FLEETCOR Technologies, Inc. — 2020 Form 10-K
Filing identity and period: The supplied filing is for FLEETCOR Technologies, Inc. (NYSE: FLT), not a filing under the name Corpay, Inc. It reports the fiscal year ended December 31, 2020; “2020 Q4” figures below are the reported fourth-quarter results.
Business context
FLEETCOR provides digital business payment and expense-management solutions, including fuel, corporate payments, tolls, lodging and gift programs. It reports North America, International and Brazil segments. The COVID-19 pandemic reduced customer activity and transaction volumes during 2020.
Financial results and liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Full-year revenue, net | $2,388.9 million | $2,648.8 million | -9.8% |
| Operating income | $972.3 million | $1,231.4 million | -21.0% |
| Operating margin | 40.7% | 46.5% | -5.8 percentage points |
| Net income | $704.2 million | $895.1 million | -21.3% |
| Diluted EPS | $8.12 | $9.94 | -18.3% |
| Operating cash flow | $1,472.6 million | $1,162.1 million | +$310.5 million |
| Capital expenditures | $78.4 million | $75.2 million | +$3.3 million |
Net margin was 29.5%, versus 33.8% in 2019. Revenue is reported net of underlying product and service costs; the filing does not present a comparable gross margin measure.
Fourth quarter: Revenue was $617.3 million, operating income $293.9 million, net income $209.9 million and diluted EPS $2.44. Compared with fourth-quarter 2019, these declined 11.7%, 8.4%, 10.9% and 6.2%, respectively.
Debt and liquidity: Year-end total debt was $4.33 billion, down from $5.04 billion. Cash and cash equivalents were $934.9 million; restricted cash was $541.7 million and is not freely available for general use. Management reported approximately $1.9 billion in total liquidity, including $941 million available under the Credit Facility; no additional Securitization Facility capacity was available at year-end. Operating cash flow increased mainly because of working-capital timing. Financing cash use was $1.42 billion, including substantial debt repayments and share repurchases.
Material changes and unusual items
- All three segments reported lower revenue: North America -7.4%, International -9.6% and Brazil -19.6%. Brazil’s decline reflected approximately $101 million of unfavorable foreign exchange impact despite about 4% organic growth.
- Management attributed the overall revenue decline principally to pandemic-related volume weakness, approximately $112 million of unfavorable foreign exchange impact and approximately $31 million from lower fuel prices; favorable fuel spreads partly offset these effects by approximately $48 million.
- Processing expense rose 12.4%, primarily reflecting a $90.1 million customer receivable write-off in the cross-border payments business and acquisition costs. Credit-loss provision was $158.5 million, compared with $74.3 million in 2019.
- Adjusted net income, a non-GAAP measure, was $962.2 million and adjusted diluted EPS was $11.09, down from $1,062.1 million and $11.79. The 2020 adjustments included the customer receivable write-off and other specified items; these measures are not substitutes for GAAP results.
- FLEETCOR repurchased 3.5 million shares for $940.8 million in 2020. It reported no cash dividends and said it did not anticipate paying them in the foreseeable future.
Outlook, risks and contingencies
Management expected the pandemic to continue to weigh on revenue and earnings in 2021, while anticipating improvement through the year as economic activity recovered. No numerical 2021 financial guidance is provided in the supplied filing text. Management cited uncertainty around the pandemic, vaccination and recovery, customer financial distress, fuel prices and spreads, foreign exchange, and business travel and trucking volumes.
The FTC lawsuit concerning advertising and marketing practices in the U.S. direct fuel-card business seeks injunctive relief and consumer redress, among other remedies. The company disputes the claims; it stated that it could not reasonably estimate a possible loss range. A shareholder derivative action dismissal was appealed, and a related state action remained stayed. Other risks include credit losses, cybersecurity and service disruptions, regulatory requirements, dependence on payment-network and business partners, foreign exchange and variable-rate debt exposure, and goodwill impairment. Goodwill and intangible assets together represented approximately 61% of total assets; the company reported no goodwill impairment in its 2020 annual test.
Important facts for investors to verify
- Confirm the issuer and ticker: this is FLEETCOR Technologies, Inc. (FLT), despite the request metadata naming Corpay, Inc.
- Review the causes and recoverability of the $90.1 million cross-border customer receivable write-off, the broader credit-loss provision and customer credit trends.
- Track pandemic-related volume recovery, especially fuel, tolls, lodging and corporate-payment activity, and distinguish organic performance from foreign exchange and fuel-price effects.
- Assess liquidity and refinancing risk, including the November 2021 securitization-facility maturity, debt maturities and the use of cash or borrowing for further repurchases and acquisitions.
- Monitor the FTC litigation and any subsequent estimate, settlement, redress or other financial impact.
- Reconcile non-GAAP adjusted results to GAAP earnings and evaluate assumptions used in goodwill valuations.