FleetCor Reports Second Quarter 2014 Financial Results

July 31, 2014

Adjusted Net Income Per Share Grows 28% Year-Over-Year

Raises 2014 Guidance

NORCROSS, Ga.--(BUSINESS WIRE)--Jul. 31, 2014-- FleetCor Technologies, Inc. (NYSE:FLT), a leading global provider of fuel cards and workforce payment products to businesses, today reported financial results for its second quarter ended June 30, 2014.

“We are pleased with our results for the quarter which included adjusted net income per diluted share growth of 28% and adjusted revenue growth of 26%,” said Ron Clarke, chairman and chief executive officer, FleetCor Technologies, Inc. “These results were driven by strong organic growth in the U.S. and the impact of acquisitions closed over the last year. Integration of our recent acquisitions remains on track.”

Financial Results for Second Quarter 2014:

GAAP Results

Total revenues increased 24% to $273.5 million compared to $220.9 million in the second quarter of 2013;
Net income increased 21% to $88.5 million compared to $73.1 million in the second quarter of 2013;
Net income per diluted share increased 19% to $1.03 compared to $0.87 in the second quarter of 2013.

Non-GAAP Results

Adjusted revenues¹ (revenues, net less merchant commissions) increased 26% to $253.2 million compared to $201.3 million in the second quarter of 2013;
Adjusted net income¹ increased 30% to $108.9 million compared to $84.0 million in the second quarter of 2013;
Adjusted net income per diluted share¹ increased 28% to $1.27 compared to $1.00 in the second quarter of 2013.

Fiscal Year 2014 Outlook:

For fiscal year 2014 FleetCor Technologies, Inc. is raising its financial guidance for 2014 as follows:

Total revenues between $1,082 million and $1,097 million, up from our previous guidance range of $1,075 million and $1,095 million;
Adjusted net income between $432 million and $438 million, up from our previous guidance range of $422 million and $432 million;
Adjusted net income per diluted share between $5.04 and $5.10, up from our previous guidance range of $4.97 and $5.07.

The Company's fiscal-year guidance assumptions for 2014 are as follows:

Continued weakness in our Russian business
A start up investment related to the implementation of the Shell contract in Germany of approximately $2 million
Fuel prices and market spreads at the year to date average
FX rates equal to current levels
Full year tax rate of 30.7%
Fully diluted shares outstanding of 86 million shares
No impact related to acquisitions or material new partnership agreements not already disclosed

“We have reported another strong quarter and are again raising our financial guidance for 2014. We are now expecting a 22% growth in revenue and 25% adjusted net income per share growth rate, at the midpoint of our guidance range, versus 2013,” said Eric Dey, chief financial officer FleetCor Technologies, Inc.

Conference Call

The Company will host a conference call to discuss second quarter 2014 financial results today at 5:00pm ET. Hosting the call will be Ron Clarke, chief executive officer, and Eric Dey, chief financial officer. 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 (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 13586369. The replay will be available until August 7, 2014. The call will be webcast live from the Company's investor relations website at investor.fleetcor.com.

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 revenue and earnings guidance, assumptions underlying financial guidance, and expectations regarding integration of recent deals. 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 delays or failures associated with implementation; fuel price and spread volatility; 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 partnership arrangements or acquisitions and the failure to successfully integrate or otherwise achieve anticipated benefits from such partnerships or acquired businesses; failure to successfully expand business internationally; 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, 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, 2013, filed with the Securities and Exchange Commission on March 3, 2014. 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.

About Non-GAAP Financial Measures

Adjusted revenue is calculated as revenues, net less merchant commissions. 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 and intangible assets, (c) amortization of the premium recognized on the purchase of receivables, and (d) loss on the early extinguishment of debt and (e) our proportionate share of amortization of intangible assets at our equity method investment. Adjusted EBITDA is calculated as net income as reflected in our income statement, adjusted to eliminate (a) interest expense, (b) tax expense, (c) depreciation of long-lived assets (d) amortization of intangible assets, (e) other (income) expense, net and (f) gains and losses at equity method investment. The Company uses adjusted revenues as a basis to evaluate the company’s revenues, net of the commissions that are paid to merchants to participate in our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. The Company believes this is a more effective way to evaluate the company’s revenue performance. The Company uses adjusted EBITDA as a basis to evaluate our operating performance net of the impact of certain items during the period. We believe that adjusted EBITDA may be useful to investors for understanding our operating performance on a consistent basis. We prepare adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. Adjusted revenues and adjusted net income are supplemental measures of operating performance that do not represent and should not be considered as an alternative to revenues, net, 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 exclude loss on the early extinguishment of debt from adjusted net income, as this expense is non-cash and is one-time in nature and does not reflect the ongoing operations of the business.

Management uses adjusted revenues, adjusted net income, and adjusted EBITDA:

as measurements of operating performance because they assist 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 revenues, adjusted net income and adjusted EBITDA 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 is a leading global provider of fuel cards and workforce payment products to businesses. FleetCor’s payment programs enable businesses to better control employee spending and provide card-accepting merchants with a commercial customer base that can increase their sales and customer loyalty. FleetCor serves commercial accounts in North America, Latin America, Europe, Australia and New Zealand. For more information, please visit www.fleetcor.com.

¹ Reconciliations of GAAP results to non GAAP results are provided in Exhibit 1 attached. Additional supplemental data is provided in Exhibit 2 and segment information is provided in Exhibit 3.

FleetCor Technologies, Inc. and subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

		Three Months Ended June 30,						Six Months Ended June 30,
		2014			2013			2014		2013

Revenues, net		$	273,502		$	220,869		$	527,410	$	414,520

Expenses:
	Merchant commissions		20,327			19,555			37,950		33,416
	Processing		38,845			32,010			75,701		61,953
	Selling		17,521			13,386			34,935		25,090
	General and administrative		37,896			30,954			81,357		60,215
	Depreciation and amortization		24,429			15,890			48,847		30,519
Operating income			134,484			109,074			248,620		203,327
	Other (income) expense, net		(268	)		(6	)		276		286
	Interest expense, net		5,308			3,756			10,769		7,204
	Equity method investment loss		1,489			-			1,489		-
Total other expense			6,529			3,750			12,534		7,490
Income before income taxes			127,955			105,324			236,086		195,837
Provision for income taxes			39,406			32,225			72,428		58,076
Net income		$	88,549		$	73,099		$	163,658	$	137,761

Basic earnings per share		$	1.07		$	0.90		$	1.97	$	1.69
Diluted earnings per share		$	1.03		$	0.87		$	1.91	$	1.64

Weighted average shares outstanding:
Basic shares			82,996			81,573			82,867		81,398
Diluted shares			85,817			84,461			85,757		84,212

FleetCor Technologies, Inc. and subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)

		June 30, 2014			December 31, 2013
		(Unaudited)
Assets

Current assets:
	Cash and cash equivalents	$	297,642		$	338,105
	Restricted cash		46,153			48,244
	Accounts receivable (less allowance for doubtful accounts of $22,754 and $22,416, respectively)		688,527			573,351
	Securitized accounts receivable - restricted for securitization investors		424,400			349,000
	Prepaid expenses and other current assets		61,917			40,062
	Deferred income taxes		4,415			4,750

Total current assets			1,523,054			1,353,512

Property and equipment			125,195			111,100
Less accumulated depreciation and amortization			(68,695	)		(57,144	)

Net property and equipment			56,500			53,956

Goodwill			1,572,930			1,552,725
Other intangibles, net			848,635			871,263
Equity method investment			162,383			-
Other assets			89,863			100,779

Total assets		$	4,253,365		$	3,932,235

Liabilities and Stockholders’ Equity

Current liabilities:
	Accounts payable	$	573,482		$	467,202
	Accrued expenses		124,027			114,870
	Customer deposits		193,604			182,541
	Securitization facility		424,400			349,000
	Current portion of notes payable and other obligations		596,749			662,439
	Other current liabilities		115,726			132,846

Total current liabilities			2,027,988			1,908,898

Notes payable and other obligations, less current portion			450,207			474,939
Deferred income taxes			245,984			249,504
Other noncurrent liabilities			53,666			55,001

Total noncurrent liabilities			749,857			779,444

Commitments and contingencies

Stockholders’ equity:
	Common stock, $0.001 par value; 475,000,000 shares authorized, 118,785,091 shares issued and 83,050,599 shares outstanding at June 30, 2014; and 475,000,000 shares authorized, 118,206,262 shares issued and 82,471,770 shares outstanding at December 31, 2013		118			117
	Additional paid-in capital		676,876			631,667
	Retained earnings		1,198,856			1,035,198
	Accumulated other comprehensive loss		(24,667	)		(47,426	)
	Less treasury stock, 35,734,492 shares at March 31, 2014 and December 31, 2013		(375,663	)		(375,663	)

Total stockholders’ equity			1,475,520			1,243,893

Total liabilities and stockholders’ equity		$	4,253,365		$	3,932,235

FleetCor Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)

	Six Months Ended June 30,
	2014			2013
Operating activities
Net income	$	163,658		$	137,761
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		9,673			8,054
Stock-based compensation		18,299			8,059
Provision for losses on accounts receivable		11,783			9,199
Amortization of deferred financing costs		1,062			1,593
Amortization of intangible assets		36,482			19,239
Amortization of premium on receivables		1,630			1,632
Deferred income taxes		2,032			(2,598	)
Equity method investment loss		1,488
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash		2,092			5,199
Accounts receivable		(197,167	)		(190,998	)
Prepaid expenses and other current assets		(8,285	)		1,392
Other assets		(388	)		39,322
Excess tax benefits related to stock-based compensation		(18,634	)		(12,016	)
Accounts payable, accrued expenses and customer deposits		133,996			56,874
Net cash provided by operating activities		157,721			82,712


Investing activities
Acquisitions, net of cash acquired		(189,850	)		(156,956	)
Purchases of property and equipment		(11,552	)		(10,108	)
Net cash used in investing activities		(201,402	)		(167,064	)


Financing activities
Excess tax benefits related to stock-based compensation		18,634			12,016
Proceeds from issuance of common stock		8,277			12,511
Borrowings on securitization facility, net		75,400			104,000
Deferred financing costs paid		(546	)		(1,967	)
Principal payments on notes payable		(13,750	)		(14,375	)
Payments on revolver- A Facility		(262,377	)		(70,000	)
Borrowings on revolver- A Facility		142,330			55,000
Payments on foreign revolver- B Facility		(7,337	)		(13,821	)
Borrowings on foreign revolver- B Facility		-			26,895
Borrowings from swing line of credit, net		41,522			–
Other		(371	)		(175	)
Net cash provided by financing activities		1,782			110,084

Effect of foreign currency exchange rates on cash		1,436			(16,476	)

Net (decrease) increase in cash and cash equivalents		(40,463	)		9,256
Cash and cash equivalents, beginning of period		338,105			283,649
Cash and cash equivalents, end of period	$	297,642		$	292,905

Supplemental cash flow information
Cash paid for interest	$	12,797		$	8,262

Cash paid for income taxes	$	52,697		$	60,120

Exhibit 1
RECONCILIATION OF NON-GAAP MEASURES AND PRO FORMA INFORMATION
(In thousands, except shares and per share amounts)
(Unaudited)

	The following table reconciles revenues, net to adjusted revenues:

		Three Months Ended June 30,						Six Months Ended June 30,
		2014			2013			2014			2013

Revenues, net		$	273,502		$	220,869		$	527,410		$	414,520
Merchant commissions			20,327			19,555			37,950			33,416
Total adjusted revenues		$	253,175		$	201,314		$	489,460		$	381,104


	The following table reconciles net income to adjusted EBITDA

		Three Months Ended June 30,						Six Months Ended June 30,
		2014			2013			2014			2013

Net income		$	88,549		$	73,099		$	163,658		$	137,761
Provision for income taxes			39,406			32,225			72,428			58,076
Interest expense, net			5,308			3,756			10,769			7,204
Depreciation and amortization			24,429			15,890			48,847			30,519
Other (income) expense, net			(268	)		(6	)		276			286
Equity method investment loss			1,489			-			1,489			-
Adjusted EBITDA		$	158,913		$	124,964		$	297,467		$	233,846


	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,
		2014			2013			2014			2013
Net income		$	88,549		$	73,099		$	163,658		$	137,761

Stock based compensation			7,687			3,897			18,299			8,059
Amortization of intangible assets			18,210			10,217			36,482			19,239
Amortization of premium on receivables			816			816			1,630			1,632
Amortization of deferred financing costs			531			833			1,062			1,593
Amortization at equity method investment			2,149			-			2,149			-

Total pre-tax adjustments			29,393			15,763			59,622			30,523

Income tax impact of pre-tax adjustments at the effective tax rate			(9,052	)		(4,823	)		(18,291	)		(9,052	)

Adjusted net income		$	108,890		$	84,039		$	204,989		$	159,232
Adjusted net income per diluted share		$	1.27		$	1.00		$	2.39		$	1.89

Diluted shares			85,817			84,461			85,757			84,212

Exhibit 2
Transaction Volume, Revenues and Adjusted Revenue, Per Transaction and by Segment
(In thousands except revenues, net per transaction and adjusted revenues per transaction)
(Unaudited)

		Three Months Ended June 30,											Six Months Ended June 30,
			2014			2013		Change			% Change			2014			2013		Change			% Change

	NORTH AMERICA
	- Transactions		42,717			41,138			1,579		3.8	%		83,142			79,400			3,742		4.7	%
	- Revenues, net per transaction	$	3.25		$	2.90		$	0.35		11.9	%	$	3.19		$	2.77		$	0.42		15.1	%
	- Revenues, net	$	138,861		$	119,486		$	19,375		16.2	%	$	265,236		$	220,080		$	45,156		20.5	%

	INTERNATIONAL
	- Transactions		47,524			37,836			9,688		25.6	%		94,282			73,734			20,548		27.9	%
	- Revenues, net per transaction	$	2.83		$	2.68		$	0.15		5.7	%	$	2.78		$	2.64		$	0.14		5.4	%
	- Revenues, net	$	134,641		$	101,383		$	33,258		32.8	%	$	262,174		$	194,440		$	67,734		34.8	%


	FLEETCOR CONSOLIDATED REVENUES
	- Transactions		90,241			78,974			11,267		14.3	%		177,424			153,134			24,290		15.9	%
	- Revenues, net per transaction	$	3.03		$	2.80		$	0.23		8.4	%	$	2.97		$	2.71		$	0.27		9.8	%
	- Revenues, net	$	273,502		$	220,869		$	52,633		23.8	%	$	527,410		$	414,520		$	112,890		27.2	%



	FLEETCOR CONSOLIDATED ADJUSTED REVENUES¹
	- Transactions		90,241			78,974			11,267		14.3	%		177,424			153,134			24,290		15.9	%
	- Adjusted Revenues per transaction	$	2.81		$	2.55		$	0.26		10.1	%	$	2.76		$	2.49		$	0.27		10.8	%
	- Adjusted Revenues	$	253,175		$	201,314		$	51,861		25.8	%	$	489,460		$	381,104		$	108,356		28.4	%



¹Adjusted revenues is a non-GAAP financial measure defined as revenues, net less merchant commissions. The Company believes this measure is a more effective way to evaluate the Company's revenue performance. Refer to Exhibit 1 for a reconciliation of revenues, net to adjusted revenues.

Sources of Revenue²
		Three Months Ended June 30,											Six Months Ended June 30,
			2014			2013		Change			% Change			2014			2013		Change			% Change
	Revenue from customers and partners		55.1	%		50.9	%		4.2	%	8.3	%		55.6	%		51.1	%		4.5	%	8.8	%
	Revenue from merchants and networks		44.9	%		49.1	%		-4.2	%	-8.6	%		44.4	%		48.9	%		-4.5	%	-9.2	%

	Revenue tied to fuel-price spreads		14.5	%		18.7	%		-4.2	%	-22.5	%		14.2	%		17.4	%		-3.2	%	-18.4	%
	Revenue influenced by absolute price of fuel		18.7	%		19.6	%		-0.9	%	-4.6	%		18.4	%		20.1	%		-1.7	%	-8.5	%
	Revenue from program fees, late fees, interest and other		66.8	%		61.7	%		5.1	%	8.3	%		67.4	%		62.5	%		4.9	%	7.8	%

²Expressed as a percentage of consolidated revenue.

Exhibit 3
Segment Results
(In thousands)
(Unaudited)

		Three Months Ended June 30,				Six Months Ended June 30,
		2014		2013		2014		2013
Revenues, net:
	North America	$	138,861	$	119,486	$	265,236	$	220,080
	International		134,641		101,383		262,174		194,440
		$	273,502	$	220,869	$	527,410	$	414,520

Operating income:
	North America	$	68,317	$	60,103	$	124,514	$	109,529
	International		66,167		48,971		124,106		93,798
		$	134,484	$	109,074	$	248,620	$	203,327

Depreciation and amortization:
	North America	$	6,376	$	5,267	$	13,012	$	10,439
	International		18,053		10,623		35,835		20,080
		$	24,429	$	15,890	$	48,847	$	30,519

Capital expenditures:
	North America	$	1,840	$	1,292	$	3,836	$	2,356
	International		4,128		4,054		7,716		7,752
		$	5,968	$	5,346	$	11,552	$	10,108

Source: FleetCor Technologies, Inc.

Investor Relations
investor@fleetcor.com
770-729-2017

Release Details

FleetCor Reports Second Quarter 2014 Financial Results