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Text: Following their 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 acquisitions are based on that information.
They are not guarantees of future performance and you should not put undue reliance upon them.
These documents are available on our website and at sec.gov.
Before we begin, I would like to make you aware that over the last few weeks, we posted two short videos to the Investor Relations website.
The first is around our approach and strategy for electric vehicles as discussed by Alan King, who is the head of the U.K., Europe and ANZ for fuel and heading up that effort for us.
The second is a video providing some insight into our downmarket full AP product so you can get a feel for what it is and how it works.
We had mentioned that we would likely spend some more time on these topics in the future, and this is an interim step while we continue to work on those efforts.
So upfront here, three subjects: first, my view of Q1 results; second, I'll share our rest of year outlook; and then third, talk a bit about how we're positioned for growth over the midterm.
Okay, let me turn to Q1 results.
So we reported Q1 revenue of $609 million, really kind of spot on our expectations.
Reported cash earnings per share of $2.82.
That's a bit better than our guide, mostly helped by lower credit losses and fewer outstanding shares.
The macro, not much of a factor.
We really call the macro pretty well versus our guidance.
We did have higher fuel prices but a bit lower spreads and so really no impact there.
Against the prior year, we reported a revenue decline of 8% and organic revenue decline of 6%.
Unfavorable Brazil FX hurting our prints and continued weak same-store client volume softness impacting our organic growth.
All right, let me make a turn to the trends in the quarter and share with you what we're seeing.
So volume, sequential volume in Q1 versus Q4, pretty stable, as we expected, but we are now beginning to see a bit of an uptick here in April, so early signs of volume recovery.
Same-store sales or what we call client softness really stuck at approximately minus 6%.
This continues to reflect a small segment of our client base that is struggling to recover but fortunately still trying.
Retention, really terrific in Q1.
We reported 93% overall retention.
That's our best result in years.
Credit losses, very low for the quarter, $2 million.
That was helped by a $6 million recovery and again, lower sales rolling into this year.
But the real story of Q1 is sales, so Q1 sales results, nothing -- really nothing short of fantastic.
Consolidated sales finished 7% ahead of last year.
Yes, 7% ahead of last year, so finally growing again.
If you rewind sales over the last four quarters, so sales versus prior year, 55%, 81%, 92% and now 107%.
Inside of that, our fuel card businesses, both here and international, coming in ahead of the prior year, driven mostly by record digital sales.
So for Q1, we signed 35,000 new business clients worldwide, 35,000.
So again, a terrific result.
So the summary for Q1, I'd call it an in-line result for volume, revenue and cash EPS, and I call it an outstanding result for credit performance, retention performance and most importantly, sales performance.
Let me transition to our rest of year 2021 outlook, along with the assumptions behind that.
Included in our Q1 earnings supplement on page 12, you'll see our updated guidance for the year.
So full year '21 revenue expectations at the midpoint, $2,650,000,000.
That's unchanged from last time.
Reasons that we're staying put are: one, Q1 revenue, again, coming in kind of on plan; two, we've built in significant sequential revenue step-up in the forward quarters, probably in the range of $100 million up from Q1 to Q4.
So our Q2, Q3, Q4 revenue guidance now assumes revenue growth in the high teens.
In terms of the COVID recovery in our outlook, I'd say it's a bit mixed.
U.S. and U.K. look maybe better than our planned outline.
But in our case, the Brazil COVID situation, worse, and so a pushback there in terms of recovery.
On the cash earnings per share front, we will flow through our $0.12 Q1 beat.
We'll raise full year '21 cash earnings per share guidance at the midpoint to $12.42, so $12.42 for the base business.
In terms of the AFEX acquisition, hopeful now to close that deal on June 1.
Initially, we thought May 1.
So as a result of the one month delay, we're going to take the expected in-year AFEX accretion at the midpoint to $0.18 versus $0.20 previously.
If you combine the base business and AFEX, our consolidated earnings per share outlook at the midpoint would be $12.60, $12.60 for the full year.
I do want to add, we feel very good about the AFEX cross-border deal.
They had a great Q1 performance and their management is really holding steady their rest of year forecast.
Let me make a turn over to our last subject today, which is how is FLEETCOR positioned for growth in '22 and beyond.
So I do want to highlight just a few factors that give us confidence in sustainable growth.
So one is the exit rate.
So if we hit this rest of year guidance, our Q4 step-off will be quite strong heading into '22.
And if we hit our rest of year sales plan, again, that will pour in-year revenues into 2022.
Digital, I can't say enough about digital and the investments we're making in digital selling, digital UIs and customer experience, new ways of underwriting credit, and so the digital transformation making a big impact on the company.
We're actually embracing EV, particularly in Europe.
Early feedback really, really positive there that we may actually be advantaged in selling because of our integrated mix lead experience as well as this at-home recharging opportunity.
It looks like clients will pay subscriptions to basically measure and reimburse employee recharging at home.
So potentially a new meaningful revenue opportunity that is nonexistent today.
Fourth factor, our Beyond strategy or our entry into new segments.
So as we've discussed before, we're extending into new customer segments really in each of our major lines of business.
So in corporate pay, the Roger deal helped us enter the SMB space.
In lodging, a couple of deals last year helped us enter the airline accommodation space.
And in Brazil, we've entered what we call the urban driver space.
So in each of these cases, basically, we're extending our businesses, extending our TAM and obviously extending our longer-term sales opportunity.
Fifth factor is brand.
We've just introduced our new Corpay brand aimed at unifying all of our various corporate payment assets.
So this single brand will help our corporate payment business go to market with a single identity and hopefully give us an advantage with this broader bundle that we've got.
And then last factor is capital.
Our balance sheet's in terrific shape.
Leverage ratio 2.5 times, liquidity approaching $2 billion.
Again, our plan is to generate $1 billion-plus of annual free cash flow.
We had the ability to lever up to three times target, which would produce circa $8 billion in capital to invest in either M&A or buybacks over the forecast period.
So obviously, upside for us via capital allocation.
So look, the takeaways from today: so one, Q1, I'd say again, an in-line Q1 financial performance but an outstanding Q1 sales performance.
Rest of year, again, we're raising rest of year cash earnings per share at the midpoint to $12.42.
That's excluding acquisitions, and the $12.60 at the midpoint, that's including AFEX, so tracking to deliver that, although again, fully aware of the uncertainties.
And then lastly, in terms of positioning, we really do feel well positioned to grow the company next year and beyond.
Again, we expect a strong exit, which will pour into '22.
We're extending each of our businesses into bigger TAMs, and we've got the available capital to drive incremental returns if we manage it well.
For Q1 of 2021, we reported revenue of $609 million, down 8%; GAAP net income up 25% to $184 million, and GAAP net income per diluted share up 29% to $2.15.
Included in our Q1 2020 results was the impact of the $90 million onetime loss related to a customer receivable in our cross-border payments business, which equated to $0.74 per diluted share, as reported last year.
Adjusted net income for the quarter decreased 8% to $242 million, and adjusted net income per diluted share decreased 6% to $2.82 as we continue to feel the effects of COVID on our businesses.
Organic revenue growth improved two points sequentially to down 6% on a year-over-year basis.
We saw improvement in every category except tolls as Brazil continues to grapple with incremental COVID-related shutdowns.
As a reminder, 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 during the two years being compared.
Our fuel category was down organically about 6% year-over-year, which was a 4-point improvement from Q4.
The international fuel business growth was a bit better than North American growth as those international markets shut down earlier in the quarter last year, so had easier comps.
The corporate payments category was down 5% in the first quarter, one point better than Q4, as improvements in virtual card and full AP were offset by FX, which was lapping a very strong Q1 last year.
Full AP growth accelerated 14 points sequentially to 21% growth year-over-year, powered by continued strong new sales.
Tolls was up 3% compared with last year but down four points from Q4 of 2020 due to the aforementioned shutdowns in Brazil.
Looking longer term, compared with Q1 of 2019, revenue was up 13% organically.
The lodging category was down 14%, which was an improvement from down 25% last quarter, with domestic airline activity recovering faster than we expected.
Gift showed organic growth of 2% year-over-year as that business felt the effects of COVID earlier in Q1 of 2020 than most of our other businesses.
That said, we've seen real traction in digital card sales and in our B2B sales efforts where we are selling gift cards to businesses for use as incentives.
Recognizing that the comps to 2020 may not be very helpful, we did add some comparisons to 2019 for organic revenue growth and sales, so you can see how we are trending compared with the most recent pre-COVID or "normal year".
That's available in the supplement we provided today.
looking further down the income statement.
Total operating expenses were down 7% to $343 million, excluding the impact of the onetime loss in our cross-border payments business last year.
The decrease was primarily due to better bad debt expense, lower expenses in Brazil due to the currency translation impact and lower T&E costs as travel and the associated expenses are much lower than last year.
As a percentage of total revenues, operating expenses excluding the onetime loss were stable compared with Q1 of 2020 at approximately 56%.
In the quarter, bad debt was only $2.5 million or one basis point, as it included the benefit of a $6 million recovery for credit loss recorded in the first quarter of last year.
Credit continues to be a bright spot, but we expect our bad debt to normalize as our new sales levels recover and grow.
Interest expense decreased 20% to $29 million due to lower borrowings on our revolver and decreases in LIBOR related to the unhedged portion of our debt.
Our effective tax rate for the first quarter was 21.8%.
Excluding the impact of the onetime loss in our cross-border payments business last year, our effective tax rate in Q1 of 2020 was 18.9%.
The increase over last year's adjusted tax rate was due primarily to the level of excess tax benefit on employee stock option exercises relative to pre-tax income.
Now turning to the balance sheet.
We ended the quarter with $958 million of unrestricted cash, and we also had approximately $1 billion of undrawn availability on our revolver.
In total, we had $3.5 billion outstanding on our credit facilities and $915 million borrowed on our securitization facility.
As of March 31, our leverage ratio was 2.48 times trailing 12-month adjusted EBITDA, as calculated in accordance with our credit agreement.
We refinanced our securitization facility at the end of the first quarter, less than six months after our last refi.
Recall that our normal three year term expired last fall when credit markets were unfavorable, so we entered into a one year note at LIBOR plus 125 basis points with a 37.5 basis point floor, expecting to refinance again when conditions improve.
Our new securitization has a duration of three years at LIBOR plus 100 basis points with a floor of 0, so our effective all-in rate is approximately 50 basis points better, given the current level of LIBOR.
We've also just completed a refinance of our Term B credit facility, upsizing it to $1.15 billion for a new term of seven years and maintaining the rate of LIBOR plus 175 basis points.
We used the proceeds to pay off our existing Term B note, pay down the revolver, funded the AFEX acquisition and improve our liquidity position for future capital actions.
We repurchased approximately 640,000 shares during the quarter for $170 million at an average price of $266 per share, and we have approximately $836 million in repurchase capacity remaining under our current authorization.
Now let me share some thoughts on our outlook.
We are maintaining our full year revenue guidance of between $2.6 billion and $2.7 billion as improvements in some businesses such as domestic airline lodging are being offset by other places like Brazil and Europe.
They're experiencing incremental virus flare-ups and associated lockdowns.
As we explained last quarter, our full year guidance assumes we recover about 1/3 of our Q4 exit revenue softness during calendar 2021.
And that this recovery would account for about four to five percentage points of revenue growth in the second half.
Within that expectation, there is very little recovery impact assumed for Q1, a modest amount for Q2 and then an acceleration into the back half of the year.
While we are seeing some puts and takes between businesses, our overall outlook remains intact.
We are raising the midpoint of our adjusted net income per diluted share guidance $0.12 to $12.42 to reflect our first quarter results compared to our expectations.
Looking ahead, we are expecting Q2 2021 adjusted net income per diluted share to be in the range of $2.80 to $3 per share.
Volumes should build throughout the year with the COVID recovery and our new growth initiatives gaining momentum.
As for AFEX, the closing is taking longer than we had hoped, but we still believe the deal will close by the end of the second quarter as we're nearing the finish line with all of the approvals we need from the various regulators globally.
Because of the delay, the in-year benefit will be slightly less than what we expected in February.
But the upside is that we've had more time to refine our integration plans, so we'll hit the ground running at full speed once we do close.

user
sees q2 adjusted earnings per share $2.80 to $3.00.
q1 adjusted earnings per share $2.82.
q1 earnings per share $2.15.
sees fy revenue $2.6 billion to $2.7 billion.
q1 revenue fell 8 percent to $608.6 million.

assistant