10-QPeriod: Q2 FY2018

CORPAY, INC. Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 9, 2018For Securities:CPAY

Summary

CORPAY, INC. (CPAY) reported a strong second quarter of 2018, demonstrating robust revenue growth and improved profitability. Total revenues increased by 8.1% year-over-year to $585.0 million, driven by acquisitions and organic growth across both its North America and International segments. Net income saw a significant jump of 35.0% to $176.9 million, benefiting from increased revenues, strategic cost management, and the positive impact of the U.S. Tax Cuts and Jobs Act which lowered the effective tax rate. The company continued its strategic growth through acquisitions in 2017, which are now contributing meaningfully to revenue. Despite some headwinds such as unfavorable foreign exchange rates in Brazil and the impact of adopting new accounting standards (ASC 606), the company managed these challenges effectively. Management highlighted continued investment in its sales and marketing efforts and reaffirmed its commitment to strategic acquisitions as a growth driver. The company also reported strong operating income growth and improved operating margins in both segments, indicating effective operational execution.

Financial Highlights

49 data points
Beta

Revenue

$584.99M

Net Income

$176.85M

30.2% Net Margin

EPS (Diluted)

$1.91

Total Assets

$11.49B

Cash & Equivalents

$919.66M

Free Cash Flow

$54.99M

Financial Statements
Beta
Revenue$584.99M
Operating Income$264.78M
Net Income$176.85M
EPS (Basic)$1.98
EPS (Diluted)$1.91
Shares Outstanding (Basic)89.17M
Shares Outstanding (Diluted)92.70M

Key Highlights

  • 1Consolidated revenues increased by 8.1% to $585.0 million for the three months ended June 30, 2018, compared to $541.2 million in the prior year period.
  • 2Net income surged by 35.0% to $176.9 million ($1.91 per diluted share) for the three months ended June 30, 2018, compared to $131.0 million ($1.39 per diluted share) in the prior year.
  • 3Operating income for the three months ended June 30, 2018, increased by 22.6% to $264.8 million, with operating margin improving to 45.3% from 39.9% in the prior year.
  • 4The North America segment revenue grew by 8.2% to $370.9 million, and the International segment revenue grew by 8.0% to $214.0 million, both driven by acquisitions and organic growth.
  • 5The company adopted ASC 606 effective January 1, 2018, which impacted revenue presentation but was managed effectively. The adoption resulted in a reduction of reported revenues by $23 million for the quarter.
  • 6Significant share repurchases continued, with $380.7 million repurchased in the first six months of 2018, reflecting a strong commitment to returning capital to shareholders.
  • 7The company maintains a strong liquidity position with $1.185 billion in cash and cash equivalents, and $444 million available under its Credit Facility as of June 30, 2018.

Frequently Asked Questions

CORPAY, INC. reported strong financial performance in Q2 2018, with an 8.1% increase in total revenues to $585.0 million and a significant 35.0% rise in net income to $176.9 million. This growth was driven by a combination of acquisitions, organic expansion in both North America and International segments, and effective cost management, partially offset by the impact of adopting ASC 606 and foreign currency fluctuations.

The adoption of ASC 606, effective January 1, 2018, led to presentation changes in the statements of income, primarily reclassifying certain amounts previously reported as merchant commissions and processing expenses into revenues. For the three months ended June 30, 2018, this adoption reduced reported consolidated revenues by approximately $23 million. The company adopted this standard using the modified retrospective method, meaning prior periods were not restated.

CORPAY's growth strategy heavily relies on strategic acquisitions and organic expansion. Acquisitions completed in 2017, such as Cambridge Global Payments and CLS, are now contributing meaningfully to revenue growth. The company continues to seek acquisition opportunities to expand its customer base and service offerings, and is also investing in organic growth through dedicated sales forces and marketing efforts.

As of June 30, 2018, CORPAY maintained a solid liquidity position with $1.185 billion in cash and cash equivalents and had $444 million in available borrowing capacity under its Credit Facility. The company utilized a securitization facility for a portion of its domestic receivables to manage funding efficiently. Interest expenses increased due to higher borrowings related to acquisitions and share repurchases, as well as rising LIBOR rates, but the company remained in compliance with all debt covenants.