Solid execution against strategic priorities
drives results in line with expectations
WEX Inc. (NYSE:WEX), a leading provider of corporate payment
solutions, today reported financial results for the three months
ended June 30, 2015.
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Second Quarter 2015 Financial Results
Total revenue for the second quarter of 2015 increased 6% to
$213.7 million from $201.6 million for the second quarter of 2014.
Net income to common shareholders on a GAAP basis was $26.5
million, or $0.68 per diluted share, compared with $43.3 million,
or $1.11 per diluted share, for the second quarter last year.
On a non-GAAP basis, the Company's adjusted net income for the
second quarter of 2015 decreased 9% to $48.3 million, or $1.25 per
diluted share, from $53.1 million, or $1.36 per diluted share, for
the same period a year ago. Note that adjusted net income has been
revised to exclude the impact of foreign currency remeasurement
gains and losses and related hedges. With the revision of adjusted
net income, full year guidance now excludes the impact of these
foreign currency remeasurement gains and losses and related hedges.
See Exhibit 1 for a full reconciliation of adjusted net income.
"I am pleased to report solid top and bottom line results this
quarter that were in line with our expectations. WEX Europe
Services and Evolution1 continue to progress better than
anticipated, which have partially offset softness in macroeconomic
factors, including continued fuel price headwinds. As we move into
the second half of the year, I am encouraged by the momentum our
team is demonstrating across our high-growth verticals and
geographies and the underlying organic growth in the business,"
said Melissa Smith, WEX's president and chief executive
officer.
Smith continued, "Overall, I remain optimistic about the
trajectory of our long term growth. Our guidance assumes that 2015
will continue to be a year of investment as we ramp our global
operations and optimize the efficiency of our expanded
infrastructure and assets. We have established the building blocks
we need to retain our market leadership in our core segments while
expanding our reach in high-growth, emerging industries. We will
continue to seek strategic acquisitions that complement our
business or enhance our offering in the market."
Second Quarter 2015 Performance Metrics
Where applicable, the performance metrics listed below have been
revised for and include WEX Europe Services, which WEX acquired in
December 2014:
- Average number of vehicles serviced
worldwide was approximately 9.8 million, an increase of 24% from
the second quarter of 2014.
- Total fuel transactions processed
increased 5% from the second quarter of 2014 to 103.1 million.
Payment processing transactions increased 11% to 86.7 million.
- Average expenditure per payment
processing transaction decreased 22% from the second quarter of
2014 to $68.98.
- U.S. retail fuel price decreased 27% to
$2.74 per gallon from $3.76 per gallon in the second quarter of
2014.
- Total corporate card purchase volume
grew 31% to $5.7 billion, from $4.3 billion for the second quarter
of 2014.
Financial Guidance and Assumptions
- For the third quarter of 2015, WEX
expects revenue in the range of $224 million to $233 million and
adjusted net income in the range of $54 million to $57 million, or
$1.38 to $1.46 per diluted share.
- For the full year 2015, the Company
expects revenue in the range of $847 million to $872 million and
adjusted net income in the range of $192 million to $201 million,
or $4.94 to $5.14 per diluted share.
Third quarter 2015 guidance is based on an assumed average U.S.
retail fuel price of $2.77 per gallon, and approximately 39 million
shares outstanding. Full-year 2015 guidance is based on an assumed
average U.S. retail fuel price of $2.68 per gallon and
approximately 39 million shares outstanding. The fuel prices
referenced above are based on the applicable NYMEX
futures price.
The Company's guidance also assumes that third quarter 2015
credit loss will range between 6 and 11 basis points, and full year
2015 fleet credit loss will range between 7 and 10 basis points.
Our guidance also includes $11 million to $14 million of after tax
losses related to WEX Europe Services.
The Company's guidance excludes the impact of non-cash,
mark-to-market adjustments on the Company's fuel-price-related
derivative instruments, foreign currency remeasurement gains and
losses and related hedges, stock-based compensation, restructuring
charges, gain on divestitures and the amortization of purchased
intangibles as well as the related tax and non-controlling interest
impacts of the forgoing adjustments.
Additional Information
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 three and six months ended
June 30, 2015 and 2014.
Management uses the non-GAAP measures presented within this news
release to evaluate the Company's performance on a comparable
basis, to lessen the volatility associated with its derivative
instruments and foreign exchange rates on financial results.
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.
To provide investors with additional insight into its
operational performance, WEX has included in this news release a
table of selected non-financial metrics for the five quarters ended
June 30, 2015. This table is presented as Exhibit 2. The Company is
also providing selected segment revenue information for the three
and six months ended June 30, 2015 and 2014 in Exhibit 3.
Conference Call Details
In conjunction with this announcement, WEX will host a
conference call today, July 29, 2015, 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 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 62983827. 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 approximately
9.8 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
approximately 2,000 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: financial guidance; assumptions underlying
the Company's financial guidance; business momentum; optimism about
trajectory for long term growth trends; and, plans for strategic
acquisitions. 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, payments, transaction processing
activity and the commercial activity of fleets; the effects of the
Company’s business expansion and acquisition efforts; the Company’s
failure to successfully integrate the businesses it has acquired;
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 standard; breaches of the
Company’s technology systems and any resulting negative impact on
our reputation, or liabilities, or loss of relationships with
customers or merchants; fuel price volatility and changes in fleet
fuel efficiency; 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; the actions of regulatory bodies, including banking
and securities regulators, or possible changes in banking
regulations impacting the Company’s industrial bank and the Company
as the corporate parent; the impact of foreign currency exchange
rates on the Company’s operations, revenue and income; changes in
interest rates; the impact of the Company’s outstanding notes on
its operations; financial loss if the Company determines it
necessary to unwind its derivative instrument position prior to the
expiration of a contract; 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, 2014, filed on Form 10-K with the
Securities and Exchange Commission on February 26, 2015. 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 Six months
ended June 30, June 30, 2015
2014 2015 2014 Revenues Fleet
payment solutions
$ 135,520 $ 145,828
$
264,010 $ 281,263 Other payment solutions
78,133
55,753
151,928 102,386 Total
revenues
213,653 201,581
415,938 383,649
Expenses Salary and other personnel
59,091 43,426
117,508 87,328 Restructuring
-
-
8,559
-
Service fees
33,941 27,831
64,011 54,136 Provision
for credit losses
3,983 6,803
7,897 15,893 Technology
leasing and support
10,021 7,151
19,455 14,178
Occupancy and equipment
5,034 3,761
10,031 8,127
Depreciation, amortization and impairment
20,759 15,176
42,146 30,194 Operating interest expense
1,357 1,599
2,936 2,887 Cost of hardware and equipment sold
684
2,255
1,793 3,203 Other
15,865 13,250
31,659
25,837
Gain on divestiture
-
-
(1,215 )
-
Total operating expenses
150,735 121,252
304,780 241,783 Operating income
62,918 80,329
111,158 141,866 Financing interest
expense
(11,916 ) (7,276 )
(24,004 )
(14,632 ) Net foreign currency (loss) gain
(2,161 )
1,238
(6,537 ) 2,271 Net realized and unrealized loss
on fuel price derivative instruments
(6,000 ) (7,561
)
(3,251 ) (5,716 ) Income before income taxes
42,841 66,730
77,366 123,789 Income taxes
16,441 23,881
30,933 44,860
Net income 26,400 42,849
46,433 78,929
Less: Net loss attributable to non-controlling interests
(92
) (484 )
(2,404 ) (946 )
Net earnings
attributable to WEX Inc. $ 26,492 $ 43,333
$ 48,837 $ 79,875
Net
earnings attributable to WEX Inc. per share: Basic
$
0.68 $ 1.12
$ 1.26 $ 2.05 Diluted
$
0.68 $ 1.11
$ 1.26 $ 2.05
Weighted average
common shares outstanding: Basic
38,739 38,856
38,798 38,911 Diluted
38,799 38,946
38,880
39,031
WEX INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands, except per share
data) (unaudited) June 30, December
31, 2015 2014 Assets Cash and cash
equivalents
$ 184,332 $ 284,763 Accounts receivable
(less reserve for credit losses of $9,665 in 2015 and $13,919 in
2014)
1,972,141 1,865,538
Securitized accounts receivable,
restricted
104,259
-
Income taxes receivable
-
6,859 Available-for-sale securities
18,672 18,940 Fuel price
derivatives, at fair value
16,668 40,969 Property, equipment
and capitalized software (net of accumulated depreciation of
$176,950 in 2015 and $169,382 in 2014)
114,729 105,596
Deferred income taxes, net
11,415 5,764 Goodwill
1,089,271 1,117,149 Other intangible assets, net
461,727 497,297 Other assets
206,559 175,506
Total assets $ 4,179,773 $
4,118,381
Liabilities and Stockholders’ Equity
Accounts payable
$ 596,526 $ 425,956 Accrued expenses
125,865 137,227 Income taxes payable
3,032
-
Deposits
905,193 979,553
Securitized debt
89,176
-
Borrowed federal funds
50,500
-
Revolving line-of-credit facilities and term loan
720,970
901,564 Deferred income taxes, net
58,766 44,004 Notes
outstanding
400,000 400,000 Other debt
51,446 52,975
Amounts due under tax receivable agreement
64,516 69,637
Other liabilities
10,837 13,154
Total
liabilities 3,076,827 3,024,070 Commitments and
contingencies Redeemable non-controlling interest
14,992
16,590
Stockholders’ Equity Common stock $0.01 par value;
175,000 shares authorized; 43,077 shares issued in 2015 and 43,021
in 2014; 38,745 shares outstanding in 2015 and 38,897 in 2014
431 430 Additional paid-in capital
183,655 179,077
Non-controlling interest
13,165 17,396 Retained earnings
1,130,567 1,081,730 Accumulated other comprehensive income
(67,522 ) (50,581 ) Less treasury stock at cost;
4,428 shares in 2015 and 4,218 shares in 2014
(172,342
) (150,331 )
Total stockholders’ equity
1,087,954 1,077,721
Total liabilities and
stockholders’ equity $ 4,179,773 $
4,118,381
Exhibit 1
Reconciliation of Adjusted Net Income to GAAP Net Earnings
(in thousands) (unaudited) Three
months ended Six months ended June 30, June
30, 2015 2014
2015
2014 Adjusted Net Income attributable to WEX Inc.
$ 48,317 $ 53,100
$
94,535 $ 94,091 Unrealized loss on fuel price
derivatives
(14,956 ) (4,896 )
(24,301
) (2,073 ) Net foreign currency (loss) gain
(2,161
) 1,238
(6,537 ) 2,271 Amortization of
acquired intangible assets
(12,016 ) (8,330 )
(24,175 ) (16,617 ) Stock-based compensation
(3,942 ) (3,117 )
(7,160 ) (5,540 )
Restructuring
-
-
(8,559 )
-
Gain on divestiture
-
-
1,215
-
Expenses and adjustments related to acquisitions
-
(500 )
-
(500 ) ANI adjustments attributable to non-controlling interests
765 271
3,618 420 Tax impact
10,485
5,567
20,201 7,823
Net earnings
attributable to WEX Inc. $ 26,492 $
43,333
$ 48,837 $ 79,875
Beginning in the second quarter of 2015, adjusted net income
attributable to WEX Inc. excludes foreign currency remeasurement
gains and losses and related hedges. For comparative purposes,
adjusted net income attributable to WEX Inc. for the prior periods
has been revised to reflect the exclusion of net foreign currency
gains and losses and differs from the figure previously reported
due to this adjustment. We believe this adjustment facilitates the
comparison of operating results and helps identify trends in our
businesses.
Although adjusted net income is not calculated in accordance
with generally accepted accounting principles (GAAP), this measure
is integral to the Company's reporting and planning processes. The
Company considers this measure integral because it eliminates the
non-cash volatility associated with the fuel price related
derivative instruments, and excludes other 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:
- Exclusion of the non-cash,
mark-to-market adjustments on fuel-price related derivative
instruments helps management identify and assess trends in the
Company's underlying business that might otherwise be obscured due
to quarterly non-cash earnings fluctuations associated with
fuel-price-related derivative contracts.
- The non-cash, mark-to-market
adjustments on derivative instruments are difficult to forecast
accurately, making comparisons across historical and future
quarters difficult to evaluate.
- Net foreign currency gains and losses
primarily result from the remeasurement to functional currency of
foreign currency cash, receivable and payable balances, certain
intercompany notes and any gain or loss on foreign currency hedges
relating to these items. The exclusion of these items will improve
the comparison of operating results.
- The amortization of purchased
intangibles, deferred loan costs associated with the extinguishment
of debt, acquisition related expenses, non-cash adjustments related
to the Company's tax receivable agreement and adjustments
attributable to non-controlling interest have no significant impact
on the ongoing operations of the business.
- Stock-based compensation is different
from other forms of compensation, as it is a non-cash expense. For
example, a cash salary generally has a fixed and unvarying cash
cost. In contrast, the expense associated with an equity-based
award is generally unrelated to the amount of cash ultimately
received by the employee, and the cost to us is based on a
stock-based compensation valuation methodology and underlying
assumptions that may vary over time.
- Restructuring charges are related to
employee termination benefits from certain identified initiatives
to further streamline the business, improve the Company's
efficiency, and to globalize the Company's operations, all with an
objective to improve scale and increase profitability going
forward. We exclude these items when evaluating our continuing
business performance as such items are not consistently recurring
and do not reflect expected future operating expense, nor provide
meaningful insight into the fundamentals of current or past
operations of our business.
- The gain or loss from a divestiture is
not indicative of the performance of the ongoing operations of the
business.
- The Company considers certain
acquisition-related costs, such as investment banking fees,
financing fees and warranty and indemnity insurance, to be
unpredictable, dependent on factors that may be outside of our
control and unrelated to the continuing operations of the acquired
business or the Company. In addition, the size and complexity of an
acquisition, which often drives the magnitude of
acquisition-related costs, may not be indicative of such future
costs. The Company believes that excluding acquisition-related
costs facilitates the comparison of our financial results to the
Company's historical operating results and to other companies in
our industry.
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 tax impact of the foregoing adjustments is the difference
between the Company’s U.S. GAAP tax provision and a pro forma tax
provision based upon the Company’s adjusted net income before
taxes. The methodology utilized for calculating the Company’s
adjusted net income tax provision is the same methodology utilized
in calculating the Company’s U.S. GAAP tax provision. 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.
Exhibit 2 Selected Non-Financial Metrics
Q2 2015 Q1 2015 Q4 2014 Q3 2014
Q2 2014
Fleet Payment Solutions – Payment Processing
Revenue:(1) Payment
processing transactions (000s)
86,700 81,934 79,195 80,379
78,390 Gallons per payment processing transaction
23.1 23.1
23.4 23.1 23.2 Payment processing gallons of fuel (000s)
2,005,051 1,890,048 1,850,304 1,859,894 1,816,204 Average US
fuel price (US$ / gallon)
$ 2.74 $ 2.57 $ 3.17 $ 3.61
$ 3.76 Average Australian fuel price (US$ / gallon)
$
3.91 $ 3.73 $ 4.63 $ 5.22 $ 5.44 Payment processing $ of
fuel (000s)
$ 5,980,928 $ 5,344,929 $ 6,071,384 $
6,842,202 $ 6,933,978 Net payment processing rate
1.34
% 1.36 % 1.37 % 1.37 % 1.36 % Fleet payment processing
revenue (000s)
$ 80,127 $ 72,943 $ 83,336 $ 93,462 $
94,550
Other Payment Solutions – Payment Processing
Revenue:(2) Payment solutions purchase volume (000s)
$ 5,682,989 $ 5,039,867 $ 4,500,724 $ 5,477,610 $
4,339,339 Net interchange rate
0.84 % 0.87 % 0.89 %
0.83 % 0.86 % Payment solutions processing revenue (000s)
$
47,433 $ 43,837 $ 40,279 $ 45,476 $ 37,460
(1) As of December 1, 2014, includes metrics for WEX Europe
Services where applicable.
(2) Excludes payment processing revenue from rapid! PayCard and
UNIK. As of July 16, 2014, includes interchange volume and
associated revenue for Evolution1.
Definitions 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.
Payment solutions purchase volume represents the total dollar
value of all transactions that use corporate card products
including single use account 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.
Exhibit 3 Segment Revenue Information (in
thousands) (unaudited) Fleet Payment Solutions (in
thousands)
Three months ended June
30,
Increase (decrease)
Six months ended June
30,
Increase (decrease) 2015 2014 Amount
Percent
2015 2014 Amount Percent
Revenues Payment processing revenue
$
80,127 $ 94,550 $ (14,423 ) (15 )%
$ 153,070 $
180,252 $ (27,182 ) (15 )% Transaction processing revenue
4,927 5,250 (323 ) (6 )%
9,610 10,140 (530 ) (5 )%
Account servicing revenue
25,360 20,112 5,248 26 %
49,243 39,467 9,776 25 % Finance fees
19,069 17,661
1,408 8 %
38,064 34,981 3,083 9 % Other
6,037
8,255 (2,218 ) (27 )%
14,023 16,423
(2,400 ) (15 )% Total revenues
$ 135,520 $ 145,828 $
(10,308 ) (7 )%
$ 264,010 $ 281,263 $ (17,253 ) (6 )%
Other Payment Solutions
Three months ended June
30,
Increase (decrease)
Six months ended June
30,
Increase (decrease) (in thousands) 2015 2014
Amount Percent
2015 2014 Amount Percent
Revenues
Payment processing revenue
$ 47,954 $ 40,147 $ 7,807
19 %
$ 92,446 $ 72,049 $ 20,397 28 % Transaction
processing revenue
1,309 1,652 (343 ) (21 )%
2,916
3,347 (431 ) (13 )% Account servicing revenue
13,114 3,596
9,518 265 %
26,179 6,769 19,410 287 % Finance fees
1,332 1,352 (20 ) (1 )%
2,528 2,794 (266 ) (10 )%
Other
14,424 9,006 5,418 60 %
27,859 17,427 10,432 60 % Total
revenues
$ 78,133 $ 55,753 $ 22,380 40 %
$
151,928 $ 102,386 $ 49,542 48 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150729005419/en/
News media:WEX Inc.Jessica Roy, 207-523-6763Jessica.Roy@wexinc.comorInvestors:WEX
Inc.Michael E. Thomas, 207-523-6743Michael.Thomas@wexinc.com
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