FLEETCOR Reports Second Quarter 2018 Financial Results

PEACHTREE CORNERS, Ga.--()--FLEETCOR Technologies, Inc. (NYSE:FLT), a leading global provider of commercial payment solutions, today reported financial results for its second quarter of 2018.

“Our second quarter revenues and profits once again finished above our expectations, with adjusted net income per diluted share growth of 29%. We delivered another solid organic revenue growth quarter of 9% overall, driven by growth rates of more than 20% in the Lodging, Corporate Payments and Tolls business lines. Additionally, we were delighted to join the S&P 500 index, and to be recognized for our consistent performance over a long period of time,” said Ron Clarke, chairman and chief executive officer, FLEETCOR Technologies, Inc.

Financial Results for Second Quarter of 2018:

GAAP Results

  • Total revenues, including the impact of the new revenue recognition standard ASC 606, increased 8% to $585.0 million in the second quarter of 2018, compared to $541.2 million in the second quarter of 2017.
  • Net income increased 35% to $176.9 million in the second quarter of 2018, compared to $131.0 million in the second quarter of 2017.
  • Net income per diluted share increased 37% to $1.91 in the second quarter of 2018, compared to $1.39 per diluted share in the second quarter of 2017.

On January 1, 2018, the Company adopted FASB ASC Topic 606, "Revenue from Contracts with Customers" ("ASC 606") and related cost capitalization guidance, using the modified retrospective method by recognizing the cumulative effect of initially applying ASC 606 as an adjustment to opening retained earnings at January 1, 2018. As such, the Company is not required to restate comparative financial information prior to the adoption of ASC 606 and, therefore, such information for the three months ended June 30, 2017 continues to be reported under FASB ASC Topic 605, "Revenue Recognition" ("ASC 605"). The adoption of ASC 606 did not materially impact the Company’s financial position. For the three months ended June 30, 2018, the adoption of ASC 606 reduced revenue by $23.3 million and increased operating income by $0.7 million. The adoption of ASC 606 did not have a material impact on net income or net income per diluted share for the three months ended June 30, 2018. A comparison of the current presentation under ASC 606 to the prior presentation under ASC 605 is provided below:

2018 Reported
under ASC 606

2018 Impact of
ASC 606

2018 Excluding
Impact of Adoption
of ASC 606

(millions)
Revenue $585.0 $23.3 $608.3
 
Operating Expense $320.2 $24.1 $344.3
 
Operating Income $264.8 ($0.7) $264.0
 
The above table presents the U.S. GAAP financial measures of Revenue, Operating Expense and Operating Income as reported, as well as the impact of the adoption of ASC 606 on these measures for the period presented. The impact of the adoption of ASC 606 on net income and net income per diluted share was not material.

Non-GAAP Results1

  • Revenues under ASC 605 increased 12% to $608.3 million in the second quarter of 2018, compared to $541.2 million in the second quarter of 2017.
  • Adjusted net income1 increased 27% to $237.8 million in the second quarter of 2018, compared to $187.0 million in the second quarter of 2017.
  • Adjusted net income per diluted share1 increased 29% to $2.57 in the second quarter of 2018, compared to $1.99 per diluted share in the second quarter of 2017.

Fiscal-Year 2018 Outlook:

“We are raising our 2018 guidance to reflect our strong second quarter results compared to our original outlook, despite the unfavorable macro that we now expect to realize for the remainder of the year. We believe that negative movements in foreign exchange rates, will more than offset the impact of favorable fuel prices, producing an overall unfavorable impact on second half revenue of approximately $30 to $40 million,” said Eric Dey, chief financial officer, FLEETCOR Technologies, Inc. “We currently expect to offset this impact through continued over performance in some of our businesses, lower expenses, and the impact from a lower share count in the second half of the year.”

For fiscal 2018, FLEETCOR Technologies, Inc. updated financial guidance is as follows:

  • Revenues including the adoption of ASC 606, between $2,365 million and $2,415 million;
  • Net income between $720 million and $740 million;
  • Net income per diluted share between $7.75 and $7.95;
  • Revenues under ASC 605 between $2,470 million and $2,520 million;
  • Adjusted net income1 between $960 million and $980 million; and
  • Adjusted net income per diluted share1 between $10.32 and $10.52.

FLEETCOR’s guidance assumptions for 2018 are as follows:

  • Weighted fuel prices equal to $2.88 per gallon average in the U.S. for those businesses sensitive to the movement in the retail price of fuel for the balance of the year;
  • Market spreads equal to the 2017 average;
  • Foreign exchange rates equal to the seven-day average as of July 1, 2018;
  • Interest expense of $135 million;
  • Fully diluted shares outstanding of approximately 93 million shares;
  • A tax rate of 22 to 24%; and
  • No impact related to acquisitions or material new partnership agreements not already disclosed.

_______________________________________

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. A reconciliation of the impact of the adoption of ASC 606 is provided in exhibit 7.

Conference Call

The Company will host a conference call to discuss second quarter 2018 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, 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 13681872. The replay will be available until Thursday, August 9, 2018. 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 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 relating to macro- economic conditions, expected organic growth rates, impact of the new Tax Act, and estimated impact of these conditions on our operations and financial results, the impact of new asset initiatives, revenue and earnings guidance and assumptions underlying financial guidance, and statements regarding the unauthorized access to the Company’s systems, including the assumptions with respect to the investigation of the incident to date. 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 fuel price and spread volatility; the impact of foreign exchange rates on operations, revenue and income; the effects of general economic conditions on fueling patterns and the commercial activity of fleets; changes in credit risk of customers and associated losses; the actions of regulators relating to payment cards or resulting from investigations; failure to maintain or renew key business relationships; failure to maintain competitive offerings; failure to maintain or renew sources of financing; failure to complete, or delays in completing, anticipated new customer arrangements or acquisitions and the failure to successfully integrate or otherwise achieve anticipated benefits from such customer arrangements or acquired businesses; failure to successfully expand business internationally, risks related to litigation: risks related to the unauthorized access to systems and information; 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, 2017 and FLEETCOR’s quarterly report on form 10-Q for the three months ended March 31, 2018. FLEETCOR believes these forward-looking statements are reasonable; however, 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 or to publicly announce the results of any revisions to any of such statements to reflect 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, (c) other non-recurring items, including the impact of the Tax Reform Act, restructuring costs, 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 stock 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 stock 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. Furthermore, a reconciliation of the impact of the Company’s adoption of the new revenue standard, ASC 606, is provided in exhibit 7, along with its impact on 2018 guidance in 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 provider of commercial payment solutions. The Company helps businesses of all sizes better control, simplify and secure payment of their fuel, toll, lodging and other general payables. With its proprietary payment acceptance networks, FLEETCOR provides affiliated merchants with incremental sales and loyalty. FLEETCOR serves businesses, partners and merchants in North America, Latin America, Europe, and Australasia. For more information, please visit www.FLEETCOR.com.

FLEETCOR Technologies, Inc. and Subsidiaries
Unaudited Consolidated Statements of Income
(In thousands, except per share amounts)
             
Three Months Ended June 30, Six Months Ended June 30,
2018(1) 2017   2018(1) 2017
 
Revenues, net $ 584,985 $ 541,237 $ 1,170,484 $ 1,061,670
 
Expenses:
Merchant commissions - 30,619 - 55,003
Processing 111,201 103,322 227,686 205,146
Selling 44,009 38,957 91,120 77,794
General and administrative 96,382 87,587 186,696 183,041
Depreciation and amortization   68,610   64,709     140,112   129,575
Operating income   264,783   216,043     524,870   411,111
Investment loss - 2,354 - 4,731
Other expense (income), net 458 (551 ) 161 1,645
Interest expense, net   33,150   23,851     64,215   46,978
Total other expense   33,608   25,654     64,376   53,354
Income before income taxes 231,175 190,389 460,494 357,757
Provision for income taxes   54,323   59,402     108,705   103,077
Net income $ 176,852 $ 130,987   $ 351,789 $ 254,680
 
Basic earnings per share $ 1.98 $ 1.42 $ 3.93 $ 2.77
Diluted earnings per share $ 1.91 $ 1.39 $ 3.78 $ 2.70
 
Weighted average shares outstanding:
Basic shares 89,169 92,013 89,466 92,060
Diluted shares 92,702 94,223 92,970 94,392
 
1 Reflects the impact of the Company's adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606") and related cost capitalization guidance, which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effective of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606. See exhibit 7 for a reconciliation of the impact of adoption of ASC 606.
FLEETCOR Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
 
    June 30, 20181   December 31, 2017
(Unaudited)
Assets
 
Current assets:
Cash and cash equivalents $ 919,662 $ 913,595
Restricted cash 265,776 217,275
Accounts and other receivables (less allowance for doubtful accounts of $48,245 at June 30, 2018 and $46,031 at December 31, 2017, respectively) 1,716,937 1,420,011
Securitized accounts receivable - restricted for securitization investors 939,000 811,000
Prepaid expenses and other current assets   207,832     187,820  
 
Total current assets   4,049,207     3,549,701  
 
Property and equipment, net 179,096 180,057
Goodwill 4,556,206 4,715,823
Other intangibles, net 2,515,232 2,724,957
Investments 39,859 32,859
Other assets   145,533     114,962  
 
Total assets $ 11,485,133   $ 11,318,359  
 
Liabilities and Stockholders’ Equity
 
Current liabilities:
Accounts payable $ 1,532,741 $ 1,437,314
Accrued expenses 214,682 238,472
Customer deposits 852,617 732,171
Securitization facility 939,000 811,000
Current portion of notes payable and lines of credit 976,685 805,512
Other current liabilities   85,789     71,033  
 
Total current liabilities   4,601,514     4,095,502  
 
Notes payable and other obligations, less current portion 2,832,316 2,902,104
Deferred income taxes 498,918 518,912
Other noncurrent liabilities   113,300     125,319  
 
Total noncurrent liabilities   3,444,534     3,546,335  
 
Commitments and contingencies
 
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized; 122,551,794 shares issued and 88,376,611 shares outstanding at June 30, 2018; and 122,083,059 shares issued and 89,803,982 shares outstanding at December 31, 2017 123 122
Additional paid-in capital 2,277,227 2,214,224
Retained earnings 3,357,962 2,958,921
Accumulated other comprehensive loss (870,688 ) (551,857 )
Less treasury stock, 34,175,183 shares at June 30, 2018 and 32,279,077 shares at December 31, 2017 (1,325,539 ) (944,888 )
   
Total stockholders’ equity   3,439,085     3,676,522  
 
Total liabilities and stockholders’ equity $ 11,485,133   $ 11,318,359  
 
1 Reflects the impact of the Company's adoption of ASC 606 and related cost capitalization guidance, which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effective of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606. See exhibit 7 for a reconciliation of the impact of adoption of ASC 606.
FLEETCOR Technologies, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(In thousands)
 
Six Months Ended June 30,
2018(1)   2017(1)
 
Operating activities
Net income $ 351,789 $ 254,680
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 25,033 21,593
Stock-based compensation 33,505 44,243
Provision for losses on accounts receivable 26,495 27,648
Amortization of deferred financing costs and discounts 2,678 3,800
Amortization of intangible assets 112,540 104,894
Amortization of premium on receivables 2,539 3,088
Deferred income taxes (6,473) (32,660)
Investment loss - 4,731
Other non-cash operating income (104) -
Changes in operating assets and liabilities (net of acquisitions):
Accounts and other receivables (519,527) (380,196)
Prepaid expenses and other current assets (20,440) (18,778)
Other assets (15,418) (15,050)
Accounts payable, accrued expenses and customer deposits   282,472   189,750
Net cash provided by operating activities   275,089   207,743
 
 
Investing activities
Acquisitions, net of cash acquired (3,811) (3,580)
Purchases of property and equipment (34,614) (32,600)
Other   (11,192)   (6,327)
Net cash used in investing activities   (49,617)   (42,507)
 
 
Financing activities
Proceeds from issuance of common stock 29,498 16,432
Repurchase of common stock (380,651) (52,393)
Borrowings on securitization facility, net 128,000 150,000
Principal payments on notes payable (69,000) (66,725)
Borrowings from revolver 774,019 90,000
Payments on revolver (600,109) (215,901)
Borrowings on swing line of credit, net 13,632 10,245
Other   (149)   537
Net cash used by financing activities   (104,760)   (67,805)
 
Effect of foreign currency exchange rates on cash   (66,144)   24,416
 
Net increase in cash and cash equivalents and restricted cash 54,568 121,847
Cash and cash equivalents and restricted cash, beginning of period   1,130,870   643,770
Cash and cash equivalents and restricted cash, end of period $ 1,185,438 $ 765,617
 
Supplemental cash flow information
Cash paid for interest $ 73,303 $ 68,431
 
Cash paid for income taxes $ 112,982 $ 188,157
 
1 Reflects the impact of the Company's adoption of Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230), which was adopted by the Company on January 1, 2018 and applied retrospectively to results for 2017. The adoption of Topic 230 resulted in the statement of cash flows presenting the changes in the total of cash, cash equivalents and restricted cash. As a result, the Company will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows.
Exhibit 1
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 June 30, Six Months Ended June 30,
2018   2017   2018   2017  
Net income $ 176,852 $ 130,987 $ 351,789 $ 254,680
 
Stock based compensation 19,102 21,150 33,505 44,243
Amortization of intangible assets, premium on receivables, deferred financing costs and discounts 57,313 58,587 117,757 117,158
Restructuring costs 1,506 - 3,435 -
Unauthorized access impact   1,743     -     1,743     -  
Total pre-tax adjustments 79,664 79,737 156,441 161,401
 
Income tax impact of pre-tax adjustments at the effective tax rate (18,720 ) (23,675 ) (1) (36,927 ) (44,055 ) (1)
       
Adjusted net income $ 237,796   $ 187,049   $ 471,303   $ 372,026  
Adjusted net income per diluted share $ 2.57 $ 1.99 $ 5.07 $ 3.94
 
Diluted shares 92,702 94,223 92,970 94,392
 

(1)Excludes the results of the Company's Masternaut investment on our effective tax rate, as results from our Masternaut investment are reported within the consolidated statements of income on a post-tax basis and no tax-over-book outside basis differences related to our equity method investment reversed during 2017.

Exhibit 2
Transaction Volume and Revenues Per Transaction by Segment and by Product Category, on a GAAP Basis

and Pro Forma and Macro Adjusted

(In millions except revenues, net per transaction)
(Unaudited)
                                     
The following table presents revenue and revenue per transaction, by segment.          
    As Reported As Reported and Pro Forma for Impact of

Adoption of ASC 606

Three Months Ended June 30, Three Months Ended June 30,
2018(1)   2017   Change % Change 2018(1) 2017(1) Change % Change
 

NORTH AMERICA

- Transactions 426.9 429.7

 

 

(2.8 ) (1 %) 426.9 429.7

 

 

(2.8 ) (1 %)
- Revenues, net per transaction $ 0.87 $ 0.80 $ 0.07 9 % $ 0.87 $ 0.73 $ 0.13 18 %
- Revenues, net $ 370.9 $ 343.0 $ 28.0 8 % $ 370.9 $ 315.7 $ 55.3 18 %
 

INTERNATIONAL

- Transactions 2

264.2 265.5 (1.3 ) (1 %) 264.2 265.5 (1.3 ) (1 %)
- Revenues, net per transaction $ 0.81 $ 0.75 $ 0.06 9 % $ 0.81 $ 0.73 $ 0.08 11 %
- Revenues, net $ 214.0 $ 198.2 $ 15.8 8 % $ 214.0 $ 193.5 $ 20.6 11 %
 
                                     

FLEETCOR CONSOLIDATED REVENUES

- Transactions 691.1 695.3 (4.1 ) (1 %) 691.1 695.3 (4.1 ) (1 %)
- Revenues, net per transaction $ 0.85 $ 0.78 $ 0.07 9 % $ 0.85 $ 0.73 $ 0.11 16 %
  - Revenues, net   $ 585.0     $ 541.2   $ 43.7       8 %   $ 585.0     $ 509.1     $ 75.9     15 %
 
                                     
The following table presents revenue and revenue per transaction, by product category.
As Reported Pro Forma and Macro Adjusted4
Three Months Ended June 30, Three Months Ended June 30,
2018(1) 2017 Change % Change 2018(1) 2017(1) Change % Change
 

FUEL5

- Transactions 122.1 116.8 5.3 5 % 122.1 118.5 3.6 3 %
- Revenues, net per transaction $ 2.22 $ 2.38 $ (0.16 ) (7 %) $ 2.15 $ 2.10 $ 0.04 2 %
- Revenues, net $ 270.8 $ 278.2 $ (7.4 ) (3 %) $ 261.9 $ 249.4 $ 12.5 5 %
 

CORPORATE PAYMENTS

- Transactions 11.8 10.4 1.5 14 % 11.8 10.6 1.2 11 %
- Revenues, net per transaction $ 8.44 $ 4.85 $ 3.59 74 % $ 8.35 $ 7.70 $ 0.65 8 %
- Revenues, net $ 99.6 $ 50.2 $ 49.4 98 % $ 98.5 $ 81.7 $ 16.9 21 %
 

TOLLS

- Transactions 2

209.3 216.7 (7.4 ) (3 %) 209.3 216.7 (7.4 ) (3 %)
- Revenues, net per transaction $ 0.39 $ 0.35 $ 0.04 11 % $ 0.44 $ 0.35 $ 0.09 24 %
- Revenues, net $ 81.5 $ 76.0 $ 5.6 7 % $ 91.3 $ 76.0 $ 15.3 20 %
 

LODGING

- Transactions 4.7 3.4 1.4 40 % 4.7 3.9 0.9 23 %
- Revenues, net per transaction $ 9.40 $ 8.57 $ 0.84 10 % $ 9.40 $ 9.08 $ 0.32 4 %
- Revenues, net $ 44.6 $ 29.0 $ 15.7 54 % $ 44.6 $ 35.2 $ 9.5 27 %
 

GIFT

- Transactions 324.5 328.3

 

 

(3.9 ) (1 %) 324.5 328.3

 

 

(3.9 ) (1 %)
- Revenues, net per transaction $ 0.10 $ 0.13 $ (0.02 ) (18 %) $ 0.10 $ 0.13 $ (0.02 ) (18 %)
- Revenues, net $ 33.3 $ 41.3 $ (8.0 ) (19 %) $ 33.3 $ 41.3 $ (8.0 ) (19 %)
 

OTHER3,5

- Transactions 18.7 19.7 (1.0 ) (5 %) 18.7 19.3 (0.6 ) (3 %)
- Revenues, net per transaction $ 2.94 $ 3.37 $ (0.43 ) (13 %) $ 2.96 $ 2.80 $ 0.16 6 %
- Revenues, net $ 55.1 $ 66.6 $ (11.5 ) (17 %) $ 55.5 $ 54.1 $ 1.4 3 %
                                     
 

FLEETCOR CONSOLIDATED REVENUES

- Transactions 691.1 695.3 (4.1 ) (1 %) 691.1 697.3 (6.2 ) (1 %)
- Revenues, net per transaction $ 0.85 $ 0.78 $ 0.07 9 % $ 0.85 $ 0.77 $ 0.08 10 %
- Revenues, net $ 585.0 $ 541.2 $ 43.7 8 % $ 585.2 $ 537.5 $ 47.6 9 %
                                     
 

1 Reflects the impact of the Company's adoption of ASC 606 and related cost capitalization guidance, which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effective of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606. For purposes of comparability, 2017 revenue has been recast in this exhibit and is reconciled to GAAP in Exhibit 5, which includes certain estimates and assumptions made by the Company for the impact of ASC 606 on 2017 revenues, as the Company did not apply a full retrospective adoption.

2 Reflects adjustments from previously disclosed amounts for the prior period to conform to current presentation.

3 Other includes telematics, maintenance, food, and transportation related businesses.
4 See Exhibit 5 for a reconciliation of Pro forma and Macro Adjusted revenue by product, non gaap measures, to the gaap equivalent.
5 Fuel Cards product category further refined to Fuel, to reflect different ways that fuel is paid for by our customers and as a result, reflects immaterial reclassifications from previously disclosed amounts for the prior period.

 

Exhibit 3
Revenues by Geography, Product and Source
(In millions)
(Unaudited)

 

Revenue by Geography*

Three Months Ended June 30,   Six Months Ended June 30,
  2018(1)   %     2017   % 2018(1)   %     2017   %
 
US $ 348 59 % $ 343 63% $ 691 59 % $ 673 63%
Brazil 96 16 % 93 17% 203 17 % 186 18%
UK 65 11 % 58 11% 130 11 % 112 11%
Other   76     13 %   47 9%   146   12 %   90 8%
 
Consolidated Revenues, net $ 585   100 % $ 541 100% $ 1,170   100 % $ 1,062 100%
* Columns may not calculate due to rounding.                
 

Revenue by Product Category*

Three Months Ended June 30, Six Months Ended June 30,
2018(1) %   2017 % 2018(1) % 2017 %
 
Fuel $ 271 46 % $ 278 51% $ 529 45 % $ 539 51%
Corporate Payments 100 17 % 50 9% 194 17 % 97 9%
Tolls 82 14 % 76 14% 173 15 % 153 14%
Lodging 45 8 % 29 5% 84 7 % 53 5%
Gift 33 6 % 41 8% 82 7 % 90 8%
Other   55   9 %   67 12%   108   9 %   131 12%
 
Consolidated Revenues, net $ 585   100 % $ 541 100% $ 1,170   100 % $ 1,062 100%
* Columns may not calculate due to rounding.                
 

Major Sources of Revenue*

Three Months Ended June 30, Six Months Ended June 30,
2018(1) % 2017 % 2018(1) %   2017 %
 
Processing and Program Revenue2 $ 299 51 % $ 248 46% $ 611 52 % $ 493 46%
Late Fees and Finance Charges3 36 6 % 34 6% 72 6 % 71 7%
Miscellaneous Fees4 39 7 % 33 6% 74 6 % 65 6%
Discount Revenue (Fuel)5 85 15 % 74 14% 170 15 % 146 14%
Discount Revenue (NonFuel)6 46 8 % 44 8% 89 8 % 85 8%
Tied to Fuel-Price Spreads7 29 5 % 62 12% 55 5 % 112 11%
Merchant Program Revenue8   51   9 %   47 9%   101   9 %   91 9%
Consolidated Revenues, net $ 585   100 % $ 541 100% $ 1,170   100 % $ 1,062 100%
 
1 Reflects the impact of the Company's adoption of ASC 606 and related cost capitalization guidance, which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effective of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606. See exhibit 7 for a reconciliation of the impact of adoption of ASC 606.
2 Includes revenue from customers based on accounts, cards, devices, transactions, load amounts and/or purchase amounts, etc. for participation in our various fleet and workforce related programs; as well as, revenue from partners (e.g., major retailers, leasing companies, oil companies, petroleum marketers, etc.) for processing and network management services. Primarily represents revenue from North American trucking, lodging, prepaid benefits, telematics, gift cards and toll related businesses.
3 Fees for late payment and interest charges for carrying a balance charged to a customer.
4 Non-standard fees charged to customers based on customer behavior or optional participation, primarily including high credit risk surcharges, over credit limit charges, minimum processing fees, printing and mailing fees, environmental fees, etc.
5Interchange revenue directly influenced by the absolute price of fuel and other interchange related to fuel products.
6 Interchange revenue related to nonfuel products.
7 Revenue derived from the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction.
8 Revenue derived primarily from the sale of equipment, software and related maintenance to merchants.
* We may not be able to precisely calculate revenue by source, as certain estimates were made in these allocations. Columns may not calculate due to rounding.
Exhibit 4
Segment Results
(In thousands)
(Unaudited)
         
Three Months Ended June 30, Six Months Ended June 30,
2018(1) 2017 2018(1) 2017
Revenues, net:
North America $ 370,949 $ 342,995 $ 735,218 $ 672,943
International   214,036     198,242   435,266     388,727
$ 584,985   $ 541,237 $ 1,170,484   $ 1,061,670
 
Operating income:
North America $ 161,376 $ 134,926 $ 317,326 $ 255,898
International   103,407     81,117   207,544     155,213
$ 264,783   $ 216,043 $ 524,870   $ 411,111
 
Depreciation and amortization:
North America $ 38,317 $ 33,384 $ 76,992 $ 66,561
International   30,293     31,325   63,120     63,014
$ 68,610   $ 64,709 $ 140,112   $ 129,575
 
Capital expenditures:
North America $ 11,685 $ 12,102 $ 20,096 $ 21,734
International   7,715     5,702   14,518     10,866
$ 19,400   $ 17,804 $ 34,614   $ 32,600
 
 
1 Reflects the impact of the Company's adoption of ASC 606 and related cost capitalization guidance, which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effective of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606. See exhibit 7 for a reconciliation of the impact of adoption of ASC 606.
Exhibit 5
Reconciliation of Non-GAAP Revenue and Transactions by Product to GAAP
(In millions)
(Unaudited)
                   
    Revenue   Transactions
Three Months Ended June 30, Three Months Ended June 30,
2018*   2017* 2018*   2017*
 

FUEL

Pro forma and macro adjusted $ 261.9 $ 249.4 122.1 118.5
Impact of acquisitions/dispositions - (2.2 ) - (1.7 )
Impact of fuel prices/spread 6.3 - - -
Impact of foreign exchange rates 2.6 - - -
Impact of adoption of ASC 606   -     31.0   - -  
As reported $ 270.8   $ 278.2   122.1 116.8  
 

CORPORATE PAYMENTS

Pro forma and macro adjusted $ 98.5 $ 81.7 11.8 10.6
Impact of acquisitions/dispositions - (32.1 ) - (0.3 )
Impact of fuel prices/spread 0.2 - - -
Impact of foreign exchange rates 0.9 - - -
Impact of adoption of ASC 606   -     0.6   - -  
As reported $ 99.6   $ 50.2   11.8 10.4  
 

TOLLS

Pro forma and macro adjusted $ 91.3 $ 76.0 209.3 216.7
Impact of acquisitions/dispositions - - - -
Impact of fuel prices/spread - - - -
Impact of foreign exchange rates (9.8 ) - - -
Impact of adoption of ASC 606   -     -   - -  
As reported $ 81.5   $ 76.0   209.3 216.7  
 

LODGING

Pro forma and macro adjusted $ 44.6 $ 35.2 4.7 3.9
Impact of acquisitions/dispositions - (6.2 ) - (0.5 )
Impact of fuel prices/spread - - - -
Impact of foreign exchange rates - - - -
Impact of adoption of ASC 606   -     -   - -  
As reported $ 44.6   $ 29.0   4.7 3.4  
 

GIFT

Pro forma and macro adjusted $ 33.3 $ 41.3 324.5 328.3
Impact of acquisitions/dispositions - - - -
Impact of fuel prices/spread - - - -
Impact of foreign exchange rates - - - -
Impact of adoption of ASC 606   -     -   - -  
As reported $ 33.3   $ 41.3   324.5 328.3  
 

OTHER1

Pro forma and macro adjusted $ 55.5 $ 54.1 18.7 19.3
Impact of acquisitions/dispositions - 12.0 - 0.4
Impact of fuel prices/spread - - - -
Impact of foreign exchange rates (0.4 ) - - -
Impact of adoption of ASC 606   -     0.5   - -  
As reported $ 55.1   $ 66.6   18.7 19.7  
                   
 

FLEETCOR CONSOLIDATED REVENUES

Pro forma and macro adjusted $ 585.2 $ 537.5 691.1 697.3
Impact of acquisitions/dispositions - (28.4 ) - (2.0 )
Impact of fuel prices/spread 6.4 - - -
Impact of foreign exchange rates (6.6 ) - - -
Impact of adoption of ASC 606   -     32.1   - -  
As reported $ 585.0   $ 541.2   691.1 695.3  
                   
* Columns may not calculate due to rounding.
1 Other includes telematics, maintenance and transportation related businesses.
Exhibit 6
RECONCILIATION OF NON-GAAP GUIDANCE MEASURES
(In millions, except per share amounts)
(Unaudited)
           
The following table reconciles 2018 financial guidance for revenues, net to revenues prior to the adoption of ASC 606 and net income to adjusted net income and adjusted net income per diluted share, at both ends of the range:
 
    2018 GUIDANCE
Low*   High*
Revenues, net $ 2,365 $ 2,415
Impact of adoption of ASC 606   105     105  
Revenues, net prior to adoption of ASC 606 $ 2,470   $ 2,520  
 
Net income $ 720 $ 740
Net income per diluted share $ 7.75 $ 7.95
 
Stock based compensation 72 72
Amortization of intangible assets, premium on receivables, deferred financing costs and discounts 236 236
Restructuring costs 3 3
Unauthorized access impact   2     2  
Total pre-tax adjustments 313 313
 
Income tax impact of pre-tax adjustments at the effective tax rate (73 ) (73 )
   
Adjusted net income $ 960   $ 980  
Adjusted net income per diluted share $ 10.32 $ 10.52
 
Diluted shares 93 93
 
* Columns may not calculate due to rounding.
Exhibit 7
Reconciliation of Impact of Adoption of ASC 606 to the Consolidated Statement of Income
(In thousands)
(Unaudited)
           
Three Months Ended June 30,
2018 As Reported1 Impact of ASC 606

2018 Prior to
Adoption

 
Revenues, net $ 584,985 $ 23,336 $ 608,321
 
Expenses:
Merchant commissions - 26,387 26,387
Processing 111,201 (2,713 ) 108,488
Selling 44,009 397 44,406
General and administrative 96,382 - 96,382
Depreciation and amortization 68,610 - 68,610
     
Operating income 264,783 (735 ) 264,048
Total other expense   33,608   -     33,608
Income before income taxes 231,175 (735 ) 230,440
Provision for income taxes   54,323   (91 )   54,232
Net income $ 176,852 $ (644 ) $ 176,208
 
1 Reflects the impact of the Company's adoption of ASC 606 and related cost capitalization guidance, which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effective of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, the Company's prior period results within its Form 10-K and quarterly reports on Form 10-Q will not be restated to reflect ASC 606.

Contacts

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

Contacts

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