FleetCor Technologies, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2016. The filing identifies the registrant as FleetCor Technologies, Inc.; the supplied metadata names Corpay, Inc. FleetCor describes a global commercial payments business, including fuel cards, stored-value products, payment processing and fleet services, reported in North America and International segments.
Financial performance
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue, net | $417.9 million | $404.6 million | $832.2 million | $820.8 million |
| Operating income | $171.2 million | $169.2 million | $347.1 million | $332.9 million |
| Operating margin | 41.0% | 41.8% | 41.7% | 40.6% |
| Net income | $114.2 million | $98.7 million | $224.2 million | $192.8 million |
| Diluted EPS | $1.21 | $1.05 | $2.37 | $2.05 |
- Q2 revenue grew 3.3%; net income rose 15.7%. For the first half, revenue grew 1.4% and net income rose 16.2%.
- Q2 North America revenue increased 5.8% to $301.1 million, while International revenue declined 2.7% to $116.8 million. First-half changes were +3.6% and −4.2%, respectively.
- Transaction volumes increased 6.9% in Q2 and 9.9% for the first half. Consolidated revenue per transaction fell to $0.90 from $0.93 in Q2 and to $0.87 from $0.95 for the first half; management cites product mix, fuel economics and foreign exchange.
- Management estimated macroeconomic headwinds reduced consolidated revenue by about $25 million in Q2 and $62 million in the first half, including lower fuel prices/spreads and unfavorable currency movements. Excluding those estimated effects, management reported revenue growth of approximately 9% for Q2 and characterized underlying segment growth as stronger.
- Q2 operating margin contracted 0.8 percentage points, despite higher operating income. North America margin improved to 39.1% from 38.5%; International margin declined to 45.9% from 49.6%. First-half consolidated margin improved to 41.7% from 40.6%.
- Management’s supplemental non-GAAP adjusted net income was $147.1 million in Q2 ($1.56 per diluted share), versus $138.9 million ($1.48) a year earlier; first-half adjusted net income was $291.4 million ($3.09), versus $274.9 million ($2.92). These measures exclude specified items, including stock compensation and amortization.
Cash flow, debt and liquidity
- First-half operating cash flow was $208.9 million, versus $198.4 million. Investing cash use was $37.9 million, including $24.8 million of capital expenditures; financing cash use was $118.3 million. Cash and cash equivalents increased $45.9 million to $493.1 million.
- Cash plus restricted cash totaled approximately $649.1 million at June 30; $156.0 million was restricted. The filing reports $339.9 million of cash and cash equivalents in foreign subsidiaries treated as permanently reinvested.
- Total debt, including the receivables securitization facility, was $2.832 billion, down from $2.935 billion at December 31, 2015. This includes $713 million outstanding under a $950 million securitization facility. The company reported approximately $1.025 billion available under its credit facility and about $8 million of additional securitization capacity.
- Management said cash, borrowing capacity and operating cash generation should meet liquidity needs for at least the next 12 months. The company was in compliance with its credit and securitization covenants at quarter-end.
- First-half share repurchases were $26 million under a newly authorized $500 million, 18-month program; $474.0 million remained available at June 30.
Outlook, developments and risks
- No specific earnings or revenue guidance is provided. Management expects to continue investing in sales and marketing and identifies acquisitions as part of its growth strategy.
- The proposed acquisition of Brazilian electronic toll-payment company STP was expected to cost approximately R$4.4 billion, or about $1.36 billion at June 30 exchange rates, subject to closing adjustments. Regulatory approvals were received in August 2016; management expected a third-quarter close and planned to use existing cash and credit-facility borrowings.
- Q2 and first-half earnings benefited from a non-recurring approximately $11 million purchase-price recovery recorded through the equity-method investment. This was a material contributor to the year-over-year improvement and was excluded from adjusted earnings.
- Key exposures include fuel-price and fuel-spread volatility, customer credit losses, foreign exchange, economic conditions, interest rates, regulatory actions, financing availability and acquisition execution/integration. The filing also identifies risks associated with international operations, including the potential effects of the United Kingdom’s EU referendum.
- Management said ordinary-course legal matters were not expected to have a material adverse effect; no material legal proceedings or governmental investigations were reported. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the registrant and corporate-name relationship: this supplied filing is for FleetCor Technologies, Inc., not a registrant named Corpay, Inc.
- Track STP’s final purchase price, financing, closing and subsequent operating contribution, and assess the impact on leverage and liquidity.
- Separate recurring earnings from the approximately $11 million non-recurring recovery and review management’s non-GAAP adjustments against GAAP results.
- Monitor fuel prices and spreads, foreign-exchange impacts, revenue per transaction and the differing North America and International segment trends.
- Reassess debt, covenant headroom, securitization capacity, restricted and overseas cash, and the pace of share repurchases alongside acquisition funding needs.