WEX Inc. (NYSE: WXS), a leading provider of corporate card
payment solutions, today reported financial results for the three
months ended December 31, 2012.
Fourth Quarter Financial Results
Total revenue for the fourth quarter of 2012 increased 21% to
$169 million from $140.0 million for the fourth quarter of 2011.
Net income to common shareholders on a GAAP basis was $29.1
million, or $0.74 per diluted share, compared with $32.8 million,
or $0.84 per diluted share, for the fourth quarter last year. The
current quarter’s net income on a GAAP basis reflected several
items related to the acquisition of Fleet One, including an $8.9
million charge related to the discontinuation of WEX’s OTR platform
and a $1.7 million expense related to the termination of Fleet
One’s MasterCard business. These items are excluded from adjusted
net income.
On a non-GAAP basis, the Company's adjusted net income for the
fourth quarter of 2012 increased 9% to $41.8 million, or $1.07 per
diluted share, from $38.4 million, or $0.98 per diluted share, for
the same period a year ago. As previously announced, fourth quarter
GAAP net income and adjusted net income both included $4.8 million
of deal and integration related costs associated with the
acquisition of Fleet One.
For the full year 2012, revenue increased 13% to $623 million
from $553 million in 2011. Net income to common shareholders on a
GAAP basis was $2.48 per diluted share in 2012 compared to $3.43
per diluted share in 2011. In addition to the expenses outlined
above, full year 2012 GAAP net income included an impairment charge
in the third quarter related to the Company’s Australian prepaid
business. On a non-GAAP basis, adjusted net income increased 12% to
$4.06 per diluted share from $3.64 per diluted share in 2011. For
the full year 2012, adjusted net income included a charge related
to a retroactive change in Australian tax law that was enacted in
the third quarter, as well as deal and integration costs associated
with the Company’s acquisition of Fleet One.
WEX uses fuel-price derivative instruments to mitigate financial
risks associated with the variability in fuel prices in North
America. For the fourth quarter of 2012, the Company's GAAP
financial results include an unrealized gain of $0.1 million dollar
pre-tax, non-cash, mark-to-market gain on these instruments. See
Exhibit 1 for a full reconciliation of adjusted net income.
“2012 was a great year for WEX as illustrated by our financial
results. Over the past year, we made great strides in executing
against our multi-pronged strategy, setting the stage for strong
potential revenue expansion in 2013,” said Michael E. Dubyak, WEX
chairman, president and chief executive officer. “As we look to the
upcoming year, there are a number of emerging opportunities across
our business to drive our future growth including global prospects
for our successful virtual card product. Given our track record of
targeting investments to yield strong performance, we plan to
accelerate the level and timing of our strategic investments to
maximize the potential of our businesses. Overall, we believe these
actions will better position WEX for the long-term while also
advancing our status as a comprehensive business partner for fleet,
virtual and paycard solutions,” concluded Mr. Dubyak.
Fourth Quarter 2012 Performance Metrics
Where applicable, the performance metrics listed below include
activity from Fleet One, acquired October 4, 2012, which positively
impacted metrics for the fourth quarter.
- Average number of vehicles serviced
worldwide was approximately 7.6 million, an increase of 14% from
the fourth quarter of 2011.
- Total fuel transactions processed
increased 12.1% from the fourth quarter of 2011 to 89.7 million.
Payment processing transactions increased 15.7% to 70.1 million;
transaction processing transactions increased 1.1% to 19.6
million.
- Average expenditure per domestic
payment processing transaction increased 23.4% from the fourth
quarter of 2011 to $86.53.
- Domestic retail fuel price increased
5.9% to $3.74 per gallon from $3.53 per gallon in the fourth
quarter of 2011.
- Total corporate card purchase volume
grew 23.6% to $2.5 billion, from $2.0 billion for the fourth
quarter of 2011.
Financial Guidance and Assumptions
“Over the past year we have delivered solid financial results
while actively investing in our business to drive future growth,
and we expect this momentum to persist into 2013. While we
anticipate continued strong revenue growth in both our Fleet and
Other Payments segments in 2013, we expect these benefits to be
impacted by higher interest expense as a result of our recent bond
offering and an elevated level of investments in growth
opportunities, particularly related to the globalization of our
virtual card product. With a strong foundation to build upon, we
believe these actions will contribute to the long-term
sustainability of our business,” said Steve Elder, WEX senior vice
president and chief financial officer.
- For the first quarter of 2013, WEX
expects revenue in the range of $158 million to $165 million and
adjusted net income in the range of $34 million to $37 million, or
$0.89 to $0.96 per diluted share.
- For the full year 2013, the Company
expects revenue in the range of $721 million to $741 million and
adjusted net income to be in the range of $168 million to $176
million, or $4.30 to $4.50 per diluted share.
First quarter 2013 guidance is based on an assumed average U.S.
retail fuel price of $3.72 per gallon, and approximately 39 million
shares outstanding. Full-year 2013 guidance is based on an assumed
average U.S. retail fuel price of $3.65 per gallon and
approximately 39 million shares outstanding. In addition, the fuel
prices referenced above are based on the applicable NYMEX futures
price. WEX is assuming that exchange rates will remain in the range
of the current spot rates.
The Company's guidance also assumes that first quarter 2013
domestic fleet credit loss will range between 9 and 14 basis
points, and that domestic fleet credit loss for full year 2013 will
range between 9 to 14 basis points.
The Company's guidance does not reflect the impact of any future
stock repurchases that may occur in 2013, any potential write-offs
related to refinancing our credit facility or the impact of the
resolution of the pending MasterCard merchant litigation. In
addition, this guidance excludes the impact of non-cash,
mark-to-market adjustments on the Company's fuel-price-related
derivative instruments and the amortization of purchased
intangibles as well as the related tax impacts.
Additional Information
Exhibit 1 reconciles adjusted net income, which has not been
determined in accordance with GAAP, to net income as determined in
accordance with GAAP for the three months and years ended December
31, 2012 and 2011.
Management uses the non-GAAP measures presented within this news
release to evaluate the Company's performance on a comparable
basis, to eliminate the volatility associated with its derivative
instruments and to measure the amount of cash that is available for
making payments on the Company's financing debt and for
discretionary purposes. Management believes that investors may find
these measures useful for the same purposes, but cautions that they
should not be considered a substitute for, or superior to,
disclosure in accordance with GAAP.
To provide investors with additional insight into its
operational performance, WEX has included in this news release a
table of selected non-financial metrics for the five quarters ended
December 31, 2012. This table is presented as Exhibit 2. The
Company is also providing selected segment review information for
the three months and years ended December 31, 2012 and 2011 in
Exhibit 3.
Conference Call Details
In conjunction with this announcement, WEX will host a
conference call today, February 6, 2013, at 10:00 a.m. (ET). As
previously announced, the conference call will be webcast live on
the Internet, and can be accessed at the Investor Relations section
of the WEX website, http://www.wexinc.com. The live conference call
also can be accessed by dialing (866) 334-7066 or (973) 935-8463. A
replay of the webcast will be available on the Company's
website.
About WEX Inc.
WEX Inc. (NYSE: WXS) is a leading provider of corporate card
payment solutions. From its roots as a pioneer in fleet card
payments in 1983, WEX now provides its 7.6 million cardholders with
exceptional payment security and control across a wide spectrum of
business sectors. The Company’s operations include WEX Bank, Fleet
One, Pacific Pride, rapid! PayCard, Wright Express Prepaid Cards
Australia, Wright Express Fuel Cards Australia, Wright Express New
Zealand and CorporatePay Limited, England, as well as a majority
equity position in UNIK S.A., Brazil. WEX and its subsidiaries
employ more than 1,300 associates. For more information about WEX,
please visit WEXInc.com.
Forward Looking Statement
This news release contains forward-looking statements, including
statements regarding: financial guidance; assumptions underlying
the Company's financial guidance; management’s expectations for the
impact of recent acquisitions and equity investments; the Company’s
positioning for future growth; planned investments in growth
opportunities; and, confidence in future performance. Any
statements that are not statements of historical facts may be
deemed to be forward-looking statements. When used in this earnings
release, the words "may," "could," "anticipate," "plan,"
"continue," "project," "intend," "estimate," "believe," "expect"
and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain
such words. These forward-looking statements are subject to a
number of risks and uncertainties that could cause actual results
to differ materially, including: the effects of general economic
conditions on fueling patterns and the commercial activity of
fleets; the effects of the Company’s business expansion and
acquisition efforts; the Company’s failure to successfully
integrate the businesses it has acquired; the failure of corporate
investments to result in anticipated strategic value; the impact
and range of credit losses; breaches of the Company’s technology
systems and any resulting negative impact on our reputation,
liability, or loss of relationships with customers or merchants;
fuel price volatility; the Company’s failure to maintain or renew
key agreements; failure to expand the Company’s technological
capabilities and service offerings as rapidly as the Company’s
competitors; the actions of regulatory bodies, including banking
and securities regulators, or possible changes in banking
regulations impacting the Company’s industrial bank and the Company
as the corporate parent; the impact of foreign currency exchange
rates on the Company’s operations, revenue and income; changes in
interest rates; the impact of the Company’s outstanding bonds on
its operations; financial loss if the Company determines it
necessary to unwind its derivative instrument position prior to the
expiration of a contract; the incurrence of impairment charges if
our assessment of the fair value of certain of our reporting units
changes; the uncertainties of litigation; as well as other risks
and uncertainties identified in Exhibit 99.2 of the Company's
current report on Form 8-K furnished to the Securities and Exchange
Commission on January 22, 2013 and the Company's subsequent
periodic and current reports. The Company's forward-looking
statements and these factors do not reflect the potential future
impact of any alliance, merger, acquisition, disposition or stock
repurchases. The forward-looking statements speak only as of the
date of this news release and undue reliance should not be placed
on these statements. The Company disclaims any obligation to update
any forward-looking statements as a result of new information,
future events or otherwise.
WEX INC. CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (in thousands, except per share
data) (unaudited)
Three months endedDecember
31,
For the year endedDecember
31,
2012
2011 2012 2011
Revenues Fleet payment solutions
$
128,882 107,468
$ 470,591 $ 436,704 Other
payment solutions
40,116
32,368
152,560
116,372 Total revenues
168,998 139,836
623,151 553,076
Expenses Salary and other personnel
35,879 25,118
123,380 104,610 Service fees
29,143 18,224
103,189 70,202 Provision for credit losses
7,665
7,063
22,539 27,527 Technology leasing and support
4,819 3,572
18,537 15,423 Occupancy and equipment
12,202 2,957
21,264 11,803 Depreciation and
amortization
15,769 11,725
66,360 45,369 Operating
interest expense
1,560 1,265
4,990 5,453 Cost of
hardware and equipment sold
877 722
3,147 3,764 Other
11,585
8,457
38,126
35,601 Total operating expenses
119,499 79,103
401,532 319,752
Operating income
49,499 60,733
221,619
233,324 Financing interest expense
(3,556 )
(2,589 )
(10,433 ) (11,676 ) Gain (loss) on foreign
currency transactions
13 (96 )
(299 ) (459 )
Net realized and unrealized (loss) on fuel
price derivatives
(319 ) (6,878 )
(12,365 ) (11,869 )
Decrease in tax refund due to former
shareholder of RD Card Holdings Australia
— 9,750 — Increase in amount due under tax receivable
agreement
(2,089 )
160
(2,089 )
(715 ) Income before income taxes
43,548 51,330
206,183 208,605 Income taxes
14,694
18,538
109,474
74,983 Net income before noncontrolling
interest
28,854 32,792
96,709 133,622 Less:
Net earnings from noncontrolling interest
(199 ) —
(213 ) —
Net
earnings attributable to WEX Inc. 29,053 32,792
96,922 133,622
Changes in available-for-sale securities,
net of tax effect of $(71) and $(3) in 2012 and $(24)
and $66 in 2011
(117 ) (36 )
(3 ) 108
Changes in interest rate swaps, net of tax
effect of $— and $35 in 2012 and $33 and $179 in
2011
— 56
60 308 Foreign currency translation
(455 )
13,974
6,734 2,567
Comprehensive income attributable to WEX Inc.
$ 28,481
46,786
$ 103,713 $
136,605
Net earnings attributable to WEX Inc. per
share: Basic
$ 0.75 $ 0.85
$ 2.50 $
3.45 Diluted
$ 0.74 $ 0.84
$ 2.48 $
3.43
Weighted average common shares outstanding:
Basic
38,862 38,759
38,840 38,686 Diluted
39,091
39,015
39,092
38,998
WEX INC. CONSOLIDATED BALANCE
SHEETS (in thousands, except per share data)
December 31,
2012 2011
Assets
Cash and cash equivalents
$ 197,662 $ 25,791 Accounts
receivable (less reserve for credit losses of $11,709 in 2012 and
$11,526 in 2011)
1,555,814 1,323,915 Income taxes receivable
— 7,755 Available-for-sale securities
16,350 17,044
Fuel price derivatives, at fair value
— 410 Property,
equipment and capitalized software, net
60,097 62,078
Deferred income taxes, net
100,128 143,524 Goodwill
844,285 549,504 Other intangible assets, net
241,810
109,656 Other assets
90,538
38,383 Total assets
$ 3,106,684 $
2,278,060
Liabilities and Stockholders' Equity Accounts payable
$ 527,838 $ 409,226 Accrued expenses
60,532
54,738 Income taxes payable
10,151 — Deposits
890,345
693,654 Borrowed federal funds
48,400 6,900 Revolving
line-of-credit facilities and term loan
621,000 295,300
Amounts due under tax receivable agreement
86,550 92,763
Fuel price derivatives, at fair value
1,729 415 Other
liabilities
20,546
15,749 Total liabilities
2,267,091 1,568,745
Commitments and contingencies Redeemable
noncontrolling interest
21,662 —
Stockholders'
Equity
Common stock $0.01 par value; 175,000
shares authorized; 42,586 in 2012 and 42,252 in 2011
shares issued; 38,908 in 2012 and 38,765 in 2011 shares
outstanding
426 423 Additional paid-in capital
162,470
146,282 Retained earnings
730,311
633,389 Other comprehensive income (loss), net of tax: Net
unrealized gain on available-for-sale securities
197 200 Net
unrealized loss on interest rate swaps
— (60 ) Net foreign
currency translation adjustment
37,182 30,448 Accumulated other
comprehensive income
37,379 30,588 Less treasury
stock at cost; 3,766 shares in 2012 and 3,566 in 2011
(112,655 ) (101,367 )
Total stockholders' equity
817,931 709,315 Total
liabilities and stockholders' equity
$
3,106,684 $ 2,278,060
Exhibit
1 Reconciliation of Adjusted Net Income to GAAP Net
Earnings Fourth Quarter and Full Year Ended 2012 and
2011 (in thousands) (unaudited)
Three months endedDecember
31,
Year endedDecember 31,
2012 2011
2012 2011
Total
adjusted net income WEX Inc. $
41,843 $ 38,374
$
158,524 $ 141,792 Unrealized
gains (losses) on fuel price derivatives
116
(2,913 )
(1,724 ) 10,872 Amortization of acquired
intangible assets
(7,987 ) (5,690 )
(23,468
) (22,412 ) Goodwill impairment
(1,337 )
— (17,508 ) — Change in tax refund due
to former shareholders of RD CardHoldings Australia
—
— 9,750 — Non-cash adjustment related to the
tax receivable agreement
(2,089 ) 160
(2,089
) (715 ) Impairment and other charges related to Fleet One
acquisition
(10,550 ) — (10,550
) — Net earnings attributable to noncontrolling
interest
228 — 305 — Tax impact
8,829
2,861
(16,318
) 4,085 Net earnings
attributable to WEX Inc.
$
29,053 $ 32,792
$
96,922 $ 133,622
Although adjusted net income is not calculated in accordance
with generally accepted accounting principles (GAAP), this measure
is integral to the Company's reporting and planning processes. The
Company considers this measure integral because it eliminates the
non-cash volatility associated with the fuel price related
derivative instruments, and excludes the amortization of purchased
intangibles, goodwill impairment, asset impairment, charges related
to the acquisition of Fleet One, the net impact of tax rate changes
on the Company's deferred tax asset and related changes in the
tax-receivable agreement including the former shareholder of RD
Card Holdings Australia. Specifically, in addition to evaluating
the Company's performance on a GAAP basis, management evaluates the
Company's performance on a basis that excludes the above items
because:
- Exclusion of the non-cash,
mark-to-market adjustments on fuel-price related derivative
instruments helps management identify and assess trends in the
Company's underlying business that might otherwise be obscured due
to quarterly non-cash earnings fluctuations associated with
fuel-price derivative contracts;
- The non-cash, mark-to-market
adjustments on derivative instruments are difficult to forecast
accurately, making comparisons across historical and future
quarters difficult to evaluate; and
- The amortization of purchased
intangibles, goodwill impairment, asset impairment and other
charges related to the acquisition of Fleet One, the net impact of
tax rate changes on the Company's deferred tax asset and related
tax refund due to former shareholders of RD Card Holdings Australia
have no impact on the ongoing operations of the business.
For the same reasons, WEX believes that adjusted net income may
also be useful to investors as one means of evaluating the
Company's performance. However, because adjusted net income is a
non-GAAP measure, it should not be considered as a substitute for,
or superior to, net income, operating income or cash flows from
operating activities as determined in accordance with GAAP. In
addition, adjusted net income as used by WEX may not be comparable
to similarly titled measures employed by other companies.
The tax impact of the foregoing adjustments is the difference
between the Company’s GAAP tax provision and a pro forma tax
provision based upon the Company’s adjusted net income before
taxes. The methodology utilized for calculating the Company’s
adjusted net income tax provision is the same methodology utilized
in calculating the Company’s GAAP tax provision.
Exhibit 2 Selected Non-Financial Metrics
Q4 2012 Q3 2012
Q2 2012 Q1 2012 Q4 2011
Fleet
Payment Solutions – Payment Processing Revenue: Payment
processing transactions (000s)
70,091
66,155
63,912
60,557
60,598
Gallons per payment processing transaction
22.7
19.3
19.5
19.5
19.6
Payment processing gallons of fuel (000s)
1,592,347
1,274,798
1,243,466
1,178,090
1,185,522
Average US fuel price (US$ / gallon)
$
3.74
3.74
3.79
3.72
3.53
Average Australian fuel price (US$ / gallon) $
5.82
5.42
5.60
5.80
5.45
Payment processing $ of fuel (000s)
$
6,083,379
4,868,631
4,823,656
4,503,698
4,304,150
Net payment processing rate
1.40
%
1.62 %
1.63
%
1.64
%
1.66
%
Fleet payment processing revenue (000s)
$
85,371
78,803
78,451
73,855
71,276
Other Payment Solutions –
PaymentProcessing Revenue:*
Payment solutions purchase volume (000s)
$
2,494,508
3,182,032
2,822,657
2,189,578
2,018,097
Net interchange rate
0.94
%
0.90 %
0.90
%
0.90
%
0.98
%
Payment solutions processing revenue (000s)
$
23,322
28,544
25,417
19,747
19,845
*Excludes payment processing revenue from rapid! Paycard and
UNIK
Definitions and explanations:
Payment processing transactions represents the total number of
purchases made by fleets that have a payment processing
relationship with WEX.
Payment processing gallons of fuel represents the total number
of gallons of fuel purchased by fleets that have a payment
processing relationship with WEX.
Payment processing $ of fuel represents the total dollar value
of the fuel purchased by fleets that have a payment processing
relationship with WEX.
Net payment processing rate represents the percentage of the
dollar value of each payment processing transaction that WEX
records as revenue from merchants less any discounts given to
fleets or strategic relationships.
Payment solutions purchase volume represents the total dollar
value of all transactions that use corporate charge card products
including single use account products.
Net interchange rate represents the percentage of the dollar
value of each transaction that WEX records as revenue less any
discounts given to customers.
Exhibit 3 Segment Revenue Information Fourth
Quarter and Full Year Ended 2012 and 2011 (in thousands)
(unaudited) Fleet Payment Solutions
(in thousands)
Three months endedDecember
31,
Increase (decrease)
Year endedDecember 31,
Increase (decrease)
2012 2011 Amount
Percent
2012
2011 Amount Percent
Revenues Payment processing
$ 85,371 $ 71,276
$ 14,095 20 %
$ 316,480 $ 293,756 $ 22,724 8 %
Transaction processing
4,708 4,081 627 15 %
16,943
16,553 390 2 % Account servicing
18,250 15,149 3,101 20 %
66,842 60,569 6,273 10 % Finance fees
14,555 12,263
2,292 19 %
49,977 46,084 3,893 8 % Other
5,998 4,699 1,299
28 %
20,349
19,742 607 3 % Total
revenues
128,882 107,468 21,414 20 %
470,591 436,704
33,887 8 %
Other Payment Solutions
Three months endedDecember
31,
Increase (decrease)
Year endedDecember 31,
Increase (decrease) (in thousands)
2012 2011
Amount Percent
2012
2011 Amount Percent
Revenues Payment processing
$ 25,751 $
20,226 $ 5,525 27 %
$ 101,482 $ 77,570 $ 23,912 31 %
Transaction processing
2,292 2,924 (632 ) (22 )%
7,420 8,185 (765 ) (9 )% Account servicing
2,627
1,438 1,189 83 %
6,518 3,432 3,086 90 % Finance fees
1,490 202 1,288 638 %
2,330 731 1,599 219 % Other
7,956 7,578
378 5 %
34,810
26,454 8,356 32 %
Total revenues
40,116 32,368 7,748 24 %
152,560 116,372 36,188 31 %
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