FLEETCOR Technologies, Inc. (now identified in the request as Corpay) — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The filing is by FLEETCOR Technologies, Inc.; it reports full-year results, not standalone fourth-quarter results. Amounts below are in U.S. dollars unless noted.
Business context and performance
FLEETCOR provides business payment and spend-management solutions, including fuel and fleet payments, corporate payments, lodging, Brazilian tolls, gift cards and payroll cards. It reports five segments: Fleet, Corporate Payments, Lodging, Brazil and Other. In 2022, the company updated its segment structure and recast prior-period segment information.
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Net revenue | $3.427 billion | $2.834 billion | +20.9% |
| Operating income | $1.447 billion | $1.243 billion | +16.4% |
| Operating margin | 42.2% | 43.8% | Down 1.6 percentage points |
| Net income | $954.3 million | $839.5 million | +13.7% |
| Diluted EPS | $12.42 | $9.99 | +24.3% |
| Adjusted net income (non-GAAP) | $1.237 billion | $1.110 billion | +11.4% |
| Adjusted diluted EPS (non-GAAP) | $16.10 | $13.21 | +21.9% |
Net revenue growth included estimated organic growth of 13%, approximately $121.8 million from acquisitions, and an estimated $96 million favorable macroeconomic contribution. Higher fuel prices and fuel spreads contributed about $99 million and $43 million, respectively; unfavorable foreign exchange reduced revenue by about $47 million. Adjusted results are non-GAAP measures and should be considered alongside GAAP results.
Revenue by segment
| Segment | 2022 revenue | Year-over-year change |
|---|---|---|
| Fleet | $1.505 billion | +14.0% |
| Corporate Payments | $772.4 million | +28.7% |
| Lodging | $456.5 million | +47.4% |
| Brazil | $442.2 million | +20.1% |
| Other | $251.0 million | +6.4% |
Lodging benefited from higher volumes and acquisitions, alongside recovery in airline travel. Corporate Payments growth reflected AP and cross-border sales and higher spend volume. Fleet grew on transaction volumes and new sales, while Brazil benefited from toll-tag growth and expanded product use.
Cash flow, liquidity and debt
- Cash flow from operations: $754.8 million, down from $1.197 billion in 2021. Management attributed the decrease primarily to working-capital movements, including higher fuel prices and volumes and timing of year-end receipts and payments.
- Investing cash flow: $368.3 million used, versus $715.9 million used in 2021; 2022 included $216.9 million of net acquisition spending and $151.4 million of capital expenditures.
- Financing cash flow: $311.2 million used, compared with $343.9 million provided in 2021. The company repurchased $1.405 billion of shares in 2022.
- Operating cash flow less capital expenditures: approximately $603.4 million, calculated from reported figures; this is not a company-reported free-cash-flow measure.
- Liquidity at year-end: approximately $2.0 billion, consisting of $1.4 billion unrestricted cash and $0.6 billion available under the Credit Facility. The company reported no additional availability under its Securitization Facility. Restricted cash included $215.8 million held in Russia.
- Total debt: $7.037 billion at December 31, 2022, versus $5.978 billion a year earlier. The company reported $5.8 billion of variable-rate debt under its Credit Agreement; year-end rates were 5.80% on Term Loan A, 6.13% on Term Loan B and 5.79% on the Revolving A facility. It was in compliance with debt covenants.
- Interest expense, net: $164.7 million, up 44.8%, primarily reflecting higher rates and increased borrowings.
Material changes, outlook and key risks
- Credit losses increased materially: bad-debt expense, including fraud losses, was $131.1 million in 2022 versus $37.9 million in 2021. Management cited higher customer spending associated with fuel prices, new sales and elevated losses among micro-SMB customers. The year-end allowance for credit losses was $149.8 million, up from $98.7 million.
- Russia: the Russian business generated about 3.3% of 2022 revenue and 7.2% of net income. Its year-end net book value was $226.1 million, including $215.8 million of restricted cash. No impairment had been recorded at year-end. The company was pursuing a sale and expected completion in Q2 or Q3 2023, subject to negotiations; timing and outcome were uncertain.
- FTC case: in August 2022, a federal district court granted the FTC summary judgment on liability against the company and CEO, but granted the company summary judgment on the FTC’s claim for monetary relief under the statutory provision at issue. Injunctive relief remained unresolved, and the company said it intended to appeal after final judgment. The filing states that possible losses could not be reasonably estimated.
- Other litigation: two new shareholder derivative suits filed in January 2023 allege fiduciary-duty breaches and seek damages, including a stated approximately $118 million claim in one case. The defendants dispute the allegations.
- Fuel and foreign-exchange exposure: management estimated 13% of 2022 revenue was directly influenced by absolute fuel prices and 6% by fuel-price spreads. About 39% of revenue was denominated in currencies other than the U.S. dollar. A hypothetical 10% exchange-rate change would have changed 2022 operating income by approximately $68.4 million, according to the filing’s sensitivity analysis.
- Outlook: the filing provides no numerical 2023 earnings or revenue guidance. Management said liquidity and expected operating cash flow should be sufficient for existing operations and planned requirements under its current assumptions. It cited macroeconomic conditions, interest rates, fuel prices and spreads, foreign exchange, credit losses, cybersecurity, regulation, and execution of acquisitions and technology initiatives as important uncertainties.
- Capital allocation and leadership: the company authorized up to $7.1 billion under its repurchase program, with approximately $1.2 billion remaining at year-end and authorization through February 1, 2024. It did not anticipate cash dividends in the foreseeable future. Alissa Vickery became interim CFO in October 2022.
Most important facts for investors to verify
- Whether revenue growth and segment profitability persist after separating organic growth, acquisitions, fuel-price and spread effects, and foreign-exchange changes.
- Whether credit losses and receivables quality stabilize; compare subsequent bad-debt expense and allowance coverage with the 2022 increase.
- The resolution and financial consequences of the FTC matter and derivative lawsuits, including any final injunctive order, appeal, settlement or new loss estimate.
- Progress and proceeds from the planned Russia disposition, treatment of restricted Russian cash, and any resulting impairment or other charges.
- Debt repayment, borrowing costs and liquidity as variable rates rise; confirm current facility availability and covenant headroom.
- How much of reported adjusted earnings reflects recurring operating performance versus excluded compensation, amortization, acquisition, restructuring and legal items.