FLEETCOR Reports Fourth Quarter and Fiscal Year 2019 Financial Results

ATLANTA--(BUSINESS WIRE)--FLEETCOR Technologies, Inc. (NYSE: FLT), a global leader in business payments, today reported financial results for its fourth quarter and year ended December 31, 2019.


“Our fourth quarter finish was quite good. Adjusted net income per diluted share was up 14%, at the high end of our guidance range. Organic revenue growth was 10%, and new sales and client retention trends were positive,” said Ron Clarke, chairman and chief executive officer, FLEETCOR Technologies, Inc. “We like the early set up to 2020 and expect each of our four primary product categories to deliver performance that meets our stated midterm growth targets.”

Financial Results for Fourth Quarter of 2019:

GAAP Results

  • Total revenues increased 9% to $698.9 million in the fourth quarter of 2019, compared to $643.4 million in the fourth quarter of 2018.
  • Net income decreased 22% to $235.5 million in the fourth quarter of 2019, compared to $302.0 million in the fourth quarter of 2018. Included in the fourth quarter of 2019, was a gain of approximately $13 million related to a minority investment and in the fourth quarter of 2018 was a gain of approximately $153 million from the sale of the Chevron portfolio.
  • Net income per diluted share decreased 22% to $2.60 in the fourth quarter of 2019, compared to $3.33 per diluted share in the fourth quarter of 2018. Included in the fourth quarter of 2019, was a gain of approximately $13 million related to a minority investment and in the fourth quarter of 2018 was a gain of approximately $153 million from the sale of the Chevron portfolio.

Non-GAAP Results1

  • Adjusted net income1 increased 14% to $286.4 million in the fourth quarter of 2019, compared to $252.0 million in the fourth quarter of 2018.
  • Adjusted net income per diluted share1 increased 14% to $3.17 in the fourth quarter of 2019, compared to $2.78 per diluted share in the fourth quarter of 2018.

Financial Results for Fiscal Year 2019:

GAAP Results

  • Total revenues increased 9% to $2,648.8 million in 2019, compared to $2,433.5 million in 2018.
  • Net income increased 10% to $895.1 million in 2019, compared to $811.5 million in 2018.
  • Net income per diluted share increased 13% to $9.94 in 2019, compared to $8.81 per diluted share in 2018.

Non-GAAP Results1

  • Adjusted net income1 increased 10% to $1,062.1 million in 2019, compared to $969.8 million in 2018.
  • Adjusted net income per diluted share1 increased 12% to $11.79 in 2019, compared to $10.53 in 2018.

Fiscal Year 2020 Outlook:

“Our outlook for 2020 is for organic revenue growth to be in the 9% to 11% range and adjusted net income to be up approximately 15%. As always there are a number of moving parts to our budget. Some of our assumptions include the continuation of a soft macro-environment, primarily unfavorable foreign exchange rates compared to 2019, mostly in Brazil, and market spreads projected to be slightly worse than the 2019 average. The combined unfavorable revenue impact from these factors is expected to be approximately $20 million in 2020. In addition, we are making incremental investments in sales and IT to help drive future growth,” said Eric Dey, chief financial officer, FLEETCOR Technologies, Inc.

For fiscal year 2020, FLEETCOR Technologies, Inc.’s financial outlook is as follows:

  • Total revenues to be between $2,900 million and $2,960 million;
  • GAAP net income to be between $965 million and $1,005 million;
  • GAAP net income per diluted share to be between $10.80 and $11.20;
  • Adjusted net income to be between $1,190 million and $1,230 million; and
  • Adjusted net income per diluted share to be between $13.35 and $13.75.

FLEETCOR’s outlook assumptions for fiscal year 2020 are as follows:

  • Weighted fuel prices equal to $2.78 per gallon average in the U.S.;
  • Market spreads slightly unfavorable compared to the 2019 average;
  • Foreign exchange rates equal to the 7-day average as of the week ending January 19, 2020;
  • Interest expense between $130 million and $140 million;
  • Approximately 89.5 million fully diluted shares outstanding for 2020;
  • An adjusted tax rate of approximately 20% to 22%; and
  • No impact related to acquisitions or material new partnership agreements not already disclosed.

Fiscal First Quarter of 2020 Outlook:

FLEETCOR experiences some seasonality and typically the first quarter is the lowest in terms of both revenue and profit. First quarter seasonality is impacted by weather, holidays in the U.S., and lower business levels in Brazil, due to summer break and the Carnival celebration that occurs in the first quarter. Also, the first quarter revenue will be impacted by the divestiture of the Chevron portfolio, which was still transitioning in the first quarter of 2019, an unfavorable macro impact versus prior year, and the net impact of share repurchases and the associated interest expense carry versus prior year. In total, we estimate these items will negatively impact our first quarter net income per diluted share by approximately $0.15 versus the first quarter of 2019.

The Company is expecting first quarter adjusted net income per diluted share to be between $2.90 and $3.001. Additionally, volumes should build throughout the year, and new asset initiatives are also expected to gain momentum throughout the year resulting in higher revenue and earnings per share in the second through fourth quarters.

_______________________________________
1 Reconciliations of GAAP results to non-GAAP results are provided in Exhibit 1 attached. Additional supplemental data is provided in Exhibits 2-3 and 5, and segment information is provided in Exhibit 4. A reconciliation of GAAP guidance to non-GAAP guidance is provided in Exhibit 6.

Conference Call:

The Company will host a conference call to discuss fourth quarter and fiscal year 2019 financial results today at 5:00 pm ET. Hosting the call will be Ron Clarke, chief executive officer, Eric Dey, chief financial officer, and Jim Eglseder, senior vice president investor relations. The conference call can be accessed live over the phone by dialing (877) 407-0784, or for international callers (201) 689-8560. A replay will be available one hour after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 13698073. The replay will be available until Thursday, February 13, 2020. The call will be webcast live from the Company's investor relations website at http://investor.fleetcor.com. Prior to the conference call, the Company will post supplemental financial information that will be discussed during the call and live webcast.

Forward-Looking Statements:

This press release contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about FLEETCOR's beliefs, expectations, assumptions and future performance, are forward-looking statements. Forward-looking statements can be identified by the use of words such as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project," "expect," "may," "will," "would," "could" or "should," the negative of these terms or other comparable terminology. Examples of forward-looking statements in this press release include statements about FLEETCOR's beliefs, expectations and assumptions with respect to the lawsuit filed by the FTC, FLEETCOR’s intentions with respect to challenging such lawsuit and the potential impact of such lawsuit. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement, such as adverse outcomes with respect to current and future legal proceedings, including, without limitation, the FTC lawsuit, or actions of governmental or quasi-governmental bodies or standards or industry organizations with respect to our payment cards; fuel price and spread volatility; the impact of foreign exchange rates on operations, revenue and income; the effects of general economic and political conditions on fueling patterns and the commercial activity of fleets; changes in credit risk of customers and associated losses; failure to maintain or renew key business relationships; failure to maintain competitive product offerings; failure to maintain or renew sources of financing; failure to complete, or delays in completing, anticipated new partnership and customer agreements or acquisitions and to successfully integrate or otherwise achieve anticipated benefits from such partnerships and customer arrangements or acquired businesses; failure to successfully expand business internationally, other risks related to our international operations, including the potential impact to our business as a result of the United Kingdom’s referendum to leave the European Union, risks related to litigation, the impact of new tax regulations and the resolution of tax contingencies resulting in additional tax liabilities; as well as the other risks and uncertainties identified under the caption "Risk Factors" in FLEETCOR's Annual Report on Form 10-K for the year ended December 31, 2018 and subsequent filings made by FLEETCOR with the Securities and Exchange Commission. These forward-looking statements are not a guarantee of performance, and undue reliance should not be placed on such statements. The forward-looking statements included in this press release are made only as of the date hereof, and FLEETCOR does not undertake, and specifically disclaims, any obligation to update any such statements as a result of new information, future events or developments except as specifically stated in this press release or to the extent required by law.

About Non-GAAP Financial Measures:

Adjusted net income is calculated as net income, adjusted to eliminate (a) non-cash stock based compensation expense related to share based compensation awards, (b) amortization of deferred financing costs, discounts and intangible assets, amortization of the premium recognized on the purchase of receivables, and our proportionate share of amortization of intangible assets at our equity method investment, and (c) other non-recurring items, such as the impact of the Tax Act, impairment of investment, asset write-offs, restructuring costs, gains and related taxes due to disposition of assets and a business, loss on extinguishment of debt, legal settlements/litigation, and the unauthorized access impact. We calculate adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. Adjusted net income is a supplemental measure of operating performance that does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by U.S. generally accepted accounting principles, or U.S. GAAP, and our calculation thereof may not be comparable to that reported by other companies. We believe it is useful to exclude non-cash share based compensation expense from adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and share based compensation expense is not a key measure of our core operating performance. We also believe that amortization expense can vary substantially from company to company and from period to period depending upon their financing and accounting methods, the fair value and average expected life of their acquired intangible assets, their capital structures and the method by which their assets were acquired; therefore, we have excluded amortization expense from our adjusted net income. We also believe one-time non-recurring gains, losses, and impairment charges do not necessarily reflect how our investments and business are performing. Reconciliations of GAAP results to non-GAAP results are provided in the attached exhibit 1. A reconciliation of GAAP to non-GAAP product revenue organic growth calculation is provided in the attached exhibit 5. A reconciliation of GAAP to non-GAAP guidance is provided in the attached exhibit 6.

Management uses adjusted net income:

  • as measurement of operating performance because it assists us in comparing our operating performance on a consistent basis;
  • for planning purposes, including the preparation of our internal annual operating budget;
  • to allocate resources to enhance the financial performance of our business; and
  • to evaluate the performance and effectiveness of our operational strategies.

We believe adjusted net income and adjusted net income per diluted share are key measures used by the Company and investors as supplemental measures to evaluate the overall operating performance of companies in our industry. By providing these non-GAAP financial measures, together with reconciliations, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives.

About FLEETCOR:

FLEETCOR Technologies (NYSE: FLT) is a leading global business payments company that simplifies the way businesses manage and pay their expenses. The FLEETCOR portfolio of brands help companies automate, secure, digitize and control payments to, or on behalf of, their employees and suppliers. FLEETCOR serves businesses, partners and merchants in North America, Latin America, Europe, and Asia Pacific. For more information, please visit www.FLEETCOR.com.

FLEETCOR Technologies, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
 
Three Months Ended December 31, Year Ended December 31,

2019

2018

2019

2018

(Unaudited) (Unaudited) (Unaudited)
Revenues, net 

 $           698,881

 $           643,422

 $         2,648,848

 $         2,433,492

 
Expenses:
   Processing   

              146,081

              131,609

              530,669

              487,695

   Selling   

                51,899

                46,667

              204,806

              182,593

   General and administrative   

              109,592

              104,453

              407,210

              389,172

   Depreciation and amortization   

                68,510

                67,230

              274,210

              274,609

   Other operating, net

                  2,003

                  8,725

                    523

                  8,725

Operating income 

              320,796

              284,738

            1,231,430

            1,090,698

   Investment (gain) loss, net

              (12,190)

                      -  

                  3,470

                  7,147

   Other (income) expense, net

                   (535)

             (152,630)

                      93

             (152,166)

   Interest expense, net

                34,960

                38,207

              150,048

              138,494

   Loss on extinguishment of debt

                      -  

                  2,098

                      -  

                  2,098

Total other expense (income)

                22,235

             (112,325)

              153,611

                (4,427)

Income before income taxes

              298,561

              397,063

            1,077,819

            1,095,125

Provision for income taxes

                63,051

                95,063

              182,746

              283,642

Net income

 $           235,510

 $           302,000

 $           895,073

 $           811,483

 
Basic earnings per share

 $                2.72

 $                3.45

 $               10.36

 $                9.14

Diluted earnings per share

 $                2.60

 $                3.33

 $                9.94

 $                8.81

 
Weighted average shares outstanding:
Basic shares

                86,600

                87,636

                86,401

                88,750

Diluted shares

                90,427

                90,703

                90,070

                92,151

FLEETCOR Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
December 31, 20191 December 31, 2018
(Unaudited)
Assets    
 
Current assets:
Cash and cash equivalents

 $                          1,271,494

 $                          1,031,145

Restricted cash

                               403,743

333,748

Accounts and other receivables (less allowance for doubtful accounts of $70,890 and  $59,963 at December 31,
2019 and 2018, respectively)

                             1,528,007

1,425,815

Securitized accounts receivable - restricted for securitization investors

                               970,973

886,000

Prepaid expenses and other current assets   

                               403,400

199,278

 
Total current assets

4,577,617

3,875,986

 
Property and equipment, net

199,825

186,201

Goodwill 

4,833,047

4,542,074

Other intangibles, net 

2,341,882

2,407,910

Investments

30,440

42,674

Other assets

224,776

147,632

 
Total assets

 $                        12,207,587

 $                        11,202,477

 
Liabilities and Stockholders’ Equity
 
Current liabilities:
Accounts payable 

 $                          1,208,631

 $                          1,117,649

Accrued expenses   

                               275,511

261,594

Customer deposits

                             1,007,631

926,685

Securitization facility

                               970,973

886,000

Current portion of notes payable and lines of credit

                               775,865

1,184,616

Other current liabilities

                               183,503

118,669

 
Total current liabilities

4,422,114

4,495,213

 
Notes payable and other obligations, less current portion

                             3,289,947

2,748,431

Deferred income taxes   

                               519,980

491,946

Other noncurrent liabilities

                               263,930

126,707

 
Total noncurrent liabilities   

4,073,857

3,367,084

 
Commitments and contingencies
 
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized; 124,626,786 shares issued and 85,342,156 shares
outstanding at December 31, 2019; and 123,035,859 shares issued and 85,845,344 shares outstanding at December
31, 2018

124

123

Additional paid-in capital

2,494,721

2,306,843

Retained earnings

4,712,729

3,817,656

Accumulated other comprehensive loss

(972,465)

(913,858)

Less treasury stock, 39,284,630 shares and 37,190,515 shares at December 31, 2019 and 2018, respectively

(2,523,493)

(1,870,584)

   
Total stockholders’ equity

3,711,616

3,340,180

 
Total liabilities and stockholders’ equity

 $                        12,207,587

 $                        11,202,477

1 Reflects the impact of the Company's adoption of ASU 2016-02 "Leases", on January 1, 2019 using the modified retrospective transition method.  The adoption of the Leases guidance resulted in an adjustment to other assets, other current liabilities and other noncurrent liabilities in our consolidated balance sheet for the cumulative effect of applying the standard. Financial results reported in periods prior to 2019 are unchanged. 
Consolidated Statements of Cash Flows 
(In thousands) 
Year Ended December 31,

20191

2018

(Unaudited)
Operating activities
Net income 

 $           895,073

 $           811,483

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 

                62,784

                52,936

Stock-based compensation 

                60,953

                69,939

Provision for losses on accounts receivable 

                74,309

                64,377

Amortization of deferred financing costs and discounts

                 5,106

                 5,342

Amortization of intangible assets and premium on receivables

              211,426

              221,673

Loss on extinguishment of debt

                      -  

                 2,098

Loss on write-off of fixed assets

                 1,819

                 8,793

Deferred income taxes 

                34,670

                (2,750)

Investment loss, net

                 3,470

                 7,147

Gain on sale of assets/business

                      -  

            (152,750)

Other non-cash operating income

                (1,297)

                  (186)

Changes in operating assets and liabilities (net of acquisitions/dispositions):
Accounts and other receivables 

            (198,156)

            (159,024)

Prepaid expenses and other current assets 

            (185,391)

              (27,650)

Other assets 

                (6,792)

              (25,432)

Accounts payable, accrued expenses and customer deposits 

              204,097

                27,386

Net cash provided by operating activities 

           1,162,071

              903,382

 
 
Investing activities
Acquisitions, net of cash acquired

            (448,277)

              (20,843)

Purchases of property and equipment 

              (75,170)

              (81,387)

Proceeds from disposal of assets/business

                      -  

                98,735

Other

                  (255)

              (22,775)

Net cash used in investing activities 

            (523,702)

              (26,270)

 
 
Financing activities
Proceeds from issuance of common stock 

              168,925

                55,680

Repurchase of common stock

            (694,909)

            (958,696)

Borrowings on securitization facility, net 

                84,973

                75,000

Deferred financing costs paid and debt discount

                (2,868)

                (4,927)

Proceeds from issuance of notes payable

              700,000

              363,430

Principal payments on notes payable 

            (138,500)

            (498,305)

Borrowings from revolver

           1,811,509

           1,493,091

Payments on revolver 

          (2,292,349)

          (1,099,040)

Borrowings from (payments to) swing line of credit, net

                52,996

                (4,935)

Other

                      52

                    887

Net cash used in financing activities 

            (310,171)

            (577,815)

 
Effect of foreign currency exchange rates on cash 

(17,854)

(65,274)

 
Net increase in cash and cash equivalents and restricted cash

              310,344

              234,023

Cash and cash equivalents and restricted cash, beginning of period

           1,364,893

           1,130,870

Cash and cash equivalents and restricted cash, end of period

 $         1,675,237

 $         1,364,893

 
Supplemental cash flow information
Cash paid for interest 

 $           178,417

 $           156,749

Cash paid for income taxes 

 $           200,525

 $           207,504

1 Reflects the impact of the Company's adoption of ASU 2016-02 "Leases", on January 1, 2019 using the modified retrospective transition method.  The adoption of the Leases guidance resulted in an adjustment to other assets, other current liabilities and other noncurrent liabilities in our consolidated balance sheet for the cumulative effect of applying the standard. Financial results reported in periods prior to 2019 are unchanged. 
RECONCILIATION OF NON-GAAP MEASURES
(In thousands, except shares and per share amounts)
(Unaudited)
                 
The following table reconciles net income to adjusted net income and adjusted net income per diluted share:*
 
Three Months Ended December 31, Year Ended December 31,

2019

2018

2019

2018

Net income

 $            235,510

 $            302,000

 $            895,073

 $            811,483

 
Stock based compensation

                14,833

                15,732

                60,953

                69,939

Amortization of intangible assets, premium on receivables, deferred financing costs and discounts

                53,484

                53,776

              216,532

              227,015

Investment (gains) losses

               (12,955)

                      -  

                  2,705

                  7,147

Net gain on disposition of assets/business

                      -  

             (152,750)

                      -  

             (152,750)

Loss on write-off of fixed assets

                  1,819

                  8,793

                  1,819

                  8,793

Loss on extinguishment of debt

                      -  

                  2,098

                      -  

                  2,098

Legal settlements/litigation

                  2,707

                  5,500

                  6,181

                  5,500

Restructuring and related costs

                  2,814

                  1,052

                  2,814

                  4,969

Unauthorized access impact

                      -  

                      -  

                      -  

                  2,065

Total pre-tax adjustments

                62,702

               (65,799)

              291,004

              174,777

 
Income tax impact of pre-tax adjustments at the effective tax rate1

               (12,596)

                15,753

               (61,619)

               (39,151)

Impact of investment sale, other discrete item and tax reform2

                    765

                      -  

               (62,333)

                22,731

 
Adjusted net income

 $            286,380

 $            251,954

 $         1,062,125

 $            969,840

Adjusted net income per diluted share

 $                 3.17

 $                 2.78

 $               11.79

 $               10.53

 
Diluted shares

                90,427

                90,703

                90,070

                92,151


Contacts

Investor Relations
Jim Eglseder, 770-417-4697
Jim.Eglseder@fleetcor.com


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