Corpay, Inc.(US:CPAY)2021-05-10 20:48PART I—FINANCIAL INFORMATION Financial Statements FLEETCOR reported Q1 2021 revenues of $608.6 million, with net income increasing to $184.2 million despite reduced operating cash flow Consolidated Statements of Income (Q1 2021 vs Q1 2020) | Metric | Three Months Ended March 31, 2021 (in millions) | Three Months Ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Revenues, net | $608.6 million | $661.1 million | | Operating income | $266.0 million | $201.0 million | | Net income | $184.2 million | $147.1 million | | Diluted earnings per share | $2.15 per share | $1.67 per share | Consolidated Balance Sheets | Metric | March 31, 2021 (Unaudited) (in billions) | December 31, 2020 (in billions) | | :--- | :--- | :--- | | Total current assets | $4.29 billion | $3.96 billion | | Total assets | $11.43 billion | $11.19 billion | | Total current liabilities | $4.31 billion | $3.97 billion | | Total liabilities | $8.13 billion | $7.84 billion | | Total stockholders' equity | $3.30 billion | $3.36 billion | Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2021 (in millions) | Three Months Ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $77.9 million | $420.0 million | | Net cash used in investing activities | ($63.2 million) | ($18.7 million) | | Net cash used in financing activities | ($16.6 million) | ($314.5 million) | | Cash and cash equivalents and restricted cash, end of period | $1.43 billion | $1.55 billion | Notes to Unaudited Consolidated Financial Statements Notes detail accounting policies, Roger acquisition, goodwill, total debt, and derivative hedging, including $2.59 billion gross receivables - On January 13, 2021, the Company completed the acquisition of Roger (rebranded CorpayOne), a global accounts payable (AP) cloud software platform, for $38.6 million. This acquisition added $34.2 million to goodwill and $6.9 million in other intangible assets6869 - The company utilizes a $1 billion revolving trade accounts receivable securitization facility, which was amended on March 29, 2021, to extend the maturity to 2024, reduce the LIBOR floor, and improve margins4446 - The company uses interest rate swap contracts to hedge variability on $2.0 billion of its variable rate debt. These swaps are designated as cash flow hedges80103 - The Board of Directors authorized a stock repurchase program of up to $4.1 billion. As of the report date, $836.3 million remained available for future repurchases58 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a 7.9% revenue decrease for Q1 2021, with operating income rising 32.3% due to a prior-year write-off, and strong liquidity maintained Financial Performance Summary (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | % Change (%) | | :--- | :--- | :--- | :--- | | Revenues, net | $608.6 million | $661.1 million | (7.9%) | | Operating income | $266.0 million | $201.0 million | 32.3% | | Net income | $184.2 million | $147.1 million | 25.3% | | Adjusted net income | $242.1 million | $264.5 million | (8.5%) | - Consolidated revenues declined primarily due to decreased transaction volume from the COVID-19 pandemic. Organically, revenues were down approximately 6%140 - The significant increase in operating income was primarily driven by a $90 million write-off of a customer receivable in the cross-border payments business during Q1 2020, which did not recur in 2021146158 - The company signed a definitive agreement to acquire Associated Foreign Exchange (AFEX) for approximately $450 million, with the transaction expected to close in late Q2 2021135184 Results of Operations Q1 2021 saw revenue declines across all segments, with North America operating income increasing significantly due to the absence of a prior-year write-off Revenues by Segment (Q1 2021 vs Q1 2020) | Segment | Q1 2021 Revenue (in millions) | Q1 2020 Revenue (in millions) | % Change (%) | | :--- | :--- | :--- | :--- | | North America | $402.2 million | $434.7 million | (7.5%) | | Brazil | $81.9 million | $99.0 million | (17.2%) | | International | $124.5 million | $127.4 million | (2.3%) | | Total | $608.6 million | $661.1 million | (7.9%) | - The Brazil segment's revenue decline was primarily due to an unfavorable foreign exchange impact of approximately $19 million144 - Processing expenses decreased by $117.3 million (50.2%), largely due to a non-recurring $90 million write-off of a customer receivable in Q1 2020146 - The North America segment's operating margin increased from 19.7% to 40.4%, primarily driven by the absence of the prior year's $90 million customer receivable write-off159160 Liquidity and Capital Resources The company maintained strong liquidity of $1.96 billion, despite a significant decrease in operating cash flow due to unfavorable working capital movements - Total liquidity was approximately $1.96 billion, consisting of $958 million in unrestricted cash and $998 million available under the Credit Facility164 - Net cash provided by operating activities decreased from $420.0 million in Q1 2020 to $77.9 million in Q1 2021, mainly due to unfavorable working capital movements170 - On April 30, 2021, subsequent to the quarter end, the company amended its Credit Agreement to establish a new seven-year $1.15 billion term loan B, maturing in 2028, which was used to pay off the existing term loan B77174 Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk profile were reported as of March 31, 2021, from prior 10-K disclosures - There were no material changes to the company's market risk profile during the first quarter of 2021201 Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period202 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting203 PART II—OTHER INFORMATION Legal Proceedings The company is involved in ongoing legal matters, including shareholder derivative lawsuits and an FTC investigation, which management believes will not materially affect financial condition - The company is defending against shareholder derivative lawsuits. A federal action was dismissed but is now on appeal, while a similar state action remains stayed206207 - The FTC filed a lawsuit against the company and its CEO in December 2019 regarding advertising and marketing practices. The company believes the claims are without merit and notes a recent Supreme Court decision that may limit the FTC's ability to seek monetary redress in such cases209 Risk Factors The report refers to risk factors detailed in the 2020 Form 10-K, now encompassing impacts related to the COVID-19 pandemic and its economic consequences - Investors are directed to the risk factors in the 2020 Form 10-K, with a specific mention that these risks now encompass the impacts of the COVID-19 pandemic210 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased approximately 0.64 million shares in Q1 2021 under its $4.1 billion stock repurchase program, with $836.3 million remained available - The stock repurchase program was increased to $4.1 billion in total authorization, with $836.3 million remained available as of March 31, 2021211 Share Repurchases in Q1 2021 | Period | Total Shares Purchased (shares) | Average Price Paid Per Share (per share) | | :--- | :--- | :--- | | Jan 2021 | 1,143 shares | $267.32 | | Feb 2021 | 513,695 shares | $264.04 | | Mar 2021 | 125,895 shares | $273.58 | Defaults Upon Senior Securities Not applicable Mine Safety Disclosures Not applicable Other Information Not applicable Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to key agreements and certifications by the CEO and CFO