10-QPeriod: Q3 FY2017

CORPAY, INC. Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 9, 2017For Securities:CPAY

Summary

Corpay, Inc. (CPAY) reported solid financial results for the nine months ended September 30, 2017, demonstrating significant growth driven by strategic acquisitions and organic expansion. Total revenues increased by 24.5% year-over-year to $1.64 billion, fueled by a strong performance in both the North America and International segments. The acquisition of Cambridge Global Payments in August 2017 was a key driver, expanding the company's corporate payments capabilities, alongside the acquisition of STP in Brazil in 2016 which bolstered the International segment. Despite increased operating expenses related to acquisitions and growth initiatives, the company managed to improve net income by 28.2% to $457.5 million. The company also successfully executed a significant divestiture of its NexTraq telematics business, generating a substantial gain and allowing for a strategic refocusing. Management expressed confidence in the company's liquidity and ability to meet its financial obligations, supported by robust cash flows from operations and available credit facilities.

Financial Highlights

48 data points
Beta

Revenue

$577.88M

Net Income

$202.82M

35.1% Net Margin

EPS (Diluted)

$2.18

Total Assets

$11.33B

Cash & Equivalents

$834.76M

Free Cash Flow

$206.99M

Financial Statements
Beta
Revenue$577.88M
Operating Income$232.64M
Net Income$202.82M
EPS (Basic)$2.23
EPS (Diluted)$2.18
Shares Outstanding (Basic)90.75M
Shares Outstanding (Diluted)93.00M

Key Highlights

  • 1Total revenues increased by 24.5% to $1.64 billion for the nine months ended September 30, 2017, compared to the same period in 2016.
  • 2Net income rose by 28.2% to $457.5 million for the nine months ended September 30, 2017.
  • 3The company completed the acquisition of Cambridge Global Payments for approximately $584.1 million, significantly expanding its corporate payments segment.
  • 4Acquisitions, particularly STP in Brazil and Cambridge, were major contributors to revenue growth, especially in the International segment.
  • 5Corpay successfully divested its NexTraq telematics business for $316 million, resulting in a pre-tax gain of $175 million.
  • 6Operating income grew by 19.6% to $643.7 million for the nine months ended September 30, 2017.
  • 7Cash flow from operations remained strong, providing $419.5 million for the nine months ended September 30, 2017, while investing activities decreased due to fewer acquisition outlays and proceeds from asset sales.

Frequently Asked Questions

The primary drivers of Corpay's revenue growth were strategic acquisitions, including Cambridge Global Payments and STP, as well as organic growth across its payment programs. These acquisitions significantly expanded the company's market reach and service offerings, particularly in the International segment.

The sale of the NexTraq telematics business for $316 million generated a pre-tax gain of $175 million, which was recognized in 'Other (income) expense, net'. This divestiture allowed Corpay to exit the telematics business and reinvest in its core payment solutions. While it reduced current period revenues, the gain significantly boosted net income for the period.

Corpay maintains a strong liquidity position with $1.02 billion in total cash and cash equivalents (including restricted cash) as of September 30, 2017. The company anticipates its current cash, available borrowing capacity, and cash generated from operations will be sufficient to meet its liquidity needs for at least the next twelve months. Management is confident in its ability to service debt, fund acquisitions, and meet working capital needs.

Acquisitions led to increased operating expenses, notably in processing, selling, general and administrative, and depreciation and amortization. For instance, processing expenses rose by 23.2% and selling expenses by 32.6% for the nine months ended September 30, 2017, largely due to integration costs, amortization of intangible assets, and increased personnel related to the acquired businesses.