UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the Fiscal Year Ended December 31, 20192020
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the Transition Period From to
Commission File Number 001-35004
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FLEETCOR TECHNOLOGIES, INC.Technologies, Inc.
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| Delaware | 72-1074903 | ||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| 3280 Peachtree Road, Suite 2400, | Atlanta, | Georgia | 30305 | ||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
Registrant’s telephone number, including area code: (770) (770) 449-0479
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, $0.001 par value per share | FLT | NYSE | ||||||
Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||||||
| Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ | |||||||||||||||
| Emerging growth company | ☐ | |||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $23,926,076,53720,742,490,287 as of June 30, 2019,2020, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing sale price as reported on the New York Stock Exchange.
As of February 7, 2020,12, 2021, there were 85,429,05783,416,310 shares of common stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held on June 11, 202010, 2021 are incorporated by reference into Part III of this report.
FLEETCOR TECHNOLOGIES, INC.
FORM 10-K
For The Year Ended December 31, 20192020
INDEX
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| PART I | ||||||||
| Item 1. | ||||||||
| Item X. | ||||||||
| Item 1A. | ||||||||
| Item 1B. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
| Item 7. | ||||||||
| Item 7A. | ||||||||
| Item 8. | ||||||||
| Item 9. | ||||||||
| Item 9A. | ||||||||
| Item 9B. | ||||||||
| PART III | ||||||||
| Item 10. | ||||||||
| Item 11. | ||||||||
| Item 12. | ||||||||
| Item 13. | ||||||||
| Item 14. | ||||||||
| PART IV | ||||||||
| Item 15. | ||||||||
| Item 16. | ||||||||
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Note About Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about FLEETCOR’s beliefs, expectations and future performance, are forward-looking statements. Forward-looking statements can be identified by the use of words such as “anticipate,” “intend,” “believe,” “estimate,” “plan,” “seek,” “project” or “expect,” “may,” “will,” “would,” “could” or “should,” the negative of these terms or other comparable terminology.
These forward-looking statements are not a guarantee of performance, and you should not place undue reliance on such statements. We have based these forward-looking statements largely on our current expectations and projections about future events. Forward-looking statements are subject to many uncertainties and other variable circumstances, including those discussed in this report in Item 1A, “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” many of which are outside of our control, that could cause our actual results and experience to differ materially from any forward-looking statement.
These forward-looking statements may not be realized due to a variety of factors, including, without limitation:
•regulatory measures, voluntary actions, or changes in consumer preferences, that impact our transaction volume, including social distancing, shelter-in-place, shutdowns of nonessential businesses and similar measures imposed or undertaken in an effort to contain and mitigate the spread of the coronavirus (COVID-19);
•the impact of macroeconomic conditions and whether expected trends, including in retail fuel prices, fuel price spreads, and fuel transaction patterns, develop as anticipated;
•our ability to successfully execute our strategic plan, manage our growth and achieve our performance targets;
•our ability to attract new and retain existing partners, fuel merchants, and lodging providers, their promotion and support of our products, and their financial performance;
•the failure of management assumptions and estimates, as well as differences in, and changes to, economic, market, interest rate, interchange fees, foreign exchange rates, and credit conditions, including changes in borrowers’ credit risks and payment behaviors;
•the risk of higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings;
•our ability to successfully manage our credit risks and the sufficiency of our allowance for possible loanexpected credit losses;
•our ability to securitize our loantrade receivables;
•the occurrence of fraudulent activity, data breaches or failures of our information security controls or cybersecurity-related incidents that may compromise our systems or customers’ information;
•any disruptions in the operations of our computer systems and data centers;
•the international operational and political risks and compliance and regulatory risks and costs associated with international operations;
•our ability to develop and implement new technology, products, and services;
•any alleged infringement of intellectual property rights of others and our ability to protect our intellectual property;
•the regulation, supervision, and examination of our business by foreign and domestic governmental authorities, as well as litigation and regulatory actions, including the lawsuit recently filed by the FTC;Federal Trade Commission (FTC);
•the impact of regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering (AML) and anti-terrorism financing laws;
•changes in our senior management team and our ability to attract, motivate and retain qualified personnel consistent with our strategic plan;
•tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations;
•the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; and
•the other factors and information in this Annual Report on Form 10-K and other filings that we make with the SEC under the Exchange Act and Securities Act. See “Risk Factors” in this Annual Report on Form 10-K.
Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. We do not undertake, and specifically disclaim, any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.
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PART I
ITEM 1. BUSINESS
FLEETCOR is a leading global businessprovider of digital payment solutions company that simplifiesenables businesses to control purchases and make payments more effectively and efficiently. Since its incorporation in 2000, FLEETCOR has continued to deliver on its mission: to provide businesses with “a better way to pay”. FLEETCOR has been a member of the wayS&P 500 since 2018 and trades on the New York Stock Exchange under the ticker FLT.
Businesses spend an estimated $170 trillion each year. In many instances, they lack the proper tools to monitor what is being purchased, and employ manual, paper-based, disparate processes and methods to both approve and make payments for their purchases. This often results in wasted time and money due to unnecessary or unauthorized spending, fraud, receipt collection, data input and consolidation, report generation, reimbursement processing, account reconciliations, employee disciplinary actions, and more.
FLEETCOR’s vision is that every payment is digital, every purchase is controlled, and every related decision is informed. Digital payments are faster and more secure than paper-based methods such as checks, and provide timely and detailed data which can be utilized to effectively reduce unauthorized purchases and fraud, automate data entry and reporting, and eliminate reimbursement processes. Combining this payment data with analytical tools delivers powerful insights, which managers can use to better run their businesses.
Our wide range of modern, digitized solutions generally provides control, reporting, and automation benefits superior to many of the payment methods businesses manageoften used such as cash, paper checks, general purpose credit cards, as well as employee pay and pay their expenses. Thereclaim processes. In addition to delivering meaningful value to our customers, our solutions also share several important and attractive business model characteristics such as:
•customers are primarily businesses, which tend to have relatively predictable, consistent volumes;
•recurring revenue models driven by recurring volume, resulting in predictable revenue;
•similar business-to-business (B2B) selling systems with common sales approaches, management and reporting;
•specialized technology platforms and proprietary payment acceptance networks, which create competitive advantages and barriers to entry; and
•high EBITDA margins and cash flow translation given limited infrastructure investment requirements.
We are executing on a strategy of optimizing assets, leveraging similar selling methods, and bundling and cross-selling value-added solutions. We continue to enhance our solutions to displace inferior payment methods, improve customers’ mobile and digital experiences, and extend utility. We actively market and sell to current and prospective customers leveraging a multi-channel go-to-market approach, which includes direct sales forces, comprehensive digital channels, and strategic partner relationships. We supplement our organic growth strategy and sales efforts by pursuing attractive acquisition opportunities, which serve to strengthen or extend our market positions and create value even faster. With a long, proven operating history, FLEETCOR portfolionow serves hundreds of brands help companies automate, secure, digitize and controlthousands of business customers with millions of cardholders making payments on behalfto millions of their employees and suppliers. We serve businesses, partners, merchants and consumer and payment networks in North America, Latin America, Europe, and Asia Pacific. FLEETCOR’s predecessor company was organized invendors around the United States in 1986, and FLEETCOR had its initial public offering in 2010 (NYSE: FLT).world.
FLEETCOR has twothree reportable segments, North America, International, and International.Brazil. We report these twothree segments as they reflect how we organize and manage our employees around the world,global employee base, manage operating performance, contemplate the differing regulatory environments in North America versus otheracross geographies, and help us isolate the impact of foreign exchange fluctuations on our financial results. However, to help facilitate an understanding of our expansive range of solutions around the world, we describe them in two categories: Corporate Payments solutions, which simplify and automate payments, and Expense Management solutions, which help control and monitor employee spending.
Corporate Payments
Our Corporate Payments solutions are designed to help businesses streamline the back-office operations associated with making outgoing payments. Companies save time, cut costs, and manage B2B payment processing more efficiently with our suite of Corporate Payment solutions, including accounts payable (AP) automation, virtual cards, cross-border, and purchasing and T&E cards.
AP Automation– We offer AP automation solutions with options that are purpose-built for the simplest, small business, to the most complex large enterprise. We initiate, manage and guarantee payment of all company-approved bills to all domestic and international vendors through whichever payment modalities the vendors allow, such as automated clearing house (ACH), wire, check or payment card. For small/medium sized businesses (SMB), our offering is simple, modern bill pay with invoice scanning and automated workflows, which also syncs to popular accounting systems like QuickBooksTM. Our mid-market/enterprise option meets the needs of the most complex global enterprises with multiple organizational hierarchies, approval workflows, locations, bank accounts, robust on-demand reporting and seamless integration with Enterprise Resource Planning
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(ERP) systems. We also provide rich data on the remittance to the supplier, regardless of payment modality, which facilitates invoice reconciliations and payment posting. By automating the process of paying vendors, businesses of all sizes can reduce the time, costs and fraud risks associated with their payment processes, and refocus on operating their businesses.
Virtual Card– Virtual Card provides a single-use card number for a specific amount, usable within a defined timeframe. Virtual Cards provide enhanced security relative to checks while reducing total payment costs for our customers. Full remittance data accompanies each Virtual Card payment, providing significant reconciliation advantages to ACH payments. We have integrated our Virtual Card offering into most leading ERP systems, providing a seamless experience for AP personnel.
We have built a proprietary merchant acceptance network, which we believe is largest in the industry, that accepts our Virtual Card payments. Our merchant acceptance network is unique from all others, due to the nature of commercial Virtual Card acceptance, so other issuers’ virtual cards are not interchangeable. This network is managed with proprietary technology that allows us to continuously expand Virtual Card acceptance and optimize the amount of spend we can capture. The scale of this network, coupled with a best-in-class, in-house vendor enrollment service, is a competitive advantage. Our ERP integrations, application programming interface (API) capabilities, strategic vendor enrollment, and transaction management tools enable us to optimize our customers’ electronic payables programs.
Our Virtual Card operates solely on the Mastercard network. Our customers’ ERP systems are directly integrated with our issuing system, and merchants must be enrolled in our proprietary vendor network to accept our Virtual Card solution. This two-sided transaction, where both payor and receiver are both in our network, provides substantial payment security relative to paper checks or ACH.
Cross-Border– Our Cross-Border solution is used by our customers to pay international suppliers, foreign office and personnel expenses, capital expenditures, and profit repatriation and dividends. We also offer hedging and risk management services to customers, which helps them manage the impact of volatile exchange rates in the course of doing business internationally.
Trade settlement and payment delivery is facilitated through a global network of correspondent banks, in-country payment gateways and technology providers, enabling us to send payments to recipients in over 200 countries and 150 currencies. Our customers rely on us to deliver personalized service and customer solutions, with a heavy focus on technology. We offer a proprietary trading and payments platform that we can "white label" for financial institutions looking to expand their cross-border payment method designedcapability, as well as a suite of API products that enables us to be superiorembed our full capability directly within the technology of both customers and partners. By utilizing transaction monitoring and watch list screening systems, we ensure payments are safe, secure, and meet all applicable regulatory requirements.
Purchasing and T&E cards – We also offer purchasing cards and travel & entertainment (T&E) solutions to our customers. These solutions are generally sold in conjunction with our Virtual Card or AP Automation offerings. Additionally, we provide technology, which combines and more robustleverages transaction data captured from our virtual, purchasing, and effective than what they use currently, whether they use a competitor’s product or another alternative methodT&E card products, to help our customers analyze and manage their corporate spending.
Employee Expense Management
Our Expense Management solutions are purpose-built to provide customers with greater control and visibility of employee spending when compared with less specialized payment methods, such as cash or check. Our solutions are comprised of payment products, networks and associated services. We group our payment solutions into five primary categories: Fuel, Lodging, Tolls, Corporate Payments and Gift. Additionally, we provide other complementary payment products including fleet maintenance, employee benefits and long haul transportation-related services.
We utilize both proprietary and third-party payment acceptance networks to deliver our Expense Management solutions. In our proprietary networks, which tend to be geographically distinct, transactions are processed on systems owned and operated by us, and only at select participating merchants with whom we have contracted directly for acceptance. These proprietary networks generally provide us with better economics, as we control more of the transaction, and richer data because of how the networks and point of sale software are configured. Third-party networks are operated by independent parties, and tend to be more broadly accepted, which is the primary benefit compared with our proprietary networks. Mastercard and VISA are our primary third-party network partners in North America and Europe, respectively.
Fuel
We offer Fuel solutions to businesses and government entities who operate vehicle fleets. At its most basic, we provide the measurement of fuel used and facilitate the payment for that fuel to the merchant, whether that fuel be diesel, gasoline, compressed natural gas, or even electricity.
The combinationmeasurement and payment needs of these specialized attributes allows our customers operating electric vehicles (EV) are similar to those operating traditional, internal combustion vehicles, just centered around electricity usage instead of gas or diesel usage. As we help our customers manage through the transition to EVs, we expect many of them to operate mixed fleets, and will need access to networks of fuel payment productsstations, electric charging stations both on the road and at the office, in addition to compete well against less specialized productsat-home charging options. Considering the increased complexity of managing a mixed fleet or an all EV fleet, we believe the value of our solutions will endure, regardless of the propulsion method.
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We utilize both proprietary and third-party networks to deliver our Fuel solutions. Our proprietary fuel networks are geographically distinct, and may also be unique to specific market segments we serve, such as cash or general purposehighway-based truck stops with high speed diesel pumps that can quickly refuel long-haul diesel trucks. We are actively expanding our proprietary networks, particularly in Europe, to accommodate EV charging. Many of our Fuel solutions also have additional purchasing capabilities as part of our "beyond fuel" program. We can enable the fuel card to allow customers to purchase non-fuel items such as oil, vehicle maintenance supplies and services, and building supplies, but with more control than a general-purpose credit cards when it comescard.
We also provide program management services to controlling fuel purchases.
Lodging payment product line
We offer lodging paymentLodging solutions to businesses in North America that have employees who travel overnight for work purposes, and to airlines and cruise lines globally to accommodate both their traveling crews and distressed passengers whose flights have been canceled.stranded passengers. We offer card-based lodging payment products for individual business travelers and non-card based solutions for crews and distressed passengers. Our solutions can be customized to meet the specific needs of our customers, includingprovide access to deeply discounted hotel networks and may include customer-specific rate negotiation, the ability to customize the network to fit the customers’ specific travel needs and policies, enhanced controls and reporting, and audit and tax management services.
Our customersLodging solutions operate on our proprietary lodging networks, which include a worldwide network of hotels across 136 countries. We also can secure room nights withhotel rooms outside our solutions throughproprietary networks if required by our website or mobile app, by phone or email, or by walking into participating lodging properties and presenting their FLEETCOR lodging payment product credentials.customers.
Gift payment product line
We provide fully integrated gift card productprogram management and processing services in 61 different countries, around the world. These products come in the form ofboth plastic and digital form. The gift cards carry our customers’are issued specifically for each customer under their specific brands and are generally accepted exclusively within thetheir retail network, websites, and mobile applications of each respective customer.digitally or in person.
Our services includeGift solution includes card design, production and packaging, delivery and fulfillment, card and account management, transaction processing, promotion development and management, website design and hosting, program analytics, and card distribution channel management. The combination of our products and services provides aOur turnkey solution tobenefits our customers who benefit in the form of brand promotion, cardholder loyalty, increased sales, interest income on prepaid balances, and breakage on abandoned card balances.
Other
Payroll Card – We distribute our giftoffer a Payroll Card solution in North America in the form of a reloadable stored value card, that can be used instead of a paper payroll check. Our solution operates on the Mastercard payment productsnetwork and services directly through a specialized, dedicated field sales force. We serve our commercial customers in numerous industry verticals, with a focus in restaurants, supermarkets, drugstores, airlines, hotels, apparelthe All Point ATM network, and other retail categories. We help our commercial customers manage distribution with omni-channel strategies which include card sales through the customers’ retail outlets, websites and mobile applications, as well as through third party locations, such as supermarkets and drug stores. This third party distribution is generally provided by other companies, such as Blackhawk and InComm, whoPayroll Cards are reliant on accessissued to our systems to meet their distribution obligations.
Fleet maintenance
Maintenance – We provide a vehicle maintenance service offeringsolution that helps fleet customers to manage their vehicle maintenance, service, and repair needs in the U.K. This productsolution is provided through our proprietary 1link maintenance and repair
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network, which
processes transactions for fleet customers through approximately 8,700 service centers across the U.K. With regardWe also offer compliance service to the U.K.’s heavy goods (truck) operators, workshops and drivers.
Long-haul transportation services – In addition to, and often in conjunction with, our fleet maintenance products,Fuel solution, we competeprovide trucking companies in North America with several companies including Ebbon-Dacsvarious solutions and Fleet on Demand.services specifically relevant to their industry including: road tax compliance analysis and reporting, permit procurement, and cash movement and disbursement.
Benefits – In Mexico and Brazil, we offer prepaid food vouchers andor cards that may be used as a form of payment in restaurants and grocery stores. These payment products operate on one of the following networks:
Sales and trains. Our proprietary VB Servicos, Comercio e Administracao LTDA (“VB”) distribution network distributes cards and vouchers to employees on behalf of approximately 27,300 customers and negotiates with more than 1,500 public transportation agencies across Brazil.Distribution
We provide these various payment productsactively market and sell our solutions to businessescurrent and prospective customers leveraging a multi-channel approach. This go-to-market strategy includes direct sales forces, comprehensive digital channels, and strategic partner relationships. Our primary focus is on direct sales, where we acquire and manage the customer relationship, which has historically been either in-person or via telesales. We also have a robust, digital sales platform that enables our sales people to be more efficient by improving their prospecting efforts through web sourced leads. With the shift of all sizescustomer behavior to the web for much of their consumer purchases, we are building an online, end-to-end capability where the customers can buy, onboard and manage their accounts on their own. Our capabilities are also offered through indirect sales channels (e.g., major oil companies and fuel marketers for Fuel, and retail establishments for Tolls) and on a branded or “white label” basis, indirectly through a broad range of resellers and partners across Fuel, Lodging, and Corporate Payments. In doing so, we leverage their sales networks to expand our reach into new customer segments, new industry verticals, and the businesses in turn offer the products to their employees asnew geographies faster and at a form of benefit. significantly lower cost.
With regardrespect to our employee benefit payment products,Tolls solution, to reach consumers, we competealso place proprietary manned kiosks and unmanned vending machines in areas with numeroushigh consumer foot traffic, such as shopping malls. With respect to our Gift solution, third-party distribution is generally provided by other companies, the largest of which includes Edenred, Sodexo, Chèque Déjeuner, and Alelo.
We face considerable competition incapitalize on our business. The most significant competitive factors inproducts’ specialization by deploying product-dedicated sales forces who use field sales, telesales and digital marketing to target specific customer segments. As our businesssolution set has expanded, we are the breadth ofalso facilitating cross-selling and bundled product offerings to fully leverage our distribution capabilities, capture more spend and service features,revenue from our existing customer base, and deliver more value to customers which should improve customer loyalty and retention.
Credit Underwriting and Collections
We follow detailed application credit extension, payment terms, customer service andreview, account management, and price. For certain payment-related products, wecollections procedures for all customers of our payment solutions. The credit review includes a combination of quantitative, third-party credit scoring models, and judgmental underwriting based on customer financials. We employ a variety of tools to manage risk in our portfolio, including: billing frequency, payment terms, spending limits, payment methods, delinquency suspension, and security. We use fraud detection programs, including proprietary and third-party solutions, to monitor transactions and prevent misuse. We monitor the credit quality of our portfolio periodically utilizing external credit scores and internal behavior data to identify high risk or deteriorating credit quality accounts. We conduct targeted strategies to minimize exposure to high-risk accounts, including reducing spending limits and payment terms or requiring additional security.
Competition
Our primary competition is from financial institutions offering general payment methods, like cash, checks, and general-purpose credit cards. We also compete with specialized competitive offerings from other companies that vary by product category.
•Our Corporate Payments solutions compete with similar offerings from financial institutions, American Express, Western Union Business Solutions and Associated Foreign Exchange.
•Our Fuel solutions compete with similar offerings from WEX, U.S. Bank Voyager Fleet Systems, Edenred, Sodexo, Alelo, Radius Payment Solutions, World Fuel Services, and DKV.
•Our Lodging solutions compete with similar offerings from Egencia (Expedia), hotelengine.com, and in-house travel departments of large corporations and airlines.
•Our Toll solutions compete with similar offerings from ConectCar (Banco Itaú and Ipiranga), Veloe (Alelo), and Repom (Edenred).
•Our Gift and Payroll Card solutions compete with similar offerings from First Data (Fiserv), other special-purpose card issuers, and payroll companies.
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Competitive Advantage
In executing on the respective size or nature (i.e., open versus closed loop) of each product’s acceptance network. For certain payment processing services, systemsour strategy, we are advantaged by leveraging our competitive strengths:
•Global Scale – We have strong market positions across four continents. This enables us to provide new offerings with better cost economics; sell complementary products; acquire attractive assets that can leverage existing infrastructure and technology are also significant competitive factors. We believe that we generally compete favorably with respect to each of these factors. However, we may experience competitive disadvantages with respect to each of these factorscost synergies; and introduce successful products and practices from time to time as potential customers prioritize or value these competitive factors differently.other markets.
•Focused Growth Strategy – As a result a specific offering of ourstrong revenue retention, we can focus on driving organic growth from new customer acquisitions in addition to selling more value-added products to current customers. Also, we effectively identify and service features, networksacquire new attractive assets.
•Scalable Technology – Our easy-to-use platforms provide control and pricing may serve as a competitive advantage with respect to one customer and a disadvantagefunctionality for another based on the customers’ preferences. The companies with whom we compete often vary by product line and/or geography, and are therefore identified by name in the respective product line discussions.
•Diversification – Our solutions and other awareness campaignsgeographic diversification are designed to further market our products and services.
Technology
Our technology provides continuous authorization of transactions, processing of critical account and clientcustomer information, and settlement between merchants, issuing companies, and individual commercial entities. We recognize the importance of state-of-the-art, secure, efficient, and reliable technology in our business and have made significant investments in our applications and infrastructure. In 2019,2020, we spent approximately $200$220 million in capital and operating expenses to operate, protect, and enhance our technology.
We operate several proprietary processing systems that provide features and functionality to run our card programs and solutions, including our card issuing, processing, and information services. Our processing systems also integrate with our proprietary networks, which provide brand awareness and connectivity to our acceptance locations that enables the “end-to-end” card acceptance, data capture, and transaction authorization capabilities of our card programs. Our proprietary processing systems and aggregation software are tailored to meet the unique needs of the individual markets they serve and enable us to create and deliver solutions that serve each of our industry verticals and geographies. Our technology platforms are primarily comprised of four key components, which were primarily developed and are maintained in-house: (1) a core processing platform; (2) specialized software; (3) integrated network capabilities; and (4) a cloud-based architecture with proprietary APIs.
Our technology function is based in the United States,U.S., Europe, and Brazil and has expertise in the management of applications, transaction networks, and infrastructure. We operate application development centers in the United States, United Kingdom,U.S., U.K., Netherlands, Russia, Czech Republic, Brazil, and New Zealand. Our distributed application architecture allows us to maintain, administer, and upgradeinnovate our systemssolutions in a cost-effective and flexible manner. Our purpose-built solutions contain significant intellectual property that differentiates us from our competition.
Our IT transformation initiatives are focused on three main pillars: (1) digital strategy; (2) core systems modernization; and (3) data. Our digital strategy is focused on streamlining a digital customer experience across all of our solutions, providing a seamless experience. Additionally, we are investing in modernizing our core transactional systems to make them more resilient, secure, and scalable. Through the use of cloud technology and microservices, we are able to modernize our platforms with no disruption to our customers. Finally, data is becoming an ever-increasing part of how the Company and its customers do business. We integrateare focused on investing in our systems with third-party vendor applicationsdata assets to deliver value for certain products, salesour customers through improved insights to them to better control expenses and customer relationship management and back-office support. Our technology
Our technology infrastructure is supported by highly-secure data centers, with redundant locations. We operate our primary data centers, which are located in Atlanta, Georgia; Brentwood, Tennessee; Prague;Prague, Czech Republic; Las Vegas, Nevada; Lexington and Louisville, Kentucky; SaoSão Paulo, Brazil; Toronto, CanadaCanada; and Moscow, Russia. Additionally, as we develop new solutions and modernize legacy assets, we increasingly leverage cloud services. The use of cloud services provides us with increased flexibility and agility. We use only proven technology and expect no foreseeable capacity limitations. Our systems align with industry standards for security, with multiple industry certifications. Our network is configured with multiple layers of security to isolate our databases from unauthorized access. We use security protocols for communication among applications, and our employees access critical components on a need-only basis. We may not be able to adequately protect our systems or the data we collect from continually evolving cybersecurity risks or other technological risks, which could subject us to liability and damage our reputation. See also, "We are dependent on the efficient and uninterrupted operation of interconnected computer systems, telecommunications, data centers and call centers, including"Risks related to information technology and network systems managed by multiple third parties, which could result in our inability to prevent disruptions in our services" and "We may experience software defects, system errors, computer viruses and development delays, which could damage customer relationships, decrease our profitability and expose us to liability"security" under Item 1A for further discussion of the risks we face in connection with our technology systems and potential data breach and cybersecurity risks facing the Company.
We maintain disaster recovery and business continuity plans.plans, which benefited and continue to benefit us during the COVID-19 pandemic. Our telecommunications and internet systems have multiple levels of redundancy to ensure the reliability of network service. In 2019,2020, we achieved over 99.9% up-time for authorizations globally.
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Safeguarding Our Business
To provide our services, we collect, use and store sensitive business information and personal information, which may include credit and debit card numbers, bank account numbers, social security numbers, driver’s license numbers, names and addresses, and other types of personal information or sensitive business information. Some of this information is also processed and stored by financial institutions, merchants, and other entities, as well as third-party service providers to whom we outsource certain functions and other agents, which we refer to collectively as, our associated third parties. We may have responsibility to the card networks, financial institutions, and in some instances, our customers, and/or individuals, for our failure or the failure of our associated third parties (as applicable) to protect this information.
We operate several proprietary processing systems that provide features and functionalityare subject to run our card programs and product offerings, including our card issuing, processingcybersecurity and information services. Ourtheft risks in our operations, which we seek to manage through cyber and information security programs, training, and insurance coverage. To strengthen our security and cyber defenses, we maintain a defensive in-depth approach to cyber and information security to defend our systems against misuse, intrusions, and cyberattacks and to protect the data we collect. Further, we work with information security and forensics firms and employ advanced technologies to help prevent, investigate and address issues relating to processing systemssystem security and availability. We also integratecollaborate with our proprietary networks, which provide brand awarenessthird parties, regulators, and connectivitylaw enforcement, when appropriate, to resolve security incidents and assist in efforts to prevent unauthorized access to our acceptance locations that enables the “end-to-end” card acceptance, data capture and transaction authorization capabilities processing systems.
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Tableof our card programs. Our proprietary processing systems and aggregation software are tailored to meet the unique needs of the individual markets they serve and enable us to create and deliver commercial payment solutions and stored value programs that serve each of our industry verticals and geographies. Our technology platforms are primarily comprised of four key components, which were primarily developed and are maintained in-house: (1) a core processing platform; (2) specialized software; (3) integrated network capabilities; and (4) a cloud based architecture with proprietary APIs.Contents
Regulatory
A substantial number of laws and regulations, both in the United StatesU.S. and in other jurisdictions, apply to businesses offering payment cardsproducts to customers, processing payments and servicing related accounts, or processing or servicing foroperating payment cards and related accounts.networks. These laws and regulations are often evolving and sometimes ambiguous or inconsistent, and the extent to which they apply to us is at times unclear. Failure to
comply with regulations may result in the suspension or revocation of licenses or registrations, the limitation, suspension, or termination of services or relationships with our bank partners and sponsors and business and sales partners, and/or the imposition of civil and criminal penalties, including fines. Certain of our servicessolutions are also subject to rules set by various payment networks, such as Mastercard, as more fully described below.
The following, while not exhaustive, is a description of several federal and state laws and regulations in the United StatesU.S., as well as foreign laws and regulations, that are applicable to our business. The lawsbusiness, and regulations of other jurisdictions alsotherefore can materially affect us,our capital expenditures, earnings, and they may be more or less restrictive than those in the United States and may also impact different parts of our operations.competitive position. In addition, the legal and regulatory framework governing our business is subject to ongoing revision, and changes in that framework could have a significant effect on us.
Money Transmission and Payment Instrument Licensing Regulations
We are subject to various U.S. laws and regulations governing money transmission and the issuance and sale of payment instruments relating to certain aspects of our business. In the United States,U.S., most states license money transmitters and issuers of payment instruments. Through our subsidiaries, we are licensed in all states where required for business. Many states exercise authority over the operations of our services related to money transmission and payment instruments and, as part of this authority, subject us to periodic examinations, which may include a review of our compliance practices, policies and procedures, financial position and related records, privacy and data security policies and procedures, and other matters related to our business. As a result of these periodic examinations, state agencies sometimes issue us findings and recommendations, prompting us to make changes to our operations, such as improving our reporting processes, detailing our intercompany arrangements, and implementing new or revising existing policies and procedures, such as our anti-money laundering and the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) compliance program and our complaints-management process, and improving our documentation processes.procedures.
As a licensee, we are subject to certain restrictions and requirements, including net worth and surety bond requirements, record keeping and reporting requirements, requirements for regulatory approval of controlling stockholders or direct and indirect changes of control of the licensee and certain other corporate events, and requirements to maintain certain levels of permissible investments in an amount equal to our outstanding payment obligations. Many states also require money transmitters and issuers of payment instruments to comply with federal and state anti-money laundering laws (AML) and regulations. See “Anti-Money Laundering and“Anti-Money Laundering. Counter Terrorist, Regulations.and Sanctions Regulations.”
Government agencies may impose new or additional requirements on money transmission and sales of payment instruments, and we expect that compliance costs will increase in the future for our regulated subsidiaries.
Privacy and Information Security Regulations
We provide services that may be subject to various state, federal, and foreign privacy and information security laws and regulations, including, among others, the Gramm-Leach Bliley Act, the EU’s General Data Protection Regulation (the “GDPR”)(GDPR) and its Network and Information Security directive, Canada’s Personal Information Protection and Electronic Documents Act, Brazil’s General Data Protection Law, and California’s Consumer Protection Act of 2018 (the “CCPA”)(CCPA).
These and similar laws and their implementing regulations restrict certain collection, processing, storage, use, and disclosure of personal information, require notice to individuals of privacy practices, and provide individuals with certain rights to prevent use and disclosure of protected information. Some also impose requirements for the safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines. In many cases they impose obligations to notify affected individuals, state officers or other governmental authorities, the media, and consumer reporting agencies, as well as businesses and governmental agencies, of security breaches affecting personal information. In addition, some restrict the ability to collect and utilize certain types of information such as Social Security and driver’s license numbers.
Certain of our products that access payment networks require compliance with Payment Card Industry (“PCI”)(PCI) data security standards. See “Payment“Payment Card Industry Rules.Rules.”
Email and Text Marketing Laws
We may use direct email marketing and text-messaging to reach out to current or potential customers and therefore are subject to various statutes, regulations, and rulings, including the Telephone Consumer Protection Act (“TCPA”)(TCPA), the Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM Act”)(CAN-SPAM Act) and related Federal Communication Commission (“FCC”)(FCC) orders. The TCPA, as interpreted and implemented by the FCC and U.S. courts imposes significant restrictions on the use of telephone calls and text messages to residential and mobile telephone numbers as a means of
Several states have enacted additional, more restrictive and punitive laws regulating commercial email. Foreign legislation exists as well, including Canada’s Anti-Spam Legislation and the European laws that have been enacted pursuant to European Union Directive 2002/58/EC and its amendments.
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Unfair or Deceptive Business Practices
All persons engaged in commerce, including, but not limited to, us and our bank sponsors and customers, are subject to regulatory enforcement by the FTC, under Section 5 of the Federal Trade Commission Act, and state attorneys general, under various consumer-protection statutes, prohibiting unfair or deceptive acts or practices, and certain products also are subject to the jurisdiction of the Consumer Financial Protection Bureau (“CFPB”)(CFPB) regarding the prohibition of unfair, deceptive, or abusive acts and practices (both, collectively, UDAAP). A numberpractices. As a service provider to certain of state lawsour bank sponsors, we may further be subject to direct supervision and regulations also prohibit unfairexamination by federal banking regulators in connection with certain of our products and deceptive business practices. Various federal and state regulatory enforcement agencies including the Federal Trade Commission (“FTC”), CFPB and the state attorneys general have authority to investigate and take action against businesses, merchants and financial institutions that are alleged to engage in UDAAP or violate other laws, rules and regulations.services, which may increase our compliance costs. If we are accused of violating suchany of these laws, rules and regulations, we may be subject to enforcement actions and as a result, may incur losses and liabilities that may impact our business.
We are subject to several laws and related regulations governing the provision and administration of credit. The Truth in Lending Act or TILA,(TILA) was enacted as a consumer protection measure to increase consumer awareness of the cost of credit and to protect consumers from unauthorized charges or billing errors, and is implemented by the Federal Reserve’sCFPB’s Regulation Z. Most provisions of TILA and Regulation Z apply only to the extension of consumer credit, but a limited number of provisions apply to commercial cards as well. One example where TILA and Regulation Z are generally applicable is a limitation on liability for unauthorized use, although a business that acquires 10 or more credit cards for its personnel can agree to more expansive liability. Our cardholder agreements generally provide that these business customers waive, to the fullest extent possible, all limitations on liability for unauthorized card use.
The Equal Credit Opportunity Act or ECOA,(ECOA) together with Regulation B prohibit creditors from discriminating on certain prohibited bases, such as an applicant’s sex, race, nationality, age and marital status, and further requires that creditors disclose the reasons for taking any adverse action against an applicant or a customer seeking credit.
The Fair Credit Reporting Act or FCRA,(FCRA) regulates consumer reporting agencies and the disclosure and use of consumer reports. We may obtain consumer reports with respect to an individual who guarantees or otherwise is obligated on a commercial card.
The Fair and Accurate Credit Transactions Act of 2003 amended FCRA and requires creditors to adopt identity theft prevention programs to detect, prevent and mitigate identity theft in connection with covered accounts, which can include business accounts for which there is a reasonably foreseeable risk of identity theft.
Anti-Money Laundering, and Counter Terrorist, and Sanctions Regulations
The Currency and Foreign Transactions Reporting Act, which is also known as the Bank Secrecy Act (the “BSA”)(BSA) and which has been amended by the USA PATRIOT Act of 2001, contains a variety of provisions aimed at fighting terrorism and money laundering. Among other things, the BSA and implementing regulations issued by the U.S. Treasury Department require financial-services providers to establish anti-money launderingAML programs, to not engage in terrorist financing, to report suspicious activity, and to maintain a number of related records. We are also subject to certain economic and trade sanctions programs that are administered by the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) that prohibit or restrict transactions to or from or dealings with specified countries, their governments and, in certain circumstances, their nationals, narcotics traffickers, and terrorists or terrorist organizations. In addition to economic sanctions programs, we are also subject to international laws and regulations focused on fighting terrorism and money laundering:laundering, including:
•in Canada, Proceeds of Crime (Money Laundering) and Terrorist Financing Act or the PCTFA;(PCMLTFA);
•in Australia, as a registered remittance dealer with AUSTRAC, the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act); and
•in the UK,U.K., as a registered Electronic Money Institution with the Financial Conduct Authority, the Proceeds of Crime Act, 2002, (as amended by the Serious Organised Crime and Police Act 2005), and the Terrorism Act 2000 (as amended by2000; and
•in the Anti-Terrorism, CrimeEU, AML requirements promulgated under the 4th, 5th and Security Act 20016th EU Anti-Money Laundering Directives.
Numerous other countries have also enacted or proposed new or enhanced AML legislation and the Terrorism Act 2006).regulations applicable to us.
Non-banks that provide certain financial services are required to register with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (FinCEN) as “money services businesses” (MSBs)(MSB). Through certain subsidiaries, we are registered as MSBs. As a result, we have established anti-money laundering compliance programs that include: (i) internal policies and controls; (ii) designation of a compliance officer; (iii) ongoing employee training; and (iv) an independent review function. We have developed and implemented compliance programs comprised of policies, procedures, systems and internal controls to monitor and address various legal requirements and developments.
In addition, provisions of the BSA known as the Prepaid Access Rule issued by FinCEN impose certain obligations, such as registration and collection of consumer information, on “providers” of certain prepaid access programs, including the stored value products issued by our sponsor banks for which we serve as program manager. FinCEN has taken the position that, where the issuing bank has principal oversight and control of such prepaid access programs, no other participant in the distribution chain would be required to register as a provider under the Prepaid Access Rule. Despite this position, we have opted to register as a provider of prepaid access through our subsidiary, Comdata Inc. We are also subject to certain economic and trade sanctions programs that are administered by the OFAC that prohibit or restrict transactions to or from or dealings with specified countries, their governments and, in certain circumstances, their nationals, narcotics traffickers, and terrorists or terrorist organizations.
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Interchange Fees
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 or the Dodd-Frank Act,(Dodd-Frank Act) effected comprehensive revisions to a wide array of federal laws governing financial institutions, financial services, and financial markets. Among its most notable provisions is the creation of the CFPB, which is charged with regulating consumer financial products or services and which is assuming much of the rulemaking authority under TILA, ECOA, FCRA, and other federal laws affecting the extension of credit. In addition to rulemaking authority over several enumerated federal consumer financial protection laws, the CFPB is authorized to issue rules prohibiting UDAAP by persons offering consumer financial products or services and their service providers, and has authority to enforce these consumer financial protection laws and CFPB rules. The CFPB has not defined what is a consumer financial product or service but has indicated informally that, in some instances, small businesses may be covered under consumer protection.
restrictions. In July 2011, theThe Federal Reserve published the final rules governinghas capped debit interchange fees. Thefees, however the cap on interchange fees ishas not expected to havehad a material direct impact on our results of operations because we qualify foroperate under an exemption to the cap for the majority of our debit transactions.
Anti-Bribery Regulations
The FCPAForeign Corrupt Practices Act (FCPA) prohibits the payment of bribes to foreign government officials and political figures and includes anti-bribery provisions enforced by the Department of Justice and accounting provisions enforced by the Securities and Exchange Commission (the “SEC”)(SEC). The statute has a broad reach, covering all U.S. companies and citizens doing business abroad, among others, and defining a foreign official to include not only those holding public office but also local citizens affiliated with foreign government-run or -owned organizations. The statute also requires maintenance of appropriate books and records and maintenance of adequate internal controls to prevent and detect possible FCPA violations. We are subject to similar statutes in certain foreign jurisdictions in which we operate, such as the U.K. Bribery Act.
Payment Card Industry Rules
We are also subject to network operating rules promulgated by the National Automated Clearing HouseACH Association relating to payment transactions processed by us using the Automated Clearing HouseACH Network.
Escheat Regulations
We may be subject to unclaimed or abandoned property (escheat) laws in the United StatesU.S. that require us to turn over to certain government authorities the property of others that we hold that has been unclaimed for a specified period of time, such as payment instruments that have not been presented for payment and account balances that are due to a customer following discontinuation of our relationship. We may be subject to audit by individual U.S. states with regard to our escheatment practices.
Prepaid Card Regulations
Prepaid card programs that we manage aremay be subject to various federal and state laws and regulations, includingsuch as the CARDCredit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) and the Federal Reserve Board’sCFPB’s Regulation E, which impose requirements on general-use prepaid cards, store gift cards and electronic gift certificates. The CFPB issued a final rule on prepaid accounts that came into effect on April 1, 2019. The definition of prepaid account under this rule includes certain accounts that are capable of being loaded with funds and whose primary function is to conduct transactions with multiple, unaffiliated merchants, at ATMs or for person-to-person transfers. The requirements under this rule include, among other things, the disclosure of fees and other information to the consumer prior to the creation of a prepaid account; the extension of Regulation E liability limits and error-resolution requirements to all prepaid accounts; the application of Regulation Z credit card requirements to prepaid accounts with overdraft and credit features; and the submission of prepaid account agreements to the CFPB and the publication of such agreements to the general public.
State Usury Laws
Extensions of credit under many of our card products may be treated as commercial loans. In some states, usury laws limit the interest rates that can be charged not only on consumer loans but on commercial loans as well. To the extent that these usury
laws apply, we are limited in the amount of interest that we can charge and collect from our customers. Because we have substantial operations in multiple jurisdictions, we utilize choice of law provisions in our cardholder agreements as to the laws of which jurisdiction to apply. With respect to card products where we work with a partner or issuing bank, the partner bank may utilize the law of the jurisdiction applicable to the bank and “export” the usury limit of that state in connection with cards issued to residents of other states or we may use our choice of law provisions.
Derivatives Regulations
Rules adopted under the Dodd-Frank Act by the Commodity Futures Trading Commission (the “CFTC”)(CFTC), as well as the provisions of the European Market Infrastructure Regulation and its technical standards, which are directly applicableas well as derivative reporting in Canada and the member states of the European Union,U.S., have subjected certain of the foreign exchange derivative contracts we offer to our customers as part of the Cambridge Global Payments (“Cambridge”)our cross-border payments business to reporting, recordkeeping, and other requirements. Additionally, certain foreign exchange derivatives transactions we may enter into in the future may be subject to centralized clearing requirements, or may be subject to margin requirements in the United StatesU.S., U.K., and European Union. Other jurisdictions outside the United StatesU.S., U.K., and the European Union are considering, have implemented, or are implementing regulations similar to those described above.
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Other
We are subject to examination by our sponsor banks’ regulators, and must contractually comply with certain regulations to which our sponsor banks are subject, as applicable. We aremay be examined by our sponsor banks’ regulators and be subject to auditaudits by certain sponsor banks.banks relative to such regulations.
The Housing Assistance Tax Act of 2008 requires information returns to be made for each calendar year by merchants, acquiring entities, and third-party settlement organizations with respect to payments made in settlement of electronic payment transactions and third-party payment network transactions occurring in that calendar year. Reportable transactions are also subject to backup withholding requirements. We are required to comply with these requirements for the merchants in our Comdata network. We could be liable for penalties if our information return is not in compliance with these regulations.
As of December 31, 2019, we2020, FLEETCOR employed approximately 8,700 employees, approximately 3,450 of whom were8,400 associates located in more than 20 countries around the United States.world, with approximately 3,100 of those associates based in the U.S. At FLEETCOR, we strongly believe that talent is a strong determinant of the Company’s performance and success. Our values-driven people programs, practices and policies have been developed to ensure we are able to attract, retain and develop the quality of talent necessary to advance our key initiatives and achieve our strategic objectives. We considerare firmly committed to delivering a strong employee value proposition and unique employment experience to our associates which, in turn, should lead to better customer experiences and business outcomes.
Culture
Our culture has evolved through time, as the Company has grown considerably both organically and through acquisitions. Despite FLEETCOR’s expansive size and geographic scope, we retain a strong entrepreneurial spirit, and share a common vision, mission and set of values, which together serve as cornerstones to our “One FLEETCOR” culture. Our values, listed below, are infused in all aspects of FLEETCOR, and guide our employee relationsselection, behavior and interactions with both internal and external stakeholders:
•Innovation – figure out a better way
•Execution – get it done quickly
•Integrity – do the right thing
•People – we make the difference
•Collaboration – accomplish more together
Diversity, Inclusion and Belonging
Our focus on diversity, inclusion and belonging (DIB) is paramount to our successful “One FLEETCOR” culture. As of December 31, 2020, females represented approximately 53% of our global workforce and approximately 20% of our senior leadership team, while minorities comprised approximately 32% of our domestic workforce and approximately 22% of our senior leadership team.
Fostering a culturally diverse and inclusive environment and creating a true sense of belonging are among our top priorities. Our global diversity council, three regional councils and nine employee resource groups (ERG) are dedicated to building diversity, inclusion and belonging into all aspects of our global operations. Sponsored by the Chairman of the Board and CEO, the councils and ERGs are vital to creating an environment where all employees are able to prosper. Our ERGs allow a safe space for traditionally underrepresented employees to connect and discuss experiences. The ERGs also provide FLEETCOR with perspectives on the unique needs and lived experiences of those who are traditionally underrepresented.
Employee Wellness
FLEETCOR’s benefits programs are designed to meet the evolving needs of a diverse workforce across the globe. Because we want our employees and their families to thrive, in additional to our regular benefit offerings, we focused on physical and mental well-being in 2020. During the year, we offered free, online fitness classes, sponsored the FLEETCOR Wellbeing Challenge, provided access to employee assistance programs in all regions, and celebrated Mental Health Awareness programs globally.
Talent Development
FLEETCOR offers a variety of high-quality learning opportunities, designed to support employee development and organizational effectiveness. Learning opportunities are available in all geographies at all levels, and incorporate personal, business and leadership skills development with the goal of empowering our organization, creating avenues for closing skill gaps, and enhancing the capabilities of our workforce. Leadership, teamwork, communication, and many other soft skills are vital to our success. We offer a wide variety of career opportunities and paths to advancement through on-the-job coaching, training, and education. We are proud to be gooda company where an associate can start as an intern and have never experiencedturn it into a work stoppage.successful career.
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The Voice of the Employee
We continue to develop and refine our people programs based on feedback we receive directly from our workforce, which we gather through an annual survey of all employees globally. The participation rate for our 2020 annual survey was approximately 83%. Reflecting our efforts to continuously improve in aspects deemed most important by our workforce, our employee engagement score in 2020 was approximately 7 percentage points higher than in our 2019 survey results. We share the detailed engagement scores across the organization, and analyze the results to understand differences by geography, demographics, job level, and leader, and to identify opportunities for further improvement. During 2020, we also conducted several additional surveys specifically related to our response to the COVID-19 pandemic, which helped inform our decisions regarding policies and processes for operating safely and effectively.
In October 2020, FLEETCOR published its inaugural Corporate Responsibility & Sustainability (CRS) report, in which we provided detailed information about the Company’s views and approaches regarding environmental, social and governance issues. We are currently preparing our second annual CRS report for publication later this year, which will include further details related to our global talent strategy, DIB metrics, employee wellness and talent development.
Additional Information
The Company maintains a website at the following address: www.fleetcor.com. The information on the Company’s website is not incorporated by reference into this Annual Report on Form 10-K. We make available on or through our website certain reports and amendments to those reports that we file with or furnish the to the SEC in accordance with the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)(Exchange Act). These include our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
In addition, the SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically at https://www.sec.gov.
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ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding our executive officers, with their respective ages as of December 31, 2019.2020. Our officers serve at the discretion of our board of directors. There are no family relationships between any of our directors or executive officers.
| Name | Age | Position(s) | ||||||||||||
| Ronald F. Clarke | Chief Executive Officer and Chairman of the Board of Directors | |||||||||||||
| Chief Financial Officer | ||||||||||||||
| John S. Coughlin | Group President—Corporate Payments | |||||||||||||
| Alexey Gavrilenya | Group President—North America Fuel | |||||||||||||
| Alan King | Group President—Europe, Australia and New Zealand Fuel | |||||||||||||
| Armando L. Netto | Group President—Brazil | |||||||||||||
| Alissa B. Vickery | 43 | Chief Accounting Officer | ||||||||||||
Ronald F. Clarke has been our Chief Executive Officer since August 2000 and was appointed Chairman of our boardBoard of directorsDirectors in March 2003. From 1999 to 2000, Mr. Clarke served as President and Chief Operating Officer of AHL Services, Inc., a staffing firm. From 1990 to 1998, Mr. Clarke served as Chief Marketing Officer and later as a division presidentDivision President with Automatic Data Processing, Inc. (ADP), a computer services company. From 1987 to 1990, Mr. Clarke was a principalPrincipal with Booz Allen Hamilton, a global management consulting firm. Earlier in his career, Mr. Clarke was a marketing manager for General Electric Company, a diversified technology, media, and financial services corporation.
John S. Coughlin was named Group President—Corporate Payments in December 2019. Prior to this role, Mr. Coughlinhas served as our Group President of Corporate Payments since August 2019. Mr. Coughlin joined FLEETCOR in 2010, and was the Executive Vice President—President of Global Corporate Development since September 2010. From 2007from his hiring to 2010,August 2019. He has led 37 FLEETCOR acquisitions, as well as spearheaded the integration and growth plans. Prior to joining us, Mr. Coughlin servedheld senior roles in private equity, operations, and strategy consulting as a Managing Director at PCG Capital Partners, a private equity firm. From 2005 to 2006, Mr. Coughlin served as Chief Executive Officer of NCDR LLC, a private equity owned national dental practice management company. From 1994 to 2005, Mr. Coughlin was withNCDR/Benevis, and Senior Partner at The Parthenon Group, a strategic advisory and principal investment firm, where he was a Senior Partner and the founder and head of the firm’s San Francisco office. From 1990 to 1992, Mr. Coughlin was an investment banker with Credit Suisse First Boston.Group.
Alexey Gavrilenya was namedhas been our Group President—President – North America Fuel insince September 2019. Prior to this role, Mr. Gavrilenya was our President of Continental Europe since 2016. From 2011 to 2015, Mr. Gavrilenya served as our President, Eastern Europe, where he was responsible for PPRjoined FLEETCOR in March 2009 and NKT. From 2009 to 2010, Mr. Gavrilenya served as our Executive Vice President Strategy and Finance, Eastern Europe until April 2011. From May 2011 to January 2016, Mr. Gavrilenya was President – Eastern Europe. He then added to his responsibilities as President – Continental Europe in February 2016. Prior to joining us, Mr. Gavrilenya was CFO of Matarex, Ltd.
Alan King joined us in August 2016 and serveshas served as our Group President—President of Europe, Australia, and New Zealand.Zealand Fuel since July 2019. Mr. King began leading all European operations,joined FLEETCOR in addition to his UK responsibilitiesAugust 2016 as President - U.K., Australia, and New Zealand, based in July 2019.London. Prior to joining us, Mr. King held various positionsworked at MasterCard from 2005 to 2016, includingMastercard where he was most recently Managing Director, of MasterCard Prepaid Management Services,Services. During his 11 year career at MasterCard, Mr. King held the roles of Group Head, of Global Prepaid Solutions, Group General Manager for Market and Business Development in the UK andU.K. & Ireland, and General Manager, of Global Accounts. Prior to MasterCard, Mr. King held leadership positions at VISA in the CEMEA region from 2003 to 2005 and at Citibank from 1998 to 2003, largely across commercial payments in international markets. Mr. King spent the early part of his career in the telecom and automotive industries, in various sales and marketing roles covering Europe.
Armando L. Netto was namedhas served as Group President—President – Brazil in April 2018. Mr. Netto joined us insince June 2014, serving as President of our legacy Brazil businesses, prior to our acquisition of STP.2014. Prior to joining us, Mr. Netto led IT Services for TIVIT, an IT and BPO services company, from 2006 to 2014, where he led the integration of functional areas into the business unit, focused on onboarding new clients and ensuredensuring service quality. Prior to TIVIT, Mr. Netto held various leadership roles with Unisys and McKinsey, where he gained international experience in Europe supporting clients in the UK,U.K., France, Austria, Portugal, and the Netherlands.
Alissa B. Vickery is a Certified Public Accountant and was appointed our Chief Accounting Officer in September 2020. Mrs. Vickery joined FLEETCOR in 2011 and also serves as Senior Vice President of Accounting and Controls, with oversight of external reporting, technical accounting, and internal audit. Prior to joining us, Mrs. Vickery held a Senior Director position at Worldpay and spent more than nine years in public accounting at Deloitte LLP and Arthur Andersen LLP, as a senior manager in the audit and assurance practice.
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ITEM 1A. RISK FACTORS
You should carefully consider the following risks applicable to us. If any of the following risks actually occur, our business, operating results, financial condition and the trading price of our common stock could be materially adversely affected. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Note Regarding Forward-Looking Statements” in this report.
Risks related to our business and operations
The novel strain of the coronavirus (COVID-19) has globally spread throughout other areas such as Asia, Europe, the Middle East, and North America and have negatively impacted the macroeconomic environment, significantly increasing economic uncertainty. The outbreak has resulted in regulatory and other authorities periodically implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and business shutdowns. These measures have negatively impacted consumer and business spending and could continue to do so.In addition, these measures have adversely impacted and may further impact our workforce and operations and the operations of our customers, suppliers and business partners. These measures may remain in place or return, as applicable, for significant periods of time and they are likely to continue to adversely affect our business, results of operations and financial condition.
The spread of the coronavirus has caused us to modify our business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners. While vaccines are currently being administered around the world, vaccine availability, distribution, efficacy to new strains of the virus and the public's willingness to get vaccinated could limit their impact and extend the duration of the pandemic.We continue to manage the business as appropriate in order to preserve our financial flexibility during this challenging time. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.
In addition, the impact of COVID-19 on macroeconomic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, commodity prices, including fuel prices, and interest rates. Even after the COVID-19 global pandemic has subsided or, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. The continued disruption of global financial markets as a result of the COVID-19 global pandemic could have a negative impact on our ability to access capital in the future.
The extent to which the COVID-19 outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact through vaccines or otherwise, and how quickly and to what extent normal economic and operating conditions can resume. Even after the coronavirus outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.
There are no comparable recent events which may provide guidance as to the effect of the spread of the coronavirus and a global pandemic, and, as a result, the ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. However, the effects could have a material impact on our results of operations.
Adverse effects on payment card transaction volume, including from unfavorable macroeconomic conditions, weather conditions, natural catastrophes or public health crises or from changes to business purchasing practices, could adversely affect our revenuerevenues and operating results.
For example, our transaction volume is generally correlated with general economic conditions and levels of spending, particularly in the U.S., Europe, Russia, Latin America, Australia and New Zealand, and the related amount of business activity in economies in which we operate. Downturns in these economies are generally characterized by reduced commercial activity and, consequently, reduced purchasing of fuel and other business related products and services by our customers. Similarly, prolonged adverse weather events, travel bans due to medical quarantine (such as the recent responses to the COVID-19 pandemic) or in response to natural catastrophes, especially those that impact regions in which we process a result, a contraction in fuel-price spreadslarge number and amount of payment transactions, could adversely affect our operating results.
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In addition, our transaction volumes could be adversely affected if businesses do not continue to use, or fail to increase their use of, credit, debit or stored value cards as a payment mechanism for their transactions. Similarly, our transaction volumes could be impacted by adverse developments in the payments industry, such as new legislation or regulation that makes it more difficult for customers to do business, or a well-publicized data security breach that undermines the confidence of the public in electronic payment systems.
If we fail to adequately assess and monitor credit risks of our customers, we could experience an increase in credit loss.
We are subject to the credit risk of our customers which range in size from small sole proprietorships to large publicly traded companies. We use various methods to screen potential customers and establish appropriate credit limits, but these methods cannot eliminate all potential credit risks and may not always prevent us from approving customer applications that are not credit-worthy or are fraudulently completed. Changes in our industry, customer demand, and, in relation to our fleetFuel customers, movement in fuel prices may result in periodic increases to customer credit limits and spending and, as a result, could lead to increased credit losses. We may also fail to detect changes to the credit risk of customers over time. Further, during a declining economic environment (including economic weakness caused by large-scale crises like the COVID-19 pandemic), we may experience increased customer defaults and preference claims by bankrupt customers. Additionally, the counterparties to the derivative financial instruments that we use in our international payments provider business to reduce our exposure to various market risks, including changes in foreign exchange rates, may fail to honor their obligations, which could expose us to risks we had sought to mitigate. This risk includes the exposure generated when we write derivative contracts to our customers as part of our cross-currency payments business, and we typically hedge the net exposure through offsetting contracts with established financial institution counterparties. If an international payments customer becomes insolvent, files for bankruptcy, commits fraud or otherwise fails to pay us, we may be exposed to the value of an offsetting position with such counterparties for the derivatives or may bear financial risk for those receivables where we have offered trade credit. If we fail to adequately manage our credit risks, our bad debt expense could be significantly higher than historic levels and adversely affect our business, operating results and financial condition. For the years ended December 31, 20192020 and 2018,2019, our bad debt expense was $158.5 million and $74.3 million, and $64.4 million, or 615 bps and 6 bps of total billings, respectively.
Any decrease in our receipt of program fees and charges, or limitations on our program fees and charges, could adversely affect our business, results of operations and financial condition.
Our card programssolutions include a variety of fees and charges associated with transactions, cards, reports, optional services and late payments. Revenues for late fees and finance charges represent 6%4% of our consolidated revenue for the year ended December 31, 2019.2020. If the users of our cards decrease their transaction activity, or the extent to which they use optional services or pay invoices late, our revenue could be materially adversely affected. In addition, several market factors can affect the amount of our fees and charges, including the market for similar charges for competitive card products and the availability of alternative payment methods such as cash or house accounts. Furthermore, regulators and Congress have scrutinized the electronic payments industry’s pricing, charges and other practices related to its customers. Any legislative or regulatory restrictions on our ability to price our products and services could materially and adversely affect our revenue. Any decrease in our revenue derived from these fees and charges could materially and adversely affect our business, operating results and financial condition.
We operate in a competitive business environment, and if we are unable to compete effectively, our business, operating results and financial condition would be adversely affected.
The market for our products and servicessolutions is highly competitive, and competition could intensify in the future. Our competitors vary in size and in the scope and breadth of the products and services they offer. In the fleet card business, ourOur primary competitors in the North AmericaAmerican Fuel solution are small regional and large independent fleet card providers, major oil companies and petroleum marketers that issue their own fleet cards, and major financial services companies that provide card services to major oil companies and petroleum marketers. In the commercial payments business, we faceCorporate Payments solutions faces a variety of competitors, some of which have greater financial resources, name recognition and scope and breadth of products and services. Competitors in the hotel card businessLodging solution include travel agencies, online lodging discounters, internal corporate procurement and travel resources, and independent services companies. We also compete for customers with providers of alternative payment mechanisms, such as merchants offering house cash accounts or other forms of credit. Our primary competitors in Europe, Australia and New Zealand are independent fleet card providers, major oil companies and petroleum marketers that issue branded fleet cards, and providers of card outsourcing services to major oil companies and petroleum marketers. Our primary competitors in Latin America are independent providers of fleet cards and vouchers for food, fuel, tolls, and transportation and major oil companies and providers of card outsourcing services to major oil companies and petroleum marketers who offer commercial fleet cards.
The most significant competitive factors in our business are the breadth of product and service features, network acceptance size, customer service, payment terms, account management, and price. We may experience competitive disadvantages with respect to any of these factors from time to time as potential customers prioritize or value these competitive factors differently. As a result, a specific offering of our products and service features, networks and pricing may serve as a competitive advantage with respect to one customer and a disadvantage for another based on the customers’ preferences.
Some of our existing and potential competitors have longer operating histories, greater brand name recognition, larger customer bases, more extensive customer relationships or greater financial and technical resources than we do. In addition, our larger competitors may also have greater resources than we do to devote to the promotion and sale of their products and services and to pursue acquisitions. Many of our competitors provide additional and unrelated products and services to customers, such as treasury management, commercial lending and credit card processing. By providing these services that we do not provide, these competitors have an advantage of being ableprocessing, which allow them to bundle their products and services together and present them to existing customers with whom they have established relationships, sometimes at a discount. For example, in the commercial payments business, we compete with full service banks that are able to offer treasury management and commercial lending in addition to commercial payment solutions. If price competition continues to intensify, we may have to increase the incentives that we offer to our customers, decrease the prices of our products and servicessolutions or lose customers, each of which could adversely affect our operating results. In the fleet card business,Fuel solutions, major oil
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companies, and petroleum marketers and large financial institutions may choose to integrate fuel-cardfuel card services as a complement to their existing or complementary card products and services as well as offer add-on complementary services. As a result, they may be able to adapt more quickly to new or emerging technologies and changing opportunities, standards or customer requirements. To the extent that our competitors are regarded as leaders in specific categories, they may have an advantage over us as we attempt to further penetrate these categories.
Future mergers or consolidations among competitors, or acquisitions of our competitors by large companies may present competitive challenges to our business. Resulting combined entities could be at a competitive advantagebusiness if their fuel-cardfuel card products and services are effectively integrated and bundled into lower cost sales packages with theirother widely utilized non-fuel-card-relatednon-fuel card related products and services. Further, competitors may reduce the fees for their services, which could increase pricing pressure within our markets.
Overall, increased competition in our markets could result in intensified pricing pressure, reduced profit margins, increased sales and marketing expenses and a failure to increase, or a loss of, market share. We may not be able to maintain or improve our competitive position against our current or future competitors, which could adversely affect our business, operating results and financial condition.
A decline in retail fuel prices or contraction in fuel price spreads could adversely affect our revenue and operating results.
We believe in 2020, approximately 11% of our consolidated revenue was directly influenced by the absolute price of fuel. Approximately 8% of our consolidated revenue in 2020 was derived from transactions where our revenue is tied to fuel price spreads. When our fleet customers purchase fuel, certain arrangements in our Fuel solution generates revenue as a percentage of the fuel transaction purchase amount and other arrangements generate revenue based on fuel price spreads. The fuel price that we charge to any Fuel customer is dependent on several factors including, among others, the fuel price paid to the fuel merchant, posted retail fuel prices and competitive fuel prices. The significant volatility in fuel prices can impact these revenues by lowering total fuel transaction purchase amounts and tightening fuel price spreads. We experience fuel price spread contraction when the merchant’s wholesale cost of fuel increases at a faster rate than the fuel price we charge to our Fuel customers, or the fuel price we charge to our Fuel customers decreases at a faster rate than the merchant’s wholesale cost of fuel. The volatility is due to many factors outside our control, including new oil production or production slowdowns, supply and demand for oil and gas and market expectations of future supply and demand, political conditions, actions by OPEC and other major oil producing countries, speculative trading, government regulation, weather and general economic conditions. When such volatility leads to a decline in retail fuel prices or a contraction of fuel price spreads, our revenue and operating results could be adversely affected.
The value of certain of our solutions depend, in part, on relationships with oil companies, fuel and lodging merchants, truck stop operators, airlines and sales channels to grow our business. The failure to maintain and grow existing relationships, or establish new relationships, could adversely affect our revenues and operating results.
The success and growth of our solutions depend on the wide acceptability of such cards when our customers need to use them. As a result, the success of these solutions is in part dependent on our ability to maintain relationships with major oil companies, petroleum marketers, closed-loop fuel and lodging merchants, truck stop operators, airlines and sales channels (each of whom we refer to as our “partners”) and to enter into additional relationships or expand existing arrangements to increase the acceptability of our payment cards. These relationships vary in length from one to eight years for oil companies to one to two years for merchants and may be renegotiated at the end of their respective terms. Due to the highly competitive, and at times exclusive, nature of these relationships, we often must participate in a competitive bidding process to establish or continue the relationships. Such bidding processes may focus on a limited number of factors, including pricing, which may affect our ability to effectively compete for these relationships.
If the various partners with whom we maintain relationships experience bankruptcy, financial distress, or otherwise are forced to contract their operations, our solutions could be adversely impacted. Similarly, because some of our solutions are marketed under the brands of major oil companies, certain other adverse events outside our control, like those companies’ failure to maintain their brands or a decrease in the size of their branded networks may adversely affect our ability to grow our revenue.
The loss of, failure to continue or failure to establish new relationships, or the weakness or decrease in size of companies with whom we maintain relationships, could adversely affect our ability to serve our customers and adversely affect our solutions and operating results.
We must comply with various rules and requirements, including the payment of fees, of Mastercard and our sponsor banks in order to remain registered to participate in the Mastercard networks.
A significant source of our revenue comes from processing transactions through the Mastercard networks. In order to offer Mastercard programs to our customers, one of our subsidiaries is registered as a member service provider with Mastercard through sponsorship by Mastercard member banks in both the U.S. and Canada. Registration as a service provider is dependent upon our being sponsored by member banks. If our sponsor banks should stop providing sponsorship for us or determine to provide sponsorship on materially less favorable terms, we would need to find other financial institutions to provide those services or we would need to become a Mastercard member, either of which could prove to be difficult and expensive. Even if we pursue sponsorship by alternative member banks, similar requirements and dependencies would likely still exist. In addition, Mastercard routinely updates and modifies its membership requirements. Changes in such requirements may make it significantly more expensive for us to provide these services. If we do not comply with Mastercard requirements, it could seek to fine us, suspend us or terminate our registration, which allows us to process transactions on its networks. The termination of our registration, or any changes in the payment network rules that would impair our registration, could require us to stop providing Mastercard payment processing services. If we are unable to find a replacement financial institution to provide sponsorship or become a member, we may no longer be able to provide such services to the affected customers.
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Changes in Mastercard interchange fees could decrease our revenue.
A portion of our revenue is generated by network processing fees charged to merchants, known as interchange fees, associated with transactions processed using our Mastercard-branded cards. Interchange fee amounts associated with our Mastercard network cards are affected by a number of factors, including regulatory limits in the U.S. and Europe and fee changes imposed by Mastercard. In addition, interchange fees are the subject of intense legal and regulatory scrutiny and competitive pressures in the electronic payments industry, which could result in lower interchange fees generally in the future.
Our Cross-Border solution depends on our relationships with banks and other financial institutions around the world, which may from impose fees, restrictions and compliance burdens on us that make our operations more difficult or expensive.
In our Cross-Border solution, we facilitate payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises and other organizations. Increased regulation and compliance requirements are impacting these businesses by making it more costly for us to provide our solutions or by making it more cumbersome for businesses to do business with us. Any factors that increase the cost of cross-border trade for us or our customers or that restrict, delay, or make cross-border trade more difficult or impractical, such as trade policy or higher tariffs, could negatively impact our revenues and harm our business. We may also have difficulty establishing or maintaining banking relationships needed to conduct our services due to banks’ policies.
Increasing scrutiny and changing expectations from investors, customers and our employees with respect to our environmental, social and governance (ESG) practices may impose additional costs on us or expose us to new or additional risks.
There is increased focus, including from governmental organizations, investors, employees and clients, on ESG issues such as environmental stewardship, climate change, diversity and inclusion, racial justice and workplace conduct. Negative public perception, adverse publicity or negative comments in social media could damage our reputation if we do not, or are not perceived to, adequately address these issues. Any harm to our reputation could impact employee engagement and retention and the willingness of customers and our partners to do business with us. In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters, and unfavorable ratings of our company or our industries may lead to negative investor sentiment and the diversion of investment to other companies or industries.
Legislation and regulation of greenhouse gases (“GHG”) and related divestment and other efforts could adversely affect our business.
We are aware of the increasing focus of local, state, regional, national and international regulatory bodies on GHG emissions and climate change issues. Legislation to regulate GHG emissions has periodically been introduced in the U.S. Congress, and there has been a wide-ranging policy debate, both in the U.S. and internationally, regarding the impact of these gases and possible means for their regulation. Several states and geographic regions in the U.S. have adopted legislation and regulations to reduce emissions of GHGs. Additional legislation or regulation by these states and regions, the EPA, and/or any international agreements to which the U.S. may become a party, that control or limit GHG emissions or otherwise seek to address climate change could adversely affect our partners’ and merchants’ operations, and therefore ours. See “Our fleet card business is dependent on several key strategic relationships, the loss of which could adversely affect our operating results.
Members of the investment community have recently increased their focus on sustainability practices with regard to the oil and gas industry, including practices related to GHGs and climate change. An increasing percentage of the investment community considers sustainability factors in areas where our customers purchase fuel, maintenance services,making investment decisions, and lodging. Our contractual agreements with fuel merchants and service garages typically have initial terms of one or two years and automatically renew on the same basis unless either party gives notice of termination. Our agreements with lodging providers typically have initial terms of one year and automatically renew on a month-to-month basis unless either party gives notice of termination. Furthermore, merchants with which we have relationships may experience bankruptcy, financial distress, or otherwise be forced to contract their operations. The loss of existing merchant relationships, failure to continue such relationships on similarly attractive economic terms, the contractionan increasing number of our existing merchants’ operations or the inability to acquire new merchant relationships could adversely affect our ability to serve our customers and our business and operating results.
awarding work. If we are unable to successfully integrate new lines of businessaddress sustainability enhancement, we have acquiredmay lose partners or may acquire in the future,merchants, our results of operations and financial conditionstock price may be adversely affected.negatively impacted, our reputation may be negatively affected, and it may be more difficult for us to effectively compete.
Maintaining and enhancing our brands is critical to our business relationships and operating results.
We have expandedbelieve that maintaining and enhancing our businessbrands is critical to encompass new linesour customer relationships, and our ability to obtain partners and retain employees. The successful promotion of business in the past. For example, we have entered into the corporate payments, stored value card, vehicle maintenance managementour brands will depend upon our marketing and telematics business in the U.S. and Europe, and transaction processing, fuel, food, toll and transportation card and voucher businesses in Brazil and Mexico. We maypublic relations efforts, our ability to continue to enter into new lines of business and offer new products and services in the future. There is no guarantee that we will be successful in integrating these new lines of business into our operations. If we are unable to do so, our operating results and financial condition may be adversely affected.
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our brands will require us to dedicate amake substantial portion of our cash flow from operations to required payments on our indebtedness, thereby reducing the availability of cash flow for acquisitions, working capital, capital expenditures, and other general corporate activities. See “Management’s Discussionwe anticipate that the expenditures will increase as our markets become more competitive and Analysis of Financial Condition and Results of Operations-Contractual Obligations,” which sets forthwe expand into new markets. Even if these activities increase our payment obligations with respect to our existing long-term debt;
We are subject to risks related to volatility in foreign currency exchange rates, and restrictions on our ability to utilize revenue generated in foreign currencies.
As a result of our foreign operations, we are subject to risks related to changes in currency rates for revenue generated in currencies other than the U.S. dollar. For the year ended December 31, 2019,2020, approximately 40%39% of our revenue was denominated in currencies other than the U.S. dollar (primarily, British pound, Brazilian real, Canadian dollar, Russian ruble, Mexican peso, Czech koruna, Euro, Australian dollar and New Zealand dollar). Revenue and profit generated by international operations may increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. Resulting exchange gains and losses are included in our net income. Volatility inIn addition, a majority of the revenue from our international payments provider business is from exchanges of currency at spot rates, which enable customers to make cross-currency payments. This solution also writes foreign currency forward and option contracts for our customers. The duration of these derivative contracts at inception is generally less than one year. The credit risk associated with our derivative contracts increases when foreign currency exchange rates may materially adversely affectmove against our operating results and financial condition.customers, possibly impacting their ability to honor their obligations to deliver currency to us or to maintain appropriate collateral with us.
Furthermore, we are subject to exchange control regulations that restrict or prohibit the conversion of more than a specified amount of our foreign currencies into U.S. dollars, and, as we continue to expand, we may become subject to further exchange control regulations that limit our ability to freely utilize and transfer currency in and out of particular jurisdictions. These restrictions may make it more difficult to effectively utilize the cash generated by our operations and may adversely affect our financial condition.
Our expansion through acquisitions may divert our management’s attention and result in unexpected operating or integration difficulties or increased costs and dilution to our stockholders, and we may never realize the anticipated benefits.
We have been an active business acquirer in the U.S. and internationally, and, as part of our growth strategy, we expect to seek to acquire businesses, commercial account portfolios, technologies, services and products in the future. We have substantially expanded our overall business,portfolio of solutions, customer base, headcount and operations through acquisitions. The acquisition and integration of each business involves a number of risks and may result in unforeseen operating difficulties, delays and expenditures in assimilating or integrating the businesses, technologies, products, personnel or operations of the acquired business. Furthermore,business, all of which may divert resources and management attention otherwise available to grow our existing portfolio. In addition, acquisitions may:
In addition, international acquisitions often involve additional or increased risks including for example:
difficulty managing geographically separated organizations, systems and facilities;
facilities, difficulty integrating personnel with diverse business backgrounds, languages and organizational cultures;
cultures, difficulty and expense introducing our corporate policies or controls;
controls and increased expense to comply with foreign regulatory requirements applicable to acquisitions;acquisitions.
To complete future acquisitions, we may determine that it is necessary to use a substantial amount of our cash or engage in equity or debt financing. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters that make it more difficult for us to obtain additional capital in the future and to pursue other business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all, which could limit our ability to engage in acquisitions. Moreover, we can make no assurances that the anticipated benefits of any acquisition, such as operating improvements or anticipated cost savings, would be realized or that we would not be exposed to unexpected liabilities in connection with any acquisition.
realized. Further, an acquisition may negatively affect our operating results because it may require us to incur charges and substantial debt or other liabilities, may cause adverse tax consequences, substantial depreciation and amortization or deferred compensation charges, may require the amortization, write-down or impairment of amounts related to deferred compensation, goodwill and other intangible assets, may include substantial contingent consideration payments or other compensation that reduce our earnings during the quarter in which incurred, or may not generate sufficient financial return to offset acquisition costs.
Our business in foreign countries may be adversely affected by operational and political risks that are greater than in the U.S.
We have foreign operations in, or provide services for commercial card accounts in more than 100 countries throughout North America, South America, Europe, Africa, Oceania and Asia. We also expect to seek to expand our operations into various additional countries in Asia, Europe and Latin America as part of our growth strategy.
Some of the countries where we operate, and other countries where we will seek to operate, such as Russia, Brazil and Mexico, have undergone significant political, economic and social change in recent years, and the risk of unforeseen changes in these countries may be greater than in the U.S. For example, Russia and Ukraine are experiencing significant unrest, which could escalate into broader armed conflict and additional economic sanctions by the U.S, the United Nations or other countries against Russia. In addition, political discourse in the U.S. may impact business practices in Mexico and other jurisdictions. In addition, changes in laws or regulations, including with respect to payment service providers, taxation, information technology, data transmission and the Internet, revenues from non-U.S. operations or in the
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interpretation of existing laws or regulations, whether caused by a change in government or otherwise, could materially adversely affect our business,portfolio, operating results and financial condition.
In addition, conducting and expanding our business, results ofinternational operations subjects us to other political, economic, technological, operational and financial condition.
We may incur substantial losses due to fraudulent use of our payment cards or vouchers.
Under certain circumstances, when we fund customer transactions, we may bear the risk of substantial losses due to fraudulent use of our payment cards or vouchers. We do not maintain insurance to protect us against such losses. We bear similar risk relating to fraudulent acts of employees or contractors, for which we maintain insurance. However, the conditions or limits of coverage may be insufficient to protect us against such losses.
Criminals are using increasingly sophisticated methods to engage in illegal activities involving financial products, such as skimming and counterfeiting payment cards and identity theft. A single significant incident of fraud, or increases in the overall level of fraud, involving our cards and other products and services, could result in reputational damage to us, which could reduce the use and acceptance of our cards and other products and services or lead to greater regulation that would increase our compliance costs. Fraudulent activity could also result in the imposition of regulatory sanctions, including significant monetary fines, which could have a material adverse effect on our business, financial condition and results of operations.
Our Fuel, Payroll Card and Gift solutions' results are subject to seasonality, which could result in fluctuations in our quarterly net income.
Our Fuel and Payroll Card solutions are typically subject to seasonal fluctuations in revenues and profit, which are impacted during the first and fourth quarter each year by the weather, holidays in the U.S., Christmas being celebrated in Russia in January, and lower business levels in Brazil due to summer break and the Carnival celebration. Our Gift solution is typically subject to seasonal fluctuations in revenues as a result of consumer spending patterns. Historically Gift revenues have been strongest in the third and fourth quarters and weakest in the first and second quarters, as the retail industry has its highest level of activity during and leading up to the Christmas holiday season.
Risks related to information technology and security
We are dependent on the efficient and uninterrupted operation of interconnected computer systems, telecommunications, data centers and call centers, including technology and network systems managed by multiple third parties, which could result in our inability to prevent disruptions in our services.
Our ability to provide reliable service to customers, cardholders and other network participants depends upon uninterrupted operation of our data centers and call centers as well as third-party labor and services providers. Our business involves processing large numbers of transactions, the movement of large sums of money and the management of large amounts of data. We rely on the ability of our employees, contractors, suppliers, systems and processes to complete these transactions in a secure, uninterrupted and error-free manner.
Our subsidiaries operate in various countries and country specific factors, such as power availability, telecommunications carrier redundancy, embargoes and regulation can adversely impact our information processing by or for our local subsidiaries.
We engage backup facilities for each of our processing centers for key systems and data. However, there could be material delays in fully activating backup facilities depending on the nature of the breakdown, security breach or catastrophic event (such as fire, explosion, flood, pandemic, natural disaster, power loss, telecommunications failure or physical break-in). We have controls and documented measures to mitigate these risks but these mitigating controls might not reduce the duration, scope or severity of an outage in time to avoid adverse effects.
We may experience software defects, system errors, computer viruses and development delays, which could damage customer relationships, decrease our profitability and expose us to liability.
Our business depends heavily on the reliability of proprietary and third-party processing systems. A system outage could adversely affect our business, financial condition or results of operations, including by damaging our reputation or exposing us
to third-party liability. To successfully operate our business, we must be able to protect our processing and other systems from interruption, including from events that may be beyond our control. Events that could cause system interruptions include fire, natural disaster, unauthorized entry, power loss, telecommunications failure, computer viruses, terrorist acts and war. Although we have taken steps to protect against data loss and system failures, there is still risk that we may lose critical data or experience system failures.
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Our products and servicessolutions are based on sophisticated software and computing systems that are constantly evolving. We often encounter delays and cost overruns in developing changes implemented to our systems. In addition, the underlying software may contain undetected errors, viruses or defects. Defects in our software products and errors or delays in our processing of electronic transactions could result in additional development costs, diversion of technical and other resources from our other development efforts, loss of credibility with current or potential customers, harm to our reputation or exposure to liability claims. In addition, we rely on technologies supplied to us by third parties that may also contain undetected errors, viruses or defects that could adversely affect our business, financial condition or results of operations. Although we attempt to limit our potential liability for warranty claims through disclaimers in our software documentation and limitation of liability provisions in our licenses and other agreements with our customers, we cannot assure that these measures will be successful in limiting our liability.
We may incur substantial losses due to fraudulent use of our payment cards or vouchers.
We electronically receive, process, store and transmit data and sensitive information about our customers and merchants, including bank account information, social security numbers, expense data, and credit card, debit card and checking account numbers. We endeavor to keep this information confidential; however, our websites, networks, information systems, services and technologies may be targeted for sabotage, disruption or misappropriation. The uninterrupted operation of our information systems and our ability to maintain the confidentiality of the customer and consumer information that resides on our systems are critical to the successful operation of our business. Unauthorized access to our networks and computer systems could result in the theft or publication of confidential information or the deletion or modification of records or could otherwise cause interruptions in our service and operations.
Because techniques used to sabotage or obtain unauthorized access to our systems and the data we collect change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Threats to our systems and our associated third parties’ systems can derive from human error,
fraud or malice on the part of employees or third parties, or may result from accidental technological failure. Computer viruses can be distributed and could infiltrate our systems or those of our associated third parties. In addition, denial of service or other attacks could be launched against us for a variety of purposes, including to interfere with our services or create a diversion for other malicious activities. Although we believe we have sufficient controls in place to prevent disruption and misappropriation and to respond to such attacks, any inability to prevent security breaches could have a negative impact on our reputation, expose us to liability, decrease market acceptance of electronic transactions and cause our present and potential clients to choose another service provider. Any of these developments could have a material adverse effect on our business, operating results and financial condition.
We could also be subject to liability for claims relating to misuse of personal information, such as unauthorized marketing purposes and violation of data privacy laws. For example, we are subject to a variety of U.S. and international statutes, regulations, and rulings relevant to the direct email marketing and text-messaging industries, including the TCPA, the CAN-SPAM Act, FCC orders, state-enacted laws regulating commercial email and foreign legislation (such as the Canadian Anti-Spam Legislation and European laws enacted pursuant to European Union Directive 2002/58/EC and its amendments).industries. While we believe we are in compliance with the relevant laws and regulations, if we were ever found to be in violation, our business, financial condition, operating results and cash flows could be materially adversely affected. We cannot provide assurance that the contractual requirements related to security and privacy that we impose on our service providers who have access to customer and consumer data will be followed or will be adequate to prevent the unauthorized use or disclosure of data. In addition, we have agreed in certain agreements to take certain protective measures to ensure the confidentiality of customer data. The costs of systems and procedures associated with such protective measures, as well as the cost of deploying additional personnel, training our employees and hiring outside experts, may increase and could adversely affect our ability to compete effectively. Any failure to adequately enforce or provide these protective measures could result in liability, protracted and costly litigation, governmental and card network intervention and fines, remediation costs, and with respect to misuse of personal information of our customers, lost revenue and reputational harm. While we maintain insurance covering certain security and privacy damages and claim expenses we may not carry insurance or maintain coverage sufficient to compensate for all liability and such insurance may not be available for renewal on acceptable terms or at all, and in any event, insurance coverage would not address the reputational damage that could result from a security incident.
In addition, under payment network rules, regulatory requirements, and related obligations, we may be responsible for the acts or failures to act of certain third parties, such as third partythird-party service providers, vendors, partners and others, which we refer to collectively as associated participants. The failure of our associated participants to safeguard cardholder data and other information in accordance with such rules, requirements and obligations could result in significant fines and sanctions and could harm our reputation and deter existing and prospective customers from using our services. We cannot assure you that there are written agreements in place with every associated participant or that such written agreements will ensure the adequate safeguarding of such data or information or allow us to seek reimbursement from associated participants. Any such unauthorized use or disclosure of data or information also could result in litigation that could result in a material adverse effect on our business, financial condition and results of operations.
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If we fail to develop and implement new technology, products and services, adapt our products and services to changes in technology, the marketplace requirements, or if our ongoing efforts to upgrade our technology, products and services are not successful, we could lose customers and partners.
The marketmarkets for our commercial payment, fleetsolutions are highly competitive and stored value cardcharacterized by technological change, frequent introduction of new products and services isand evolving and may not continueindustry standards. We must respond to develop or grow.
The solutions we deliver are designed to process complex transactions and provide reports and other information on those transactions, all at high volumes and processing speeds. Any failure to deliver an effective and secure product or service or any performance issue that arises with a new product or service could result in significant processing or reporting errors or other losses. We may rely on third parties to develop or co-develop our solutions or to incorporate our solutions into broader platforms for the acceptance and use of credit, debit and/or stored value cards, and electronic
If we are unable to protect our intellectual property rights and confidential information, our competitive position could be harmed and we could be required to incur significant expenses in order to enforce our rights.
To protect our proprietary technology, we rely on copyright, trade secret, patent and other intellectual property laws and confidentiality agreements with employees and third parties, all of which offer only limited protection. Despite our precautions, it may be possible for third parties to obtain and use without our consent confidential information or infringe on our intellectual property rights, and our ability to police that misappropriation or infringement is uncertain, particularly in countries outside of the U.S. In addition, our confidentiality agreements with employees, vendors, customers and other third parties may not effectively prevent disclosure or use of proprietary technology or confidential information and may not provide an adequate remedy in the event of such unauthorized use or disclosure.
Protecting against the unauthorized use of our intellectual property and confidential information is expensive, difficult and not always possible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our confidential information, including trade secrets, or to determine the validity and scope of the proprietary rights of others. This litigation could be costly and divert management resources, either of which could harm our business, operating results and financial condition. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property and proprietary information.
We cannot be certain that the steps we have taken will prevent the unauthorized use or the reverse engineering of our proprietary technology. Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. The enforcement of our intellectual property rights also depends on our legal actions against these infringers being successful, and we cannot be sure these actions will be successful, even when our rights have been infringed. Furthermore, effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which we may offer our products and services.
Claims by others that we or our customers infringe their intellectual property rights could harm our business.
Third parties have in the past, and could in the future claim that our technologies and processes underlying our products and services infringe their intellectual property. In addition, to the extent that we gain greater visibility, market exposure, and add new products and services, we may face a higher risk of being the target of intellectual property infringement claims asserted by third parties. We may, in the future, receive notices alleging that we have misappropriated or infringed a third party’s intellectual property rights. There may be third-party intellectual property rights, including patents and pending patent applications that cover significant aspects of our technologies, processes or business methods. Any claims of infringement or misappropriation by a third party, even those without merit, could cause us to incur substantial defense costs and could distract our management from our business, and there can be no assurance that we will be able to prevail against such claims. Some of our competitors may have the capability to dedicate substantially greater resources to enforcing their intellectual property rights and to defending claims that may be brought against them than we do. Furthermore, a party making such a claim, if successful,
could secure a judgment that requires us to pay substantial damages, potentially including treble damages if we are found to have willfully infringed a patent. A judgment could also include an injunction or other court order that could prevent us from offering our products and services. In addition, we might be required to seek a license for the use of a third party’s intellectual property, which may not be available on commercially reasonable terms or at all. Alternatively, we might be required to develop non-infringing technology, which could require significant effort and expense and might ultimately not be successful.
Third parties may also assert infringement claims against our customers relating to their use of our technologies or processes. Any of these claims might require us to defend potentially protracted and costly litigation on their behalf, regardless of the
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merits of these claims, because under certain conditions we may agree to indemnify our customers from third-party claims of intellectual property infringement. If any of these claims succeed, we might be forced to pay damages on behalf of our customers, which could adversely affect our business, operating results and financial condition.
Finally, we use open source software in connection with our technology and services. Companies that incorporate open source software into their products, from time to time, face claims challenging the ownership of open source software. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Open source software is also provided without warranty, and may therefore include bugs, security vulnerabilities or other defects.defects for which we have no recourse or recovery. Some open source software licenses require users of such software to publicly disclose all or part of the source code to their software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. While we monitor the use of open source software in our technology and services and try to ensure that none is used in a manner that would require us to disclose the source code to the related technology or service, such use could inadvertently occur and any requirement to disclose our proprietary source code could be harmful to our business, financial condition and results of operations.
Our success is dependent, in part, upon our executive officers and other key personnel, and the loss of key personnel could materially adversely affect our business.
Our success depends, in part, on our executive officers and other key personnel. Our senior management team has significant industry experience and would be difficult to replace. The market for qualified individuals is competitive, and we may not be able to attract and retain qualified personnel or candidates to replace or succeed members of our senior management team or other key personnel. The loss of key personnel could materially adversely affect our business.
Risks related to regulatory matters and litigation
Changes in laws, regulations and enforcement activities may adversely affect our products and services and the markets in which we operate.
The electronic payments industry is subject to increasing regulation in the U.S. and internationally. Domestic and foreign government regulations impose compliance obligations on us and restrictions on our operating activities, which can be difficult to administer because of their scope, mandates and varied requirements. We are subject to government regulations covering a number of government regulations,different areas, including, among others: interest rate and fee restrictions; credit access and disclosure requirements; licensing and registration requirements; collection and pricing regulations; compliance obligations; security, privacy and data breach requirements; identity theft avoidanceprotection programs; and anti-money launderingAML compliance programs. Government regulations can also include licensing or registration requirements. While a large portion of these regulations focuses on individual consumer protection, legislatures and regulators continue to consider whether to include business customers, especially smaller business customers, within the scope of these regulations. As a result, new or expanded regulation focusing on business customers or changes in interpretation or enforcement of regulations may have an adverse effect on our business and operating results, due to increased compliance costs and new restrictions affecting the terms under which we offer our products and services.
In addition, certain of our subsidiaries are subject to regulation under the BSA by the Financial Crimes Enforcement Network or FinCEN,(FinCEN) and must comply with applicable anti-money launderingAML requirements, including implementation of an effective anti-money launderingAML program. Our business in Canada is also subject to the PCMLTFA, which is a corollary to the BSA. Changes in this regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government, may significantly affect or change the manner in which we currently conduct some aspects of our business.
Many of these laws and regulations are evolving, unclear and inconsistent across various jurisdictions, and ensuring compliance with them is difficult and costly. With increasing frequency, federal and state regulators are holding businesses like ours to higher standards of training, monitoring and compliance, including monitoring for possible violations of laws by our customers and people who do business with our customers while using our products. If we fail or are unable to comply with existing or changed government regulations in a timely and appropriate manner, we may be subject to injunctions, other sanctions andor the payment of fines and penalties, and our reputation may be harmed, which could have a material adverse effect on our business, financial condition and results of operations.
For more information about laws, regulations and enforcement activities that may adversely affect our products and services and the markets in which we operate, see “Business- Regulatory.”
Derivatives regulations have added costs to our business and any additional requirements, such as future registration requirements and increased regulation of derivative contracts, may result in additional costs or impact the way we conduct our hedging activities, as well as impact how we conduct our business within our international payments provider operations.
Rules adopted under the Dodd-Frank Act by the Commodity Futures Trading Commission (the “CFTC”), as well as theCFTC, provisions of the European Market Infrastructure Regulation and its technical standards, which are directly applicableas well as derivative reporting in Canada and the member states of the European Union,U.S., have subjected certain of the foreign exchange derivative contracts we offer to our customers as part of the Cambridge Global Payments (“Cambridge”) business,our Cross-Border solutions to reporting, record keeping, and other
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requirements. Additionally, certain foreign exchange derivatives transactions we may enter into in the future may be subject to centralized clearing requirements, or may be subject to margin requirements in the U.S., U.K., and European Union. Other jurisdictions outside the U.S. and the European Union are considering, have implemented, or are implementing regulations similar to those described above. Derivatives regulations have added costs to our business and any additional requirements,
Our compliance with these requirements has resulted, and may continue to result, in additional costs to our business and may impact our international payments provider business operations. Furthermore, our failure to comply with these requirements could result in fines and other sanctions, as well as necessitate a temporary or permanent cessation to some or all of our derivative related activities. Any such fines, sanctions or limitations on our business could adversely affect our operations and financial results. Additionally, the regulatory regimes for derivatives in the U.S., U.K., and European Union, such as under the Dodd-Frank Act and the European Markets in Financial Instruments Directive known as “MiFID II,”(MiFID II) are continuing to evolve and changes to such regimes, our designation under such regimes, or the implementation of new rules under such regimes, such as future registration requirements and increased regulation of derivative contracts, may result in additional costs to our business. Other jurisdictions outside the U.S., U.K., and the European Union are considering, have implemented, or are implementing regulations similar to those described above and these may result in greater costs to us as well.
Governmental regulations and contractual obligations designed to protect or limit access to personal information could adversely affect our ability to effectively provide our services.
Governmental bodies in the U.S. and abroad have adopted, or are considering the adoption of, laws and regulations restricting the transfer of, and requiring safeguarding of, non-public personal information. For example, in the U.S., all financial institutions must undertake certain steps to help protect the privacy and security of consumer financial information. In connection with providing services to our clients, we are required by regulations and arrangements with payment networks, our sponsor bankbanks and certain clients to provide assurances regarding the confidentiality and security of non-public consumer information. These arrangements require periodic audits by independent companies regarding our compliance with industry standards such as PCI standards and also allow for similar audits regarding best practices established by regulatory guidelines. The compliance standards relate to our infrastructure, components, and operational procedures designed to safeguard the confidentiality and security of non-public consumer personal information received from our customers. Our ability to maintain compliance with these standards and satisfy these audits will affect our ability to attract and maintain business in the future. If we fail to comply with these regulations, we could be exposed to suits for breach of contract or to governmental proceedings. In addition, our client relationships and reputation could be harmed, and we could be inhibited in our ability to obtain new clients. If more restrictive privacy laws or rules are adopted by authorities in the future on the federal or state level or internationally, our compliance costs may increase, our opportunities for growth may be curtailed by our compliance capabilities or reputational harm and our potential liability for security breaches may increase, all of which could have a material adverse effect on our business, financial condition and results of operations.
We contract with government entities and are subject to risks related to our governmental contracts.
In the course of our business we contract with domestic and foreign government entities, including state and local government customers, as well as federal government agencies. As a result, we are subject to various laws and regulations that apply to companies doing business with federal, state and local governments. The laws relating to government contracts differ from other commercial contracting laws and our government contracts may contain pricing terms and conditions that are not common among commercial contracts. In addition, we may be subject to investigation from time to time concerning our
compliance with the laws and regulations relating to our government contracts. Our failure to comply with these laws and regulations may result in suspension of these contracts or administrative or other penalties.
Litigation and regulatory actions could subject us to significant fines, penalties or requirements resulting in significantly increased expenses, damage to our reputation and/or material adverse effects on our business.
We are subject to claims and a number of judicial and administrative proceedings considered normal in the ordinary course of our current and past operations, including employment-related disputes, contract disputes, intellectual property disputes, government inquiries, investigations, audits and regulatory proceedings, customer disputes and tort claims. Responding to proceedings may be difficult and expensive, and we may not prevail. In some proceedings, the claimant seeks damages as well as other relief, which, if granted, would require expenditures on our part or changes in how we conduct business. There can be no certainty that we will not ultimately incur charges in excess of presently established or future financial accruals or insurance coverage, or that we will prevail with respect to such proceedings. Regardless of whether we prevail or not, such proceedings could have a material adverse effect on our business, reputation, financial condition and results of operations.
Failure to comply with the FCPA, anti-money launderingAML regulations, economic and trade sanctions regulations and similar laws and regulations associated withapplicable to our international activities, could subject us to penalties and other adverse consequences.
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As we continue to expand our business internationally, we may continue to expand into certain foreign countries, particularly those with developing economies, where companies often engage in business practices that are prohibited by U.S., U.K. and other foreign regulations, including the FCPA, the U.K. Bribery Act, the 2013 Brazilian Clean Companies ActCanada’s PCMLTFA, and the 2013 Russian Law on Preventing Corruption.Australia’s AML/CTF Act. These laws and regulations generally prohibit us,and our employees, consultants and agents from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. We have implemented policies to discourage such practices; however, there can be no assurances that all of our employees, consultants and agents, including those that may be based in or from countries where practices that violate U.S.these laws may be customary, will not take actions in violation of our policies for which we may be ultimately responsible. Violations of the FCPA or similar laws may result in severe criminal or civil sanctions and, in the U.S., suspension or debarment from U.S. government contracting, which could negatively affect our business, operating results and financial condition.
In addition, we are subject to anti-money launderingAML laws and regulations, including the BSA. Among other things, the BSA requires money services businesses (such as money transmitters and providers of prepaid access) to develop and implement risk-based anti-money launderingAML programs, verify the identity of our customers, report large cash transactions and suspicious activity, and maintain transaction records.
We are also subject to certain economic and trade sanctions programs that are administered by OFAC, which prohibit or restrict transactions to or from or dealings with specified countries, their governments, and in certain circumstances, their nationals, and with individuals and entities that are specially-designatedspecially designated nationals of those countries, narcotics traffickers, and terrorists or terrorist organizations. Other group entities may be subject to additional foreign or local sanctions requirements in other relevant jurisdictions.
Similar anti-money launderingAML and counter-terrorist financing and proceeds of crime laws apply to movements of currency and payments through electronic transactions and to dealings with persons specified in lists maintained by the country equivalent to OFAC lists in several other countries and require specific data retention obligations to be observed by intermediaries in the payment process. Our businesses in those jurisdictions are subject to those data retention obligations.
Violations of these laws and regulations may result in severe criminal or civil sanctions and, in the U.S., suspension or debarment from U.S. government contracting, which could negatively affect our business, operating results and financial condition.contracting. Likewise, any investigation of any potential violations of these laws and regulations by U.S. or foreign authorities could also have an adverse impact on our reputation business, financial condition and operating results. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws and regulations might be administered or interpreted.
Risks related to our debt
Our debt obligations, or our incurrence of additional debt obligations, could limit our flexibility in managing our business and could materially and adversely affect our financial performance.
At December 31, 2020, we had approximately $4.3 billion of debt outstanding under our Credit Facility and Securitization Facility. In addition, we are permitted under our credit agreement to incur additional indebtedness, subject to specified limitations. Our indebtedness currently outstanding, or as may be outstanding if we incur additional indebtedness, could have important consequences, including the following:
•we may be required to dedicate a substantial portion of our cash flow from operations to required payments on our indebtedness, thereby reducing the money transfer, payment service,availability of cash flow for acquisitions, working capital, capital expenditures and other marketsgeneral corporate activities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations;”
•covenants relating to our debt may limit our ability to enter into certain contracts, pay dividends or to obtain additional financing for acquisitions, working capital, capital expenditures and other general corporate activities, including to react to changes in our business or the industry in which we operate,operate;
•events outside our control, including volatility in the credit markets or a significant rise in fuel prices, may make it difficult to renew our Securitization Facility on terms acceptable to us and limit our ability to timely fund our working capital needs;
•we may be more vulnerable than our less leveraged competitors to the impact of economic downturns declines, and difficult conditionsadverse developments in global financial marketsthe industry in which we operate; and
•financialwe are exposed to the risk of increased interest rates because certain of our borrowings are subject to variable rates of interest.
In addition, we and our subsidiaries may incur substantial additional indebtedness in the future, including through our Securitization Facility. Although our credit agreements contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of additional indebtedness that could be incurred in compliance with these restrictions could be substantial. If new debt is added to our existing debt levels, the related risks that we will face would increase.
Changes in the method pursuant to which the LIBOR rates are determined and potential phasing out of LIBOR after 2021 may adversely affect our results of operations.
LIBOR and certain other “benchmarks” are the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms may cause such benchmarks to perform differently than in the past or have other
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consequences which cannot be predicted. Specifically, there is currently considerable uncertainty regarding the publication of LIBOR beyond 2021, in response to which the Federal Reserve Bank of New York began publishing the Secured Overnight Financing Rate (SOFR) and two other alternative rates beginning in April 2018.
We are not able to predict whether LIBOR will actually cease to be available after 2021 or whether SOFR will become the market disruptionsbenchmark in its place. Any uncertainty regarding the continued use and reliability of LIBOR as a benchmark interest rate could adversely affect the performance of LIBOR relative to its historic values. If the methods of calculating LIBOR change from current methods for any reason, or if LIBOR ceases to perform as it has historically, our business, financialcondition, resultsinterest expense associated with the unhedged portion of operations,our outstanding indebtedness or any future indebtedness we incur may increase. Further, if LIBOR ceases to exist, we may be forced to substitute an alternative reference rate, such as SOFR or a different benchmark interest rate or base rate borrowings, in lieu of LIBOR under our current and future indebtedness and cash flows.
Finally, the replacement or disappearance of LIBOR may adversely affect the value of and return on our LIBOR-based obligations and the availability, pricing and terms of cash flow hedges we use to hedge our variable interest rate risk. Alternative reference rates or modifications to LIBOR may not align for our assets, liabilities, and hedging instruments, which could reduce the effectiveness of certain of our interest rate hedges, and could cause increased volatility in our earnings. We may also incur expenses to amend and disruption,adjust our indebtedness and we face certain risks relatingswaps to such events, including:eliminate any differences between any alternative reference rates used by our cash flow hedges and our outstanding indebtedness.
Our international payments provider business provides currency conversionbalance sheet includes significant amounts of goodwill and foreign exchange hedging services tointangible assets. The impairment of a significant portion of these assets would negatively affect our customers, exposing us to foreign currency exchange risk. In order to help mitigate these risks, we enter into derivative contracts. However, these contracts do not eliminate all of the risks related to fluctuating foreign currency rates.financial results.
Our international payments provider business is heavily dependent on global trade. A downturn in global trade or the failurebalance sheet includes goodwill and intangible assets that represent approximately 61% of long-term import growth rates to return to historic levels could have an adverse effect on our business, financial condition, resultstotal assets at December 31, 2020. These assets consist primarily of operations, cash flows,goodwill and identified intangible assets associated with our cash management strategies. Additionally, as customer hedging activity in our international payments provider business generally varies with currency volatility, we have experienced andacquisitions, which may experienceincrease in the future lower foreign exchange revenues in periodsconnection with new acquisitions. Under current accounting standards, we are required to amortize certain intangible assets over the useful life of lower currency volatility.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We have no unresolved written comments regarding our periodic or current reports from the staff of the SEC.
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ITEM 2. PROPERTIES
Our corporate headquarters are located in Atlanta, Georgia where we lease approximately 46,500 square feet of office space. In addition to our headquarters, we have major operations located in Brentwood, Tennessee; Louisville, Kentucky; Lexington Kentucky, and Peachtree Corners, Georgia. Our largest offices internationally are located in São Paulo, Brazil; Prague, Czech Republic; and Mexico City, Mexico. We lease all of the real property used in our business, except as noted below. The following table lists each of our material facilities and its location, use and approximate square footage, at December 31, 2019.
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ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, we are subject tothe Company is involved in various pending and potentialor threatened legal actions, arbitration proceedings, claims, subpoenas, and matters relating to compliance with laws and regulations (collectively, legal proceedings)"legal proceedings"). Based on our current knowledge, management presently does not believe that the liabilities arising from these legal proceedings will have a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal proceedings could have a material adverse effect on our results of operations and financial condition for any particular period.
On July 10, 2017, a shareholder derivative complaint was filed against the Company and certain of the Company’s directors and officers in the United States District Court for the Northern District of Georgia (“Federal Derivative Action”) seeking recovery on behalf of the Company. The Federal Derivative Action alleges that the defendants issued a false and misleading proxy statement in violation of the federal securities laws; that defendants breached their fiduciary duties by causing or permitting the Company to make allegedly false and misleading public statements concerning the Company’s fee charges, and financial and business prospects; and that certain defendants breached their fiduciary duties through allegedly improper sales of stock. The complaint seeks unspecified monetary damages on behalf of the Company, corporate governance reforms, disgorgement of profits, benefits and compensation by the defendants, restitution, costs, and attorneys’ and experts’ fees. On September 20, 2018, the court entered an order deferring the Federal Derivative Action pending a ruling on motions for summary judgment in the shareholder class action, notice a settlement has been reached in the shareholder class action, or until otherwise agreed to by the parties. After preliminary approval of the proposed settlement of the shareholder class action was granted, the stay on the Federal Derivative Action was lifted. Plaintiffs amended their complaint on February 22, 2020 and FleetCor has an April 10, 2020 date by which2020. FLEETCOR filed a motion to move to dismiss or otherwise respond to the amended complaint in the Federal Derivative Action. Action on April 17, 2020, which the court granted without leave to amend on October 21, 2020. Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Eleventh Circuit on November 18, 2020. The appeal is pending.
On January 9, 2019, a similar shareholder derivative complaint was filed in the Superior Court of Gwinnett County, Georgia (“State Derivative Action”), which was stayed pending a ruling on motions for summary judgment in the shareholder class action, notice a settlement has been reached in the shareholder class action, or until otherwise agreed by the parties. On the parties’ joint motion, the court has continued the stay of the State Derivative Action “pending further developments in the first-filed Federal Derivative Action.” The defendants dispute the allegations in the derivative complaints and intend to vigorously defend against the claims.
FTC Investigation
On December 20, 2019, the FTC filed a lawsuit in the Northern District of Georgia against the Company and Ron Clarke. See FTC v. FleetCorFLEETCOR and Ronald F. Clarke, No. 19-cv-05727 (N.D. Ga.). The complaint alleges the Company and Clarke violated the FTC Act’s prohibitions on unfair and deceptive acts and practices. The complaint seeks among other things injunctive relief, consumer redress, and costs of suit. The Company continues to believe that the FTC’s claims are without merit.merit and these matters are not and will not be material to the Company’s financial performance. The Company has incurred and continues to incur legal and other fees related to this complaint. Any settlement of this matter, or defense against the lawsuit, could involve costs to the Company, including legal fees, fines,redress, penalties, and remediation expenses. At
this time, in view of the complexity and ongoing nature ofCompany believes the matter, we are unable to estimate a reasonably possible loss or range of loss that we may incuroutcomes includes continuing litigation or discussions leading to settle this mattera settlement, or defend against the lawsuit brought by the FTC.closure of these matters without further action.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol “FLT.”ticker FLT. As of December 31, 2019,2020, there were 257265 holders of record of our common stock.
DIVIDENDS AND SHARE REPURCHASES
We currently expect to retain all future earnings, if any, for use in the operation and expansion of our business. We have never declared or paid any dividends on our common stock and do not anticipate paying cash dividends to holders of our common stock in the foreseeable future. In addition, our credit agreements restrict our ability to pay dividends. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements and covenants in our existing financing arrangements and any future financing arrangements.
Any stock repurchases may be made at times and in such amounts as deemed appropriate. The timing and amount of stock repurchases, if any, will depend on a variety of factors including the stock price, market conditions, corporate and regulatory requirements, and any additional constraints related to material inside information we may possess. Any repurchases have been and are expected to be funded by a combination of available cash flow from the business, working capital and debt.
On December 14, 2018, as part of the Program, wethe Company entered an accelerated share repurchase ("ASR")(ASR) agreement ("2018(2018 ASR Agreement")Agreement) with a third-party financial institution to repurchase $220 million of ourits common stock. Pursuant to the 2018 ASR Agreement, wethe Company delivered $220 million in cash and received 1,057,035 shares based on a stock price of $176.91 on December 14, 2018. The 2018 ASR Agreement was completedAn additional 117,751 shares were received on January 29, 2019 at which time we received 117,751 additional shares based on a final weighted average per share purchase price duringupon completion of the repurchase period of $187.27.2018 ASR Agreement.
On December 18, 2019, wethe Company entered into anotheran accelerated stock repurchase agreement (2019 ASR agreement ("2019 ASR Agreement")Agreement) with a third-party financial institution to repurchase $500 million of its common stock. Pursuant to the 2019 ASR Agreement, wethe Company delivered $500 million in cash and received 1,431,989 shares based on a stock price of $285.70 on December 18, 2019. The 2019 ASR Agreement was completedAn additional 175,340 shares were received on February 20, 2020 at which time we received 175,340 additional shares based on a final weighted average per share purchase price duringupon completion of the repurchase period of $306.81.2019 ASR Agreement.
The following table presents information with respect to purchase of common stock of the Company made during the three months ended December 31, 20192020 by the Company as defined in Rule 10b-18(a)(3) under the Exchange Act:
| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of the Publicly Announced Plan | Maximum Value that May Yet be Purchased Under the Publicly Announced Plan (in thousands) | ||||||||||||||||||||||
| October 1, 2020 through October 31, 2020 | 2,176 | $ | 241.96 | 14,437,742 | $ | 1,055,150 | ||||||||||||||||||||
| November 1, 2020 through November 30, 2020 | 62,217 | $ | 260.34 | 14,499,959 | $ | 1,038,952 | ||||||||||||||||||||
| December 1, 2020 through December 31, 2020 | 116,983 | $ | 276.23 | 14,616,942 | $ | 1,006,638 | ||||||||||||||||||||
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| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of the Publicly Announced Plan | Maximum Value that May Yet be Purchased Under the Publicly Announced Plan (in thousands) | ||||||||||
| October 1, 2019 through October 31, 2019 | 49 | $ | 297.49 | 9,238,809 | $ | 1,489,074 | ||||||||
| November 1, 2019 through November 30, 2019 | 149,848 | $ | 293.43 | 9,388,657 | $ | 1,445,105 | ||||||||
| December 1, 2019 through December 31, 2019 | 1,731,000 | $ | 287.51 | 11,119,657 | $ | 947,420 | ||||||||
PERFORMANCE GRAPH
The following graph assumes $100 invested on December 31, 2014,2015, at the closing price ($148.71)142.93) of our common stock on that day, and compares (a) the percentage change of our cumulative total stockholder return on the common stock (as measured by dividing (i) the difference between our share price at the end and the beginning of the period presented by (ii) the share price at the beginning of the periods presented) with (b) (i) the Russell 2000 Index, (ii) the S&P 500® Data Processing & Outsourced Services and (iii) S&P 500.
RECENT SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS
Not Applicable.
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in conjunction with “Management’s(i) "Item 7 ‑ Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations," (ii) "Item 8 ‑ Financial Statements and our auditedSupplementary Data" and (iii) the historical consolidated financial statements of the FLEETCOR Technologies, Inc. and the related notes thereto included elsewherepresented in this report.Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results to be expected in any future period.
| (in thousands, except per share data) | 2020 | 20191 | 20182 | 2017 | 2016 | |||||||||||||||||||||||||||
| Income statement data: | ||||||||||||||||||||||||||||||||
| Revenues, net | $ | 2,388,855 | $ | 2,648,848 | $ | 2,433,492 | $ | 2,249,538 | $ | 1,831,546 | ||||||||||||||||||||||
| Operating income | 972,265 | 1,231,430 | 1,090,698 | 883,760 | 754,153 | |||||||||||||||||||||||||||
| Net income | $ | 704,216 | $ | 895,073 | $ | 811,483 | $ | 740,200 | $ | 452,385 | ||||||||||||||||||||||
| Per share data: | ||||||||||||||||||||||||||||||||
| Basic earnings per share | $ | 8.38 | $ | 10.36 | $ | 9.14 | $ | 8.12 | $ | 4.89 | ||||||||||||||||||||||
| Diluted earnings per share | $ | 8.12 | $ | 9.94 | $ | 8.81 | $ | 7.91 | $ | 4.75 | ||||||||||||||||||||||
| As of December 31, | ||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||
| Balance sheet data: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 934,900 | $ | 1,271,494 | $ | 1,031,145 | $ | 913,595 | $ | 475,018 | ||||||||||||||||||||||
Restricted cash3 | 541,719 | 403,743 | 333,748 | 217,275 | 168,752 | |||||||||||||||||||||||||||
| Total assets | 11,194,579 | 12,248,541 | 11,202,477 | 11,318,359 | 9,626,732 | |||||||||||||||||||||||||||
| Total debt | 4,332,623 | 5,036,785 | 4,819,047 | 4,518,616 | 3,858,233 | |||||||||||||||||||||||||||
| Total stockholders’ equity | 3,355,411 | 3,711,616 | 3,340,180 | 3,676,522 | 3,084,038 | |||||||||||||||||||||||||||
| (in thousands, except per share data) | 20191 | 20182 | 2017 | 2016 | 2015 | |||||||||||||||
| Consolidated statement of income data: | ||||||||||||||||||||
| Revenues, net | $ | 2,648,848 | $ | 2,433,492 | $ | 2,249,538 | $ | 1,831,546 | $ | 1,702,865 | ||||||||||
| Expenses: | ||||||||||||||||||||
| Merchant commissions | — | — | 113,133 | 104,345 | 108,257 | |||||||||||||||
| Processing | 530,669 | 487,695 | 429,613 | 355,414 | 331,073 | |||||||||||||||
| Selling | 204,806 | 182,593 | 170,717 | 131,443 | 109,075 | |||||||||||||||
| General and administrative | 407,210 | 389,172 | 387,694 | 283,625 | 297,715 | |||||||||||||||
| Depreciation and amortization | 274,210 | 274,609 | 264,560 | 203,256 | 193,453 | |||||||||||||||
| Other operating expense (income), net | 523 | 8,725 | 61 | (690 | ) | (4,242 | ) | |||||||||||||
| Operating income | 1,231,430 | 1,090,698 | 883,760 | 754,153 | 667,534 | |||||||||||||||
| Investment loss, net | 3,470 | 7,147 | 53,164 | 36,356 | 57,668 | |||||||||||||||
| Other expense (income), net | 93 | (152,166 | ) | (173,436 | ) | 2,982 | 2,523 | |||||||||||||
| Interest expense, net | 150,048 | 138,494 | 107,146 | 71,896 | 71,339 | |||||||||||||||
| Loss on extinguishment of debt | — | 2,098 | 3,296 | — | — | |||||||||||||||
| Total other expense (income) | 153,611 | (4,427 | ) | (9,830 | ) | 111,234 | 131,530 | |||||||||||||
| Income before income taxes | 1,077,819 | 1,095,125 | 893,590 | 642,919 | 536,004 | |||||||||||||||
| Provision for income taxes | 182,746 | 283,642 | 153,390 | 190,534 | 173,573 | |||||||||||||||
| Net income | $ | 895,073 | $ | 811,483 | $ | 740,200 | $ | 452,385 | $ | 362,431 | ||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic earnings per share | $ | 10.36 | $ | 9.14 | $ | 8.12 | $ | 4.89 | $ | 3.94 | ||||||||||
| Diluted earnings per share | $ | 9.94 | $ | 8.81 | $ | 7.91 | $ | 4.75 | $ | 3.85 | ||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic shares | 86,401 | 88,750 | 91,129 | 92,597 | 92,023 | |||||||||||||||
| Diluted shares | 90,070 | 92,151 | 93,594 | 95,213 | 94,139 | |||||||||||||||
| As of December 31, | ||||||||||||||||||||
| (in thousands) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Consolidated balance sheet data: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 1,271,494 | $ | 1,031,145 | $ | 913,595 | $ | 475,018 | $ | 447,152 | ||||||||||
Restricted cash3 | 403,743 | 333,748 | 217,275 | 168,752 | 167,492 | |||||||||||||||
| Total assets | 12,248,541 | 11,202,477 | 11,318,359 | 9,626,732 | 7,889,806 | |||||||||||||||
| Total debt | 5,036,785 | 4,819,047 | 4,518,616 | 3,858,233 | 2,935,000 | |||||||||||||||
| Total stockholders’ equity | 3,711,616 | 3,340,180 | 3,676,522 | 3,084,038 | 2,830,047 | |||||||||||||||
1Reflects the impact of the Company's adoption of ASU 2016-02 "Leases", on January 1, 2019, using a modified retrospective transition method. Under this method, financial results reported in periods prior to 2019 are unchanged. | ||
2 Reflects the impact of the Company's adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606") and related cost capitalization guidance, which was adopted by the Company on January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 resulted in an adjustment to retained earnings in our consolidated balance sheet for the cumulative effect of applying the standard, which included costs incurred to obtain a contract, as well as presentation changes in our statements of income, including the classification of certain amounts previously classified as merchant commissions and processing expense net with revenues. As a result of the application of the modified retrospective transition method, | ||
3 Restricted cash represents customer deposits repayable, as well as collateral received from customers for cross-currency transactions. | ||
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences include, but are not limited to, those identified below and those described in Item 1A “Risk Factors” appearing elsewhere in this report. All foreign currency amounts that have been converted into U.S. dollars in this discussion are based on the exchange rate as reported by Oanda for the applicable periods.
The following discussion and analysis of our financial condition and results of operations generally discusses 2020 and 2019 items and year-over-year comparisons between 2020 and 2019. A detailed discussion of 2018 items and year-over-year comparisons between 2019 and 2018. A detailed discussion of 2017 items and year-over-year comparisons between 2018 and 2017 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
FLEETCOR is a leading global businessprovider of digital payment solutions company that simplifies the wayenables businesses manageto control purchases and pay their expenses. The FLEETCOR portfolio of brands help companies automate, secure, digitizemake payments more effectively and control payments on behalf of their employees and suppliers. We serve businesses, partners, merchants and consumer and payment networksefficiently. Since its incorporation in North America, Latin America, Europe, and Asia Pacific. FLEETCOR’s predecessor company was organized in the United States in 1986, and FLEETCOR had its initial public offering in 2010 (NYSE: FLT).
2000, FLEETCOR has two reportable segments, North Americacontinued to deliver on its mission: to provide businesses with “a better way to pay”. FLEETCOR has been a member of the S&P 500 since 2018 and International. Wetrades on the New York Stock Exchange under the ticker FLT.
Businesses spend an estimated $170 trillion each year. In many instances, they lack the proper tools to monitor what is being purchased, and employ manual, paper-based, disparate processes and methods to both approve and make payments for their purchases. This often results in wasted time and money due to unnecessary or unauthorized spending, fraud, receipt collection, data input and consolidation, report these two segmentsgeneration, reimbursement processing, account reconciliations, employee disciplinary actions, and more.
FLEETCOR’s vision is that every payment is digital, every purchase is controlled, and every related decision is informed. Digital payments are faster and more secure than paper-based methods such as they reflect how we organizechecks, and manage our employees around the world, manage operating performance, contemplate the differing regulatory environments in North America versus other geographies,provide timely and help us isolate the impactdetailed data which can be utilized to effectively reduce unauthorized purchases and fraud, automate data entry and reporting, and eliminate reimbursement processes. Combining this payment data with analytical tools delivers powerful insights, which managers can use to better run their businesses. Our wide range of foreign exchange fluctuations on our financial results.
On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The pandemic and these containment and mitigation measures have created adverse impacts on the U.S. and global economies and it is unclear how long the pandemic and related economic impacts will continue. The COVID-19 pandemic has impacted our business operations in 2020 as described in more detail under “Results of Operations” below, due to a significant decrease in the level of business activity across industries worldwide, which reduced the volume of payment services provided to our customers and revenue generated beginning during the second half of March 2020 and continuing through the date of this Report.
The COVID-19 pandemic has had, and could continue to have, an adverse impact on our results of operations and liquidity; the operations of our suppliers, vendors and customers; and on our employees as a result of quarantines, facility closures, travel and logistics restrictions and general decreases in the level of consumer confidence and business activity. Our business operations and results of operations, including our revenues, earnings and cash flows, have been and may continue to be negatively impacted by Segment. certain factors arising from the pandemic including, but not limited to:
•For the years ended December 31, 2019changes in business and 2018,consumer confidence and spending habits, including negative trends in our North Americacustomers’ purchasing patterns due to decreased levels of business activity, credit availability, high debt levels and International segments generated the following revenue (in millions):financial distress;
•volatile fuel prices and fuel price spreads;
•lower volumes of commercial trucking;
•fluctuations in the dollar compared to other currencies around the world;
•reduction in the level of business travel;
•decreased productivity due to travel bans, work-from-home policies or shelter-in-place orders;
•slowdown in the U.S. and global economies, and an uncertain global economic outlook or a potential credit crisis; and
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| Year ended December 31, | |||||||||||||||
| 2019 | 2018 | ||||||||||||||
Revenues, net | % of total revenues, net | Revenues, net | % of total revenues, net | ||||||||||||
| North America | $ | 1,709 | 64.5 | % | $ | 1,571 | 64.6 | % | |||||||
| International | 940 | 35.5 | % | 862 | 35.4 | % | |||||||||
| $ | 2,649 | 100.0 | % | $ | 2,433 | 100.0 | % | ||||||||
The COVID-19 pandemic continues to impact the world economy and our customers, in particular, by restricting day-to-day operations and business activity generally, which adversely impacted our financial performance in 2020. The extent to which the COVID-19 pandemic impacts our business operations, financial results, and liquidity into 2021 will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the pandemic; vaccine availability, distribution, efficacy to new strains of the virus and the public's willingness to get vaccinated; our response to the continued impact of the pandemic; the negative impact it has on global and regional economies and general economic activity, including the duration and magnitude of its impact on unemployment rates and business spending levels; its short- and longer-term impact on the levels of consumer confidence; the ability of our suppliers, vendors and customers to successfully address the continued impacts of the pandemic; actions governments, businesses and individuals take in response to the pandemic; and how quickly economies recover after the pandemic subsides.
We have taken steps to mitigate the potential risks related to the circumstances and impacts of COVID-19. We have been focused on addressing these challenges with proactive actions designed to protect our employees, provide uninterrupted service to our customers, and meet our near term liquidity needs. Such actions include, but are not limited to:
•Safety: ensuring the safety of our approximately 8,400 employees worldwide, with the vast majority of our employees working from home;
•BusinessContinuity: ensuring that our systems and payment solutions continue to operate efficiently for our customers;
•Liquidity: actively monitoring availability under our existing credit facilities;
•Expenses: slowing discretionary sales and technology spending, and furloughing contractors; and
•Credit: in select distressed verticals, tightening customer credit lines and payment terms, including closing inactive lines, reducing unused capacity, and reducing payment terms.
While we believe the COVID-19 pandemic will continue to have an adverse effect on our revenues and earnings in 2021, we expect continued improvement throughout the year as economic activity recovers.
Performance
Revenues, net, Net Income and Net Income Per Diluted Share. Set forth below are revenues, net, net income and net income per diluted share for the years ended December 31, 20192020 and 20182019 (in millions, except per share amounts).
| Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| 2019 | 2018 | 2020 | 2019 | |||||||||||||||||||||||
| Revenues, net | $ | 2,649 | $ | 2,433 | Revenues, net | $ | 2,389 | $ | 2,649 | |||||||||||||||||
| Net income | $ | 895 | $ | 811 | Net income | $ | 704 | $ | 895 | |||||||||||||||||
| Net income per diluted share | $ | 9.94 | $ | 8.81 | Net income per diluted share | $ | 8.12 | $ | 9.94 | |||||||||||||||||
Adjusted Net Income and Adjusted Net Income Per Diluted Share. Set forth below are adjusted net income and adjusted net income per diluted share for the years ended December 31, 20192020 and 20182019 (in millions, except per share amounts).
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||
| 2019 | 2018 | 2020 | 2019 | |||||||||||||||||||||||
| Adjusted net income | $ | 1,062.1 | $ | 969.8 | Adjusted net income | $ | 962 | $ | 1,062 | |||||||||||||||||
| Adjusted net income per diluted share | $ | 11.79 | $ | 10.53 | Adjusted net income per diluted share | $ | 11.09 | $ | 11.79 | |||||||||||||||||
Adjusted net income and adjusted net income per diluted share are supplemental non-GAAP financial measures of operating performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures” for more information and a reconciliation of the non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP. We use adjusted net income and adjusted net income per diluted share to eliminate the effect of items that we do not consider indicative of our core operating performance on a consistent basis.
Sources of Revenue
FLEETCOR offers a variety of business payment solutions that help to simplify, automate, secure, digitize and effectively control the way businesses manage and pay their expenses. We provide our payment solutions to our business, merchant, consumer and payment network customers in more than 100 countries around the world today, although we operate primarily in 3 geographies, with approximately 87% of our business in the U.S., Brazil, and the U.K. and Brazil. Our products help our customers pay their suppliers and manage spend related to their employees more efficiently. We have a variety of products that help our customers achieve these goals, primarily in five product categories: fuel, corporate payments, toll, lodging and gift. Our customers may include
34
commercial businesses (obtained through direct and indirect channels), partners for whom we manage payment programs, as well as individual consumers (for tolls).consumers.
FLEETCOR has three reportable segments, North America, International, and Brazil. We report these three segments as they reflect how we organize and manage our global employee base, manage operating performance, contemplate the differing regulatory environments across geographies, and help us isolate the impact of foreign exchange fluctuations on our financial results. However, to help facilitate an understanding of our expansive range of solutions around the world, we describe them in two categories: Corporate Payments solutions, which simplify and automate payments, and Expense Management solutions, which help control and monitor employee spending.
Our Corporate Payments solutions are designed to help businesses streamline the back-office operations associated with making outgoing payments. Companies save time, cut costs, and manage B2B payment processing more efficiently with our suite of corporate payment solutions, including accounts payable (AP) automation, virtual cards, cross-border, and purchasing and T&E cards. Our Expense Management solutions (Fuel, Tolls, and Lodging) are purpose-built to provide customers with greater control and visibility of employee spending when compared with less specialized payment methods, such as cash or general-purpose credit cards. FLEETCOR provides several other payments solutions that, due to their nature or size, are not considered within our Corporate Payments and Expense Management solutions.
Revenues, net, by Segment. The presentation of segment information has been recast for prior periods to align with our current segment presentation. For the years ended December 31, 2020 and 2019, our segments generated the following revenue (in millions):
| Year ended December 31, | ||||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||||
| Revenues, net | % of Total Revenues, net | Revenues, net | % of Total Revenues, net | |||||||||||||||||||||||
| North America | $ | 1,582 | 66 | % | $ | 1,709 | 65 | % | ||||||||||||||||||
| Brazil | 344 | 14 | % | 428 | 16 | % | ||||||||||||||||||||
| International | 463 | 19 | % | 512 | 19 | % | ||||||||||||||||||||
| $ | 2,389 | 100 | % | $ | 2,649 | 100 | % | |||||||||||||||||||
Revenues, net, by Geography and Solution. Revenue by geography and solution category for the years ended December 31, 2020 and 2019 (in millions), was as follows:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| (Unaudited) | 2020 | 2019 | |||||||||||||||||||||||||||||||||
| Revenue by Geography* | Revenues, net | % of total revenues, net | Revenues, net | % of total revenues, net | |||||||||||||||||||||||||||||||
| United States | $ | 1,468 | 61 | % | $ | 1,595 | 60 | % | |||||||||||||||||||||||||||
| Brazil | 344 | 14 | % | 428 | 16 | % | |||||||||||||||||||||||||||||
| United Kingdom | 263 | 11 | % | 275 | 10 | % | |||||||||||||||||||||||||||||
| Other | 314 | 13 | % | 351 | 13 | % | |||||||||||||||||||||||||||||
| Consolidated revenues, net | $ | 2,389 | 100 | % | $ | 2,649 | 100 | % | |||||||||||||||||||||||||||
*Columns may not calculate due to rounding.
| Year Ended December 31, | ||||||||||||||||||||||||||
| (Unaudited) | 2020 | 2019 | ||||||||||||||||||||||||
Revenue, net by Solution Category*1 | Revenues, net | % of total revenues, net | Revenues, net | % of total revenues, net | ||||||||||||||||||||||
| Fuel | $ | 1,057 | 44 | % | $ | 1,173 | 44 | % | ||||||||||||||||||
| Corporate Payments | 434 | 18 | % | 450 | 17 | % | ||||||||||||||||||||
| Tolls | 292 | 12 | % | 357 | 13 | % | ||||||||||||||||||||
| Lodging | 207 | 9 | % | 213 | 8 | % | ||||||||||||||||||||
| Gift | 154 | 6 | % | 180 | 7 | % | ||||||||||||||||||||
| Other | 244 | 10 | % | 276 | 10 | % | ||||||||||||||||||||
| Consolidated revenues, net | $ | 2,389 | 100 | % | $ | 2,649 | 100 | % | ||||||||||||||||||
*Columns may not calculate due to rounding.
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1Reflects certain reclassifications of revenue between solution categories as the Company realigned its Corporate Payments solution, resulting in reclassification of Payroll Card revenue from Corporate Payments to Other. | ||
Fuel represents approximately 44% of our revenues. Our fuel cards and productssolutions help businesses monitor and control fuel spend across multiple fuel networks, providing online analytical reporting to help customers managing the efficiency of their vehicles and drivers, while offering potential discounts off of the retail price of fuel. We generate revenue in our fuel productsFuel solution through a variety of program fees, including transaction fees, card fees, network fees and charges, as well as from interchange. These fees may be charged as fixed amounts, costs plus a mark-up, or based on a percentage of the transaction purchase
amounts, or a combination thereof. Our programs also include other fees and charges associated with late payments and based on customer credit risk.
Corporate payments represents approximately 19% of our revenues. Our productsPayments solutions help streamline B2B payments for vendors and employees, both domestically and internationally. Our corporate payments products include virtual cardVirtual Card solutions for invoice payments, corporate card programs, a fully-outsourced accounts payableAP Automation solution, a payroll card solution for employers to distribute wages, as well as a cross-border payments productCross-Border solution to facilitate customers making payments across differing currencies. In our corporate payments products, a primarilyCorporate Payments solutions, the primary measure of volume is spend, the dollar amount of payments processed on behalf of customers through our various networks. In corporate payments, weWe primarily earn revenue from the difference between the amount charged to the customer and the amount paid to the third party for a given transaction, as interchange or spread revenue. Our programs may also charge fixed fees for access to the network and ancillary services provided.
Our Tolls represents approximately 13% of our revenues. Our toll productsolution is primarily delivered via an RFID sticker affixed to the windshield of a customer vehicle in Brazil. This RFID enables customers to utilize toll roads, toll parking lots, pay for gas at partner stations and pay for drive-through food, via automated access and payment upon scan while remaining in the vehicle. In our toll product,Tolls solution, the relevant measure of volume is average monthly tags active during the period. We primarily earn revenue from fixed fees for access to the network and ancillary services provided. We also earn interchange on certain services provided.
Lodging represents approximately 8% of our revenues. Our lodging productssolutions provide customers, both workforce and airline/cruise line based, with a proprietary network of hotels with discounted room rates, centralized billing and robust reporting to help customers manage and control costs. In our lodging products,Lodging solutions, we define a transaction as a hotel room night purchased by a customer. In our lodging products, weWe primarily earn revenue from the difference between the amount charged to the customer and the amount paid to the hotel for a given transaction. Our productstransaction and commissions paid by hotels. We may also charge fees for access to the network and ancillary services provided.
Gift represents approximately 7% of our revenues. We provideprovides fully integrated gift card productprogram management and processing services via plastic and digital gift cards to our customers. We primarily earn revenue from the processing of gift card transactions sold by our customers to end users, as well as from the sale of the plastic cards. Our productsWe may also charge fixed fees for ancillary services provided.
The remaining 8% of revenues represents other products whichthat due to their nature or size, are not considered primary products. These include telematics,payroll cards, fleet maintenance, food and transportation employee benefits related offerings, and telematics offerings.
The following table provides revenue per key performance metric by productsolution category for the years ended December 31, 20192020 and 20182019 (in millions except revenues, net per transaction)key performance metric).*
36
| As Reported | Pro Forma and Macro Adjusted | |||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||
| 2019 | 2018 | Change | % Change | 2019 | 2018 | Change | % Change | |||||||||||||||||||||||
FUEL | ||||||||||||||||||||||||||||||
'- Revenues, net1 | $ | 1,173 | $ | 1,126 | $ | 47 | 4 | % | $ | 1,180 | $ | 1,079 | $ | 100 | 9 | % | ||||||||||||||
'- Transactions1 | 502 | 512 | (10 | ) | (2 | )% | 499 | 494 | 6 | 1 | % | |||||||||||||||||||
'- Revenues, net per transaction | $ | 2.33 | $ | 2.19 | $ | 0.14 | 6 | % | $ | 2.36 | $ | 2.19 | $ | 0.17 | 8 | % | ||||||||||||||
| CORPORATE PAYMENTS | ||||||||||||||||||||||||||||||
'- Revenues, net | $ | 516 | $ | 416 | $ | 100 | 24 | % | $ | 521 | $ | 433 | $ | 88 | 20 | % | ||||||||||||||
'- Transactions | 56 | 49 | 6 | 13 | % | 56 | 50 | 6 | 12 | % | ||||||||||||||||||||
'- Revenues, net per transaction | $ | 9.25 | $ | 8.42 | $ | 0.83 | 10 | % | $ | 9.33 | $ | 8.68 | $ | 0.65 | 7 | % | ||||||||||||||
'- Spend volume | $ | 73,437 | $ | 55,744 | $ | 17,693 | 32 | % | $ | 74,366 | $ | 56,736 | $ | 17,630 | 31 | % | ||||||||||||||
'- Revenues, net per spend $ | 1 | % | 1 | % | — | % | — | % | 1 | % | 1 | % | (0.1 | )% | (8 | )% | ||||||||||||||
| TOLLS | ||||||||||||||||||||||||||||||
'- Revenues, net1 | $ | 357 | $ | 333 | $ | 25 | 7 | % | $ | 387 | $ | 333 | $ | 55 | 16 | % | ||||||||||||||
| - Tags (average monthly) | 5.1 | 4.7 | 0.4 | 8 | % | 5.1 | 4.7 | 0.4 | 8 | % | ||||||||||||||||||||
'- Revenues, net per tag** | $ | 17.55 | $ | 17.59 | $ | (0.04 | ) | — | % | $ | 19.04 | $ | 17.59 | $ | 1.45 | 8 | % | |||||||||||||
| LODGING | ||||||||||||||||||||||||||||||
'- Revenues, net | $ | 213 | $ | 176 | $ | 37 | 21 | % | $ | 213 | $ | 189 | $ | 24 | 13 | % | ||||||||||||||
'- Room nights | 19 | 19 | — | — | % | 19 | 21 | (2 | ) | (11 | )% | |||||||||||||||||||
'- Revenues, net per room night | $ | 11.15 | $ | 9.14 | $ | 2.01 | 22 | % | $ | 11.15 | $ | 8.80 | $ | 2.35 | 27 | % | ||||||||||||||
| GIFT | ||||||||||||||||||||||||||||||
'- Revenues, net | $ | 180 | $ | 187 | $ | (6 | ) | (3 | )% | $ | 180 | $ | 193 | $ | (13 | ) | (7 | )% | ||||||||||||
'- Transactions | 1,274 | 1,384 | (110 | ) | (8 | )% | 1,274 | 1,385 | (111 | ) | (8 | )% | ||||||||||||||||||
'- Revenues, net per transaction | $ | 0.14 | $ | 0.13 | $ | 0.01 | 7 | % | $ | 0.14 | $ | 0.14 | $ | — | — | % | ||||||||||||||
OTHER2 | ||||||||||||||||||||||||||||||
'- Revenues, net1 | $ | 210 | $ | 197 | $ | 12 | 6 | % | $ | 219 | $ | 201 | $ | 19 | 9 | % | ||||||||||||||
'- Transactions1 | 56 | 50 | 6 | 13 | % | 56 | 55 | 1 | 2 | % | ||||||||||||||||||||
'- Revenues, net per transaction | $ | 3.75 | $ | 3.99 | $ | (0.24 | ) | (6 | )% | $ | 3.92 | $ | 3.66 | $ | 0.26 | 7 | % | |||||||||||||
| FLEETCOR CONSOLIDATED REVENUES | ||||||||||||||||||||||||||||||
'- Revenues, net | $ | 2,649 | $ | 2,434 | $ | 215 | 9 | % | $ | 2,700 | $ | 2,428 | $ | 272 | 11 | % | ||||||||||||||
| As Reported | Pro Forma and Macro Adjusted3 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | % Change | 2020 | 2019 | Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
FUEL | ||||||||||||||||||||||||||||||||||||||||||||||||||
'- Revenues, net | $ | 1,057 | $ | 1,173 | $ | (116) | (10) | % | $ | 1,057 | $ | 1,161 | $ | (104) | (9) | % | ||||||||||||||||||||||||||||||||||
'- Transactions | 442 | 502 | (60) | (12) | % | 442 | 499 | (57) | (11) | % | ||||||||||||||||||||||||||||||||||||||||
'- Revenues, net per transaction | $ | 2.39 | $ | 2.34 | $ | 0.05 | 2 | % | $ | 2.39 | $ | 2.33 | $ | 0.06 | 3 | % | ||||||||||||||||||||||||||||||||||
| CORPORATE PAYMENTS | ||||||||||||||||||||||||||||||||||||||||||||||||||
'- Revenues, net1 | $ | 434 | $ | 450 | $ | (16) | (4) | % | $ | 435 | $ | 454 | $ | (19) | (4) | % | ||||||||||||||||||||||||||||||||||
'- Spend volume | $ | 64,740 | $ | 73,437 | $ | (8,697) | (12) | % | $ | 64,740 | $ | 73,829 | $ | (9,089) | (12) | % | ||||||||||||||||||||||||||||||||||
'- Revenues, net per spend $ | 0.67 | % | 0.61 | % | 0.06 | % | 10 | % | 0.67 | % | 0.62 | % | 0.06 | % | 9 | % | ||||||||||||||||||||||||||||||||||
| TOLLS | ||||||||||||||||||||||||||||||||||||||||||||||||||
| - Revenues, net | $ | 292 | $ | 357 | $ | (65) | (18) | % | $ | 378 | $ | 357 | $ | 21 | 6 | % | ||||||||||||||||||||||||||||||||||
| - Tags (average monthly) | 5.4 | 5.1 | 0.3 | 6 | % | 5.4 | 5.1 | 0.3 | 6 | % | ||||||||||||||||||||||||||||||||||||||||
| - Revenues, net per tag | $ | 13.43 | $ | 17.56 | $ | (4.13) | (24) | % | $ | 17.38 | $ | 17.56 | $ | (0.17) | (1) | % | ||||||||||||||||||||||||||||||||||
| LODGING | ||||||||||||||||||||||||||||||||||||||||||||||||||
'- Revenues, net | $ | 207 | $ | 213 | $ | (6) | (3) | % | $ | 207 | $ | 272 | $ | (65) | (24) | % | ||||||||||||||||||||||||||||||||||
'- Room nights | 22 | 19 | 3 | 16 | % | 22 | 28 | (7) | (23) | % | ||||||||||||||||||||||||||||||||||||||||
'- Revenues, net per room night | $ | 9.54 | $ | 11.14 | $ | (1.60) | (14) | % | $ | 9.55 | $ | 9.62 | $ | (0.08) | (1) | % | ||||||||||||||||||||||||||||||||||
| GIFT | ||||||||||||||||||||||||||||||||||||||||||||||||||
'- Revenues, net | $ | 154 | $ | 180 | $ | (26) | (14) | % | $ | 154 | $ | 180 | $ | (26) | (14) | % | ||||||||||||||||||||||||||||||||||
'- Transactions | 1,045 | 1,274 | (230) | (18) | % | 1,045 | 1,274 | (230) | (18) | % | ||||||||||||||||||||||||||||||||||||||||
'- Revenues, net per transaction | $ | 0.15 | $ | 0.14 | $ | 0.01 | 7 | % | $ | 0.15 | $ | 0.14 | $ | 0.01 | 7 | % | ||||||||||||||||||||||||||||||||||
OTHER2 | ||||||||||||||||||||||||||||||||||||||||||||||||||
'- Revenues, net1 | $ | 244 | $ | 276 | $ | (32) | (11) | % | $ | 252 | $ | 285 | $ | (33) | (12) | % | ||||||||||||||||||||||||||||||||||
'- Transactions1 | 41 | 56 | (15) | (27) | % | 41 | 58 | (17) | (29) | % | ||||||||||||||||||||||||||||||||||||||||
'- Revenues, net per transaction | $ | 5.99 | $ | 4.94 | $ | 1.05 | 21 | % | $ | 6.18 | $ | 4.93 | $ | 1.24 | 25 | % | ||||||||||||||||||||||||||||||||||
| FLEETCOR CONSOLIDATED REVENUES | ||||||||||||||||||||||||||||||||||||||||||||||||||
'- Revenues, net | $ | 2,389 | $ | 2,649 | $ | (260) | (10) | % | $ | 2,484 | $ | 2,711 | $ | (227) | (8) | % | ||||||||||||||||||||||||||||||||||
1 Reflects certain reclassifications of revenue | ||
2 Other includes telematics, maintenance, food, transportation and | ||
3 See heading entitled "Managements' Use of Non-GAAP Financial Measures" for a reconciliation of pro forma and macro adjusted revenue by product and metric non-GAAP measures to the comparable financial measure calculated in accordance with GAAP. | ||
| * Columns may not calculate due to rounding. | ||