Printer Friendly Version View printer-friendly version
<< Back

Wright Express Reports Fourth-Quarter and Full-Year 2007 Financial Results

Fourth-Quarter Results Meet Expectations;
Announces Agreement to Acquire Pacific Pride

SOUTH PORTLAND, Maine--(BUSINESS WIRE)--Feb. 6, 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 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

----------------------------------------------------------------------

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

----------------------------------------------------------------------
                                                     December 31,
                                                ----------------------
                                                   2007       2006
----------------------------------------------------------------------

Assets
 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
----------------------------------------------------------------------

Liabilities and Stockholders' Equity
 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

 Stockholders' Equity
  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
----------------------------------------------------------------------

                      WRIGHT EXPRESS CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands)
                             (unaudited)

----------------------------------------------------------------------
                                               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

Cash flows from investing activities
 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)

Cash flows from financing activities
 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
----------------------------------------------------------------------
                Exhibit 1
                      Wright Express Corporation
       Reconciliation of Adjusted Net Income to GAAP Net Income
              Fourth Quarter and Full Year 2007 and 2006
                            (in thousands)
                             (unaudited)

                                 Three     Three     Year      Year
                                 months    months    ended     ended
                                  ended     ended   December  December
                                December  December  31, 2007  31, 2006
                                   31,       31,
                                  2007      2006

Adjusted net income(1)          $ 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

                              Exhibit 2
                      Wright Express Corporation
                    Selected Non Financial Metrics

                   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.

CONTACT: 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

SOURCE: Wright Express Corporation