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Wright Express Reports First-Quarter Financial Results
Company Exceeds Top End of First-Quarter Financial Guidance
SOUTH PORTLAND, Maine, May 2 /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 quarter ended March 31, 2007.
Total revenue for the first quarter of 2007 increased 11% to $71.8 million from $64.6 million for the first quarter of 2006. Net income to common shareholders on a GAAP basis for the first quarter of 2007 was $8.3 million, or $0.20 per diluted share, compared with $11.4 million, or $0.28 per share, for the comparable quarter last year. On a non-GAAP basis, the Company's adjusted net income for the first quarter of 2007 increased 21% to $14.8 million, or $0.36 per diluted share, from $12.3 million, or $0.30 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 first quarter of 2007, the Company's GAAP financial results include an unrealized $10.6 million pre-tax, non-cash, mark-to-market loss on these instruments. For the first quarter of 2006, the Company reported an unrealized pre-tax, non-cash, mark-to-market loss of $1.4 million. Exhibit 1 reconciles adjusted net income for the first 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 scheduled 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.
First-Quarter 2007 Performance Metrics - Total fuel transactions processed increased 3% from the first quarter of 2006 to 59.9 million. Primarily reflecting the conversion to payment processing of the Company's ExxonMobil portfolio, payment processing transactions increased 16% to 50.6 million, and transaction processing transactions decreased 36% to 9.4 million. - Average number of vehicles serviced was approximately 4.3 million, compared with approximately 4.3 million in the first quarter of 2006. The comparability of this metric was affected by the termination of inactive vehicles in the private label channel. - Average expenditure per payment processing transaction increased 1% to $49.32 from $48.63 for the same period last year. - Average retail fuel price was $2.43 per gallon, compared with $2.41 per gallon for the first quarter a year ago. - Total MasterCard purchase volume grew 43% to $385.2 million from $269.4 million for the comparable period in 2006. - Wright Express repurchased approximately 489,000 shares of its common stock at a cost of approximately $14 million during the first quarter of 2007. Additional selected non-financial metrics are presented in Exhibit 2. Management Comments on the First Quarter
"Overall transaction volume grew 3% this quarter, in line with our expectations," said Michael Dubyak, president and chief executive officer. "At the same time, purchase volume in our MasterCard business and the net payment processing rate in our fleet segment were higher than we expected, and operating expenses were generally consistent with our plan. As a result, first-quarter adjusted net income exceeded the top end of our guidance range. In addition, we were able to implement our share repurchase program, buying back approximately $14 million of the Company's common stock through March 31st."
"Wright Express remains on track for a stronger second half of 2007," said Dubyak. "Our front-end operations -- customer acquisition and activation -- continue to perform well. Although we faced some challenges on the annuity side of our business in the fourth quarter of 2006, they have diminished over the past four months. Looking forward, we expect improvement in transaction volume as we move through the year."
Wright Express Corporation is issuing financial guidance for the second quarter of 2007 and updating financial guidance for the full year 2007. The Company's guidance includes a $1.2 million, or $0.03 per share, non-cash charge, net of taxes, to write off previously capitalized costs for its senior credit facility, which is expected to be re-financed in the second quarter of 2007, and excludes the impact of non-cash, mark-to-market adjustments on its fuel-price-related derivative instruments. The fuel prices referenced below are based on the applicable NYMEX futures price:
- For the second quarter of 2007, revenue in the range of $78 million to $83 million. This is based on an assumed average retail fuel price of $2.81 per gallon. - Second-quarter 2007 net income, excluding unrealized gain or loss on derivative instruments, in the range of $16 million to $17 million, or $0.38 to $0.41 per diluted share, based on approximately 41 million shares outstanding. - For the full year 2007, revenue in the range of $315 million to $325 million. This is based on an assumed average retail fuel price of $2.63 per gallon. - Net income for the full year 2007, excluding unrealized gain or loss on derivative instruments, in the range of $69 million to $74 million, or $1.68 to $1.78 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, May 2, at 5:00 p.m. (ET) to discuss the Company's first-quarter financial results and business outlook. The conference call will be webcast live on the Internet, 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 (800) 289-0569 or (913) 981-5542. 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 295,000 commercial and government fleets containing 4.3 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 improvement in transaction volume in 2007; anticipated refinancing of its senior credit facility and the likely financial impact; and expectations and guidance for second-quarter, second-half 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; second-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; 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.
News media contact: Jessica Roy Wright Express 207.523.6763 Jessica_Roy@wrightexpress.com Investor contact: Steve Elder Wright Express 207.523.7769 Steve_Elder@wrightexpress.com Wright Express Corporation CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands, except per share data) (unaudited) Three months ended March 31, 2007 2006 Revenues Payment processing revenue $54,194 $46,956 Transaction processing revenue 3,475 4,210 Account servicing revenue 6,180 5,915 Finance fees 5,566 5,238 Other 2,407 2,319 Total revenues 71,822 64,638 Expenses Salary and other personnel 16,129 14,354 Service fees 3,671 3,040 Provision for credit losses 6,263 3,918 Technology leasing and support 2,340 1,863 Occupancy and equipment 1,594 1,592 Depreciation and amortization 3,302 2,514 Operating interest expense 6,921 4,607 Other 4,699 3,843 Total operating expenses 44,919 35,731 Operating income 26,903 28,907 Financing interest expense (3,130) (3,728) Net realized and unrealized losses on derivative instruments (10,690) (7,478) Income before income taxes 13,083 17,701 Provision for income taxes 4,746 6,351 Net income 8,337 11,350 Change in net unrealized loss on available-for-sale securities, net of tax effect of $5 in 2007 and $(41) in 2006 8 (63) Change in net unrealized gain on interest rate swaps, net of tax effect of $(120) in 2007 and $86 in 2006 (173) 68 Comprehensive income $8,172 $11,355 Earnings per share: Basic $0.21 $0.28 Diluted $0.20 $0.28 Weighted average common shares outstanding: Basic 40,347 40,245 Diluted 41,069 40,983 Wright Express Corporation CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) March 31, December 31, 2007 2006 (unaudited) Assets Cash and cash equivalents $20,108 $35,060 Accounts receivable (less reserve for credit losses of $10,125 in 2007 and $9,749 in 2006) 911,785 802,165 Available-for-sale securities 7,766 8,023 Property, equipment and capitalized software, net 43,506 39,970 Deferred income taxes, net 371,654 377,276 Intangible assets 2,421 2,421 Goodwill 272,861 272,861 Other assets 13,663 13,239 Total assets $1,643,764 $1,551,015 Liabilities and Stockholders' Equity Accounts payable $353,359 $297,102 Accrued expenses 18,877 26,065 Income taxes payable - 813 Deposits 387,801 394,699 Borrowed federal funds 94,244 65,396 Revolving line-of-credit facility 45,000 20,000 Term loan, net 119,115 129,760 Derivative instruments, at fair value 15,115 4,524 Other liabilities 4,633 1,170 Amounts due to Avis under tax receivable agreement 416,743 418,359 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 1,464,887 1,367,888 Commitments and contingencies Stockholders' Equity Common stock $0.01 par value; 175,000 shares authorized, 40,557 in 2007 and 40,430 in 2006 issued 406 404 Additional paid-in capital 91,059 89,325 Retained earnings 101,599 93,262 Other comprehensive income, net of tax: Net unrealized loss on available-for- sale securities (90) (98) Net unrealized gain on interest rate swaps 61 234 Accumulated other comprehensive income (29) 136 Less treasury stock at cost, 489 shares in 2007 and no shares in 2006 (14,158) - Total stockholders' equity 178,877 183,127 Total liabilities and stockholders' equity $1,643,764 $1,551,015 Wright Express Corporation CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three months ended March 31, 2007 2006 Cash flows from operating activities Net income $8,337 $11,350 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Change in net unrealized loss on derivative instruments 10,591 1,426 Stock-based compensation 1,001 707 Depreciation and amortization 3,742 2,804 Deferred taxes 5,737 5,556 Provision for credit losses 6,263 3,918 Loss on disposal and impairment of property and equipment - 5 Changes in operating assets and liabilities: Accounts receivable (115,883) (78,612) Other assets (150) 351 Accounts payable 56,257 69,317 Accrued expenses (7,251) (4,759) Income taxes (1,465) - Other liabilities 623 873 Amounts due to Avis (1,616) - Net cash (used for) provided by operating activities (33,814) 12,936 Cash flows from investing activities Purchases of property and equipment (3,998) (2,655) Purchases of available-for-sale securities (35) (33) Maturities of available-for-sale securities 305 14,623 Net cash (used for) provided by investing activities (3,728) 11,935 Cash flows from financing activities Excess tax benefits from equity instrument share-based payment arrangements 843 162 Payments in lieu of issuing shares of common stock (809) (682) Proceeds from stock option exercises 764 483 Net decrease in deposits (6,898) (53,896) Net increase in borrowed federal funds 28,848 9,677 Net borrowings (repayments) on revolving line of credit 25,000 (1,000) Repayments on term loan (11,000) (5,500) Purchase of shares of treasury stock (14,158) - Net cash provided by (used for) financing activities 22,590 (50,756) Net change in cash and cash equivalents (14,952) (25,885) Cash and cash equivalents, beginning of period 35,060 44,994 Cash and cash equivalents, end of period $20,108 $19,109 Supplemental cash flow information: Interest paid $9,636 $8,584 Income taxes (received) paid $(368) $380 Significant non-cash transactions: Capitalized software licensing agreement $2,840 - Exhibit 1 Wright Express Corporation Reconciliation of Adjusted Net Income to GAAP Net Income First Quarter 2007 (in thousands) (unaudited) Three months ended Three months ended March 31, 2007 March 31, 2006 Adjusted net income $14,797 $12,266 Non-cash, mark-to-market adjustments on derivative instruments (10,591) (1,426) Tax impact of unrealized losses 4,131 510 GAAP net income $8,337 $11,350
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. 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; and - 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.
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 Q1 2007* Q4 2006 Q3 2006 Q2 2006 Q1 2006 Fleet Payment Processing Revenue: Payment processing transactions (000s) 50,559 45,075 46,800 45,998 43,459 Gallons per payment processing transaction 20.3 20.6 20.2 20.1 20.2 Payment processing gallons of fuel (000s) 1,024,847 926,605 944,458 924,343 876,917 Average fuel price $2.43 2.37 2.87 2.86 2.41 Payment processing $ of fuel (000s) $ 2,493,781 2,194,543 2,712,120 2,642,456 2,113,614 Net payment processing rate 1.99% 2.13% 2.02% 2.03% 2.06% Fleet payment processing revenue (000s) $49,607 46,647 54,841 53,590 43,597 MasterCard Payment Processing Revenue: MasterCard purchase volume (000s) $385,153 332,934 365,739 332,706 269,361 Net interchange rate 1.19% 1.23% 1.21% 1.23% 1.25% MasterCard payment processing revenue (000s) $4,587 4,089 4,416 4,105 3,357 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.
* Q1 2007 results are affected by the conversion of the ExxonMobil
portfolio to a payment processing relationship.
SOURCE Wright Express Corporation -0- 05/02/2007 /CONTACT: News media contact - Jessica Roy, +1-207-523-6763, Jessica_Roy@wrightexpress.com; or Investor contact - Steve Elder, +1-207-523-7769, Steve_Elder@wrightexpress.com , both of Wright Express/ /Web site: http://www.wrightexpress.com / (WXS) CO: Wright Express Corporation ST: Maine IN: FIN TRN SU: ERN CCA ERP JB -- NEW101 -- 0833 05/02/2007 16:05 EDT http://www.prnewswire.com