Wright Express Corporation, a leading provider of payment processing and information management services to the U.S. commercial and government fleet industry, reported financial results for the three months ended March 31, 2010.
Total revenue for the first quarter of 2010 increased 22% to $83.8 million from $68.5 million for the first quarter of 2009. Net income to common shareholders on a GAAP basis was $18.6 million, or $0.48 per diluted share, compared with $11.0 million, or $0.28 per diluted share, for the comparable quarter a year earlier.
On a non-GAAP basis, the Company’s adjusted net income for the first quarter of 2010 increased 46% to $23.7 million, or $0.61 per diluted share, from $16.3 million, or $0.42 per diluted share, for the year-earlier period.
Wright Express uses fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices. For the first quarter of 2010, the Company’s GAAP financial results include an unrealized $6.8 million pre-tax, non-cash, mark-to-market loss on these instruments. For the first quarter of 2009, the Company reported an unrealized pre-tax, non-cash, mark-to-market loss of $6.5 million.
Exhibit 1 reconciles adjusted net income, which has not been determined in accordance with GAAP, to net income as determined in accordance with GAAP for the first quarters of 2010 and 2009.
Management uses the non-GAAP measures presented within this news release to evaluate the Company’s performance on a comparable basis to eliminate the volatility associated with its derivative instruments and to measure the amount of cash that is available for making payments on the Company’s financing debt and for discretionary purposes. Management believes that investors may find these measures useful for the same purposes, but cautions that they should not be considered a substitute for disclosure in accordance with GAAP.
First Quarter 2010 Performance Metrics
Average number of vehicles serviced was down 5% from the first quarter of 2009 at approximately 4.5 million.
Total fuel transactions processed declined 2% from the first quarter of 2009 to 61.8 million. Payment processing transactions were flat at 49.1 million, and transaction processing transactions decreased 9% to 12.7 million.
Total revenue for the fleet segment increased 19% from the first quarter of 2009 to $73.4 million.
Fleet payment processing revenue increased 27% from the first quarter of 2009 to $48.7 million.
Average expenditure per payment processing transaction increased 37% from the first quarter of 2009 to $55.80.
Average retail fuel price increased 38% to $2.76 per gallon from $2.00 per gallon in the first quarter of 2009.
Total MasterCard purchase volume grew 31% to $853 million, from $649 million for the first quarter of 2009.
To provide investors with additional insight into its operational performance, Wright Express has included in this news release a table of selected non-financial metrics for the five quarters ended March 31, 2010. This table is presented as Exhibit 2.
Management Comments on the First Quarter
“Fleet fueling volume is stabilizing as the economy strengthens, and our results for the first quarter reflect this and other signs of positive momentum in our business environment,” said Michael Dubyak, Chairman and CEO. “Total revenue was up 22% from the first quarter of 2009. Adjusted net income grew 46%, exceeding the high end of our guidance range, driven by continued strong growth in our MasterCard program, higher fuel prices and lower operating interest expense.”
“Thanks to our investments in sales, marketing and customer service, we were able to sustain our traditionally high customer satisfaction levels and keep our voluntary attrition rates low, while adding new fleets to our portfolio,” Dubyak said. “Given the improving economic trends, we believe it will be easier to see the positive impact of these organic growth initiatives in the second half of 2010 as transaction volume in our installed customer base begins to rebound.”
“In a recent third-party market research study we commissioned, Wright Express scored higher than any other fleet card provider in terms of brand impression and long-term customer satisfaction,” said Dubyak. “This strong brand positioning is integral to our value proposition and an important differentiator for us in a fleet card market that remains significantly underpenetrated. Reflecting our brand strength, our fleet marketing campaigns are producing solid results. Meanwhile, we have continued to execute successfully on our diversification strategy. Driven by growth in our MasterCard program, our diversified businesses generated 22% of our total revenue this quarter, compared with 19% in the first quarter of 2009.”
“Our resilient business model continues to generate significant cash flow,” Dubyak said. “We remain committed to leveraging our competitive advantages and our liquidity to capitalize on our market opportunities and continue to deliver consistent results in the quarters and years ahead.”
Wright Express Corporation is issuing financial guidance for the second quarter of 2010 and updating its guidance for full-year 2010. The guidance below assumes a significant year-over-year increase in average fuel prices, partially countered by the Company’s fuel-price derivative instruments. Reflecting the current economic trends, this guidance further assumes that volume in our existing customer base, or same store sales volume, will be neutral-to-positive for the year.
The Company’s guidance also assumes that second-quarter 2010 fleet credit loss will range from 12 to 17 basis points, and that fleet credit loss for full-year 2010 will range from 17 to 22 basis points. In addition, the Company expects interest rates to increase in 2010 from their current historically low levels.
The Company’s guidance does not reflect the impact of any stock repurchases that may occur in 2010. In addition, this guidance excludes the impact of non-cash, mark-to-market adjustments on the Company’s fuel-price-related derivative instruments and the amortization of purchased intangibles. The fuel prices referenced below are based on the applicable NYMEX futures price:
For the second quarter of 2010, Wright Express expects revenue in the range of $86 million to $91 million. This is based on an assumed average retail fuel price of $2.94 per gallon.
Adjusted net income for the second quarter of 2010 is expected to be in the range of $24 million to $26 million, or $0.61 to $0.66 per diluted share, based on approximately 39 million shares outstanding.
For the full year 2010, the Company expects revenue in the range of $358 million to $368 million. This is based on an assumed average retail fuel price of $2.88 per gallon.
Adjusted net income for full-year 2010 is expected to be in the range of $93 million to $99 million, or $2.39 to $2.54 per diluted share, based on approximately 39 million shares outstanding.
Conference Call Details
In conjunction with this announcement, Wright Express will host a conference call today, April 27, 2010, at 10:00 a.m. (ET). As previously announced, the conference call will be webcast live on the Internet, and can be accessed at the Investor Relations section of the Wright Express website, www.wrightexpress.com. The live conference call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. A replay of the webcast will be available on the Company’s website.
About Wright Express
Wright Express is a leading global provider of payment processing and information management services. Wright Express captures and combines transaction information from its proprietary network with specialized analytical tools and purchasing control capabilities in a suite of solutions that enable fleets to manage their vehicles more effectively. The Company’s charge cards are used by commercial and government fleets to purchase fuel and maintenance services for approximately 4.5 million vehicles. Wright Express markets its services directly to fleets and as an outsourcing partner for its strategic relationships and franchisees. The Company’s business portfolio includes a MasterCard-branded corporate card as well as TelaPoint, a provider of supply chain software solutions for petroleum distributors and retailers, and Pacific Pride, an independent fuel distributor franchisee network, as well as international subsidiaries. For more information about Wright Express, please visit www.wrightexpress.com.