FLEETCOR Technologies, Inc. (now identified in request metadata as Corpay, Inc.) — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. The filing registrant is FLEETCOR Technologies, Inc.; the company reported digital payment solutions across North America, Brazil, and International markets.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net revenue | $755.5 million | $585.3 million | $2,031.5 million | $1,771.5 million |
| Operating income | $338.7 million | $264.5 million | $902.3 million | $678.3 million |
| Operating margin | 44.8% | 45.2% | 44.4% | 38.3% |
| Net income | $234.0 million | $188.8 million | $614.5 million | $494.4 million |
| Diluted EPS | $2.80 | $2.19 | $7.24 | $5.68 |
| Adjusted net income per diluted share (non-GAAP) | $3.52 | $2.80 | $9.48 | $8.09 |
- Q3 revenue rose 29.1% year over year; management reported approximately 17% organic growth. Nine-month revenue increased 14.7%, with approximately 10% organic growth.
- Q3 operating margin declined 0.4 percentage points year over year, which management attributed primarily to increased sales spending. Nine-month margin improved 6.1 points, aided in part by the prior-year $90 million customer receivable write-off and lower credit-loss expense.
- Q3 revenue growth reflected business recovery and higher transaction volumes, acquisitions contributing approximately $38 million, and an estimated net favorable macroeconomic impact of approximately $25 million. For the first nine months, acquisitions contributed approximately $64 million; fuel-price spreads had an estimated adverse impact of $49 million.
- Corporate Payments and Lodging were notable growth areas: Q3 revenue increased 58% and 61%, respectively. Fuel revenue increased 20%.
Cash flow, debt, and liquidity
- Cash from operations for the first nine months was $599.5 million, versus $1,214.7 million in 2020. Management cited unfavorable working-capital movements, primarily timing of receipts and payments.
- Investing cash outflow was $621.8 million, primarily reflecting acquisitions; financing cash inflow was $579.2 million. Capital expenditures were $74.5 million.
- At September 30, cash and cash equivalents were $1.271 billion; restricted cash was $737.9 million. Total debt, including the securitization facility, was $5.691 billion, of which $1.901 billion was classified as current.
- Management reported approximately $1.9 billion of liquidity, comprising $1.3 billion of unrestricted cash and approximately $650 million available under the credit facility. It reported no additional availability under the securitization facility at quarter-end.
- The company increased its receivables securitization commitment from $1.0 billion to $1.3 billion. It also established a new $1.15 billion Term Loan B maturing in 2028. The company said it was in compliance with debt covenants.
- Cash returned through share repurchases was $822.3 million during the first nine months. The company had repurchased $3.9 billion under its program through quarter-end, with up to $1.2 billion remaining authorized.
Outlook, commentary, and material risks
- The filing provides no specific revenue, earnings, or full-year numerical guidance. Management said cash, borrowing capacity, and expected operating cash flows should meet existing and planned needs for the foreseeable future, subject to assumptions and risks.
- Management described continued recovery from COVID-19 effects, while warning that the pandemic’s duration and economic consequences remained uncertain and could affect activity, liquidity, customers, suppliers, and employees.
- Results are sensitive to foreign exchange rates, fuel prices and fuel-price spreads, interest rates, transaction volumes, customer credit and payment behavior, and the ability to maintain receivables securitization and other funding sources.
- The FTC matter remained unresolved. The FTC pursued an administrative action with substantially the same factual allegations as its earlier lawsuit; proceedings were stayed pending a court decision on the FTC’s request concerning the federal case. The company said it could not estimate a reasonably possible loss or range of loss.
- Other contingencies included shareholder derivative litigation, including an appeal of the dismissal of the federal case. Management said ordinary-course legal matters were not expected to have a material adverse effect overall, but acknowledged particular resolutions could affect results in a period.
- 2021 acquisitions included ALE Solutions, AFEX, and Roger (rebranded CorpayOne). Purchase accounting for these transactions was preliminary, including valuations of goodwill and intangible assets.
Most important facts for investors to verify
- Whether organic growth and transaction-volume recovery persist after adjusting for acquisitions, fuel prices, fuel spreads, and foreign exchange movements.
- Whether operating margins and cash generation improve, particularly given the sharp year-over-year decline in operating cash flow from working capital.
- Debt maturities, facility availability, interest-rate exposure, and the extent to which repurchases and acquisitions are funded with debt.
- Final acquisition purchase-price allocations and whether expected benefits from ALE, AFEX, and CorpayOne are realized.
- Developments and potential financial exposure in the FTC proceeding and shareholder litigation; the filing does not provide a clear estimated loss for the FTC matter.