (60 ) (368 )
Net foreign currency translation adjustment     30,448       27,881  
 
Accumulated other comprehensive income 30,588 27,605
 
Less treasury stock at cost; 3,566 shares in 2011 and 2010     (101,367 )     (101,367 )
 
Total stockholders' equity     709,315       559,007  
 
Total liabilities and stockholders' equity   $ 2,278,060     $ 2,097,951  
 
 
 

WRIGHT EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

                 
  Year ended December 31,
      2011       2010  
 
Cash flows from operating activities
Net income $ 133,622 $ 87,629
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Net unrealized loss (gain) on derivative instruments (10,872 ) 17,029
Stock-based compensation 9,367 7,425
Depreciation and amortization 48,112 31,504
Deferred taxes 23,700 21,536
Provision for credit losses 27,527 19,838
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (198,417 ) (236,100 )
Other assets (11,133 ) (1,241 )
Accounts payable 29,274 41,919
Accrued expenses 3,839 7,534
Income taxes (5,654 ) (2,072 )
Other liabilities 9,185 2,057
Amounts due under tax receivable agreement     (7,382 )     (7,608 )
 
Net cash provided by (used for) operating activities 51,168 (10,550 )
 
Cash flows from investing activities
Purchases of property and equipment (25,145 ) (28,944 )
Purchases of available-for-sale securities (8,509 ) (150 )
Maturities of available-for-sale securities 841 1,654
Acquisition of customer relationship intangible (3,344 )
Acquisition of rapid!, net of earn out (8,081 )
Acquisition of ReD Australia, net of cash acquired     3,734       (339,994 )
 
Net cash used for investing activities (40,504 ) (367,434 )
 
Cash flows from financing activities
Excess tax benefits from equity instrument share-based payment arrangements 3,970 1,698
Repurchase of share-based awards to satisfy tax withholdings (2,551 ) (1,476 )
Proceeds from stock option exercises 2,913 3,177
Net increase (decrease) in deposits 163,853 106,504
Net (decrease) increase in borrowed federal funds (52,584 ) (12,238 )
Net (repayments) borrowings on 2007 revolving line-of-credit facility (332,300 ) 204,300
(Repayments) borrowings on term loan (75,000 ) 75,000
Loan origination fees (6,184 ) (2,269 )
Net borrowings on 2011 revolving line-of-credit 102,800
Borrowings on 2011 term note agreement 200,000
Repayments of 2011 term note agreement (7,500 )
Purchase of shares of treasury stock           (18,357 )
 
Net cash (used for) provided by financing activities (2,583 ) 356,339
 
Effect of exchange rates on cash and cash equivalents     (335 )     386  
 
Net change in cash and cash equivalents 7,746 (21,259 )
Cash and cash equivalents, beginning of period     18,045       39,304  
 
Cash and cash equivalents, end of period   $ 25,791     $ 18,045  
 
 
 

Exhibit 1

 

Reconciliation of Adjusted Net Income to GAAP Net Income

Fourth Quarter and Full Year 2011 and 2010

(in thousands)

(unaudited)

                                             
       

 

      Three months ended
December 31,
  Year ended
December 31,
 

 

2011   2010   2011   2010
   
Adjusted net income $ 38,374 $ 28,776 $ 141,792 $ 107,301
Unrealized gains (losses) on fuel price derivatives (2,913 ) (10,009 ) 10,872 (17,029 )
Amortization of acquired intangible assets (5,690 ) (6,411 ) (22,412 ) (11,276 )
Non-cash adjustment related to the tax receivable agreement 160 - (715 ) (214 )
Tax impact         2,861       6,112       4,085       8,847  
 
Net income       $ 32,792     $ 18,468     $ 133,622     $ 87,629  
 
                                     

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 fuel price related derivative instruments, and excludes the amortization of purchased intangibles, the net impact of tax rate changes on the Company's deferred tax asset and related changes in the 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 fuel-price related 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 and asset impairment 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, 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.

The tax impact of the foregoing adjustments is the difference between the Company's GAAP tax provision and a pro forma tax provision based upon the Company's adjusted net income before taxes. The methodology utilized in calculating the Company's adjusted net income tax provision is the same methodology utilized in calculating the Company's GAAP tax provision.

Exhibit 2

Selected Non-Financial Metrics

(Including Wright Express Australia beginning with Q4 2010)

         
  Q4 2011   Q3 2011   Q2 2011   Q1 2011   Q4 2010
Fleet Payment Solutions – Payment Processing Revenue:
Payment processing transactions (000s)

60,598

65,230 63,187 58,913 58,936
Gallons per payment processing transaction

19.6

19.3 19.2 19.1 19.5
Payment processing gallons of fuel (000s)

1,185,522

1,261,088 1,214,032 1,127,019 1,148,580
Average US fuel price (US$ / gallon)

$

3.53

3.70 3.86 3.38 2.96
Average Australian fuel price (US$ / gallon) $

5.45

5.50 5.70 5.32 4.64
Payment processing $ of fuel (000s)

$

4,304,150

4,778,493 4,787,730 3,913,085 3,496,944
Net payment processing rate

1.66%

1.64% 1.64% 1.68% 1.73%
Fleet payment processing revenue (000s)

$

71,276

78,381 78,444 65,655 60,411
 
Other Payment Solutions – Payment Processing Revenue:*
Payment solutions purchase volume (000s)

$

2,018,097

2,404,668 1,900,736 1,435,965 1,214,704
Net interchange rate

0.98%

0.99% 0.97% 1.01% 1.01%
Payment solutions processing revenue (000s)

$

19,845

23,734 18,502 14,563 12,318
 

*Excludes prepaid payroll card

Notes:

Payment processing transaction and vehicle count data, as well as related calculated metrics associated with this data, for all periods presented reflect information provided from an improved business intelligence reporting process that was implemented in Q2 2011. These changes do not impact our revenue or earnings. Moving forward, Wright Express will use these updated transaction and vehicle count data to provide for quarter to quarter comparisons. In the table above Q4 2010 data has been updated to remove some non-fuel payment processing transactions from Wright Express Australia operations.

Definitions and explanations:

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.

Payment solutions purchase volume represents the total dollar value of all transactions that use corporate charge card products including single use account products.

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.

Exhibit 3

Segment Revenue Information

Three and Twelve Months Ended December 31, 2011 and 2010

(in thousands)

(unaudited)

             

Fleet Payment Solutions

                                             
Three months ended
December 31,

Increase (decrease)
Year ended
December 31,

Increase (decrease)
      2011     2010   Amount Percent   2011     2010   Amount Percent
 
Revenues
Payment processing revenue $ 71,276 $ 60,411 $ 10,865 18 % $ 293,756 $ 220,154 $ 73,602 33 %
Transaction processing revenue 4,081 3,954 127 3 % 16,553 16,591 (38 )
Account servicing revenue 15,149 13,961 1,188 9 % 60,569 39,692 20,877 53 %
Finance fees 12,263 11,117 1,146 10 % 46,084 37,264 8,820 24 %
  Other     4,699     4,487     212   5 %   19,742     15,538     4,204   27 %
 
Total revenues 107,468 93,930 13,538 14 % 436,704 329,239 107,465 33 %
                   
 

Other Payment Solutions

                                                   
Three months ended
December 31,
 
Increase (decrease)
  Year ended
December 31,
 
Increase (decrease)
(in thousands)     2011     2010     Amount Percent     2011     2010     Amount Percent
 
Revenues
Payment processing revenue $ 20,226 $ 12,318 $ 7,908 64 % $ 77,570 $ 46,034 $ 31,536 69 %
Transaction processing revenue 2,924 2,935 (11 ) 8,185 2,935 5,250 179 %
Account servicing revenue 1,438 706 732 104 % 3,432 753 2,679 356 %
Finance fees 202 118 84 71 % 731 497 234 47 %
  Other     7,578     4,889       2,689   55 %     26,454     10,948       15,506   142 %
 
Total revenues 32,368 20,966 11,402 54 % 116,372 61,167 55,205 90 %

Source: Wright Express Corporation

Wright Express
News media contact:
Jessica Roy, 207.523.6763
Jessica_Roy@wrightexpress.com
or
Wright Express
Investor contact:
Steve Elder, 207.523.7769
Steve_Elder@wrightexpress.com