Printer Friendly Version View printer-friendly version
<< Back

Wright Express Reports Third Quarter 2011 Financial Results

Revenue and Earnings Exceed Guidance

SOUTH PORTLAND, Maine, Nov 02, 2011 (BUSINESS WIRE) -- 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 September 30, 2011.

Third Quarter Financial Results

Total revenue for the third quarter of 2011 increased 52% to $151.9 million from $100.2 million for the third quarter of 2010. Net income to common shareholders on a GAAP basis was $48.1 million, or $1.23 per diluted share, compared with $20.6 million, or $0.53 per diluted share, for the third quarter last year.

On a non-GAAP basis, the Company's adjusted net income for the third quarter of 2011 increased 38% to $38.7 million, or $0.99 per diluted share, from $28.1 million, or $0.72 per diluted share, for the same period a year ago.

Wright Express uses fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices in North America. For the third quarter of 2011, the Company's GAAP financial results include an unrealized $20.7 million dollar pre-tax, non-cash, mark-to-market gain on these instruments. See Exhibit 1 for a full reconciliation of adjusted net income.

"Our performance this quarter was driven by exceptional growth in our other payment solutions segment, as well as double-digit fleet transaction and vehicle growth. Our execution and focus over the past few years has resulted in greater diversification of our business and has built a foundation for future growth. Even in the current environment, Wright Express is well positioned to deliver continued strong performance. Looking ahead, we are confident that the positive momentum in our business will continue as our more recent initiatives gain traction and we capitalize on the many opportunities in front of us, including new customer wins and multi-faceted expansion of the business," said Michael Dubyak, Chairman, President and Chief Executive Officer.

Third Quarter 2011 Performance Metrics

Where applicable, the performance metrics listed below include activity from the Company's Australian fuel business (Wright Express Australia) acquired September 14, 2010.

  • Average number of vehicles serviced worldwide was approximately 6.5 million, an increase of 29% from the third quarter of 2010.
  • Total fuel transactions processed increased 19% from the third quarter of 2010 to 85.1 million. Payment processing transactions increased 14% to 65.2 million; transaction processing transactions increased 47% to 19.9 million.
  • Average expenditure per domestic payment processing transaction increased 32% from the third quarter of 2010 to $72.48.
  • Domestic retail fuel price increased 33% to $3.70 per gallon from $2.78 per gallon in the third quarter of 2010.
  • Total corporate card purchase volume grew 83% to $2.4 billion, from $1.3 billion for the third quarter of 2010.

Financial Guidance and Assumptions

"We anticipate solid fundamental performance across our businesses as we continue to execute against our multi-pronged growth strategy. Our fourth quarter guidance reflects our expectation for continued strong growth in our other payments solutions segment and steady growth in our fleet business, offset by lower fuel prices and a weaker Australian dollar. For 2012, the impact from lower fuel prices will be mitigated as we have locked in higher prices on our commodity hedges," said Steve Elder, Senior Vice President and Chief Financial Officer.

  • For the fourth quarter of 2011, Wright Express expects revenue in the range of $135 million to $140 million and adjusted net income in the range of $34 million to $36 million, or $0.88 to $0.94 per diluted share.
  • For the full year 2011, the Company expects revenue in the range of $548 million to $553 million and adjusted net income to be in the range of $138 million to $140 million, or $3.53 to $3.59 per diluted share.

Fourth quarter 2011 guidance is based on an assumed average U.S. retail fuel price of $3.41 per gallon, and approximately 39 million shares outstanding. Full-year 2011 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 for the remainder of the year.

The Company's guidance also assumes that fourth quarter 2011 domestic fleet credit loss will range between a seasonally high 22 and 27 basis points, and that domestic fleet credit loss for full year 2011 will range from 16 to 17 basis points.

The Company's guidance does not reflect the impact of any stock repurchases that may occur in 2011. 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.

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 third 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 September 30, 2011. This table is presented as Exhibit 2.

Conference Call Details

In conjunction with this announcement, Wright Express will host a conference call today, November 2, 2011, 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 and Wright Express International, including 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 2011 and beyond; 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 press release, the words "may," "will," "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 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 uncertainties of litigation; the impact of foreign currency exchange rates on the Company's operations, revenue and income; 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 fourth quarter credit losses; 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; 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 Nine months ended
September 30, September 30,
2011 2010 2011 2010
Revenues
Fleet payment solutions $ 117,054 $ 83,514 $ 329,236 $ 235,309
Other payment solutions 34,824 16,715 84,004 40,201
Total revenues 151,878 100,229 413,240 275,510
Expenses
Salary and other personnel 27,388 23,746 79,492 63,813
Service fees 20,774 15,953 51,978 33,015
Provision for credit losses 8,677 3,882 20,464 12,644
Technology leasing and support 3,895 3,319 11,851 9,404
Occupancy and equipment 2,761 2,181 8,846 6,268
Depreciation and amortization 11,767 6,752 33,644 18,362
Operating interest expense 1,449 1,255 4,188 4,126
Cost of hardware and equipment sold 1,166 447 3,042 1,645
Other 8,757 6,502 27,144 18,504
Total operating expenses 86,634 64,037 240,649 167,781
Operating income 65,244 36,192 172,591 107,729
Financing interest expense (3,100 ) (1,484 ) (9,087 ) (2,903 )
(Loss) gain on foreign currency transactions (855 ) 7,015 (363 ) 7,058
Net realized and unrealized gain (loss) on fuel price derivatives 13,952 (3,774 ) (4,991 ) 3,809
(Increase) in amount due under tax receivable agreement (875 ) (214 ) (875 ) (214 )
Income before income taxes 74,366 37,735 157,275 115,479
Income taxes 26,266 17,164 56,445 46,318
Net income 48,100 20,571 100,830 69,161

Changes in available-for-sale securities, net of tax effect of $57 and $90 in 2011 and $15 and $74 in 2010

88 17 144 125

Changes in interest rate swaps, net of tax effect of $65 and $146 in 2011 and $(144) and $(200) in 2010

113 (248 ) 252 (344 )
Foreign currency translation (29,888 ) 13,990 (11,407 ) 13,457
Comprehensive income $ 18,413 $ 34,330 $ 89,819 $ 82,399
Earnings per share:
Basic $ 1.24 $ 0.54 $ 2.61 $ 1.80
Diluted $ 1.23 $ 0.53 $ 2.59 $ 1.77
Weighted average common shares outstanding:
Basic 38,747 38,374 38,662 38,512
Diluted 38,951 38,779 38,938 39,022
WRIGHT EXPRESS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
September 30, December 31,
2011 2010
Assets
Cash and cash equivalents $ 42,077 $ 18,045
Accounts receivable (less reserve for credit losses of $12,825 in 2011 and $10,237 in 2010) 1,512,343 1,160,482
Available-for-sale securities 17,021 9,202
Income taxes receivable 7,246 --
Fuel price derivatives, at fair value 2,908 --

Property, equipment and capitalized software (net of accumulated depreciation of $104,918 in 2011 and $88,970 in 2010)

62,606 60,785
Deferred income taxes, net 144,170 161,156
Goodwill 541,173 537,055
Other intangible assets, net 109,037 124,727
Other assets 35,499 26,499

Total assets

$ 2,474,080 $ 2,097,951
Liabilities and Stockholders' Equity
Accounts payable $ 525,920 $ 379,855
Accrued expenses 57,496 41,133
Income taxes payable -- 3,638
Deposits 700,766 529,800
Borrowed federal funds 68,713 59,484
Fuel price derivatives, at fair value -- 10,877
Revolving line-of-credit facilities and term loan 360,200 407,300
Other liabilities 5,742 6,712
Amounts due under tax receivable agreement 94,958 100,145
Total liabilities 1,813,795 1,538,944

Commitments and contingencies

Stockholders' Equity

Common stock $0.01 par value; 175,000 shares authorized, 42,240 in 2011 and 41,924 in 2010 shares issued; 38,754 in 2011 and 38,437 in 2010 shares outstanding

422 419
Additional paid-in capital 144,040 132,583
Retained earnings 600,596 499,767
Other comprehensive income (loss), net of tax:
Net unrealized gain on available-for-sale securities 236 92
Net unrealized loss on interest rate swaps (116 ) (368 )
Net foreign currency translation adjustment 16,474 27,881
Accumulated other comprehensive income 16,594 27,605
Less treasury stock at cost, 3,566 shares in 2011 and 2010 (101,367 ) (101,367 )
Total stockholders' equity 660,285 559,007
Total liabilities and stockholders' equity $ 2,474,080 $ 2,097,951

WRIGHT EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Nine months ended
September 30,
2011 2010
Cash flows from operating activities
Net income $ 100,830 $ 69,161
Adjustments to reconcile net income to net cash used for operating activities:
Fair value change of fuel price derivatives (13,785 ) 7,020
Stock-based compensation 7,429 5,411
Depreciation and amortization 35,267 19,197
Deferred taxes 20,297 18,636
Provision for credit losses 20,464 12,644
Loss on disposal of property and equipment 715 --
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable (383,951 ) (216,089 )
Other assets (7,981 ) (6,385 )
Accounts payable 148,480 84,426
Accrued expenses 6,674 8,373
Income taxes (2,765 ) 5,026
Other liabilities (962 ) 2,907
Amounts due under tax receivable agreement (5,187 ) (5,559 )
Net cash (used for) provided by operating activities (74,475 ) 4,768
Cash flows from investing activities
Purchases of property and equipment (19,862 ) (20,378 )
Purchases of available-for-sale securities (8,353 ) (115 )
Maturities of available-for-sale securities 769 1,552
Acquisition of ReD - net of cash acquired 3,734 (340,030 )
Acquisition of rapid!, net of earn out (8,081 ) --
Net cash used for investing activities (31,793 ) (358,971 )
Cash flows from financing activities
Excess tax benefits from share-based payment arrangements 3,788 1,123
Repurchase of share-based awards to satisfy tax withholdings (2,547 ) (1,763 )
Proceeds from stock option exercises 2,755 2,306
Net increase in deposits 170,974 71,763
Net increase (decrease) in borrowed federal funds 9,229 (6,729 )
Loan origination fee paid for 2011 revolving line-of-credit facility (6,184 ) --
Net (repayments) borrowing on 2007 revolving line-of-credit facility and term loan (332,300 ) 292,500
Repayments on term loan (75,000 ) --
Net borrowings in 2011 revolving line-of-credit facility 165,200 --
Borrowings on 2011 term note agreement 200,000 --
Repayment of 2011 term note agreement (5,000 ) --
Purchase of shares of treasury stock -- (18,357 )
Net cash provided by financing activities 130,915 340,843
Effect of exchange rate changes on cash and cash equivalents (615 ) 100
Net change in cash and cash equivalents 24,032 (13,260 )
Cash and cash equivalents, beginning of period 18,045 39,304
Cash and cash equivalents, end of period $ 42,077 $ 26,044
Supplemental cash flow information
Interest paid $ 11,439 $ 15,807
Income taxes paid $ 35,066 $ 21,528
Conversion of preferred stock shares and accrued preferred dividends to common stock shares $ -- $ 10,004
Significant non-cash transaction
Acquisition of rapid! - estimated earn out $ 10,000 $ --

Exhibit 1

Reconciliation of Adjusted Net Income to GAAP Net Income

Third Quarter 2011 and 2010

(in thousands)

(unaudited)

Three months ended
September 30,
Nine months ended
September 30,
2011 2010 2011 2010
Adjusted net income $ 38,707 $ 28,059 $ 103,418 $ 78,525
Unrealized gains (losses) on fuel price derivatives 20,728 (6,733 ) 13,785 (7,020 )
Amortization of acquired intangible assets (5,778 ) (2,150 ) (16,722 ) (4,865 )
Non-cash adjustment related to the tax receivable agreement (875 ) (214 ) (875 ) (214 )
Tax impact (4,682 ) 1,609 1,224 2,735
Net income $ 48,100 $ 20,571 $ 100,830 $ 69,161

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. 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)

Q3 2011 Q2 2011 Q1 2011 Q4 2010 Q3 2010 Q2 2010
Fleet Payment Solutions - Payment Processing Revenue:
Payment processing transactions (000s) 65,230 63,187 58,913 59,791 57,208 55,058
Gallons per payment processing transaction 19.3 19.2 19.1 19.2 19.8 19.6
Payment processing gallons of fuel (000s) 1,261,088 1,214,032 1,127,019 1,148,580 1,130,067

1,081,238

Average US fuel price (US$ / gallon)

$

3.70 3.86 3.38 2.96 2.78 2.87
Average Australian fuel price (US$ / gallon) $ 5.50 5.70 5.32 4.64
Payment processing $ of fuel (000s)

$

4,778,493 4,787,730 3,913,085 3,496,944 3,146,221 3,105,194
Net payment processing rate 1.64 % 1.64 % 1.68 % 1.73 % 1.78 % 1.75 %
Fleet payment processing revenue (000s)

$

78,381 78,444 65,655 60,411 56,562 54,468
Other Payment Solutions - Payment Processing Revenue:*
Payment solutions purchase volume (000s)

$

2,404,668 1,900,736 1,435,965 1,214,704 1,310,666 1,036,144
Net interchange rate 0.99 % 0.97 % 1.01 % 1.01 % 1.03 % 1.07 %
Payment solutions processing revenue (000s)

$

23,734 18,502 14,563 12,318 13,529 11,136

*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 to 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.

Wright Express Australia, which was acquired on Sept 14, 2010, provided an additional $698,000 of fleet payment processing revenues in the third quarter of 2010, which is not included in the third quarter fleet payment processing revenue shown above.

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 product 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 Nine Months Ended September 30, 2011 and 2010

(in thousands)

(unaudited)

Fleet Payment Solutions

Three months ended
September 30,


Increase (decrease)
Nine months ended
September 30,

Increase (decrease)
2011 2010 Amount Percent 2011 2010 Amount Percent
Revenues
Payment processing revenue $ 78,381 $ 56,562 $ 21,819 39 % $ 222,480 $ 159,743 $ 62,737 39 %
Transaction processing revenue 4,305 4,236 69 2 % 12,472 12,637 (165 ) (1 )%
Account servicing revenue 17,014 9,247 7,767 84 % 45,420 25,731 19,689 77 %
Finance fees 12,791 9,491 3,300 35 % 33,821 26,147 7,674 29 %
Other 4,563 3,978 585 15 % 15,043 11,051 3,992 36 %
Total revenues 117,054 83,514 33,540 40 % 329,236 235,309 93,927 40 %

Other Payment Solutions

Three months ended
September 30,

Increase (decrease)
Nine months ended
September 30,

Increase (decrease)
(in thousands) 2011 2010 Amount Percent 2011 2010 Amount Percent
Revenues
Payment processing revenue $ 24,025 $ 13,529 $ 10,496 78 % $ 57,344 $ 33,716 $ 23,628 70 %
Transaction processing revenue 1,661 -- 1661 -- 5,261 -- 5,261 --
Account servicing revenue 955 21 934 NM 1,994 47 1,947 NM
Finance fees 190 149 41 28 % 529 379 150 40 %
Other 7,993 3,016 4977 165 % 18,876 6,059 12,817 212 %
Total revenues

NM not meaningful

34,824 16,715 18,109 108 % 84,004 40,201 43,803 109 %

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