|View printer-friendly version|
WEX Inc. Reports First Quarter 2015 Financial Results
Strong revenue and operating growth driven by solid execution across segments and progress against strategic initiatives
First Quarter 2015 Financial Results
Total revenue for the first quarter of 2015 increased 11% to
On a non-GAAP basis, the Company's adjusted net income for the first
quarter of 2015 increased 3% to
"I am pleased with the growth we demonstrated across our geographies and
verticals this quarter, despite the backdrop of ongoing fuel price
Smith continued, "Overall, I'm pleased with our performance for the quarter. 2015 is shaping up to be a very good year, as we continue to enhance our competitive position within existing verticals, further globalize the business, and strategically invest in areas that have contributed to our solid performance and have the potential to drive even higher growth in years to come."
First Quarter 2015 Performance Metrics
Where applicable, the performance metrics listed below include the
- Average number of vehicles serviced worldwide was approximately 9.3 million, an increase of 19% from the first quarter of 2014.
- Total fuel transactions processed increased 6% from the first quarter of 2014 to 98.1 million. Payment processing transactions increased 12% to 81.9 million.
Average expenditure per payment processing transaction decreased 24%
from the first quarter of 2014 to
U.S. retail fuel price decreased 29% to
$2.57per gallon from $3.64per gallon in the first quarter of 2014.
Total corporate card purchase volume grew 37% to
$5.0 billion, from $3.7 billionfor the first quarter of 2014.
Financial Guidance and Assumptions
For the second quarter of 2015, WEX expects revenue in the range of
$211 million to $220 millionand adjusted net income in the range of $46 million to $49 million, or $1.18 to $1.26per diluted share.
For the full year 2015, the Company expects revenue in the range of
$867 million to $897 millionand adjusted net income in the range of $192 million to $204 million, or $4.92 to $5.22per diluted share.
Second quarter 2015 guidance is based on an assumed average U.S. retail
fuel price of
The Company's guidance also assumes that second quarter 2015 credit loss
will range between 6 and 11 basis points, and full year 2015 fleet
credit loss will range between 9 and 14 basis points. Our guidance
assumes that exchange rates will remain in the range of current rates
for the remainder of the year, and also includes
The Company's guidance excludes the impact of non-cash, mark-to-market adjustments on the Company's fuel-price-related derivative instruments, stock-based compensation, restructuring charges, gain on divestitures and the amortization of purchased intangibles as well as the related tax and non-controlling interest impacts of the forgoing adjustments.
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 three months ended March 31, 2015 and 2014.
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.
WEX uses fuel-price derivative instruments to mitigate financial risks
associated with the variability in fuel prices in
To provide investors with additional insight into its operational performance, WEX has included in this news release a table of selected non-financial metrics for the five quarters ended March 31, 2015. This table is presented as Exhibit 2. The Company is also providing selected segment revenue information for the three months ended March 31, 2015 and 2014 in Exhibit 3.
Conference Call Details
In conjunction with this announcement, WEX will host a conference call today,
This news release contains forward-looking statements, including statements regarding: financial guidance; assumptions underlying the Company's financial guidance; plans to enhance the Company's competitive position within existing verticals, further globalize the business, and strategically invest in areas that have contributed to performance and have potential to drive additional growth. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. When used in this news release, the words "may," "could," "anticipate," "plan," "continue," "project," "intend," "estimate," "believe," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including: the effects of general economic conditions on fueling patterns, payments, transaction processing activity and the commercial activity of fleets; the effects of the Company’s business expansion and acquisition efforts; the Company’s failure to successfully integrate the businesses it has acquired; the failure of corporate investments to result in anticipated strategic value; the impact and size of credit losses; the impact of changes to the Company's credit standard; breaches of the Company’s technology systems and any resulting negative impact on our reputation, or liabilities, or loss of relationships with customers or merchants; 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 bank and the Company as the corporate parent; the impact of foreign currency exchange rates on the Company’s operations, revenue and income; changes in interest rates; the impact of the Company’s outstanding notes on its operations; financial loss if the Company determines it necessary to unwind its derivative instrument position prior to the expiration of a contract; the incurrence of impairment charges if our assessment of the fair value of certain of our reporting units changes; the uncertainties of litigation; as well as other risks and uncertainties identified in Item 1A of our Annual Report for the year ended
Three months ended
|Fleet payment solutions||$||128,490||$||135,435|
|Other payment solutions||73,795||46,633|
|Salary and other personnel||58,417||43,902|
|Provision for credit losses||3,914||9,090|
|Technology leasing and support||9,434||7,027|
|Occupancy and equipment||4,997||4,366|
|Depreciation, amortization and impairment||21,387||15,018|
|Operating interest expense||1,579||1,288|
|Cost of hardware and equipment sold||1,109||948|
|Gain on divestiture||(1,215||)||
|Total operating expenses||154,045||120,531|
|Financing interest expense||(12,088||)||(7,356||)|
|Net foreign currency (loss) gain||(4,376||)||1,033|
|Net realized and unrealized gain on fuel price derivative instruments||2,749||1,845|
|Income before income taxes||34,525||57,059|
|Less: Net loss attributable to non-controlling interests||(2,312||)||(462||)|
|Net earnings attributable to WEX Inc.||$||22,345||$||36,542|
|Net earnings attributable to WEX Inc. per share:|
|Weighted average common shares outstanding:|
|Cash and cash equivalents||$||511,017||$||284,763|
|Accounts receivable (less reserve for credit losses of $11,513 in 2015 and $13,919 in 2014)||1,804,688||1,865,538|
|Income taxes receivable||9,506||6,859|
|Fuel price derivatives, at fair value||31,624||40,969|
|Property, equipment and capitalized software (net of accumulated depreciation of $168,224 in 2015 and $169,382 in 2014)||108,166||105,596|
|Deferred income taxes, net||10,270||5,764|
|Other intangible assets, net||472,062||498,045|
|Liabilities and Stockholders’ Equity|
|Revolving line-of-credit facilities and term loan||815,872||901,564|
|Deferred income taxes, net||61,235||43,752|
|Amounts due under tax receivable agreement||69,637||69,637|
|Commitments and contingencies|
|Redeemable non-controlling interest||13,647||16,590|
|Common stock $0.01 par value; 175,000 shares authorized; 43,063 shares issued in 2015 and 43,021 in 2014; 38,733 shares outstanding in 2015 and 38,897 in 2014||431||430|
|Additional paid-in capital||179,590||179,077|
|Accumulated other comprehensive income||(75,173||)||(50,581||)|
|Less treasury stock at cost; 4,428 shares in 2015 and 4,218 shares in 2014||(172,342||)||(150,331||)|
|Total stockholders’ equity||1,050,225||1,077,721|
|Total liabilities and stockholders’ equity||$||4,252,977||$||4,118,894|
Reconciliation of Adjusted Net Income to GAAP Net Earnings
Three months ended
|Adjusted Net Income attributable to WEX Inc.||$||42,876||$||41,612|
|Unrealized (loss) gain on fuel price derivatives||(9,345||)||2,823|
|Amortization of acquired intangible assets||(12,159||)||(8,287||)|
|Gain on divestiture||1,215||—|
|ANI adjustments attributable to non-controlling interests||2,381||185|
|Net earnings attributable to WEX Inc.||$||22,345||$||36,542|
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 other specified items that the Company's management excludes in evaluating the Company's performance. 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-related 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.
- The amortization of purchased intangibles, deferred loan costs associated with the extinguishment of debt, acquisition related expenses, non-cash adjustments related to the Company's tax receivable agreement and adjustments attributable to non-controlling interest have no significant impact on the ongoing operations of the business.
- Stock-based compensation is different from other forms of compensation, as it is a non-cash expense. For example, a cash salary generally has a fixed and unvarying cash cost. In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time.
- Restructuring charges are related to employee termination benefits from certain identified initiatives to further streamline the business, improve the Company's efficiency, and to globalize the Company's operations, all with an objective to improve scale and increase profitability going forward. We exclude these items when evaluating our continuing business performance as such items are not consistently recurring and do not reflect expected future operating expense, nor provide meaningful insight into the fundamentals of current or past operations of our business.
- The gain or loss from a divestiture is not indicative of the performance of the ongoing operations of the business.
- The Company considers certain acquisition-related costs, such as investment banking fees, financing fees and warranty and indemnity insurance, to be unpredictable, dependent on factors that may be outside of our control and unrelated to the continuing operations of the acquired business or the Company. In addition, the size and complexity of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs. The Company believes that excluding acquisition-related costs facilitates the comparison of our financial results to the Company's historical operating results and to other companies in our industry.
For the same reasons, WEX 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 WEX 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 U.S. GAAP tax provision and a pro forma tax provision based upon the Company’s adjusted net income before taxes. The methodology utilized for calculating the Company’s adjusted net income tax provision is the same methodology utilized in calculating the Company’s U.S. GAAP tax provision. The Company is unable to reconcile our adjusted net income guidance to the comparable GAAP measure because of the difficulty in predicting the amounts to be adjusted.
|Q1 2015||Q4 2014||Q3 2014||Q2 2014||
|Fleet Payment Solutions – Payment Processing Revenue:(1)|
|Payment processing transactions (000s)||81,934||79,195||80,379||78,390||73,327|
|Gallons per payment processing transaction||
|Payment processing gallons of fuel (000s)||1,890,048||1,850,304||1,859,894||1,816,204||1,703,887|
|Average US fuel price (US$ / gallon)||$||2.57||$||3.17||$||3.61||$||3.76||$||3.64|
|Average Australian fuel price (US$ / gallon)||$||3.73||$||4.63||$||5.22||$||5.44||$||5.34|
|Payment processing $ of fuel (000s)||$||5,344,929||$||6,071,384||$||6,842,202||$||6,933,978||$||6,301,668|
|Net payment processing rate||1.36||%||1.37||%||1.37||%||1.36||%||1.36||%|
|Fleet payment processing revenue (000s)||$||72,943||$||83,336||$||93,462||$||94,550||$||85,702|
|Other Payment Solutions – Payment Processing Revenue:(2)|
|Payment solutions purchase volume (000s)||$||5,039,867||$||4,500,724||$||5,477,610||$||4,339,339||$||3,670,609|
|Net interchange rate||0.87||%||0.89||%||0.83||%||0.86||%||0.81||%|
|Payment solutions processing revenue (000s)||$||43,837||$||40,279||$||45,476||$||37,460||$||29,683|
(2)Excludes payment processing revenue from rapid! PayCard
and UNIK. As of
Definitions and explanations:
Payment processing transactions represents the total number of purchases made by fleets that have a payment processing relationship with WEX.
Payment processing gallons of fuel represents the total number of gallons of fuel purchased by fleets that have a payment processing relationship with WEX.
Payment processing dollars of fuel represents the total dollar value of the fuel purchased by fleets that have a payment processing relationship with WEX.
Net payment processing rate represents the percentage of the dollar value of each payment processing transaction that WEX 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 card products including single use account products.
Net interchange rate represents the percentage of the dollar value of each transaction that WEX records as revenue less any discounts given to customers.
|Segment Revenue Information|
|Fleet Payment Solutions|
|(in thousands)||Three months ended March 31,||Increase (decrease)|
|Payment processing revenue||$||72,943||$||85,702||$||(12,759||)||(15||)%|
|Transaction processing revenue||4,683||4,890||(207||)||(4||)%|
|Account servicing revenue||23,883||19,355||4,528||23||%|
|Other Payment Solutions|
|Three months ended March 31,||Increase (decrease)|
|Payment processing revenue||$||44,492||$||31,902||$||12,590||39||%|
|Transaction processing revenue||1,607||1,695||(88||)||(5||)%|
|Account servicing revenue||13,065||3,173||9,892||312||%|