10-QPeriod: Q1 FY2020

CORPAY, INC. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 11, 2020For Securities:CPAY

Summary

For the first quarter of 2020, CORPAY, INC. (CPAY) reported total revenues of $661.1 million, an increase of 6.3% compared to the prior year period. This growth was driven by organic growth across segments and contributions from acquisitions made in 2019. Despite revenue growth, net income saw a decrease of 14.6% to $147.1 million, largely impacted by a significant $90 million write-off of a customer receivable in the foreign currency trading business and unfavorable foreign exchange movements. The company also experienced a decline in operating income by 29.3% to $201.0 million, with a notable drop in operating margin from 45.7% to 30.4%. The company is navigating the early stages of the COVID-19 pandemic, which began to impact operations in the latter half of March 2020, leading to reduced business activity and revenue. Management has implemented cost-saving measures and is focused on maintaining liquidity and business continuity. Despite these challenges, the company reported strong operating cash flow of $420.0 million, an increase from the prior year, and maintained sufficient liquidity through its credit facilities.

Financial Highlights

49 data points
Beta

Revenue

$661.09M

Net Income

$147.06M

22.2% Net Margin

EPS (Diluted)

$1.67

Total Assets

$11.31B

Cash & Equivalents

$1.07B

Free Cash Flow

$401.78M

Financial Statements
Beta
Revenue$661.09M
Operating Income$200.98M
Net Income$147.06M
EPS (Basic)$1.73
EPS (Diluted)$1.67
Shares Outstanding (Basic)84.90M
Shares Outstanding (Diluted)88.20M

Key Highlights

  • 1Total revenues increased by 6.3% to $661.1 million, driven by organic growth and recent acquisitions.
  • 2Net income decreased by 14.6% to $147.1 million, primarily due to a $90 million customer receivable write-off and adverse foreign exchange impacts.
  • 3Operating income declined by 29.3% to $201.0 million, and the consolidated operating margin compressed from 45.7% to 30.4%.
  • 4The company generated strong operating cash flow of $420.0 million, up from $297.5 million in the prior year quarter.
  • 5COVID-19 began to impact operations late in the quarter, with management taking proactive steps to mitigate risks and preserve liquidity.
  • 6North America segment revenue grew 9.5% to $434.7 million, but operating income significantly decreased due to the customer receivable write-off.
  • 7Brazil segment revenue decreased by 6.4% to $99.0 million, largely due to unfavorable foreign exchange rates.

Frequently Asked Questions

The primary driver for the decrease in net income was a significant $90 million write-off of a customer receivable in the company's foreign currency trading business. Additionally, unfavorable foreign exchange movements and the initial impacts of COVID-19 on late-quarter business activity contributed to the decline.

CORPAY, INC. is focusing on employee safety, business continuity, and preserving liquidity. Measures include transitioning employees to work from home, ensuring uninterrupted service, consolidating cash, slowing discretionary spending, and tightening customer credit lines. The company also took out an additional $250 million bridge loan as a precautionary measure.

At March 31, 2020, the company had $1.55 billion in cash and cash equivalents, with approximately $481.6 million restricted. They believe their current cash and borrowing capacity under credit and securitization facilities, along with expected operational cash flows, will be sufficient to meet future needs. However, they acknowledge the uncertainty surrounding the duration and severity of the COVID-19 pandemic.

Acquisitions completed in 2019 contributed approximately $22 million in additional revenue during the first quarter of 2020. These acquisitions also added to selling and general and administrative expenses. The company continues to view acquisitions as a key part of its growth strategy.