10-QPeriod: Q3 FY2012

CORPAY, INC. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 9, 2012For Securities:CPAY

Summary

FleetCor Technologies, Inc. (CPAY) reported strong revenue growth for the third quarter and the first nine months of 2012, driven by both organic expansion and significant acquisitions. Total revenues increased by 39.3% to $186.9 million for the quarter and by 33.1% to $504.9 million for the nine-month period, compared to the prior year. This growth was fueled by a substantial contribution from recent acquisitions, particularly in the International segment, which saw revenue surge by 107.3% for the quarter. While overall operating income showed robust growth, the company's operating margin experienced a slight compression, mainly due to the integration of newer businesses acquired in 2011 and 2012, which, while profitable, operate with lower margins compared to the established businesses. The company's balance sheet reflects increased assets and liabilities, including higher goodwill and intangible assets resulting from acquisitions, and a strengthened cash position. Financially, the company demonstrated improved net income, growing by 47.2% to $59.6 million for the quarter and 42.5% to $156.1 million for the nine months. This was supported by effective cost management and a lower effective tax rate, partly due to a UK statutory tax rate reduction. FleetCor also successfully managed its debt, with a significant increase in available borrowing capacity following an amendment to its Credit Agreement. The company remains focused on strategic acquisitions as a key growth driver and has sufficient liquidity to fund operations and potential future opportunities.

Financial Highlights

49 data points
Beta

Revenue

$186.93M

96.3% Gross Margin

Net Income

$59.65M

31.9% Net Margin

EPS (Diluted)

$0.69

Total Assets

$2.84B

Cash & Equivalents

$300.06M

Free Cash Flow

$64.73M

Financial Statements
Beta
Revenue$186.93M
Cost of Revenue$6.90M
Gross Profit$180.03M
Operating Income$85.83M
Interest Expense$3.25M
Net Income$59.65M
EPS (Basic)$0.71
EPS (Diluted)$0.69
Shares Outstanding (Basic)84.00M
Shares Outstanding (Diluted)86.22M

Key Highlights

  • 1Consolidated revenues increased by 39.3% to $186.9 million for the three months ended September 30, 2012, and by 33.1% to $504.9 million for the nine months ended September 30, 2012, compared to the respective prior year periods.
  • 2Net income for the three months ended September 30, 2012, increased by 47.2% to $59.6 million, or $0.69 per diluted share, compared to $40.5 million, or $0.48 per diluted share, in the prior year period.
  • 3The International segment experienced significant growth, with revenues up 107.3% to $85.4 million for the quarter, driven by acquisitions and organic growth.
  • 4Acquisitions played a major role in growth, with $206.8 million invested in acquisitions during the first nine months of 2012, significantly increasing goodwill and intangible assets.
  • 5Operating margin saw a slight decrease from 46.0% to 45.9% for the quarter, attributed to the integration of acquired businesses with lower-margin profiles.
  • 6Cash and cash equivalents increased to $300.1 million at September 30, 2012, and the company amended its Credit Agreement to increase its borrowing capacity to approximately $900 million.
  • 7Effective tax rate decreased from 31.5% to 27.8% for the three months ended September 30, 2012, partly due to a UK statutory tax rate reduction.

Frequently Asked Questions

FleetCor's consolidated revenues increased by 39.3% to $186.9 million for the three months ended September 30, 2012, compared to $134.2 million in the same period of 2011. This growth was driven by organic expansion and significant contributions from acquisitions.

The substantial 107.3% revenue increase in the International segment for the third quarter of 2012 was primarily driven by acquisitions completed in 2011 and 2012, such as the Mexican business, Allstar, a Russian fuel card company, and CTF Technologies, Inc., along with organic growth in its payment programs.

Acquisitions have been a key driver of FleetCor's revenue growth, with $206.8 million invested in acquisitions during the first nine months of 2012. While these acquisitions contribute to revenue and operating income, they have also led to a slight compression in the overall operating margin because some of the acquired businesses have lower margin profiles compared to the company's established operations. Goodwill and intangible assets have also increased substantially on the balance sheet due to these acquisitions.

FleetCor maintains a strong liquidity position, with $300.1 million in cash and cash equivalents at September 30, 2012. The company also recently amended its Credit Agreement, significantly increasing its total borrowing capacity to approximately $900 million. Management believes these resources are sufficient to fund its operations and anticipated needs for at least the next twelve months, excluding major unforecasted acquisitions.