01—Abstract
Summary
Summary of the 10-K filed March 1, 2018. Cited figures are marked; the original filing is the authoritative source.
CORPAY, INC. (CPAY), previously known as FLEETCOR, filed its 2017 10-K on March 1, 2018.
The filing details the company's performance and strategic position as a global provider of commercial payment solutions. The company operates across North America and internationally, offering specialized payment products for various spend categories like fuel, lodging, and corporate payments. Acquisitions have been a key growth driver, with significant transactions in 2017, including the acquisition of Cambridge Global Payments and CLS, expanding its corporate payments and lodging offerings respectively.
The company's financial performance showed substantial revenue growth driven by both acquisitions and organic expansion. However, operating expenses also increased, largely due to integration costs from acquisitions and increased stock-based compensation.
Despite these investments, FLEETCOR demonstrated strong operating income growth and reported a significant increase in net income, partly due to the impact of the Tax Cuts and Jobs Act of 2017. Investors should note the company's ongoing reliance on debt financing to support its growth strategy and operations.
02—Key points
Key Highlights
- FLEETCOR (CPAY) reported significant revenue growth of 22.8% in 2017, reaching $2.25 billion, primarily driven by acquisitions (contributing $212 million) and organic growth (approximately 9%).
- The company made substantial strategic acquisitions in 2017, including Cambridge Global Payments for $616.1 million and CLS for approximately $104.7 million, expanding its presence in international payments and lodging services.
- Net income saw a substantial increase of 63.6% to $740.2 million in 2017, boosted by a $175 million pre-tax gain on the sale of the NexTraq telematics business and the impact of the Tax Cuts and Jobs Act which provided a provisional net tax benefit of $128.2 million.
- Operating income grew by 17.2% to $883.8 million, although operating margins slightly decreased from 41.2% in 2016 to 39.3% in 2017 due to higher operating expenses related to acquisitions and stock-based compensation.
- The company's largest revenue segment remains Fuel Cards, accounting for 49% of total revenue in 2017, followed by Tolls (15%) and Corporate Payments (12%).
- FLEETCOR actively repurchased shares under its stock repurchase program, with $590.1 million in repurchases completed by the end of 2017, demonstrating a commitment to returning capital to shareholders.
- The company has a strong liquidity position, with $1.13 billion in cash and cash equivalents at year-end 2017, and significant available borrowing capacity under its Credit Facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Corpay, Inc. kept $0.33.
- Revenue$2.25B100.0%
- Cost of revenue−$96.8M4.3%
- Gross profit$2.15B95.7%
- Operating costs−$1.27B56.4%
- Operating income$883.8M39.3%
- Interest, other & tax−$143.6M6.4%
- Net income$740.2M32.9%
Where FY2017 revenue went
$2.25B- Operating costs: $1.27B, 56% of revenue
- Net income: $740.2M, 33% of revenue
- Cost of revenue: $96.8M, 4.3% of revenue
- Interest, other & tax: $143.6M, 6.4% of revenue
Kept 33% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 1, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $2.25B$1.83B | +22.8% |
| Cost of Revenue | $96.80M$91.60M | +5.7% |
| Gross Profit | $2.15B$1.74B | +23.7% |
| Operating Income | $883.76M$754.15M | +17.2% |
| Net Income | $740.20M$452.38M | +63.6% |
| EPS (Basic) | $8.12$4.89 | +66.1% |
| EPS (Diluted) | $7.91$4.75 | +66.5% |
| Shares Outstanding (Basic) | 91.13M92.60M | −1.6% |
| Shares Outstanding (Diluted) | 93.59M95.21M | −1.7% |
05—Questions
Frequently Asked Questions
What were the primary drivers of FLEETCOR's revenue growth in 2017?
FLEETCOR's revenue grew by 22.8% in 2017 to $2.25 billion. This growth was primarily driven by acquisitions completed in 2016 and 2017, which contributed approximately $212 million in revenue. Organic growth, reflecting increases in transaction volume and revenue per transaction, also contributed about 9% to revenue growth. The macroeconomic environment had a favorable impact of approximately $33 million.
How did recent acquisitions impact the company's financial performance and strategic direction?
FLEETCOR completed several significant acquisitions in 2017, including Cambridge Global Payments for $616.1 million and CLS for approximately $104.7 million. These acquisitions expanded the company's corporate payments and lodging businesses, respectively, and contributed significantly to revenue growth. The company views acquisitions as a critical component of its growth strategy and intends to continue seeking opportunities.
What was the impact of the Tax Cuts and Jobs Act on FLEETCOR's net income in 2017?
The Tax Cuts and Jobs Act, enacted in December 2017, had a significant positive impact on FLEETCOR's net income. The company provisionally recorded a net tax benefit of $128.2 million, primarily from the reduction in the U.S. federal corporate tax rate from 35% to 21% and the revaluation of deferred tax assets. This contributed substantially to the reported 63.6% increase in net income for the year.
What is the company's approach to capital allocation and shareholder returns?
FLEETCOR has an active stock repurchase program, authorizing up to $1.1 billion in repurchases, with $590.1 million completed by the end of 2017. The company also reported significant capital expenditures, primarily for strategic projects and acquisitions. FLEETCOR does not currently anticipate paying dividends in the foreseeable future, preferring to reinvest earnings for business operations and expansion.
06—Continue