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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.
"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."
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.
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