FleetCor Reports Third Quarter 2016 Financial Results

November 1, 2016

Raises 2016 Guidance

NORCROSS, Ga.--(BUSINESS WIRE)--Nov. 1, 2016-- FleetCor Technologies, Inc. (NYSE:FLT), a leading global provider of fuel cards and workforce payment products to businesses, today reported financial results for its third quarter ended September 30, 2016.

“We delivered a solid quarter, slightly ahead of our expectations. Adjusted net earnings per share grew 15% on a reported basis, and 25% on a macro neutral basis, ahead of our stated target”, said Ron Clarke, Chairman and CEO, FleetCor Technologies, Inc. “We also completed the STP and Travelcard acquisitions during the third quarter, and are beginning our transformation work with both assets.”

Financial Results for Third Quarter 2016:

GAAP Results

Total revenues increased 7% to $484.4 million in the third quarter of 2016 compared to $451.5 million in the third quarter of 2015.
GAAP net incomeincreased 11% to $129.6 million in the third quarter of 2016 compared to $116.8 million in the third quarter of 2015.
GAAP net incomeper diluted share increased 10% to $1.36 in the third quarter of 2016 compared to $1.24 per diluted share in the third quarter of 2015.

Non-GAAP Results¹

Adjusted revenues¹ (revenues, net less merchant commissions) increased 9% to $456.2 million in the third quarter of 2016 compared to $419.8 million in the third quarter of 2015.
Adjusted net income¹ increased 16% to $183.3 million in the third quarter of 2016 compared to $157.6 million in the third quarter of 2015.
Adjusted net income per diluted share¹ increased 15% to $1.92 in the third quarter of 2016 compared to $1.67 in the third quarter of 2015.

“We believe macro-economic headwinds impacted our business in the third quarter by approximately $28 million in revenue or approximately $0.16 in adjusted net income per diluted share on a year over year basis,” said Eric Dey, chief financial officer FleetCor Technologies, Inc. “We are raising our guidance to reflect our third quarter results compared to our expectations.”

Fiscal Year 2016 Outlook:

Total revenues between $1,810 million and $1,830 million;
GAAP net income¹ between $469 million and $477 million;
GAAP net income per diluted share¹ between $4.94 and $5.02;
Adjusted net income¹ between $648 million and $654 million; and
Adjusted net income per diluted share¹ between $6.82 and $6.90.

FleetCor’s fiscal-year guidance assumptions for the fourth quarter of 2016 are as follows:

Weighted average fuel price of $2.29 for the fourth quarter of 2016 compared to the $2.31 assumption used in our prior guidance and approximately $2.35 per gallon average in the fourth quarter of 2015.
Market spreads lower in the fourth quarter of 2016 compared to the fourth quarter of 2015 and unchanged from assumptions used in the last earnings call.
Foreign exchange rates equal to the seven day average ended October 13, 2016. The impact of the pound negatively impacts prior guidance for the fourth quarter by approximately $2 million.
Same store sales softness in the fourth quarter of approximately 3%.
Continued weakness in the Company’s Brazilian and Russian businesses.
Fully diluted shares outstanding of approximately 95.2 million shares.
Fourth quarter tax rate of approximately 30.0%.

_____________________

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. A reconciliation of GAAP guidance to non-GAAP guidance is provided in Exhibit 4 .

Conference Call

The company will host a conference call to discuss third quarter 2016 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 13647922. The replay will be available until November 8, 2016. 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 macro- economic conditions and estimated impact of these conditions on our operations and financial results, revenue and earnings guidance and assumptions underlying financial guidance. 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 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, 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, 2015, filed with the Securities and Exchange Commission on February 29, 2016. 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, discounts and intangible assets, (c) amortization of the premium recognized on the purchase of receivables, (d) our proportionate share of amortization of intangible assets at our equity method investment and (e) a non-recurring net gain at our equity method investment. The company uses adjusted revenue’s 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. 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 believe one-time non-recurring gains do not necessarily reflect how our equity method investment and business is performing. Reconciliations of GAAP results to non-GAAP results are provided in the attached exhibit 1. A reconciliation of GAAP to non-GAAP guidance is provided in the attached exhibit 4.

Management uses adjusted revenues and adjusted net income:

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 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 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 high volume customer base that can increase their sales and customer loyalty. FleetCor serves commercial accounts in North America, Latin America, Europe, and Australia/New Zealand. 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 September 30,						Nine Months Ended September 30,
		2016¹			2015			2016¹			2015

Revenues, net	$	484,426		$	451,493		$	1,316,593		$	1,272,264

Expenses:
Merchant commissions		28,214			31,726			78,755			80,777
Processing		96,233			90,959			256,738			246,879
Selling		34,180			27,383			92,680			81,011
General and administrative		77,904			66,142			209,084			199,252
Depreciation and amortization		57,084			48,526			141,848			145,435
Other operating, net		(244	)		(1,703	)		(690	)		(2,475	)
Operating income		191,055			188,460			538,178			521,385
Equity method investment loss (income)		2,744			6,108			(2,247	)		13,926
Other expense (income), net		293			(168	)		1,056			2,345
Interest expense, net		17,814			17,163			49,905			54,818
Total other expense		20,851			23,103			48,714			71,089
Income before income taxes		170,204			165,357			489,464			450,296
Provision for income taxes		40,586			48,587			132,503			140,695
Net income	$	129,618		$	116,770		$	356,961		$	309,601

Basic earnings per share	$	1.40		$	1.27		$	3.85		$	3.37
Diluted earnings per share	$	1.36		$	1.24		$	3.75		$	3.29

Weighted average shares outstanding:
Basic shares		92,631			92,110			92,604			91,923
Diluted shares		95,307			94,157			95,204			94,069

¹Reflects the impact of the Company's adoption of Accounting Standards Update 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to simplify several aspects of the accounting for share-based compensation, including the income tax consequences.


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

	September 30, 2016			December 31, 2015
	(Unaudited)
Assets

Current assets:
Cash and cash equivalents	$	405,435		$	447,152
Restricted cash		199,319			167,492
Accounts receivable (less allowance for doubtful accounts of $30,072 and $21,903, at September 30, 2016 and December 31, 2015, respectively)		1,354,306			638,954
Securitized accounts receivable - restricted for securitization investors		656,000			614,000
Prepaid expenses and other current assets		80,837			68,113
Deferred income taxes		8,879			8,913
Total current assets		2,704,776			1,944,624

Property and equipment		251,394			163,569
Less accumulated depreciation and amortization		(106,908	)		(82,809	)
Net property and equipment		144,486			80,760

Goodwill		4,183,981			3,546,034
Other intangibles, net		2,758,877			2,183,595
Equity method investment		79,717			76,568
Other assets		63,837			58,225

Total assets	$	9,935,674		$	7,889,806

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable	$	1,230,339		$	669,528
Accrued expenses		226,006			150,677
Customer deposits		595,405			507,233
Securitization facility		656,000			614,000
Current portion of notes payable and other obligations		727,763			261,100
Other current liabilities		39,080			44,936

Total current liabilities		3,474,593			2,247,474

Notes payable and other obligations, less current portion		2,552,357			2,059,900
Deferred income taxes		692,221			713,428
Other noncurrent liabilities		37,982			38,957

Total noncurrent liabilities		3,282,560			2,812,285

Commitments and contingencies

Stockholders’ equity:

Common stock, $0.001 par value; 475,000,000 shares authorized, 121,188,761 shares issued and 92,765,739 shares outstanding at September 30, 2016; and 120,539,041 shares issued and 92,376,335 shares outstanding at December 31, 2015		121			121
Additional paid-in capital		2,057,562			1,988,917
Retained earnings		2,123,297			1,766,336
Accumulated other comprehensive loss		(612,150	)		(570,811	)
Less treasury stock, 28,423,022 and 28,162,706 shares at September 30, 2016 and December 31, 2015, respectively		(390,309	)		(354,516	)

Total stockholders’ equity		3,178,521			2,830,047

Total liabilities and stockholders’ equity	$	9,935,674		$	7,889,806


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

	Nine Months Ended September 30,
		2016			2015

Operating activities
Net income	$	356,961		$	309,601

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

Depreciation		25,706			22,941
Stock-based compensation		50,025			44,387
Provision for losses on accounts receivable		24,512			18,287
Amortization of deferred financing costs and discounts		5,568			5,295
Amortization of intangible assets		112,455			120,055
Amortization of premium on receivables		3,687			2,439
Deferred income taxes		(23,566	)		(27,640	)
Equity method investment (income) loss		(2,247	)		13,926
Other non-cash operating income		(690	)		(2,476	)
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash		(28,744	)		5,697
Accounts receivable		(529,268	)		(71,310	)
Prepaid expenses and other current assets		(1,291	)		2,724
Other assets		(9,115	)		(3,297	)
Excess tax benefits related to stock-based compensation		-			(24,455	)
Accounts payable, accrued expenses and customer deposits		420,293			108,278
Net cash provided by operating activities		404,286			524,452


Investing activities
Acquisitions, net of cash acquired		(1,331,079	)		(9,239	)
Purchases of property and equipment		(41,877	)		(29,526	)
Other		1,411			(7,782	)
Net cash used in investing activities		(1,371,545	)		(46,547	)


Financing activities
Excess tax benefits related to stock-based compensation		-			24,455
Proceeds from issuance of common stock		18,620			13,977
Repurchase of common stock		(35,492	)		-
Borrowings (payments) on securitization facility, net		42,000			(10,000	)
Deferred financing costs paid		(2,272	)		-
Borrowings from notes payable		600,000			-
Principal payments on notes payable		(85,125	)		(77,625	)
Borrowings from revolver- A Facility		1,105,107			-
Payments on revolver- A Facility		(670,940	)		(411,818	)
Borrowings (payments) on swing line of credit, net		5,188			(601	)
Payment of contingent consideration		-			(40,310	)
Other		(673	)		(342	)
Net cash provided by (used in) financing activities		976,413			(502,264	)

Effect of foreign currency exchange rates on cash		(50,871	)		(30,320	)

Net decrease in cash and cash equivalents		(41,717	)		(54,679	)
Cash and cash equivalents, beginning of period		447,152			477,069
Cash and cash equivalents, end of period	$	405,435		$	422,390

Supplemental cash flow information
Cash paid for interest	$	48,525		$	55,959

Cash paid for income taxes	$	79,599		$	47,339


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 September 30,							Nine Months Ended September 30,
			2016			2015				2016			2015

Revenues, net		$	484,426		$	451,493			$	1,316,593		$	1,272,264
Merchant commissions			28,214			31,726				78,755			80,777
Total adjusted revenues		$	456,212		$	419,767			$	1,237,838		$	1,191,487


	The following table reconciles net income to adjusted net income and adjusted net income per diluted share:

		Three Months Ended September 30,							Nine Months Ended September 30,
			2016²			2015				2016²			2015
Net income		$	129,618		$	116,770			$	356,961		$	309,601

Stock based compensation			17,405			13,887				50,025			44,387
Amortization of intangible assets			46,341			39,869				112,455			120,055
Amortization of premium on receivables			1,348			812				3,687			2,439
Amortization of deferred financing costs and discounts			1,917			1,778				5,568			5,295
Amortization of intangibles at equity method investment			2,406			3,032				7,533			8,404
Non recurring net gain at equity method investment			-			-				(10,845	)		-

Total pre-tax adjustments			69,417			59,378				168,423			180,580

Income tax impact of pre-tax adjustments at the effective tax rate*			(15,726	)		(18,579	)	¹		(46,705	)		(57,758	)	¹

Adjusted net income		$	183,310		$	157,570			$	478,679		$	432,424
Adjusted net income per diluted share		$	1.92		$	1.67			$	5.03		$	4.60

Diluted shares			95,307			94,157				95,204			94,069

¹Effective tax rate utilized excludes the impact of a one time tax benefit recognized during the three months ended September 30, 2015 of approximately $7.9 million.

²Reflects the impact of the Company's adoption of Accounting Standards Update 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to simplify several aspects of the accounting for share-based compensation, including the income tax consequences.

* Excludes the results of our equity method investment on our effective tax rate, as results from our equity method investment are reported within the Consolidated Income Statements on a post-tax basis and no tax-over-book outside basis differences related to our equity method investment reversed during 2016.




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 September 30,									Nine Months Ended September 30,
	2016		2015		Change			% Change		2016		2015		Change			% Change

NORTH AMERICA
- Transactions²		371,198		371,518		(320	)	-0.1	%		1,217,292		1,145,259		72,033		6.3	%
- Revenues, net per transaction	$	0.93	$	0.90	$	0.03		3.4	%	$	0.78	$	0.80	$	(0.02	)	-2.6	%
- Revenues, net	$	345,868	$	334,944	$	10,924		3.3	%	$	950,542	$	918,333	$	32,209		3.5	%

INTERNATIONAL
- Transactions		127,390		45,588		81,802		179.4	%		233,340		138,041		95,299		69.0	%
- Revenues, net per transaction	$	1.09	$	2.56	$	(1.47	)	-57.5	%	$	1.57	$	2.56	$	(1.00	)	-38.8	%
- Revenues, net	$	138,558	$	116,549	$	22,009		18.9	%	$	366,051	$	353,931	$	12,120		3.4	%


FLEETCOR CONSOLIDATED REVENUES
- Transactions²		498,588		417,106		81,482		19.5	%		1,450,632		1,283,300		167,332		13.0	%
- Revenues, net per transaction	$	0.97	$	1.08	$	(0.11	)	-10.2	%	$	0.91	$	0.99	$	(0.08	)	-8.5	%
- Revenues, net	$	484,426	$	451,493	$	32,933		7.3	%	$	1,316,593	$	1,272,264	$	44,329		3.5	%



FLEETCOR CONSOLIDATED ADJUSTED REVENUES¹
- Transactions²		498,588		417,106		81,482		19.5	%		1,450,632		1,283,300		167,332		13.0	%
- Adjusted revenues per transaction	$	0.92	$	1.01	$	(0.09	)	-9.1	%	$	0.85	$	0.93	$	(0.08	)	-8.1	%
- Adjusted revenues	$	456,212	$	419,767	$	36,445		8.7	%	$	1,237,838	$	1,191,487	$	46,351		3.9	%

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.

²Includes approximately 270 million and 274 million transactions for the three months ended September 30, 2016 and 2015, respectively, and 924 million and 872 million for the nine months ended September 30, 2016 and 2015, respectively, related to our SVS business acquired with Comdata in the fourth quarter of 2014.


Sources of Revenue³	Three Months Ended September 30,								Nine Months Ended September 30,
	2016		2015		Change		% Change		2016		2015		Change		% Change
Revenue from customers and partners	57.0	%	53.3	%	3.7	%	6.9	%	55.3	%	52.5	%	2.8	%	5.3	%
Revenue from merchants and networks	43.0	%	46.7	%	-3.7	%	-7.9	%	44.7	%	47.5	%	-2.8	%	-5.9	%

Revenue tied to fuel-price spreads	11.2	%	13.0	%	-1.8	%	-13.8	%	11.2	%	12.4	%	-1.2	%	-9.7	%
Revenue influenced by absolute price of fuel	14.0	%	15.3	%	-1.3	%	-8.5	%	14.3	%	15.5	%	-1.2	%	-7.7	%
Revenue from program fees, late fees, interest and other	74.8	%	71.7	%	3.1	%	4.3	%	74.5	%	72.1	%	2.4	%	3.3	%

³Expressed as a percentage of consolidated revenue.


Exhibit 3
Segment Results
(In thousands)
(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Revenues, net:
North America	$	345,868	$	334,944	$	950,542	$	918,333
International		138,558		116,549		366,051		353,931
	$	484,426	$	451,493	$	1,316,593	$	1,272,264

Operating income:
North America	$	135,760	$	132,428	$	367,221	$	351,778
International		55,295		56,032		170,957		169,607
	$	191,055	$	188,460	$	538,178	$	521,385

Depreciation and amortization:
North America	$	32,739	$	32,257	$	96,351	$	96,200
International		24,345		16,269		45,497		49,235
	$	57,084	$	48,526	$	141,848	$	145,435

Capital expenditures:
North America	$	11,980	$	6,493	$	28,501	$	14,510
International		5,140		6,799		13,376		15,016
	$	17,120	$	13,292	$	41,877	$	29,526

Exhibit 4
RECONCILIATION OF NON-GAAP GUIDANCE MEASURES
(In millions, except per share amounts)
(Unaudited)

The following table reconciles 2016 financial guidance for net income to adjusted net income and adjusted net income per diluted share, at both ends of the range:

	2016 GUIDANCE
	Low*			High*
Net income	$	469		$	477
Net income per diluted share	$	4.94		$	5.02

Stock based compensation		66			66
Amortization of intangible assets, premium on receivables, deferred financing costs and discounts		186			186
Amortization of intangibles at equity method investment		10			10
Non recurring net gain at equity method investment		(11	)		(11	)

Total pre-tax adjustments		252			252

Income tax impact of pre-tax adjustments at the effective tax rate**		(74	)		(74	)

Adjusted net income	$	648		$	654
Adjusted net income per diluted share	$	6.82		$	6.90

Diluted shares		95			95

* Columns may not calculate due to impact of rounding.

** Excludes the results of our equity method investment on our effective tax rate, as results from our equity method investment are reported within the Consolidated Income Statements on a post-tax basis and no tax-over-book outside basis differences related to our equity method investment reversed during 2016.

View source version on businesswire.com: http://www.businesswire.com/news/home/20161101006686/en/

Source: FleetCor Technologies, Inc.

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

Release Details

FleetCor Reports Third Quarter 2016 Financial Results