10-QPeriod: Q1 FY2018

CORPAY, INC. Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 10, 2018For Securities:CPAY

Summary

FLEETCOR Technologies, Inc. (CPAY) reported strong financial performance for the first quarter of 2018, with revenues increasing by 12.5% year-over-year to $585.5 million. This growth was driven by a combination of strategic acquisitions, organic growth across its payment programs, and favorable macroeconomic factors. Net income also saw a significant jump of 41.4% to $174.9 million, bolstered by improved operating efficiencies and a lower effective tax rate following the Tax Cuts and Jobs Act. The company continues to expand its global reach, with both its North America and International segments showing robust revenue growth. The International segment, in particular, demonstrated impressive 16.1% revenue growth. The adoption of the new revenue recognition standard (Topic 606) had a notable impact on revenue presentation but the underlying business performance remained strong. Management highlighted that cash flow from operations was robust, increasing substantially from the prior year, providing ample liquidity for ongoing operations and future strategic initiatives, including share repurchases.

Financial Highlights

48 data points
Beta

Revenue

$585.50M

Net Income

$174.94M

29.9% Net Margin

EPS (Diluted)

$1.88

Total Assets

$11.69B

Cash & Equivalents

$979.57M

Free Cash Flow

$185.49M

Financial Statements
Beta
Revenue$585.50M
Operating Income$260.09M
Net Income$174.94M
EPS (Basic)$1.95
EPS (Diluted)$1.88
Shares Outstanding (Basic)89.77M
Shares Outstanding (Diluted)93.25M

Key Highlights

  • 1Revenue increased by 12.5% to $585.5 million in Q1 2018 compared to Q1 2017.
  • 2Net income rose significantly by 41.4% to $174.9 million.
  • 3The effective tax rate decreased from 26.1% to 23.7% due to the Tax Cuts and Jobs Act.
  • 4North America segment revenue grew by 10.4% and International segment revenue grew by 16.1%.
  • 5Net cash provided by operating activities increased substantially to $200.7 million from $73.5 million in the prior year.
  • 6The company repurchased $88.3 million of its common stock during the quarter.
  • 7Adopted new revenue recognition standard (Topic 606) effective January 1, 2018, impacting revenue presentation.

Frequently Asked Questions

The primary drivers of revenue growth were strategic acquisitions completed in 2017, organic growth across various payment programs (driven by increases in both volume and revenue per transaction), and favorable macroeconomic factors such as higher fuel prices and favorable foreign exchange rates. The adoption of Topic 606 also impacted the presentation of revenue.

FLEETCOR adopted Topic 606 using the modified retrospective method on January 1, 2018. This led to a cumulative effect adjustment to retained earnings and changes in presentation, particularly affecting how merchant commissions and certain processing expenses are reported. While it decreased reported revenues by approximately $24 million for the quarter, the underlying business performance remained strong.

The company reported strong liquidity with $1,222.5 million in cash and cash equivalents (including $242.9 million restricted) as of March 31, 2018. Net cash provided by operating activities increased significantly, and the company had approximately $627 million available under its Credit Facility. Management believes these resources are sufficient to meet liquidity needs for at least the next twelve months.

The company is involved in ongoing shareholder class action and derivative lawsuits related to past public statements. While the company disputes the allegations and intends to defend vigorously, the ultimate outcome is currently unpredictable and could have a material adverse effect. Additionally, a data security incident involving unauthorized access to gift card systems was announced shortly after the quarter end, and the company is investigating its impact, though it does not currently believe it will have a material adverse effect.