Printer Friendly Version View printer-friendly version
<< Back

Wright Express Reports Second-Quarter 2008 Financial Results

Quarterly Results Exceed Top End Of Guidance; Company To Serve Additional 211,000 Federal Fleet Vehicles And Expand Internationally
SOUTH PORTLAND, Maine, Jul 30, 2008 (BUSINESS WIRE) -- 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 June 30, 2008.

Total revenue for the second quarter of 2008 increased 29% to $111.2 million from $86.0 million for the second quarter of 2007. Net loss on a GAAP basis for the second quarter of 2008 was $24.4 million, or $0.63 per share, compared with net income to common shareholders of $16.4 million, or $0.40 per diluted share, for the comparable quarter last year. On a non-GAAP basis, the Company's adjusted net income for the second quarter of 2008 rose to $22.4 million, or $0.57 per diluted share, from $19.2 million, or $0.47 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 second quarter of 2008, the Company's GAAP financial results include an unrealized $74.1 million pre-tax, non-cash, mark-to-market loss on these instruments. For the second quarter of 2007, the Company reported an unrealized pre-tax, non-cash, mark-to-market loss of $4.0 million.

Exhibit 1 reconciles adjusted net income for the second 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 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.

Second-Quarter 2008 Performance Metrics

-- Average number of vehicles serviced was approximately 4.5 million, compared with approximately 4.4 million in the second quarter of 2007.

-- Total fuel transactions processed increased 16% from the second quarter of 2007 to 72.9 million. Payment processing transactions increased 5% to 55.9 million, and transaction processing transactions increased 72% to 17.0 million.

-- Average expenditure per payment processing transaction increased 31% to $78.72 from $60.10 for the same period last year.

-- Average retail fuel price rose 34% to $3.96 per gallon from $2.95 per gallon for the second quarter a year ago.

-- Total MasterCard purchase volume grew 34% to $622.8 million, from $464.4 million for the comparable period in 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 June 30, 2008. This table is presented as Exhibit 2.

Management Comments on the Second Quarter

"This was a strong quarter for Wright Express," said Michael Dubyak, Chairman, CEO, and President. "In a difficult period for the economy we continued to execute well, meeting or exceeding our internal projections on every one of our key performance metrics. As a result, second-quarter revenue and adjusted net income both exceeded the top end of our guidance.

"The double-digit transaction growth we produced was largely due to our continued success in customer retention, generating new fleet accounts at the front end of our business and our recent Pacific Pride acquisition. Our capabilities in this area were amply demonstrated in the second quarter by our success in winning the General Services Administration Fleet business. As a partner with CitiBank under its master contract for the GSA's SmartPay 2 program, we expect an additional 211,000 federal fleet vehicles will be using Wright Express for fuel purchases, vehicle maintenance and accident management services by the end of 2008.

"As we announced separately today, we plan to acquire the assets of Financial Automation Limited (FAL), a New Zealand-based provider of fuel card processing solutions. This will allow us to offer fleet card processing and operations solutions to major oil companies in geographic markets around the world. We expect to close the transaction in the third quarter of 2008.

"Thanks to our resilient and predictable business model, Wright Express continued to perform well in a difficult environment this quarter," said Dubyak. "Based on the current data and the trends we are seeing in our business, we have every reason to expect solid performance in the quarters ahead."

Share Repurchase Program

The Board of Directors has authorized $75 million in additional stock repurchases over the next 24 months under the Company's existing repurchase program, increasing the total currently available for share repurchases to $83 million. The program will be funded primarily through the Company's future cash flows. The Company's management, based on its evaluation of market and economic conditions and other factors, will determine the timing and number of shares repurchased, which may be commenced or suspended at any time.

Financial Guidance

Wright Express Corporation is issuing financial guidance for the third quarter of 2008 and updating revenue 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 third quarter and $4.5 million for the full year. The fuel prices referenced below are based on the applicable NYMEX futures price:

-- For the third quarter of 2008, revenue in the range of $108 million to $113 million. This is based on an assumed average retail fuel price of $3.89 per gallon.

-- Third-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 $22 million to $23 million, or $0.55 to $0.58 per diluted share, based on approximately 40 million shares outstanding.

-- For the full year 2008, revenue in the range of $421 million to $431 million. This is based on an assumed average retail fuel price of $3.75 per gallon.

-- For the full year 2008, the Company now expects 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 $2.11 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, July 30, 2008, 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 www.wrightexpress.com.

This press release contains forward-looking statements, including statements regarding: the use of fuel price derivative instruments to mitigate financial risks associated with the variability in fuel prices; the expectation that an additional 211,000 federal fleet vehicles will be using Wright Express for fuel purchases, vehicle maintenance and accident management services by the end of 2008; plans for the acquisition of the assets of Financial Automation Limited; expectations for future financial performance; the Company's share repurchase program; and expectations and guidance for third-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; third-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
                (in thousands, except per share data)
                             (unaudited)

                                    Three months
                                        ended        Six months ended
                                      June 30,           June 30,
                                  ------------------------------------
                                    2008     2007     2008     2007
----------------------------------------------------------------------

Revenues
 Payment processing revenue       $ 86,909 $ 66,973 $157,520 $121,167
 Transaction processing
  revenue                            5,255    3,652    9,235    7,127
 Account servicing revenue           7,589    6,328   15,011   12,508
 Finance fees                        7,419    6,566   15,070   12,132
 Other                               4,066    2,454    7,348    4,861
----------------------------------------------------------------------

  Total revenues                   111,238   85,973  204,184  157,795

Expenses
 Salary and other personnel         18,316   15,699   35,434   31,828
 Service fees                        5,860    3,440   10,706    7,111
 Provision for credit losses        10,823    3,043   21,219    9,306
 Technology leasing and
  support                            2,206    2,262    4,378    4,602
 Occupancy and equipment             1,998    1,502    3,850    3,096
 Depreciation and
  amortization                       4,935    3,338    9,426    6,640
 Operating interest expense          9,278    8,946   18,086   15,867
 Other                               6,874    5,096   13,069    9,795
----------------------------------------------------------------------

  Total operating expenses          60,290   43,326  116,168   88,245
----------------------------------------------------------------------

Operating income                    50,948   42,647   88,016   69,550

Financing interest expense          (3,016)  (3,001)  (6,117)  (6,131)
Loss on extinguishment of
 debt                                   --   (1,572)      --   (1,572)
Net realized and unrealized
 losses on fuel price
 derivatives                       (87,336)  (9,639) (97,910) (20,329)
Decrease in amount due to
 Avis under tax receivable
 agreement                              --   78,904       --   78,904
----------------------------------------------------------------------

(Loss) income before income
 taxes                             (39,404) 107,339  (16,011) 120,422

Income taxes                       (15,021)  90,985   (6,156)  95,731
----------------------------------------------------------------------

Net (loss) income                  (24,383)  16,354   (9,855)  24,691

Changes in available-for-
 sale securities, net of tax
 effect of $(62) and $(34)
 in 2008 and $(53) and $(48)
 in 2007                              (113)     (95)     (61)     (87)
Changes in interest rate
 swaps, net of tax effect of
 $589 and $(67) in 2008 and
 $(42) and $(162) in 2007            1,054      (61)    (128)    (234)
Foreign currency translation             2       --       (8)      --
----------------------------------------------------------------------

Comprehensive (loss) income       $(23,440)$ 16,198 $(10,052)$ 24,370
----------------------------------------------------------------------

(Loss) earnings per share:
 Basic                            $  (0.63)$   0.41 $  (0.25)$   0.61
 Diluted                          $  (0.63)$   0.40 $  (0.25)$   0.60

Weighted average common
 shares outstanding:
 Basic                              38,857   39,995   39,084   40,170
 Diluted                            38,857   41,084   39,084   40,853


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

                                                 June 30,   December
                                                   2008        31,
                                                (unaudited)   2007
----------------------------------------------------------------------

Assets
 Cash and cash equivalents                      $   47,580 $   43,019
 Accounts receivable (less reserve for credit
  losses of $14,944 in 2008 and $9,466 in
  2007)                                          1,582,939  1,070,273
 Income taxes receivable                                --      3,320
 Available-for-sale securities                      10,130      9,494
 Property, equipment and capitalized software
  (net of accumulated depreciation of $50,195
  in 2008 and $43,384 in 2007)                      46,812     45,537
 Deferred income taxes, net                        301,291    283,092
 Goodwill                                          313,853    294,365
 Other intangible assets, net                       34,090     20,932
 Other assets                                       18,799     15,044
----------------------------------------------------------------------

Total assets                                    $2,355,494 $1,785,076
----------------------------------------------------------------------

Liabilities and Stockholders' Equity
 Accounts payable                               $  692,306 $  363,189
 Accrued expenses                                   31,093     35,310
 Income taxes payable                                1,197         --
 Deposits                                          727,726    599,089
 Borrowed federal funds                             74,991      8,175
 Revolving line-of-credit facility                 218,900    199,400
 Fuel price derivatives, at fair value             119,318     41,598
 Other liabilities                                   3,421      4,544
 Amounts due to Avis under tax receivable
  agreement                                        310,405    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                               2,189,357  1,580,817

 Commitments and contingencies (Note 6)

 Stockholders' Equity

  Common stock $0.01 par value; 175,000
   shares authorized, 40,944 in 2008 and
   40,798 in 2007 shares issued; 38,808 in
   2008 and 39,625 in 2007 shares outstanding          409        408
  Additional paid-in capital                        99,448     98,174
  Retained earnings                                134,984    144,839
  Other comprehensive (loss) income, net of
   tax:
   Net unrealized loss on available-for-sale
    securities                                        (110)       (49)
   Net unrealized loss on interest rate swaps       (1,545)    (1,417)
   Net foreign currency translation
    adjustment                                           7         15
----------------------------------------------------------------------

  Accumulated other comprehensive (loss)
   income                                           (1,648)    (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                        166,137    204,259
----------------------------------------------------------------------

Total liabilities and stockholders' equity      $2,355,494 $1,785,076
----------------------------------------------------------------------


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

                                                    Six months ended
                                                        June 30,
                                                  --------------------
                                                       2008      2007
----------------------------------------------------------------------

Cash flows from operating activities
 Net (loss) income                                $  (9,855)$  24,691
 Adjustments to reconcile net (loss) income to
  net cash used for operating activities:
  Net unrealized loss on fuel price derivatives      77,720    14,582
  Stock-based compensation                            2,831     2,146
  Depreciation and amortization                       9,577     7,223
  Loss on extinguishment of debt                         --     1,572
  Deferred taxes                                    (18,098)   92,766
  Provision for credit losses                        21,219     9,306
  Loss on disposal of property and equipment             62        --
  Changes in operating assets and liabilities,
   net of effects of acquisition:
   Accounts receivable                             (494,489) (341,407)
   Other assets                                      (2,003)   (1,995)
   Accounts payable                                 286,776   136,082
   Accrued expenses                                  (4,606)   (4,305)
   Income taxes                                       4,166    (4,300)
   Other liabilities                                 (1,137)      308
   Amounts due to Avis under tax receivable
    agreement                                        (9,107)  (89,948)
----------------------------------------------------------------------

 Net cash used for operating activities            (136,944) (153,279)

Cash flows from investing activities
 Purchases of property and equipment                 (8,660)   (8,621)
 Purchases of available-for-sale securities          (1,589)      (70)
 Maturities of available-for-sale securities            858       515
 Acquisition, net of cash acquired                  (31,540)       --
----------------------------------------------------------------------

 Net cash used for investing activities             (40,931)   (8,176)

Cash flows from financing activities
 Excess tax benefits from equity instrument
  share-based payment arrangements                      112     1,279
 Payments in lieu of issuing shares of common
  stock                                              (2,076)   (1,152)
 Proceeds from stock option exercises                   356     2,240
 Net increase in deposits                           128,637   205,052
 Net increase (decrease) in borrowed federal
  funds                                              66,816   (40,046)
 Net borrowings on revolving line-of-credit
  facility                                           19,500   164,600
 Loan origination fees paid for revolving line-
  of-credit facility                                 (1,556)     (998)
 Net repayments on 2005 revolving line-of-
  credit facility                                        --   (20,000)
 Repayments on term loan                                 --  (131,000)
 Purchase of shares of treasury stock               (29,345)  (20,643)
----------------------------------------------------------------------

 Net cash provided by financing activities          182,444   159,332

Effect of exchange rates on cash and cash
 equivalents                                             (8)       --
----------------------------------------------------------------------

Net change in cash and cash equivalents               4,561    (2,123)
Cash and cash equivalents, beginning of period       43,019    35,060
----------------------------------------------------------------------

Cash and cash equivalents, end of period          $  47,580 $  32,937
----------------------------------------------------------------------

Supplemental cash flow information
 Interest paid                                    $  24,437 $  20,309
 Income taxes paid                                $   7,318 $   5,871

 Significant non-cash transactions:
  Capitalized software licensing agreement        $      -- $   2,872


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

                                 Three months ended Three months ended
                                   June 30, 2008      June 30, 2007
                                 ------------------ ------------------

Adjusted net income                       $  22,445           $ 19,226
Non-cash, mark-to-market
 adjustments on derivative
 instruments                               (74,145)            (3,991)
Amortization of purchased
 intangibles                                (1,172)                 --
Tax impact of mark-to-market
 adjustments and amortization of
 purchased intangibles                       28,489              1,119
                                 ------------------ ------------------
GAAP net income                           $(24,383)           $ 16,354
                                 ------------------ ------------------

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

                       Q2 2008   Q1 2008   Q4 2007   Q3 2007   Q2 2007
                    --------------------------------------------------
Fleet Payment
 Processing
 Revenue:
Payment processing
 transactions
 (000s)                 55,940    53,225    53,379    53,595    53,181
Gallons per payment
 processing
 transaction              19.9      20.1      20.5      20.6      20.3
Payment processing
 gallons of fuel
 (000s)              1,112,153 1,070,829 1,093,510 1,103,268 1,082,132
Average fuel price  $     3.96      3.26      3.06      2.88      2.95
Payment processing
 $ of fuel (000s)   $4,403,377 3,485,857 3,346,443 3,172,482 3,196,224
Net payment
 processing rate         1.82%     1.87%     1.91%     1.93%     1.93%
Fleet payment
 processing revenue
 (000s)             $   80,217    65,075    64,015    61,230    61,777

MasterCard Payment
 Processing
 Revenue:
MasterCard purchase
 volume (000s)      $  622,844   525,699   484,343   510,585   464,425
Net interchange
 rate                    1.07%     1.05%     1.10%     1.13%     1.12%
MasterCard payment
 processing revenue
 (000s)             $    6,692     5,536     5,323     5,757     5,197

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