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Wright Express Reports Third-Quarter Financial Results

Revenues Rise 10%; Earnings Exceed Guidance; Company Signs Long Term Agreement to Provide Outsourced Services to Citi

SOUTH PORTLAND, Maine, Oct. 31 /PRNewswire-FirstCall/ -- 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 third quarter ended September 30, 2007.

Total revenues increased 10% to $87.7 million from $79.7 million in the third quarter of 2006. Net income to common shareholders on a GAAP basis was $22.2 million, or $0.55 per diluted share, compared with $34.4 million, or $0.83 per share, for the comparable quarter last year. On a non-GAAP basis, the Company's adjusted net income increased 40% to $22.4 million, or $0.55 per diluted share, from $16.0 million, or $0.39 per diluted share, for the year- earlier period. Adjusted net income excludes the impacts of non-cash, mark- to-market adjustments on the Company's fuel-price related derivative instruments and the amortization of purchased intangibles.

Wright Express uses fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices. For the third quarter of 2007, the Company's GAAP financial results include an unrealized $300,000 pre-tax, non-cash, mark-to-market gain on these instruments. For the third quarter of 2006, the Company reported an unrealized pre-tax, non-cash, mark-to-market gain of $31.1 million. The Company also reported $400,000 of amortization on purchased intangibles related to the acquisition of TelaPoint. Exhibit 1 reconciles adjusted net income for the third quarters of 2007 and 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.

Third-Quarter 2007 Performance Metrics
  • Payment processing transactions increased 15% to 53.6 million and transaction processing transactions decreased 35% to 9.8 million, primarily reflecting the conversion to payment processing of the Company's ExxonMobil portfolio in December 2006. Total fuel transactions processed increased 3% from the third quarter of 2006 to 63.4 million.
  • Average number of vehicles serviced was approximately 4.4 million, compared with approximately 4.3 million in the third quarter of 2006.
  • Average expenditure per payment processing transaction increased 2% to $59.19 from $57.95 for the same period last year.
  • Average retail fuel price was $2.88 per gallon, compared with $2.87 per gallon in the third quarter a year ago.
  • Total MasterCard purchase volume grew 40% to $511 million from $366 million for the comparable period in 2006.
  • Wright Express repurchased approximately 274,000 shares of its common stock at a cost of approximately $10 million during the third quarter of 2007.
Additional selected non-financial metrics are presented in Exhibit 2.
Management Comments

"Earlier today, we announced a new strategic agreement with Citi that will include outsourcing major oil fleet card portfolios and help drive growth for Wright Express in the small fleet market," said Michael Dubyak, president and chief executive officer. "We are excited about the potential for this alliance with Citi to increase our penetration in the small fleet market through these major oil company brands."

"Operationally, the business continued to perform well this quarter, and our financial results were better than we anticipated," said Dubyak. "Taking into account fluctuations in fuel prices, revenue exceeded our forecast and the positive mismatch on our derivatives was larger than we expected. As a result, adjusted net income came in two cents per share higher than the top end of our guidance."

"TelaPoint revenue for the third quarter was in line with our forecast," Dubyak said. "Integration is going well, and both the Wright Express and TelaPoint sales groups are enthusiastic about the potential to leverage our channels and partner and fleet relationships to create new opportunities for cross-selling."

"We have strong earnings momentum, and Wright Express continues to deliver exceptional value to fleets of all sizes," Dubyak said. "The front end of our business is producing solid growth and our sales pipeline is in excellent shape. Looking farther ahead, we are confident in our ability to capture a larger share of total U.S. fleet spend, diversify our revenue streams, and execute our growth strategy -- including our new relationship with Citi."

Financial Guidance

Wright Express Corporation is issuing financial guidance for the fourth quarter of 2007 and updating financial guidance for the full year 2007. The Company's guidance excludes the impact of non-cash, mark-to-market adjustments on its fuel-price related derivative instruments, as well as approximately $700,000 of amortization of purchased intangibles in the fourth quarter. The fuel prices referenced below are based on the applicable NYMEX futures price:

  • For the fourth quarter of 2007, revenue in the range of $81 million to $86 million. This is based on an assumed average retail fuel price of $2.74 per gallon.
  • Fourth-quarter 2007 adjusted net income, excluding unrealized gain or loss on derivative instruments and amortization of purchased intangibles, in the range of $18 million to $20 million, or $0.47 to $0.50 per diluted share, based on approximately 41 million shares outstanding.
  • For the full year 2007, revenue in the range of $326 million to $331 million. This is based on an assumed average retail fuel price of $2.76 per gallon.
  • Net income for the full year 2007, excluding unrealized gain or loss on derivative instruments and amortization of purchased intangibles, in the range of $76 million to $78 million, or $1.88 to $1.91 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, October 31, at 10:00 a.m. (ET) to discuss the Company's third-quarter financial results and business outlook. The conference call will be webcast live, and can be accessed at the "Investor Relations" section of the Company's website (http://www.wrightexpress.com). The live conference call can also be accessed by dialing (877) 719-9795 or (719) 325-4767. 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 4.4 million vehicles. Wright Express markets these services directly as well as through 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 http://www.wrightexpress.com.

This press release contains forward-looking statements, including statements regarding Wright Express Corporation's: expectation of growth in the small fleet market; potential to leverage channels and partner and fleet relationships to create new opportunities for cross-selling; expectations about the sales pipeline; expectation of realizing positive results from the Company's agreement and relationship with Citi; ability to diversify its revenue streams; and guidance for fourth-quarter and full-year 2007 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: volatility in fuel prices; fourth-quarter and full-year 2007 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; the risks associated with the profitability and integration of TelaPoint, Inc.'s operations; 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 STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                      (in thousands, except per share data)
                                   (unaudited)

                             Three months ended        Nine months ended
                               September 30,             September 30,
                             2007         2006         2007        2006

    Revenues
      Payment processing
       revenue             $66,987      $59,256     $188,154     $163,905
      Transaction
       processing revenue    3,684        4,701       10,811       13,254
      Account servicing
       revenue               6,915        6,098       19,423       17,939
      Finance fees           7,230        6,157       19,362       16,638
      Other                  2,836        3,477        7,697        8,755

        Total revenues      87,652       79,689      245,447      220,491

    Expenses
      Salary and other
       personnel            16,222       15,236       48,050       44,786
      Service fees           3,677        3,313       10,788        9,730
      Provision for credit
       losses                3,300        4,998       12,606       11,218
      Technology leasing
       and support           2,015        2,076        6,617        5,873
      Occupancy and
       equipment             1,483        1,547        4,579        4,842
      Depreciation and
       amortization          3,922        2,734       10,562        7,940
      Operating interest
       expense               9,158        6,911       25,025       17,560
      Other                  4,873        3,741       14,668       11,990

        Total operating
         expenses           44,650       40,556      132,895      113,939

    Operating income        43,002       39,133      112,552      106,552

    Financing interest
     expense                (3,179)      (3,592)      (9,310)     (10,986)
    Loss on extinguishment
     of debt                     -            -       (1,572)           -
    Net realized and
     unrealized (losses)
     gains on derivative
     instruments            (4,701)      18,138      (25,030)      (9,849)
    Decrease in amount due
     to Avis under tax
     receivable agreement    1,706            -        1,706            -

    Income before income
     taxes                  36,828       53,679       78,346       85,717
    Provision for income
     taxes                  14,583       19,235       29,435       30,067

    Net income              22,245       34,444       48,911       55,650

      Change in
       available-for-sale
       securities, net of
       tax effect of $34
       and $(14) in 2007
       and $50 and $(12)
       in 2006                  62           99          (25)         (19)
      Change in interest
       rate swaps, net of
       tax effect of $(431)
       and $(593) in 2007
       and $(169) and
       $(132) in 2006         (622)        (334)        (856)        (286)
      Foreign currency
       translation              13                        13

    Comprehensive income   $21,698      $34,209      $48,043      $55,345

    Earnings per share:
      Basic                  $0.56        $0.85        $1.22        $1.38
      Diluted                $0.55        $0.83        $1.20        $1.34

    Weighted average common
     shares outstanding:
      Basic                 39,990       40,362       40,121       40,313
      Diluted               41,060       41,538       41,232       41,499



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

                                                 September 30,    December 31,
                                                     2007             2006
                                                  (unaudited)

    Assets
      Cash and cash equivalents                      $46,001        $35,060
      Accounts receivable (less reserve for
       credit losses of $9,684 in 2007 and
       $9,749 in 2006)                             1,064,857        802,165
      Available-for-sale securities                    8,185          8,023
      Property, equipment and capitalized
       software, net                                  45,165         39,970
      Deferred income taxes, net                     360,166        377,276
      Intangible assets                               21,613          2,421
      Goodwill                                       293,987        272,861
      Other assets                                    15,630         13,239

    Total assets                                  $1,855,604     $1,551,015

    Liabilities and Stockholders' Equity
      Accounts payable                              $418,993       $297,102
      Accrued expenses                                31,570         26,065
      Income taxes payable                                 -            813
      Deposits                                       555,964        394,699
      Borrowed federal funds                               -         65,396
      Revolving line-of-credit facilities            206,700         20,000
      Term loan, net                                       -        129,760
      Derivative instruments, at fair value           18,775          4,524
      Other liabilities                                4,528          1,170
      Amounts due to Avis under tax receivable
       agreement                                     401,160        418,359
      Preferred stock; 10,000 shares authorized:
        Series A non-voting convertible, redeemable
         preferred stock; 0.1 shares issued and
         outstanding                                  10,000         10,000

    Total liabilities                              1,647,690      1,367,888


    Stockholders' Equity
      Common stock $0.01 par value; 175,000
       shares authorized, 40,632 in 2007 and
       40,430 in 2006 issued                             407            404
      Additional paid-in capital                      96,490         89,325
      Retained earnings                              142,173         93,262
      Other comprehensive income, net of tax:
        Net unrealized loss on available-for-sale
         securities                                     (123)           (98)
        Net unrealized (loss) gain on interest
         rate swaps                                     (622)           234
        Net foreign currency translation adjustment       13              -

      Accumulated other comprehensive income            (732)           136

      Less treasury stock at cost, 972 shares in
       2007 and no shares in 2006                    (30,424)             -

      Total stockholders' equity                     207,914        183,127

    Total liabilities and stockholders' equity    $1,855,604     $1,551,015



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

                                                        Nine months ended
                                                          September 30,
                                                       2007         2006
    Cash flows from operating activities
      Net income                                     $48,911        $55,650

      Adjustments to reconcile net income
       to net cash used for operating activities:
        Net unrealized loss (gain) on derivative
         instruments                                  14,251        (22,176)
        Stock-based compensation                       3,150          2,402
        Depreciation and amortization                 11,204          8,748
        Foreign currency adjustments                      13              -
        Loss on extinguishment of debt                 1,572              -
        Deferred taxes                                17,717         27,719
        Provision for credit losses                   12,606         11,218
        Loss on disposal and impairment of property
         and equipment                                     -             42
        Changes in operating assets and liabilities,
         net of effects of acquisition
          Accounts receivable                       (274,779)      (198,379)
          Other assets                                (3,299)        (2,518)
          Accounts payable                           121,852        105,626
          Accrued expenses                             5,214          1,658
          Income taxes                                (1,271)             -
          Other liabilities                              348            816
          Amounts due to Avis under tax
           receivable agreement                      (17,199)       (14,685)

      Net cash used for operating activities         (59,710)       (23,879)

    Cash flows from investing activities
      Purchases of property and equipment            (12,477)        (8,738)
      Purchases of available-for-sale securities      (1,031)        (2,120)
      Maturities of available-for-sale securities        830         14,917
      Acquisition, net of cash acquired              (40,428)             -

      Net cash (used for) provided by investing
       activities                                    (53,106)         4,059

      Cash flows from financing activities
      Excess tax benefits from equity instrument
       share-based payment arrangements                2,099            302
      Payments in lieu of issuing shares of common
       stock                                          (1,180)          (682)
      Proceeds from stock option exercises             3,065          1,451
      Net increase in deposits                       161,265         43,084
      Net decrease in borrowed federal funds         (65,396)       (16,651)
      Net borrowings on 2007 revolving
       line-of-credit facility                       206,700              -
      Loan origination fees paid for 2007 revolving
       line-of-credit facility                          (998)             -
      Net repayments on 2005 revolving
       line-of-credit facility                       (20,000)        (2,000)
      Repayments on term loan                       (131,000)       (27,500)
      Repayments of acquired debt                       (374)             -
      Purchase of shares of treasury stock           (30,424)             -

      Net cash provided by (used in) financing
       activities                                    123,757         (1,996)

    Net change in cash and cash equivalents           10,941        (21,816)
    Cash and cash equivalents, beginning of period    35,060         44,994

    Cash and cash equivalents, end of period         $46,001        $23,178


    Supplemental cash flow information:
      Interest paid                                  $31,226        $26,889
      Income taxes paid                              $10,646         $1,032

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




                                  Exhibit 1

                          Wright Express Corporation
           Reconciliation of Adjusted Net Income to GAAP Net Income
                              Third Quarter 2007
                                (in thousands)
                                 (unaudited)

                                                 Three months   Three months
                                                    ended          ended
                                                September 30,   September 30,
                                                     2007           2006


    Adjusted net income                             $22,353       $15,960
    Non-cash, mark-to-market adjustments on
     derivative instruments                             331        31,064
    Amortization of purchased intangibles              (408)            -
    Tax impact of mark-to-market adjustments
     and amortization of purchased intangibles          (31)      (12,580)
    GAAP net income                                 $22,245       $34,444

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

                         Q3 2007*    Q2 2007*    Q1 2007*   Q4 2006    Q3 2006
    Fleet Payment
    Processing Revenue:
    Payment processing
    transactions (000s)   53,595      53,181      50,559    45,075     46,800
    Gallons per payment
     processing
     transaction            20.6        20.3        20.3      20.6       20.2
    Payment processing
     gallons of fuel
     (000s)            1,103,268   1,082,132   1,024,847   926,605    944,458
    Average fuel price $    2.88        2.95        2.43      2.37       2.87
    Payment processing
     $ of fuel (000s) $3,172,482   3,196,224   2,493,781 2,194,543  2,712,120
    Net payment
    processing rate        1.93%       1.93%       1.99%     2.13%      2.02%
    Fleet payment
     processing
     revenue (000s)   $   61,230      61,777      49,607   46,647     54,841

    MasterCard Payment
     Processing Revenue:
    MasterCard purchase
     volume (000s)    $  510,585     464,425     385,153  332,934    365,739
    Net interchange
     rate                  1.13%       1.12%       1.19%    1.23%      1.21%
    MasterCard payment
     processing
     revenue (000s)   $    5,757       5,197       4,587    4,089      4,416



     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.

     * 2007 results are affected by the conversion of the ExxonMobil portfolio
     to a payment processing relationship.

SOURCE Wright Express Corporation
CONTACT: News media, Jessica Roy, +1-207-523-6763,
Jessica_Roy@wrightexpress.com, or Investors, Steve Elder, +1-207-523-7769,
Steve_Elder@wrightexpress.com, both of Wright Express
(WXS)