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Share Name | Share Symbol | Market | Type |
---|---|---|---|
WEX Inc | NYSE:WEX | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.53 | 0.25% | 211.30 | 214.15 | 210.84 | 213.59 | 203,812 | 00:01:17 |
WEX Inc. (NYSE: WEX), a leading provider of corporate payment solutions, today reported financial results for the three months ended March 31, 2017.
First Quarter 2017 Financial Results
Total revenue for the first quarter of 2017 increased 41% to $291.4 million from $205.9 million for the first quarter of 2016. During the quarter, higher fuel prices positively impacted revenue by $15.4 million when compared to the prior year period. The impact of foreign currency translation was not material.
Net earnings attributable to shareholders on a GAAP basis increased $6.3 million to $29.4 million, or $0.68 per diluted share, compared with $23.1 million, or $0.59 per diluted share, for the first quarter of 2016. The Company's adjusted net income attributable to shareholders, which is a non-GAAP measure, for the first quarter of 2017 was $52.9 million, or $1.23 per diluted share, up 26% from $0.98 per diluted share for the same period last year. See Exhibit 1 for a full explanation and reconciliation of adjusted net income attributable to shareholders and adjusted net income attributable to shareholders per diluted share to the comparable GAAP measures.
“I am pleased to report a strong start to the year, highlighted by a top line beat and bottom line results at the upper end of our guidance range,” said Melissa Smith, WEX’s president and chief executive officer. “We have been executing against our strategic priorities of driving growth, leading through technology, and leveraging our investments. In particular, I am encouraged by the trajectory of our organic growth, the success of the EFS integration, the diversification that the health and travel businesses add to our organization, and our international expansion this quarter.”
Smith continued, “Overall, our performance this quarter is a result of our leading customer service, strategic partnerships and innovative product offerings. We look forward carrying this momentum through 2017 as we open up additional market growth opportunities, establish new client relationships, and solidify existing ones."
First Quarter 2017 Performance Metrics
Financial Guidance and Assumptions
The Company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis, due to the uncertainty and indeterminate amount of certain elements that are included in reported GAAP earnings.
"The entire organization performed well this past quarter, with our net revenue growing in excess of 40%, in part due to the return on the investments we made in 2016. As we continue our progress in 2017, we expect to further strengthen our financial position, continue to drive organic growth, and further expand into high-value, attractive markets," said Roberto Simon, WEX's chief financial officer.
Second quarter 2017 guidance is based on an assumed average U.S. retail fuel price of $2.45 per gallon. Full-year 2017 guidance is based on an assumed average U.S. retail fuel price of $2.44 per gallon. The fuel prices referenced above are based on the applicable NYMEX futures price from last week. Our guidance assumes approximately 43 million shares outstanding for the second quarter and full year 2017.
The Company's guidance also assumes that second quarter 2017 fleet credit loss will range between 11 and 16 basis points, and full year 2017 fleet credit loss will range between 10 and 15 basis points.
The Company's adjusted net income guidance, which is a non-GAAP measure, excludes unrealized gains and losses on derivative instruments, net foreign currency remeasurement gains and losses, acquisition and divestiture related items, stock-based compensation, restructuring and other costs, debt issuance cost amortization, similar adjustments attributed to our non-controlling interest and certain tax related items.
Additional Information
Management uses the non-GAAP measures presented within this news release to evaluate the Company's performance on a comparable basis. Management believes that investors may find these measures useful for the same purposes, but cautions that they should not be considered a substitute for, or superior to, disclosure in accordance with GAAP.
WEX historically used fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices in North America. Starting with the second quarter of 2016, there were no longer any fuel price related derivatives outstanding.
To provide investors with additional insight into its operational performance, WEX has included in this news release in Exhibit 2, a table illustrating the impact of foreign currency translations and fuel prices for each of our operating segments for the three months ended March 31, 2017 and 2016, and in Exhibit 3, a table of selected non-financial metrics for the five quarters ended March 31, 2017. The Company is also providing selected segment revenue information for the three months ended March 31, 2017 and 2016 in Exhibit 4.
Conference Call Details
In conjunction with this announcement, WEX will host a conference call today, April 27, 2017, at 9:00 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 WEX website, http://www.wexinc.com. The live conference call also can be accessed by dialing (866) 334-7066 or (973) 935-8463. The Conference ID number is 3130644. A replay of the webcast will be available on the Company's website.
About WEX Inc.
WEX Inc. (NYSE: WEX) is a leading provider of corporate payment solutions. From its roots in fleet card payments beginning in 1983, WEX has expanded the scope of its business into a multi-channel provider of corporate payment solutions representing more than 10 million vehicles and offering exceptional payment security and control across a wide spectrum of business sectors. WEX serves a global set of customers and partners through its operations around the world, with offices in the United States, Australia, New Zealand, Brazil, the United Kingdom, Italy, France, Germany, Norway, and Singapore. WEX and its subsidiaries employ more than 2,700 associates. The Company has been publicly traded since 2005, and is listed on the New York Stock Exchange under the ticker symbol “WEX.” For more information, visit www.wexinc.com and follow WEX on Twitter at @WEXIncNews.
Forward-Looking Statements
This news release contains forward-looking statements, including statements regarding: management’s expectations for future growth opportunities; market growth opportunities; trajectory for future growth; client expansion; business momentum; strengthening of financial position; expansion into high-value markets; financial guidance; and, assumptions underlying the Company's financial guidance. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. When used in this news release, the words "may," "could," "anticipate," "plan," "continue," "project," "intend," "estimate," "believe," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including: the effects of general economic conditions on fueling patterns as well as payment and transaction processing activity; the impact of foreign currency exchange rates on the Company’s operations, revenue and income; changes in interest rates; the impact of fluctuations in fuel prices; the effects of the Company’s business expansion and acquisition efforts; potential adverse changes to business or employee relationships, including those resulting from the completion of an acquisition; competitive responses to any acquisitions; uncertainty of the expected financial performance of the combined operations following completion of an acquisition; the ability to successfully integrate the Company's acquisitions, including Electronic Funds Source LLC's operations and employees; the ability to realize anticipated synergies and cost savings; unexpected costs, charges or expenses resulting from an acquisition; the Company's failure to successfully operate and expand ExxonMobil's European and Asian commercial fuel card programs; the failure of corporate investments to result in anticipated strategic value; the impact and size of credit losses; the impact of changes to the Company's credit standards; breaches of the Company’s technology systems or those of our third-party service providers and any resulting negative impact on our reputation, liabilities or relationships with customers or merchants; the Company’s failure to maintain or renew key agreements; failure to expand the Company’s technological capabilities and service offerings as rapidly as the Company’s competitors; failure to successfully implement the Company’s information technology strategies and capabilities in connection with its outsourcing arrangement and any resulting cost associated with that failure; the actions of regulatory bodies, including banking and securities regulators, or possible changes in banking or financial regulations impacting the Company’s industrial bank, the Company as the corporate parent or other subsidiaries or affiliates; the impact of the Company’s outstanding notes on its operations; the impact of increased leverage on the Company's operations, results or borrowing capacity generally, and as a result of acquisitions specifically; the incurrence of impairment charges if our assessment of the fair value of certain of our reporting units changes; the uncertainties of litigation; as well as other risks and uncertainties identified in Item 1A of our Annual Report for the year ended December 31, 2016, filed on Form 10-K with the Securities and Exchange Commission on March 6, 2017. The Company's forward-looking statements do not reflect the potential future impact of any alliance, merger, acquisition, disposition or stock repurchases. The forward-looking statements speak only as of the date of this earnings release and undue reliance should not be placed on these statements. The Company disclaims any obligation to update any forward-looking statements as a result of new information, future events or otherwise.
WEX INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three months ended March 31, 2017 2016 Revenues Payment processing revenue $ 136,378 $ 111,057 Account servicing revenue 61,539 44,522 Finance fee revenue 43,372 23,506 Other revenue 50,068 26,843 Total revenues 291,357 205,928 Expenses Salary and other personnel83,585
63,410 Restructuring484
1,589 Service fees 36,750 36,759 Provision for credit losses 12,231 3,917 Technology leasing and support 12,516 11,076 Occupancy and equipment 6,367 5,712 Depreciation and amortization 49,238 22,264 Operating interest expense 4,848 1,386 Cost of hardware and equipment sold 1,029 905 Other expenses 23,557 17,783 Total operating expenses 230,605 164,801 Operating income 60,752 41,127 Financing interest expense (27,148 ) (21,558 ) Net foreign currency gain 8,442 16,124 Net unrealized gains on interest rate swap agreements 1,565 — Net realized and unrealized gain on fuel price derivatives — 711 Income before income taxes 43,611 36,404 Income taxes 14,535 13,183 Net income 29,076 23,221 Less: Net (loss) gain from non-controlling interest (325 ) 135 Net earnings attributable to shareholders $ 29,401 $ 23,086 Net earnings attributable to WEX Inc. per share: Basic $ 0.69 $ 0.60 Diluted $ 0.68 $ 0.59 Weighted average common shares outstanding: Basic 42,871 38,756 Diluted 43,119 38,850
WEX INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
March 31, 2017 December 31,2016 Assets Cash and cash equivalents $ 203,995 $ 190,930 Accounts receivable (less reserve for credit losses of $23,566 in 2017 and $20,092 in 2016) 2,246,815 2,054,701 Securitized accounts receivable, restricted 101,185 97,417 Income taxes receivable 9,792 10,765 Available-for-sale securities 23,413 23,525 Property, equipment and capitalized software (net of accumulated depreciation of $240,160 in 2017 and $228,336 in 2016) 171,254 167,278 Deferred income taxes, net 7,042 6,934 Goodwill 1,840,844 1,838,441 Other intangible assets, net 1,228,670 1,265,468 Other assets 342,752 341,638 Total assets $ 6,175,762 $ 5,997,097 Liabilities and Stockholders’ Equity Accounts payable $ 674,114 $ 617,118 Accrued expenses 290,808 331,579 Deposits 1,040,675 1,118,823 Securitized debt 92,676 84,323 Revolving line-of-credit facilities and term loans, net 1,795,640 1,599,291 Deferred income taxes, net 163,465 152,906 Notes outstanding, net 395,718 395,534 Other debt 107,699 125,755 Amounts due under tax receivable agreement 47,302 47,302 Other liabilities 18,447 18,719 Total liabilities 4,626,544 4,491,350 Commitments and contingencies Stockholders’ EquityCommon stock $0.01 par value; 175,000 shares authorized; 47,327 shares issued in 2017 and 47,173 in 2016; 42,899 shares outstanding in 2017 and 42,841 in 2016
473 472 Additional paid-in capital 545,135 547,627 Non-controlling interest8,275
8,558 Retained earnings1,273,935
1,244,271 Accumulated other comprehensive loss(106,258
) (122,839 ) Treasury stock at cost; 4,428 shares in 2017 and 2016 (172,342 ) (172,342 ) Total stockholders’ equity 1,549,218 1,505,747 Total liabilities and stockholders’ equity $ 6,175,762 $ 5,997,097Exhibit 1
Reconciliation of GAAP Net Earnings Attributable to Shareholders to Adjusted Net Income Attributable to Shareholders
(in thousands, excepts per share data)(unaudited)
Three months ended March 31, 2017 2016per dilutedshare
per dilutedshare
Net earnings attributable to shareholders $ 29,401 $ 0.68 $ 23,086 $ 0.59 Unrealized (gains) losses on derivative instruments (1,565 ) (0.04 ) 5,007 0.13 Net foreign currency remeasurement gain (8,442 ) (0.20 ) (16,124 ) (0.42 ) Acquisition and divestiture related items 40,114 0.93 27,945 0.72 Stock-based compensation 6,457 0.15 4,243 0.11 Restructuring and other costs 1,747 0.04 1,589 0.04 Debt issuance cost amortization 1,954 0.05 772 0.02 ANI adjustments attributable to non-controlling interest (799 ) (0.02 ) 69 — Tax related items (15,979 ) (0.37 ) (8,515 ) (0.22 ) Adjusted net income attributable to shareholders $ 52,888 $ 1.23 $ 38,072 $ 0.98The Company's non-GAAP adjusted net income excludes unrealized gains and losses on derivatives, net foreign currency remeasurement gains and losses, acquisition and divestiture related items, stock-based compensation, restructuring and other costs, debt issuance cost amortization, similar adjustments attributed to our non-controlling interest and certain tax related items.
Although adjusted net income is not calculated in accordance with generally accepted accounting principles (GAAP), this non-GAAP measure is integral to the Company's reporting and planning processes and the chief operating decision maker of the Company uses pre-tax adjusted income to allocate resources. The Company considers this measure integral because it excludes specified items that the Company's management excludes in evaluating the Company's performance. Specifically, in addition to evaluating the Company's performance on a GAAP basis, management evaluates the Company's performance on a basis that excludes the above items because:
For the same reasons, WEX believes that adjusted net income may also be useful to investors as one means of evaluating the Company's performance. However, because adjusted net income is a non-GAAP measure, it should not be considered as a substitute for, or superior to, net income, operating income or cash flows from operating activities as determined in accordance with GAAP. In addition, adjusted net income as used by WEX may not be comparable to similarly titled measures employed by other companies. The Company is unable to reconcile our adjusted net income guidance to the comparable GAAP measure because of the difficulty in predicting the amounts to be adjusted.
The table below shows the impact of certain macro factors on reported revenue:
Exhibit 2Segment Revenue Results
(in thousands)(unaudited)
Fleet SolutionsTravel and CorporateSolutions
Health and EmployeeBenefit Solutions
Total WEX Inc. Three months ended March 31, 2017 2016 2017 2016 2017 2016 2017 2016 Reported revenue $ 190,823 121,074 $ 47,713 $ 45,142 $ 52,821 $ 39,712 $ 291,357 $ 205,928 FX impact (favorable) / unfavorable 81 — 915 — (1,861 ) — (865 ) — PPG impact (favorable) / unfavorable (15,431 ) — — — — — (15,431 ) —To determine the impact of foreign exchange translation (“FX”) on revenue, revenue from entities whose functional currency is not denominated in U.S. dollars, as well as revenue from purchase volume transacted in non-U.S. denominated currencies, were translated using the weighted average exchange rates for the same period in the prior year.
To determine the impact of price per gallon of fuel (“PPG”) on revenue, revenue variable to changes in fuel prices was calculated based on the average retail price of fuel for the same period in the prior year for the portion of our business that earns revenue based on a percentage of fuel spend. For the portions of our business that earns revenue based on margin spreads, revenue was calculated utilizing the comparable margin from the prior year.
The table below shows the impact of certain macro factors on Adjusted Net Income:
Segment Estimated Earnings Impact(in thousands)
(unaudited)
Fleet SolutionsTravel and CorporateSolutions
Health and EmployeeBenefit Solutions
Three months ended March 31, 2017 2016 2017 2016 2017 2016 FX impact (favorable) / unfavorable $ 56 — $ 254 — $ (307 ) — PPG impact (favorable) / unfavorable (8,875 ) — — — — — Realized gain on hedge settlement — 3,636 — — — —To determine the estimated earnings impact of FX, revenue and expenses from entities whose functional currency is not denominated in U.S. dollars, as well as revenue and variable expenses from purchase volume transacted in non-US denominated currencies, were translated using the weighted average exchange rates for the same period in the prior year, net of tax and non-controlling interest where applicable.
To determine the estimated earnings impact of PPG, revenue and certain variable expenses impacted by changes in fuel prices, were adjusted based on the average retail price of fuel for the same period in the prior year for the portion of our business that earns revenue based on a percentage of fuel spend, net of applicable taxes. For the portions of our business that earn revenue based on margin spreads, revenue was adjusted to the comparable margin from the prior year, net of non-controlling interest and applicable taxes.
Exhibit 3Selected Non-Financial Metrics(unaudited)
Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016 Fleet Solutions – Payment Processing Revenue: Payment processing transactions (000s) 102,765 99,662 102,947 94,155 89,097 Gallons per payment processing transaction 27.0 27.4 27.0 22.6 22.7 Payment processing gallons of fuel (000s) 2,775,590 2,731,994 2,776,622 2,126,372 2,018,310 Average US fuel price (US$ / gallon) $ 2.40 $ 2.30 $ 2.24 $ 2.29 $ 1.97 Average Australian fuel price (US$ / gallon) $ 3.76 $ 3.50 $ 3.45 $ 3.29 $ 3.10 Payment processing $ of fuel (000s) $ 7,080,117 $ 6,672,281 $ 6,593,406 $ 5,236,151 $ 4,336,399 Net payment processing rate 1.22 % 1.23 % 1.26 % 1.35 % 1.44 % Payment processing revenue (000s) $ 86,262 $ 81,767 $ 83,132 $ 70,711 $ 62,290 Travel and Corporate Solutions – Payment Processing Revenue: Purchase volume (000s) $ 6,599,797 $ 6,351,741 $ 7,138,956 $ 5,595,326 $ 4,879,001 Net interchange rate 0.53 % 0.71 % 0.74 % 0.77 % 0.71 % Payment processing revenue (000s) $ 34,875 $ 45,390 $ 52,551 $ 43,194 $ 34,626 Health and Employee Benefit Solutions: Purchase volume (000s) $ 1,347,219 $ 803,045 $ 875,598 $ 1,051,839 $ 1,092,552Definitions and explanations:
Payment processing transactions represents the total number of purchases made by fleets that have a payment processing relationship with WEX.
Payment processing gallons of fuel represents the total number of gallons of fuel purchased by fleets that have a payment processing relationship with WEX.
Payment processing dollars of fuel represents the total dollar value of the fuel purchased by fleets that have a payment processing relationship with WEX.
Net payment processing rate represents the percentage of the dollar value of each payment processing transaction that WEX records as revenue from merchants less any discounts given to fleets or strategic relationships.
Purchase volume in the Travel and Corporate Solutions segment represents the total dollar value of all transactions that use WEX corporate card products and virtual card products.
Net interchange rate represents the percentage of the dollar value of each transaction that WEX records as revenue less any discounts given to customers.
Purchase volume in the Health and Employee Benefit Solutions segment represents the total US dollar value of all transactions where interchange is earned by WEX.
Exhibit 4
Segment Revenue Information
(in thousands)
(unaudited)
Fleet SolutionsThree months endedMarch 31,
Increase (decrease) 2017 2016 Amount Percent Revenues Payment processing revenue $ 86,262 $ 62,290 $ 23,972 38.5 % Account servicing revenue 36,069 25,438 10,631 41.8 % Finance fee revenue 36,429 21,938 14,491 66.1 % Other revenue 32,063 11,408 20,655 181.1 % Total revenues $ 190,823 $ 121,074 $ 69,749 57.6 % Travel and Corporate SolutionsThree months endedMarch 31,
Increase (decrease) 2017 2016 Amount Percent Revenues Payment processing revenue $ 34,875 $ 34,626 $ 249 0.7 % Account servicing revenue 155 272 (117 ) (43.0 )% Finance fee revenue 223 75 148 197.3 % Other revenue 12,460 10,169 2,291 22.5 % Total revenues $ 47,713 $ 45,142 $ 2,571 5.7 % Health and Employee Benefit SolutionsThree months endedMarch 31,
Increase (decrease) 2017 2016 Amount Percent Revenues Payment processing revenue $ 15,241 $ 14,141 $ 1,100 7.8 % Account servicing revenue 25,315 18,812 6,503 34.6 % Finance fee revenue 6,720 1,493 5,227 350.1 % Other revenue 5,545 5,266 279 5.3 % Total revenues $ 52,821 $ 39,712 $ 13,109 33.0 %
View source version on businesswire.com: http://www.businesswire.com/news/home/20170427005315/en/
News media:WEX Inc.Jessica Roy, 207-523-6763Jessica.Roy@wexinc.comorInvestors:WEX Inc.Steve Elder, 207-523-7769Steve.Elder@wexinc.com
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