10-QPeriod: Q3 FY2014

CORPAY, INC. Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 10, 2014For Securities:CPAY

Summary

FleetCor Technologies, Inc. (CPAY) demonstrated robust top-line growth in the nine months ended September 30, 2014, with revenues increasing by 28.6% to $822.7 million, driven by a combination of strategic acquisitions and organic growth. The company's financial performance reflects strong operational execution, with notable revenue increases in both its North America and International segments. Acquisitions made in 2013 significantly contributed to this growth, alongside positive macroeconomic factors such as higher fuel spread margins. Despite increased operating expenses, including higher merchant commissions, processing, selling, general and administrative, and depreciation/amortization costs, the company managed to grow its operating income by 24.9% year-over-year. Notably, FleetCor is in the process of a significant acquisition of Comdata Inc. for $3.45 billion, which is expected to close in the fourth quarter of 2014. This transaction, to be financed through a combination of new debt and stock issuance, along with the refinancing of existing debt under a new $3.355 billion credit agreement, signifies a major strategic move for the company. Despite the increased debt load associated with these activities, the company's liquidity and capital resources appear sufficient to meet its obligations, supported by strong operating cash flow.

Financial Highlights

47 data points
Beta

Revenue

$295.28M

Net Income

$95.51M

32.3% Net Margin

EPS (Diluted)

$1.11

Total Assets

$4.22B

Cash & Equivalents

$304.11M

Free Cash Flow

$153.04M

Financial Statements
Beta
Revenue$295.28M
Operating Income$144.21M
Net Income$95.51M
EPS (Basic)$1.14
EPS (Diluted)$1.11
Shares Outstanding (Basic)83.61M
Shares Outstanding (Diluted)86.13M

Key Highlights

  • 1Total revenues grew significantly by 28.6% to $822.7 million for the nine months ended September 30, 2014, compared to the same period in 2013.
  • 2North America segment revenue increased by 25.7% to $421.6 million, while International segment revenue saw a stronger increase of 31.8% to $401.1 million.
  • 3Operating income increased by 24.9% to $392.8 million for the nine months ended September 30, 2014.
  • 4The company announced a major acquisition of Comdata Inc. for $3.45 billion, expected to close in Q4 2014, to be financed by new debt and stock issuance.
  • 5A new $3.355 billion credit agreement was entered into on October 24, 2014, intended to refinance existing debt and fund the Comdata acquisition.
  • 6Net income for the nine months ended September 30, 2014, rose by 19.8% to $259.2 million.
  • 7Stock-based compensation expense nearly doubled year-over-year for the nine-month period, impacting general and administrative expenses.

Frequently Asked Questions

FleetCor's growth strategy relies heavily on acquisitions, complemented by organic growth. For the nine months ended September 30, 2014, the company reported a substantial 28.6% increase in revenue to $822.7 million, largely driven by acquisitions completed in 2013 and positive contributions from international operations. The company also experienced growth in its North America segment. This strategy appears to be effectively driving revenue and operating income increases.

FleetCor announced a significant $3.45 billion agreement to acquire Comdata Inc., a leading business-to-business provider of electronic payment solutions. This acquisition is expected to significantly expand FleetCor's offerings, particularly in the virtual payments business, and is anticipated to close in the fourth quarter of 2014. The financing for this acquisition will involve approximately $2.4 billion in new debt and the issuance of FleetCor common stock, alongside the refinancing of existing debt through a new $3.355 billion credit facility.

Fuel prices and fuel-price spread volatility are identified as key factors impacting FleetCor's performance. For the nine months ended September 30, 2014, higher fuel spread margins positively impacted consolidated revenues and operating results. While changes in fuel prices had a minimal impact on revenues, the spread between the wholesale cost and the charged price for fuel remains a crucial element of the company's revenue model.

As of September 30, 2014, FleetCor had $304.1 million in unrestricted cash and cash equivalents. The company utilizes a securitization facility for its domestic fuel card receivables and has available borrowing capacity under its credit facilities. Management believes that current cash balances, available borrowing capacity, and operating cash flow are sufficient to meet liquidity needs for at least the next twelve months, with the pending Comdata acquisition financing already secured.