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Text: Following the prepared comments, the operator will announce that the queue will open for the Q&A session.
This information is not calculated in accordance with GAAP and may be calculated differently than non-GAAP information at other companies.
These statements reflect the best information we have as of today.
All statements about our recovery outlook, new products and acquisitions, and expectations regarding business development and future acquisition are based on that information.
They are not guarantees of future performance and you should not put undue reliance upon them.
Upfront here, I will plan to cover four subjects.
First, I'll provide my take on our Q4 finish.
Second, I'll put a bow on full-year 2020.
Third, I'll share our 2021 outlook, and lastly provide a bit of an update on our transformation plan, which is intended to accelerate the company's growth.
Okay, let me turn to our Q4 results.
So today, we reported revenue of $617 million, that's down 12%, and cash earnings per share of $3.01, that's down 5% versus last year.
These results both better than anticipated, volume recovered a bit more in the quarter than we forecasted and we did manage operating expenses down 14% against the prior year.
Organic revenue growth overall minus 8%.
But most importantly are the trends in Q4, really quite good.
Sales strengthened to over 90% of last year's level.
Same-store sales or client-volume softness improved to minus 6%.
Credit loss is $6 million, although held by a reserve release and retention continued steady at 92%.
We did have a fantastic beyond highlight in Brazil in the quarter.
We added 175,000 new urban or city users in Q4.
That represents 30% of all the new tags we sold in the quarter.
So demonstrates there's real demand among the Non-Toll segment in Brazil for this RFID purchasing network, including fueling, parking, and now even fast food locations.
So look, the conclusion of Q4 is really in the sequential trends of the business.
If you look at Page 7 of our earning supplement, you can see that every Q4 metric is improving from the Q2 low.
Revenue up from $525 million to $617 million, cash earnings per share up $2.28 to $3.01, sales up from 55% to now over 90% of last year's level.
Same-store sales volume getting better from minus 17% to minus 6%, credit losses from $21 million to $6 million, and then lastly retention holding steady at 92%.
So to us, evidence that the business continues to recover from the earlier year lows.
So from a financial perspective, 2020 not our best year.
Revenue finished at approximately $2.4 billion, that's down 10% versus $19 billion, and cash earnings per share finishing at $11.09, down 6% against 2019.
COVID and the shutdowns did manage the vanquish over $400 million of revenue that we planned in 2020, really in three ways.
So first client softness, we had a number of COVID impacted clients that use less of our services.
COVID reset the macro environment in Q2 driving down fuel prices and weakening international currencies.
And then third, for a while, COVID reduced our 2020 new sales, mostly due to the market being distracted.
The good news is despite the fact that COVID is going, that we're still living with COVID is the financial impacts on us appear to be lessening.
So we've now recovered in Q4 about half of the client softness revenue loss that we experienced in Q2.
So half of it back already.
Post the macro reset, we've seen relative stability in fuel prices and FX rates.
And lastly, the demand for our service is clearly recovering as sales reached 90% of prior-year levels.
So despite not having the greatest financial performance in 2020, we did manage to accomplish a few things.
So credit, I'm just delighted with our credit performance in 2020.
Expenses, tough times but we did manage expenses down over 10% in Q2, 3, and 4.
We signed four acquisitions in 2020.
Our guys ran IT exceptionally well, had the best overall system uptime in the history of the company.
And lastly, we were able to replan the business in the second half.
We conducted a replanning exercise in the summer and the actuals came in a smidge better than the replan.
So reminds us again that fleets of business you can plan.
I really do want to give a shoutout to all FLEETCOR people who hung in there and kept the company going through very unsettling times.
Okay, let me make the turn to 2021 and outline our initial guidance for the year, along with the assumptions behind it.
Clearly a higher beta in our 2021 numbers but we'd say that our setup is generally positive.
So first, volume and revenue trends strengthening through 2020.
So with the potential to continue that into '21.
Sales production improving thus the amount we expect to get of end-year revenue from new business, and as I mentioned a bit ago, very solid client retention and credit trends.
We are also hopeful that we'll get additional client-softness recovery in '21, although we're the first to admit that that's hard to forecast.
So in our guidance, we're planning to recover about one-third of our Q4 exit revenue softness that's still outstanding now.
So if we get that, that recovery would provide about 4% to 5% of incremental revenue lift in the second half.
So with that, our guidance for '21 would be as follows.
Revenue of $2,650,000,000 at the midpoint that reflects an 11% increase.
Overall organic revenue in the same range kind of 9% to 13% but I do want to emphasize that assumes 3% to 4% of softness recovery from today's level.
We're anticipating significant sales growth over 30% this year, which would be a record-level sales for the company and profit guide at the midpoint $12.40 of cash earnings per share for the core business.
We are planning about $0.10 of dilution from the Roger acquisition, so that would put our consolidated number at $12.30 at the midpoint.
Lastly, assuming now May 1 close for the AFEX acquisition, accretion could be approximately $0.20 for the year.
So if that happens on time, that could take consolidated cash earnings per share to $12.50.
Chuck will speak further about how the guidance rolls out across the quarters, but I do want to point out that our guidance outlooks Q2, 3, and 4 revenue and profit growth to be back into the high-teens.
Okay, let me transition now to my last subjects, which is the company's transformation plan.
So really our transformation plan is intended to accelerate growth by doing two things.
So first, the portfolio deciding what businesses we want to be in and not be and constantly reworking that to have a more diverse set of faster-growing businesses.
But the second way we transformed the company is through our Beyond strategy, which we do utilize in all four of our major existing businesses.
So in this Beyond strategy, we're really trying to do two things.
First, identify new segments of the market that we can extend the business into.
So we ask who else can we serve, and then second, we identify additional or adjacent services that we can cross-sell back to the client base.
So if you look at Page 11 of our earnings supplement, you'll see the current Beyond initiatives for each of our four businesses.
We do continue to make progress against our Beyond strategy.
Just an example to call out in our Lodging business in 2020.
We now settled 25% of all proprietary hotel payments with our virtual card in which we earn interchange.
So that's up from literally from 0% a few years ago.
But today, we begin implementation of maybe our most exciting Beyond initiative of all with the acquisition of Roger.
So this begins the move of our Corporate Payments' business down market into the SMB space along with the opportunity to offer a full online bill pay to our global SMB fuel card base.
You can see that on Pages 11 and 12 of our supplement.
So this single bill pay initiative has the potential to dramatically accelerate growth rates in both our Corporate Pay and Fuel card businesses.
We feel like it's a pretty unique position that we're in, because of the special set of assets that we have.
So a large global SMB client base numbering in the hundreds of thousands, we've got working SMB sales channels, they historically have acquired 30,000 new clients per quarter.
We've got scaled virtual card processing capability, we generated over $30 billion in annualized spend last year, we've got a very large merchant database that allows us to monetize virtual card, and now we've got some modern cloud software to provide the bill-pay functionality, along with a pretty cool user interface.
So look, in conclusion, today, I'm hoping to provide just a few away.
So Q4 again, not our best quarter from an absolute perspective, but clear evidence of improving trends in the business.
2020, we did manage to perform better as the year went on and certainly learned some new tricks around how to manage credits, expenses, IT, even sales onto remote environments.
'21, again our setup we think looks pretty good.
Only a slightly unfavorable macro to deal with, but improving trends coming into the year and certainly the wildcard that I mentioned of what happens with the incremental softness recovery.
And lastly, transformation, our Beyond strategy now progressing providing some traction but today's online SMB bill pay initiative maybe the biggest of them all.
For the fourth quarter of 2020, we reported revenue of $617 million, down 12%.
GAAP net income down 11% to $210 million, and GAAP net income per diluted share down 6% to $2.44.
The quarter was again affected by COVID-related business slowdowns, although we showed improvement over last quarter in most of our businesses.
Adjusted net income for the fourth quarter of 2020 decreased 10% to $258 million, and adjusted net income per diluted share decreased 5% to $3.01.
We continue to manage expenses in line with revenue performance.
Organic revenue in the quarter was down 8% overall, primarily due to same-store sales being down 6% year-over-year.
Organic revenue neutralizes the impact of year-over-year changes in foreign exchange rates, fuel prices, and fuel spreads and includes pro forma results for acquisitions closed mid-period.
Our fuel category was down organically about 10% versus Q4 last year.
Our domestic Fuel businesses were stable to improving in the quarter, whereas the international Fuel businesses were affected by the renewed COVID related closures, especially in Western Europe.
The corporate payments category was down approximately 6% in the fourth quarter.
Approximately 6 points of decline was again driven by the 100 most-affected customers we discussed last quarter.
Lower spending on our T&E product drove another 2 points of organic drag.
Virtual card volumes were up 12% for the quarter, which was an improvement from flat last quarter as continued political spend and the benefit of new customers offset the drag from the highly affected customers.
Cross-border or FX-related volumes were down 1% as payment volumes are still being affected by lower invoice levels, specifically in manufacturing and wholesale trade.
Full AP continued to perform very well, with volume up 14%.
New sales of Full AP were very strong as full-year 2020 sales were more than double 2019's results.
We continue to invest here and have enabled 10 new ERP integrations in 2020, with plans for another 10 or so in 2021.
Tolls continue to be our most resilient business and grew organically 7% in the fourth quarter, up 4% from last quarter.
Active toll tags were up 6% in the quarter, with urban tags accounting for 25% of all new tags sold during 2020.
The lodging category was down 25% organically in the fourth quarter, with 20 points of drag caused by the inclusion of acquired airline Lodging businesses in the year-ago period.
Our workforce Lodging business has improved with volumes down in the mid-single-digits.
The airline lodging volumes have also improved in-line with flight activity but still remained well below last year's levels.
Looking further down the income statement.
Our total operating expenses were down 14% for the fourth quarter of 2020 to $323 million.
We performed in-line with the high end of our target reduction compared with the fourth quarter of 2019.
The decrease was primarily due to lower volume-related costs, lower employee-related costs, including headcount, sales commissions, bonuses, and stock compensation.
We also saw lower T&E expenses in addition to the impact of foreign exchange rates.
As a percentage of total revenues, operating expenses were approximately 52.4%, or roughly 240 basis point improvement from last quarter.
Bad debt expense in the fourth quarter of 2020 was $6 million or 2 basis points, which includes a reserve release of $5 million.
Bad debt was only 4 basis points excluding the reserve release.
Our bad debt levels continue to be good and our aging roll rates remain very favorable.
There is still uncertainty around the timing, level, and duration of government stimulus and various responses to increaseing COVID cases around the world.
So that's still a consideration on our reserve.
Interest expense decreased 13% to $30.3 million, driven primarily by decreases in LIBOR related to the unhedged portion of our debt.
This was partially offset by the impact of additional borrowing for share buybacks earlier in the year.
Our effective tax rate for the fourth quarter of 2020 was 20.3%, with the reduction from last year, driven primarily by incremental excess tax benefit on stock option exercises.
Now, turning to the balance sheet.
As of December 31, 2020, we have approximately $1.9 billion of total liquidity consisting of available cash on the balance sheet and our un-drawn revolver at quarter-end.
We ended the quarter just shy of $1.5 billion in total cash, of which approximately $542 million is restricted and consists primarily of customer deposits.
We had $3.6 billion outstanding on our credit facilities and $700 million borrowed in our securitization facility.
We remain committed to a consistent program of capital allocation, using our free cash flow for acquisitions and buybacks.
In the quarter, we repurchased roughly 181,000 shares in-connection with employee sales.
In total for 2020, we spent $850 million on share buybacks.
We believe that we have ample liquidity to pursue any near-term M&A opportunities, while still opportunistically buying back shares when it makes sense.
For the quarter, we had approximately $23.4 million of capital expenditures and we finished with a leverage ratio of 2.67 times trailing-12 month EBITDA as of December 31st.
Now, let me share some thoughts on our outlook.
Looking ahead, we're expecting Q1 2020 adjusted net income per share to be between $2.60 and $2.80, which at the midpoint is approximately $0.31 or 10% lower than what we reported in Q4 of 2020.
About half of the difference is attributable to revenue seasonality.
You see, while some of our businesses like Gift have seasonally strong fourth quarters, most of our businesses have seasonally weak first quarters.
Of course, volume-related expenses will slightly offset this revenue seasonality impact.
Roughly a third of the difference is due to the normalization of certain expenses, for example in Q4 of 2020, we released $5 million of our bad debt reserve, which we do not expect to repeat in Q1.
As sales performance has continued to recover throughout 2020, we expect bad debt to gradually increase sequentially as those customers' balances age.
Additionally, when the impact of the COVID-related shutdowns became clear in 2020, we proactively reduced our annual incentive target payouts by 50% and accrued to those lower targets for the remainder of the year.
As our business has recovered meaningfully, we plan to return incentive targets to 2021 to normal levels.
We also expect our effective tax rate in Q1 of 2021 to be about 80 to 100 basis points higher than the rate we reported in Q4 of 2020.
Lastly, the acquisition of Roger and incremental sales and marketing investments are slightly dilutive to the quarter sequentially.
Now, looking beyond Q1 to full-year 2021, we feel it's important to help you understand how we're thinking about the outlook and providing some ranges around possible outcomes even though, those ranges are a bit wider than what they have been in the past.
For 2021, we are guiding revenues to be between $2.6 billion and $2.7 billion and adjusted net income per diluted share to be between $11.90 and $12.70 inclusive of the Roger acquisition.
We're still faced with substantial uncertainty regarding the pace of economic recovery and the impact it will have on our financial performance.
That said, we've developed a 2021 budget, which incorporates everything we know now, including revenue and expense run-rates, current macro-environmental factors, planned sales contributions, and expected attrition impacts.
In addition, our guidance assumes a continued roll-out of the vaccines, that will allow gradual volume and revenue improvement in the first half of the year, with an acceleration in the back half of the year, as client softness and new sales performance improved sequentially.
As I mentioned earlier, we expect several expense lines to normalize higher in 2021 compared with 2020.
As our business recovers, stock and bonus accruals, as well as sales commission expenses will be higher.
T&E will rise as our salespeople get back on the road and volume-related expenses will also rise with increased business activity.
Bad debt expense is expected to normalize as we've reopened credit and our sales performance continues to improve.
We're also making incremental investments in sales, marketing, and IT to support our growth aspirations and to deliver a 2021 sales production plan, that's more than 30% higher than 2020's results.
We're extremely excited with the Roger acquisition and a disproportionate share of our incremental sales and marketing investments will be directed toward that business.
As such, the fully loaded acquisition will be an estimated $0.10 drag to adjusted net income per diluted share in 2021.
As we've demonstrated time and again, we do take a balanced approach on expenses and we'll adjust accordingly if we see revenues begin to deviate from our expectations.
And lastly, we continue to work through the approvals on AFEX, which have been slowed by Brexit and virus-related shutdowns.
While we still expect the deal to be accretive in 2021, we now believe it is more likely to close in Q2 versus our original expectation of Q1.
And just for clarity, AFEX is not included in the guidance ranges I provided earlier.

user
fleetcor q4 earnings per share $2.44.
q4 adjusted earnings per share $3.01.
q4 earnings per share $2.44.
sees q1 adjusted earnings per share $2.60 to $2.80.
sees fy 2021 adjusted earnings per share $11.90 to $12.70.
sees fy 2021 revenue $2.6 billion to $2.7 billion.

assistant