# CORPAY, INC. (CPAY) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CORPAY, INC.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1175454/000162828022004531/flt-20211231.htm
Accession: 0001628280-22-004531
Filing date: 2022-03-01
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CPAY/
All MD&A years: /company/CPAY/mda/
Next year: /company/CPAY/mda/fy2022/ (FY 2022)

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 2021 and 2020 items and year-over-year comparisons between 2021 and 2020. A detailed discussion of 2020 items and year-over-year comparisons between 2020 and 2019 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, 2020.

Executive Overview

FLEETCOR is a leading global provider of digital payment solutions that enables 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 S&P 500 since 2018 and trades on the New York Stock Exchange under the ticker FLT.

Businesses spend an estimated $125 trillion each year with other businesses. 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 often used, such as cash, paper checks, general purpose credit cards, as well as employee pay and reclaim processes.

Our revenue is generally reported net of the cost for underlying products and services purchased through our payment products. In this report, we refer to this net revenue as “revenue". See “Results of Operations” for additional segment information.

Impact of COVID-19 on Our Business

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (including variants thereof, "COVID-19") a global pandemic and recommended containment and mitigation measures worldwide. 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, vaccine mandates, facility closures, travel and logistics restrictions and general decreases in the level of consumer confidence and business activity. In 2020, our operations were negatively impacted by 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 early 2021. In 2021, as described in more detail under “Results of Operations” below, we experienced a rebound in transaction volumes as the business recovered from the effects of the COVID-19 pandemic and the impact of incremental new sales, particularly as a result of the favorable impact of fuel prices and foreign exchange rates.

The COVID-19 pandemic continues to impact various aspects of the world economy and our customers. The extent to which the COVID-19 pandemic continues to impact our business operations, financial results, and liquidity into 2022 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 and the geographies most affected; vaccine availability globally, the distribution of the vaccines, efficacy to new strains of the virus and the public's willingness to get vaccinated or receive booster doses, including potential disruptions impacting our suppliers and vendors resulting, directly or indirectly, from vaccine mandates and/or vaccine hesitancy; 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 impact on our ability, or the cost and expense incurred by us, to successfully attract, retain and develop our workforce, 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; and actions governments, businesses and individuals take in response to the pandemic; and how quickly economies recover after the pandemic subsides.

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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, 2021 and 2020 (in millions, except per share amounts).

[[GREPCENT_TABLE]]
[["","","Year ended December 31,"],["","","2021","","2020"],["Revenues, net","","$","2,834","","","$","2,389"],["Net income","","$","839","","","$","704"],["Net income per diluted share","","$","9.99","","","$","8.12"]]
[[/GREPCENT_TABLE]]

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, 2021 and 2020 (in millions, except per share amounts).

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2021","","2020"],["Adjusted net income","","$","1,110","","","$","962"],["Adjusted net income per diluted share","","$","13.21","","","$","11.09"]]
[[/GREPCENT_TABLE]]

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 150 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. Our customers may include commercial businesses (obtained through direct and indirect channels), partners for whom we manage payment programs, as well as individual 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: Expense Management solutions, which help control and monitor employee spending, and Corporate Payments solutions, which simplify and automate vendor payments.

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. 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. 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. For the years ended December 31, 2021 and 2020, our segments generated the following revenue (in millions):

[[GREPCENT_TABLE]]
[["","","Year ended December 31,"],["","","2021","","2020"],["","","Revenues, net","","% of Total Revenues, net","","Revenues, net","","% of Total Revenues, net"],["North America","","$","1,921.1","","","68","%","","$","1,581.5","","","66","%"],["Brazil","","368.1","","","13","%","","344.2","","","14","%"],["International","","544.6","","","19","%","","463.1","","","19","%"],["","","$","2,833.7","","","100","%","","$","2,388.9","","","100","%"]]
[[/GREPCENT_TABLE]]

*Columns may not calculate due to rounding.

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Revenues, net, by Geography and Solution. Revenue by geography and solution category for the years ended December 31, 2021 and 2020 (in millions), was as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(Unaudited)","","2021","","2020"],["Revenues by Geography*","","Revenues, net","","% of total revenues, net","","Revenues, net","","% of total revenues, net"],["United States","","$","1,785.2","","","63","%","","$","1,467.5","","","61","%"],["Brazil","","368.1","","","13","%","","344.2","","","14","%"],["United Kingdom","","321.8","","","11","%","","262.9","","","11","%"],["Other","","358.6","","","13","%","","314.2","","","13","%"],["Consolidated revenues, net","","$","2,833.7","","","100","%","","$","2,388.9","","","100","%"]]
[[/GREPCENT_TABLE]]

*Columns may not calculate due to rounding.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(Unaudited)","","2021","","2020"],["Revenues by Solution Category*","","Revenues, net","","% of total revenues, net","","Revenues, net","","% of total revenues, net"],["Fuel","","$","1,180.1","","","42","%","","$","1,057.2","","","44","%"],["Corporate Payments","","600.0","","","21","%","","434.0","","","18","%"],["Tolls","","306.0","","","11","%","","292.0","","","12","%"],["Lodging","","309.6","","","11","%","","207.0","","","9","%"],["Gift","","179.5","","","6","%","","154.4","","","6","%"],["Other","","258.5","","","9","%","","244.3","","","10","%"],["Consolidated revenues, net","","$","2,833.7","","","100","%","","$","2,388.9","","","100","%"]]
[[/GREPCENT_TABLE]]

*Columns may not calculate due to rounding.

We generate revenue in our Fuel solutions 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, 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.

In our Corporate Payments solutions, the primary measure of volume is spend, the dollar amount of payments processed on behalf of customers through our various networks. We 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.

In our 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 non-toll products.

In our Lodging solutions, we primarily earn revenue from the difference between the amount charged to the customer and the amount paid to the hotel for a given transaction and commissions paid by hotels. We may also charge fees for access to the network and ancillary services provided.

In our Gift solutions, 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. We may also charge fixed fees for ancillary services provided.

The remaining revenues represents other products that due to their nature or size, are not considered primary products. These include telematics offerings, fleet maintenance, food and transportation employee benefits related offerings, payroll cards and long-haul transportation services.

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The following table provides revenue per key performance metric by solution category as reported and organically for the years ended December 31, 2021 and 2020 (in millions except revenues, net per key performance metric).*

[[GREPCENT_TABLE]]
[["","","As Reported","","Pro Forma and Macro Adjusted2"],["","","Year Ended December 31,","","Year Ended December 31,"],["","","2021","","2020","","Change","","% Change","","2021","","2020","","Change","","% Change"],["FUEL"],["'- Revenues, net","","$","1,180","","","$","1,057","","","$","123","","","12","%","","$","1,154","","","$","1,059","","","$","95","","","9","%"],["'- Transactions","","463","","","442","","","20","","","5","%","","463","","","443","","","20","","","4","%"],["'- Revenues, net per transaction","","$","2.55","","","$","2.39","","","$","0.16","","","7","%","","$","2.49","","","$","2.39","","","$","0.10","","","4","%"],["CORPORATE PAYMENTS"],["'- Revenues, net","","$","600","","","$","434","","","$","166","","","38","%","","$","589","","","$","505","","","$","84","","","17","%"],["'- Spend volume","","$","92,368","","","$","64,741","","","$","27,627","","","43","%","","$","92,368","","","$","74,775","","","$","17,592","","","24","%"],["'- Revenues, net per spend $","","0.65","%","","0.67","%","","(0.02)","%","","(3)","%","","0.64","%","","0.68","%","","(0.04)","%","","(6)","%"],["TOLLS"],["- Revenues, net","","$","306","","","$","292","","","$","14","","","5","%","","$","322","","","$","292","","","$","30","","","10","%"],["- Tags (average monthly)","","5.9","","","5.4","","","0.5","","","9","%","","5.9","","","5.4","","","0.5","","","9","%"],["- Revenues, net per tag","","$","12.90","","","$","13.43","","","$","(0.53)","","","(4)","%","","$","13.59","","","$","13.43","","","$","0.16","","","1","%"],["LODGING"],["'- Revenues, net","","$","310","","","$","207","","","$","103","","","50","%","","$","310","","","$","248","","","$","62","","","25","%"],["'- Room nights","","29","","","22","","","7","","","32","%","","29","","","25","","","4","","","15","%"],["'- Revenues, net per room night","","$","10.63","","","$","9.55","","","$","1.08","","","11","%","","$","10.62","","","$","9.81","","","$","0.81","","","8","%"],["GIFT"],["'- Revenues, net","","$","179","","","$","154","","","$","25","","","16","%","","$","179","","","$","154","","","$","25","","","16","%"],["'- Transactions","","1,187","","","1,045","","","142","","","14","%","","1,187","","","1,045","","","142","","","14","%"],["'- Revenues, net per transaction","","$","0.15","","","$","0.15","","","$","\u2014","","","\u2014","%","","$","0.15","","","$","0.15","","","$","\u2014","","","\u2014","%"],["OTHER1"],["'- Revenues, net","","$","259","","","$","244","","","$","14","","","6","%","","$","254","","","$","244","","","$","10","","","4","%"],["'- Transactions","","37","","","41","","","(4)","","","(10)","%","","37","","","41","","","(4)","","","(10)","%"],["'- Revenues, net per transaction","","$","7.07","","","$","6.00","","","$","1.07","","","18","%","","$","6.95","","","$","6.00","","","$","0.95","","","16","%"],["FLEETCOR CONSOLIDATED REVENUES, NET"],["'- Revenues, net","","$","2,834","","","$","2,389","","","$","445","","","19","%","","$","2,808","","","$","2,502","","","$","306","","","12","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["1 Other includes telematics, maintenance, food, payroll card and transportation related businesses."],["2 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."]]
[[/GREPCENT_TABLE]]

Organic revenue growth is a supplemental non-GAAP financial measure of operating performance. Organic revenue growth is calculated as revenue growth in the current period adjusted for the impact of changes in the macroeconomic environment (to include fuel price, fuel price spreads and changes in foreign exchange rates) over revenue in the comparable prior period adjusted to include or remove the impact of acquisitions and/or divestitures and non-recurring items that have occurred subsequent to that period. 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 believe that organic revenue growth on a macro-neutral, one-time item, and consistent acquisition/divestiture/non-recurring item basis is useful to investors for understanding the performance of FLEETCOR.

Revenue per relevant key performance indicator (KPI), which may include transaction, spend volume, monthly tags, room nights, or other metrics, is derived from the various revenue types as discussed above and can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which would be influenced by our acquisitions, organic growth in our business, and the overall macroeconomic environment, including fluctuations in foreign currency exchange rates, fuel prices and fuel price spreads. Revenue per KPI per customer may change as the level of services we provide to a customer increases or decreases, as macroeconomic factors change and as

34

adjustments are made to merchant and customer rates. See “Results of Operations” for further discussion of transaction volumes and revenue per transaction.

Sources of Expenses

We incur expenses in the following categories: 

•Processing—Our processing expense consists of expenses related to processing transactions, servicing our customers and merchants, credit losses and cost of goods sold related to our hardware and card sales in certain businesses.

•Selling—Our selling expenses consist primarily of wages, benefits, sales commissions (other than merchant commissions) and related expenses for our sales, marketing and account management personnel and activities.

•General and administrative—Our general and administrative expenses include compensation and related expenses (including stock-based compensation) for our executives, finance and accounting, information technology, human resources, legal and other administrative personnel. Also included are facilities expenses, third-party professional services fees, travel and entertainment expenses, and other corporate-level expenses.

•Depreciation and amortization—Our depreciation expenses include depreciation of property and equipment, consisting of computer hardware and software (including proprietary software development amortization expense), card-reading equipment, furniture, fixtures, vehicles and buildings and leasehold improvements related to office space. Our amortization expenses include amortization of intangible assets related to customer and vendor relationships, trade names and trademarks, software and non-compete agreements. We are amortizing intangible assets related to business acquisitions and certain private label contracts associated with the purchase of accounts receivable.

•Other operating, net—Our other operating, net includes other operating expenses and income items that do not relate to our core operations or that occur infrequently.

•Investment (gain) loss, net—Our investment results primarily relate to impairment charges related to our investments and unrealized gains and losses related to a noncontrolling interest in a marketable security, which was disposed in 2020.

•Other expense (income), net—Our other expense (income), net includes gains or losses from the sale of assets, foreign currency transactions, and other miscellaneous operating costs and revenue.

•Interest expense, net—Our interest expense, net includes interest expense on our outstanding debt, interest income on our cash balances and interest on our interest rate swaps.

•Provision for income taxes—Our provision for income taxes consists of corporate income taxes related primarily to profits resulting from the sale of our products and services on a global basis.

Factors and Trends Impacting our Business

We believe that the following factors and trends are important in understanding our financial performance: 

•Global economic conditions—Our results of operations are materially affected by conditions in the economy generally, in North America, Brazil, and internationally, including the ultimate impact of the COVID-19 pandemic. Factors affected by the economy include our transaction volumes, the credit risk of our customers and changes in tax laws across the globe. These factors affected our businesses in each of our segments.

•Foreign currency changes—Our results of operations are significantly impacted by changes in foreign currency exchange rates; namely, by movements of the Australian dollar, Brazilian real, British pound, Canadian dollar, Czech koruna, euro, Mexican peso, New Zealand dollar and Russian ruble, relative to the U.S. dollar. Approximately 63%, and 61% of our revenue in 2021 and 2020, respectively, was derived in U.S. dollars and was not affected by foreign currency exchange rates. See “Results of Operations” for information related to foreign currency impact on our total revenue, net.

Our cross-border foreign currency trading business aggregates foreign exchange exposures arising from customer contracts and economically hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. These contracts are subject to counterparty credit risk.

•Fuel prices—Our fleet customers use our products and services primarily in connection with the purchase of fuel. Accordingly, our revenue is affected by fuel prices, which are subject to significant volatility. A change in retail fuel prices could cause a decrease or increase in our revenue from several sources, including fees paid to us based on a percentage of each customer’s total purchase. Changes in the absolute price of fuel may also impact unpaid account balances and the late fees and charges based on these amounts. We believe approximately 12% and 11% of revenues, net were directly impacted by changes in fuel price in 2021 and 2020, respectively.

•Fuel price spread volatility—A portion of our revenue involves transactions where we derive revenue from fuel price spreads, which is the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction. In these transactions, the price paid to the merchant is based on the wholesale cost of fuel. The merchant’s wholesale cost of fuel is dependent on several factors including, among others, the factors

35

described above affecting fuel prices. The fuel price that we charge to our customer is dependent on several factors including, among others, the fuel price paid to the merchant, posted retail fuel prices and competitive fuel prices. 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 customers, or the fuel price we charge to our customers decreases at a faster rate than the merchant’s wholesale cost of fuel. The inverse of these situations produces fuel price spread expansion. We believe approximately 5% and 8% of revenues, net were directly impacted by fuel price spreads in 2021 and 2020, respectively.

•Acquisitions—Since 2002, we have completed over 90 acquisitions of companies, in addition to commercial account portfolios. Acquisitions have been an important part of our growth strategy, and it is our intention to continue to seek opportunities to increase our customer base and diversify our service offering through further strategic acquisitions. The impact of acquisitions has, and may continue to have, a significant impact on our results of operations and may make it difficult to compare our results between periods.

•Interest rates—Our results of operations are affected by interest rates. We are exposed to market risk changes in interest rates on our cash investments and debt. On January 22, 2019, we entered into three swap contracts. The objective of these swap contracts is to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of variable rate debt, the sole source of which is due to changes in the LIBOR benchmark interest rate. For each of these swap contracts, we pay a fixed monthly rate and receive one month LIBOR. The $1.0 billion interest rate swap matured in January 2022.

•Expenses—Over the long term, we expect that our general and administrative expense will decrease as a percentage of revenue as our revenue increases. To support our expected revenue growth, we plan to continue to incur additional sales and marketing expense by investing in our direct marketing, third-party agents, internet marketing, telemarketing and field sales force.

•Taxes—We pay taxes in various taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in certain non-U.S. taxing jurisdictions are different than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates.

Acquisitions and Investments

2022

•In February 2022, we made two immaterial investments in an electric vehicle charging payments business and an electric vehicle data analytics business.

•In March 2022, we acquired a software business that streamlines disruption events for airline passengers.

2021

•On December 15, 2021, we completed the acquisition of a mobile fuel payments solution in Russia for an immaterial amount.

•On September 1, 2021, we completed the acquisition of ALE Solutions, Inc. (ALE), a U.S. based provider of lodging solutions to the insurance industry, for $421.8 million.

•On June 1, 2021, we completed the acquisition of Associated Foreign Exchange (AFEX), a U.S. based, cross-border payment solutions provider, for $459.8 million, including cash.

•On January 13, 2021, we completed the acquisition of Roger, which has been rebranded as Corpay One, a global accounts payable (AP) cloud software platform for small businesses, for $39.0 million.

•During 2021, we made an investment of $37.8 million in a joint venture in Brazil with CAIXA. We made investments in other businesses of $6.8 million.

2020

•On November 30, 2020, we completed the acquisition of a fuel card provider in New Zealand for an immaterial amount.

•On August 10, 2020, we completed the acquisition of a business in the lodging space in the U.S. for an immaterial amount.

Results from our ALE, AFEX, Roger and lodging acquisitions are reported in our North America segment from the dates of acquisition. Results from our Russia and New Zealand acquisitions are reported in our International segment from the date of acquisition.

36

Results of Operations

Year ended December 31, 2021 compared to the year ended December 31, 2020

The following table sets forth selected consolidated statements of income and selected operational data for the years ended December 31, 2021 and 2020 (in millions, except percentages)*.

[[GREPCENT_TABLE]]
[["","","Year ended December 31, 2021","","% of total revenue","","Year endedDecember 31,2020","","% of total revenue","","Increase (decrease)","","% Change"],["Revenues, net:"],["North America","","$","1,921.1","","","67.8","%","","$","1,581.5","","","66.2","%","","$","339.5","","","21.5","%"],["Brazil","","368.1","","","13.0","%","","344.2","","","14.4","%","","23.8","","","6.9","%"],["International","","544.6","","","19.2","%","","463.1","","","19.4","%","","81.5","","","17.6","%"],["Total revenues, net","","2,833.7","","","100.0","%","","2,388.9","","","100.0","%","","444.9","","","18.6","%"],["Consolidated operating expenses:"],["Processing","","559.8","","","19.8","%","","596.4","","","25.0","%","","(36.5)","","","(6.1)","%"],["Selling","","262.1","","","9.2","%","","192.7","","","8.1","%","","69.4","","","36.0","%"],["General and administrative","","485.8","","","17.1","%","","374.7","","","15.7","%","","111.2","","","29.7","%"],["Depreciation and amortization","","284.2","","","10.0","%","","254.8","","","10.7","%","","29.4","","","11.5","%"],["Other operating, net","","(0.8)","","","\u2014","%","","(2.0)","","","0.1","%","","1.2","","","(60.5)","%"],["Operating income","","1,242.6","","","43.8","%","","972.3","","","40.7","%","","270.3","","","27.8","%"],["Investment gain","","\u2014","","","\u2014","%","","(30.0)","","","(1.3)","%","","30.0","","","NM"],["Other expense (income), net","","3.9","","","0.1","%","","(10.1)","","","(0.4)","%","","(13.9)","","","NM"],["Interest expense, net","","113.7","","","4.0","%","","129.8","","","5.4","%","","(16.1)","","","(12.4)","%"],["Loss on extinguishment of debt","","16.2","","","0.6","%","","\u2014","","","\u2014","%","","16.2","","","NM"],["Provision for income taxes","","269.3","","","9.5","%","","178.3","","","7.5","%","","91.0","","","51.0","%"],["Net income","","$","839.5","","","29.6","%","","$","704.2","","","29.5","%","","$","135.3","","","19.2","%"],["Operating income for segments:"],["North America","","$","762.6","","","","","$","547.9","","","","","$","214.7","","","39.2","%"],["Brazil","","154.3","","","","","148.1","","","","","6.2","","","4.2","%"],["International","","325.7","","","","","276.3","","","","","49.4","","","17.9","%"],["Operating income","","$","1,242.6","","","","","$","972.3","","","","","$","270.3","","","27.8","%"],["Operating margin for segments:"],["North America","","39.7","%","","","","34.6","%","","","","5.1","%"],["Brazil","","41.9","%","","","","43.0","%","","","","(1.1)","%"],["International","","59.8","%","","","","59.7","%","","","","0.1","%"],["Total","","43.8","%","","","","40.7","%","","","","3.1","%"]]
[[/GREPCENT_TABLE]]

*The sum of the columns and rows may not calculate due to rounding.

NM - not meaningful

Revenues, net

Our consolidated revenues were $2,833.7 million in 2021, an increase of $444.9 million, or 18.6%, from $2,388.9 million in 2020. Organically, consolidated revenues increased by approximately 12%. Consolidated revenues and organic growth increased primarily due to increases in transaction volume as the business recovered from the effects of the COVID-19 pandemic and the impact of incremental new sales. The increase was also due to the impact of acquisitions completed in 2020 and 2021 of approximately $114 million and the positive impact of the macroeconomic environment.

Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a positive impact on our consolidated revenue for 2021 over 2020 of approximately $26 million, driven primarily by the favorable impact of fuel prices of $53 million and favorable changes in foreign exchange rates of approximately $18 million. These increases were partially offset by unfavorable fuel price spreads of approximately $46 million.

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North America segment revenues, net

North America segment revenues were $1,921.1 million in 2021, an increase of $339.5 million, or 21.5%, from $1,581.5 million in 2020. Organically, North America segment revenues increased by approximately 13%. North America revenues and organic growth increased primarily due to increases in transaction volume as the business recovered from the effects of the COVID-19 pandemic and the impact of incremental new sales. The increase in North America revenues was also due to the impact of acquisitions completed in 2020 and 2021 of approximately $112 million and the positive impact of the macroeconomic environment.

Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a positive impact on our North America segment revenues for 2021 over 2020 of approximately $12 million, driven primarily by the favorable impact of fuel prices of approximately $47 million and favorable changes in foreign exchange rates of approximately $11 million in our cross-border payments business. These increases were partially offset by unfavorable fuel price spreads of approximately $46 million.

Brazil segment revenues, net

Brazil segment revenues were $368.1 million in 2021, an increase of $23.8 million or 6.9%, from $344.2 million in 2020. Organically, Brazil segment revenues increased by approximately 13%. Brazil revenues and organic growth increased primarily due to increases in toll tags sold as the business recovered from the effects of COVID-19 pandemic and the impact of incremental new sales. Organic growth was partially offset by the unfavorable impact of foreign exchange rates of approximately $19 million for 2021 over 2020.

International segment revenues, net

International segment revenues were $544.6 million in 2021, an increase of $81.5 million, or 17.6%, from $463.1 million in 2020. Organically, International segment revenues increased by approximately 10%. International revenues and organic growth increased primarily due to increases in transaction volume as the business recovered from the effects of the COVID-19 pandemic and the impact of incremental new sales. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a positive impact on our International segment revenues for 2021 over 2020 of approximately $33 million, driven primarily by favorable changes in foreign exchange rates of approximately $27 million primarily in our U.K. business, and the favorable impact of fuel prices of approximately $6 million.

Consolidated operating expenses

Processing. Processing expenses were $559.8 million in 2021, a decrease of $36.5 million, or 6.1%, from $596.4 million in 2020. The decrease in processing expenses was due to lower bad debt expense of approximately $121 million, which included a write-off of a customer receivable in our cross-border business of approximately $90 million in the first quarter of 2020.The remaining change in processing expense included incremental expenses of $48 million related to higher volumes processed and incremental expenses related to acquisitions completed in 2020 and 2021 of approximately $36 million.

Selling. Selling expenses were $262.1 million in 2021, an increase of $69.4 million or 36.0% from $192.7 million in 2020. Increases in selling expenses were primarily due to higher commissions and other variable costs due to increased sales volumes in 2021, incremental marketing and advertising spend, and incremental expenses related to acquisitions completed in 2020 and 2021 of approximately $27 million.

General and administrative. General and administrative expenses were $485.8 million in 2021,an increase of $111.2 million or 29.7% from $374.7 million in 2020. Increases in general and administrative expenses were primarily due to the impact of acquisitions completed in 2020 and 2021 of approximately $37 million, increased stock based compensation expense of $33 million, increased professional fees of $15 million and increased bonus expense of $9 million as the business emerged from the effects of the COVID-19 pandemic.

Depreciation and amortization. Depreciation and amortization expenses were $284.2 million in 2021, an increase of $29.4 million or 11.5% from $254.8 million in 2020. The increase was primarily due to expenses related to acquisitions completed in 2020 and 2021 of approximately $28 million.

Investment gain. Investment gain of $30 million in 2020 relates to the gain on the sale of our investment in Bill.com during the third quarter of 2020.

Other expense (income), net. Other expense, net was $3.9 million in 2021, as compared to other income, net of $10.1 million in 2020. Other income in 2020 includes a $7 million favorable purchase price settlement from our Cambridge acquisition.

Interest expense, net. Interest expense was $113.7 million in 2021, a decrease of $16.1 million or 12.4% from $129.8 million in 2020. The decrease in interest expense is primarily due to decreases in LIBOR and higher interest income due to higher rates

38

earned on customer deposits and cash balances in certain foreign jurisdictions. The average interest rates paid on borrowings under our Credit Facility, excluding the related unused credit facility fees and swaps was as follows in 2021 and 2020.

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The average unused facility fee for the Credit Facility excluding the revolving D facility was 0.30% and 0.29% in 2021 and 2020, respectively.

On January 22, 2019, we entered into three interest rate swap contracts. The objective of these interest rate swap contracts is to reduce the variability of cash flows in the previously unhedged interest payments associated with $2 billion of variable rate debt, tied to the one month LIBOR benchmark interest rate. During 2021, as a result of these swaps, we incurred additional interest expense of approximately $50 million or 2.46% over the average LIBOR rates on $2 billion of borrowings. In January 2022, $1.0 billion of our interest rate swaps matured.

Provision for income taxes. The provision for income taxes and effective tax rate were $269.3 million and 24.3% in 2021, an increase of $91.0 million, from $178.3 million and 20.2%, respectively, in 2020. The increase in the provision for income taxes was driven primarily by an increase in pre-tax earnings. The increase in the effective tax rate was primarily due to less excess tax benefit on stock option exercises in 2021 over the comparable period in 2020.

Net income. For the reasons discussed above, our net income was $839.5 million in 2021, an increase of $135.3 million or 19.2% from $704.2 million in 2020.

Operating income and operating margin

Consolidated operating income. Operating income was $1,242.6 million in 2021, an increase of $270.3 million or 27.8% from $972.3 million in 2020. Our consolidated operating margin was 43.8% in 2021 and 40.7% in 2020. These increases were primarily driven by the write-off of a customer receivable in our cross-border payments business of approximately $90 million in the first quarter of 2020, increases in volume as the business recovered from the effects of the COVID-19 pandemic driving both organic growth and incremental sales, the impact of favorable fuel prices of approximately $53 million and favorable movements in foreign exchange rates of approximately $13 million. These increases were partially offset by the unfavorable impact of fuel spread margins of $46 million.

For the purpose of segment operating results, we calculate segment operating income by subtracting segment operating expenses from segment revenue. Segment operating margin is calculated by dividing segment operating income by segment revenue.

North America segment operating income. North America operating income was $762.6 million in 2021, an increase of $214.7 million or 39.2% from $547.9 million in 2020. North America operating margin was 39.7% in 2021 and 34.6% in 2020. These increases were primarily due to lower bad debt expense due mostly to the write-off of a customer receivable in our cross-border payments business of approximately $90 million in 2020; increases in volume as the business recovered from the effects of the COVID-19 pandemic driving both organic growth and incremental sales; and the impact of favorable fuel prices of approximately $47 million and favorable movements in the foreign exchange rates of $4 million. These increases were partially offset by the unfavorable impact of fuel spread margins of $46 million.

Brazil segment operating income. Brazil operating income was $154.3 million in 2021, an increase of $6.2 million or 4.2% from $148.1 million in 2020. Brazil operating margin was 41.9% in 2021 and 43.0% in 2020. Brazil operating income benefited from the favorable impact of organic growth and incremental sales. These increases were partially offset by the unfavorable impact of foreign exchange rates of $8 million. The lower operating margin was driven by incremental spending on sales in 2021 over 2020.

International segment operating income. International operating income was $325.7 million in 2021, an increase of $49.4 million, or 17.9% from $276.3 million in 2020. International operating margin was 59.8% in 2021 and 59.7% in 2020. The increases were primarily due to an increase in transaction volume as the business recovered from the effect of the COVID-19 pandemic, driving both organic growth and incremental sales, and the favorable impacts of foreign exchange rates of $17 million, primarily in our U.K. business, and fuel prices of $6 million.

Liquidity and capital resources

Our principal liquidity requirements are to service and repay our indebtedness, make acquisitions of businesses and commercial account portfolios, repurchase shares of our common stock and meet working capital, tax and capital expenditure needs.

39

Sources of liquidity. We believe that our current level of cash and borrowing capacity under our Credit Facility and Securitization Facility (each defined below), together with expected future cash flows from operations, will be sufficient to meet the needs of our existing operations and planned requirements for the foreseeable future, based on our current assumptions. At December 31, 2021, we had approximately $2.6 billion in total liquidity, consisting of approximately $1.1 billion available under our Credit Facility (defined below) and unrestricted cash of $1.5 billion. Restricted cash primarily represents customer deposits in our Comdata business in the U.S., as well as collateral received from customers for cross-currency transactions in our cross-border payments business, which are restricted from use other than to repay customer deposits, as well as secure and settle cross-currency transactions.

We also utilize an accounts receivable Securitization Facility to finance a majority of our domestic receivables, to lower our cost of borrowing and more efficiently use capital. We generate and record accounts receivable when a customer makes a purchase from a merchant using one of our card products and generally pay merchants before collecting the receivable. As a result, we utilize the Securitization Facility as a source of liquidity to provide the cash flow required to fund merchant payments while we collect customer balances. These balances are primarily composed of charge balances, which are typically billed to the customer on a weekly, semimonthly or monthly basis, and are generally required to be paid within 14 days of billing. We also consider the undrawn amounts under our Securitization Facility and Credit Facility as funds available for working capital purposes and acquisitions. At December 31, 2021, we had no additional liquidity under our Securitization Facility.

The Company has determined that outside basis differences associated with our investment in foreign subsidiaries would not result in a material deferred tax liability, and consistent with our assertion that these amounts continue to be indefinitely reinvested, have not recorded incremental income taxes for the additional outside basis differences.

We cannot assure you that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature and unpredictability of the ongoing COVID-19 global pandemic. As a consequence, our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material impact on our results of operations and financial condition.

Cash flows

The following table summarizes our cash flows for the years ended December 31, 2021 and 2020.

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Operating activities. Net cash provided by operating activities was $1,197.1 million in 2021, a decrease from $1,472.6 million in 2020. The decrease in operating cash flows was primarily due to unfavorable working capital movements due to the timing of cash receipts and payments in 2021 over 2020.

Investing activities. Net cash used in investing activities was $715.9 million in 2021, an increase from $106.2 million in 2020. The increased use of cash was primarily due to incremental cash paid for acquisitions in 2021 over 2020.

Financing activities. Net cash provided by financing activities was $343.9 million in 2021, compared to net cash used in financing activities of $1,416.8 million in 2020. The increase in net cash provided by financing activities was primarily due to increased net borrowings on our Credit Facility of $1,702 million and increased net borrowings on our Securitization Facility of $689 million, which were partially offset by an increase in cash used to repurchase common stock of $506 million in 2021 over 2020.

Capital spending summary

Our capital expenditures were $111.5 million in 2021, an increase of $33.1 million or 42.2%, from $78.4 million in 2020. The increased size of the business due to acquisitions, as well as continued investments in technology, resulted in an increase in capital spending.

Credit Facility

FLEETCOR Technologies Operating Company, LLC, and certain of our domestic and foreign owned subsidiaries, as designated co-borrowers (the “Borrowers”), are parties to a $6.41 billion Credit Agreement (the “Credit Agreement”), with Bank of America, N.A., as administrative agent, swing line lender and local currency issuer, and a syndicate of financial institutions (the “Lenders”), which has been amended multiple times. The Credit Agreement provides for senior secured credit facilities (collectively, the “Credit Facility”) consisting of a revolving credit facility in the amount of $1.285 billion, a term loan A facility in the amount of $3.225 billion and a term loan B facility in the amount of $1.9 billion as of December 31, 2021. The revolving credit facility consists of (a) a revolving A credit facility in the amount of $800 million, with sublimits for letters of credit and swing line loans, (b) a revolving B facility in the amount of $450 million for borrowings in U.S. Dollars, Euros,

40

British Pounds, Japanese Yen or other currency as agreed in advance, and a sublimit for swing line loans, and (c) a revolving C facility in the amount of $35 million with borrowings in U.S. Dollars, Australian Dollars or New Zealand Dollars. The Credit Agreement also includes an accordion feature for borrowing an additional $750 million in term loan A, term loan B, revolver A or revolver B debt and an unlimited amount when the leverage ratio on a pro-forma basis is less than 3.00 to 1.00. Proceeds from the credit facilities may be used for working capital purposes, acquisitions, and other general corporate purposes. The maturity date for the term loan A and revolving credit facilities A, B and C is December 19, 2023. On April 30, 2021, the Company entered into the ninth amendment to the Credit Agreement. The amendment provided for a new seven-year $1.15 billion term loan B. The existing term loan B was paid off with proceeds from the new term loan B. On November 16, 2021, the Company entered into the tenth amendment to the Credit Agreement to provide for LIBOR replacement rates for Euros, British Pounds and Japanese Yen borrowings. On December 22, 2021, the Company entered into the eleventh amendment to the Credit Agreement. The amendment increased the amount of the term loan B facility by $750 million. The new term loan B has a maturity date of April 30, 2028, and interest rates remain unchanged.

Interest on amounts outstanding under the Credit Agreement (other than the term loan B) accrues as follows: For loans denominated in U.S. Dollars, Australian Dollars or New Zealand Dollars, based on the British Bankers Association LIBOR Rate (the “Eurocurrency Rate”), in British Pounds, based on the Sterling Overnight Index Average Reference Rate (“SONIA”) plus a SONIA adjustment of 0.0326%, in Euros, based on the Euro Interbank Offered Rate (“EURIBOR”), or in Japanese Yen, at the Tokyo Interbank Offer Rate (“TIBOR”) plus a margin based on a leverage ratio, or our option (for U.S. Dollar borrowings only), the Base Rate (defined as the rate equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the prime rate announced by Bank of America, N.A., or (c) the Eurocurrency Rate plus 1.00%) plus a margin based on a leverage ratio. Interest on the term loan B facility accrues based on the Eurocurrency Rate plus 1.75% for Eurocurrency Loans and at the Base Rate plus 0.75% for Base Rate Loans. In addition, the Company pays a quarterly commitment fee at a rate per annum ranging from 0.25% to 0.35% of the daily unused portion of the credit facility.

At December 31, 2021, the interest rate on the term loan A was 1.60%, the interest rate on the term loan B was 1.85% and the interest rate on the revolving A facility was 1.61%. There were no amounts outstanding under the revolving B facility at December 31, 2021. The unused credit facility fee was 0.30% for all revolving facilities at December 31, 2021.

The term loans are payable in quarterly installments due on the last business day of each March, June, September, and December with the final principal payment due on the respective maturity date. Borrowings on the revolving line of credit are repayable at the option of one, three or six months after borrowing, depending on the term of the borrowing on the facility. Borrowings on the foreign swing line of credit are due no later than twenty business days after such loan is made.

The obligations of the Borrowers under the Credit Agreement are secured by substantially all of the assets of FLEETCOR and its domestic subsidiaries, pursuant to a security agreement and includes a pledge of (i) 100% of the issued and outstanding equity interests owned by us of each Domestic Subsidiary and (2) 66% of the voting shares of the first-tier foreign subsidiaries, but excluding real property, personal property located outside of the U.S., accounts receivables and related assets subject to the Securitization Facility and certain investments required under money transmitter laws to be held free and clear of liens.

At December 31, 2021, we had $2.8 billion in borrowings outstanding on term loan A, net of discounts, and $1.9 billion in borrowings outstanding on term loan B, net of discounts, as of December 31, 2021. We have unamortized debt issuance costs of $3.3 million related to the revolving facilities as of December 31, 2021 recorded within other assets in the Consolidated Balance Sheet. We have unamortized debt discounts and debt issuance costs related to the term loans of $16.7 million and $8.5 million at December 31, 2021, respectively. The effective interest rate incurred on term loans was 1.79% during 2021 related to the discount on debt.

During 2021, we made principal payments of $508 million on the term loans, $2.0 billion on the revolving facilities, and $65.6 million on the swing line revolving facility.

As of December 31, 2021, we were in compliance with each of the covenants under the Credit Agreement.

Cash Flow Hedges

On January 22, 2019, we entered into three swap contracts. The objective of these swap contracts is to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of variable rate debt, the sole source of which is due to changes in the LIBOR benchmark interest rate. These swap contracts qualify as hedging instruments and have been designated as cash flow hedges. For each of these swap contracts, we pay a fixed monthly rate and receive one month LIBOR. We reclassified approximately $50 million of losses from accumulated other comprehensive loss into interest expense during the year ended December 31, 2021 as a result of these hedging instruments. The maturity dates of the swap contracts are January 31, 2022 for $1 billion, January 31, 2023 for $500 million and December 19, 2023 for $500 million. In January 2022, $1.0 billion of our interest rate swaps matured.

Securitization Facility

We are a party to a $1.3 billion receivables purchase agreement among FleetCor Funding LLC, as seller, PNC Bank, National Association as administrator, and various purchaser agents, conduit purchasers and related committed purchasers parties thereto. We refer to this arrangement as the Securitization Facility. There have been multiple amendments to the Securitization

41

Facility. On September 15, 2021, the Company entered into the ninth amendment to the Securitization Facility. The amendment increased the Securitization Facility commitment from $1.0 billion to $1.3 billion. On March 29, 2021, the Company entered into the eighth amendment to the Securitization Facility. The amendment included a new three year maturity date, reduced the LIBOR floor to 0 bps, improved margins, and increased the swing line from $100 million to $250 million. The maturity date for the Company's Securitization Facility is March 29, 2024.

We were in compliance with all financial and non-financial covenant requirements related to our Securitization Facility as of December 31, 2021.

Stock Repurchase Program

Given the Company’s returns on its capital investments and significant cash provided by operations, management believes it is prudent to reinvest in the business to drive profitable growth and use excess cash flow to return cash to shareholders over time through stock repurchases. The Company's Board of Directors (the "Board") has approved a stock repurchase program (as updated from time to time, the "Program") authorizing the Company to repurchase its common stock from time to time until February 1, 2023. On July 27, 2021, the Board increased the aggregate size of the Program by $1.0 billion, to $5.1 billion. Since the beginning of the Program through December 31, 2021, 20,068,498 shares have been repurchased for an aggregate purchase price of $4.4 billion, leaving the Company up to $0.7 billion available under the Program for future repurchases in shares of its common stock. There were 5,451,556 common shares totaling $1.4 billion in 2021; 3,497,285 common shares totaling $940.8 million in 2020 and 2,211,866 common shares totaling $636.8 million in 2019; repurchased under the Program.

On January 25, 2022, the Board increased the aggregate size of the Program by $1.0 billion, to $6.1 billion. In January and February 2022, 1,510,027 shares were repurchased for an aggregate purchase price of $360.8 million, of which 1,066,015 shares with an aggregate purchase price of $256.5 million were repurchased pursuant to a 10b5-1 plan. As of March 1, 2022, the Company has up to $1.3 billion available under the Program for future repurchases of its common stock.

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 the Company 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.

Critical Accounting Policies and Estimates, Adoption of New Accounting Standards, and Pending Adoption of Recently Issued Accounting Standards

In applying the accounting policies that we use to prepare our consolidated financial statements, we necessarily make accounting estimates that affect our reported amounts of assets, liabilities, revenue and expenses. Some of these estimates require us to make assumptions about matters that are highly uncertain at the time we make the accounting estimates. We base these assumptions and the resulting estimates on historical information and other factors that we believe to be reasonable under the circumstances, and we evaluate these assumptions and estimates on an ongoing basis. In many instances, however, we reasonably could have used different accounting estimates and, in other instances, changes in our accounting estimates could occur from period to period, with the result in each case being a material change in the financial statement presentation of our financial condition or results of operations. We refer to estimates of this type as critical accounting estimates. Our significant accounting policies are summarized in the consolidated financial statements contained elsewhere in this report. The critical accounting estimates that we discuss below are those that we believe are most important to an understanding of our consolidated financial statements.

See the Summary of Significant Accounting Policies footnote on page 59 of this Form 10-K for additional information.

Revenue recognition and presentation. We provide payment solutions to our business, merchant, consumer and payment network customers. Our payment solutions are primarily focused on specific commercial spend categories, including Corporate Payments, Fuel, Lodging, Tolls, as well as Gift solutions (stored value cards and e-cards). We provide solutions that help businesses of all sizes control, simplify and secure payment of various domestic and cross-border payables using specialized payment products. We also provide other payment solutions for fleet maintenance, employee benefits and long haul transportation-related services.

Payment Services

Our primary performance obligation for the majority of our payment solutions (Corporate Payments, Fuel, Lodging, and Gift, among others) is to stand-ready to provide authorization and processing services (payment services) for an unknown or unspecified quantity of transactions and the consideration received is contingent upon the customer’s use (e.g., number of transactions submitted and processed) of the related payment services. Accordingly, the total transaction price is variable. Payment services involve a series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer. As a result, we allocate and recognize variable consideration in the period we have the contractual right to invoice the customer. For the tolls payment solution, our primary performance obligation is to stand-ready each month to provide access to the toll network and process toll transactions. Each period of access is determined to be distinct and substantially the same as the customer benefits over the period of access. In our cross-border payments business, the majority of revenue is from exchanges of currency at spot rates, which enables customers to make cross-currency payments.

42

Gift Card Products and Services

Our Gift solutions deliver both stored value cards and e-cards (cards), and card-based services primarily in the form of gift cards to retailers. These activities each represent performance obligations that are separate and distinct. Revenue for stored valued cards is recognized (gross of the underlying cost of the related card, recorded in processing expenses within the Consolidated Statements of Income) at the point in time when control passes to our customer, which is generally upon shipment.

Other

We account for revenue from late fees and finance charges, in jurisdictions where permitted under local regulations, primarily in the U.S. and Canada in accordance with ASC 310, "Receivables". Such fees are recognized net of a provision for estimated uncollectible amounts, at the time the fees and finance charges are assessed and services are provided. We cease billing and accruing for late fees and finance charges approximately 30 - 40 days after the customer’s balance becomes delinquent.

In addition, in our cross-border payments business, we write foreign currency forward and option contracts for our customers to facilitate future payments in foreign currencies. The duration of these derivative contracts at inception is generally less than one year. We aggregate our foreign exchange exposures arising from customer contracts, including forwards, options and spot exchanges of currency, as necessary, and economically hedge the net currency risks by entering into offsetting derivatives with established financial institution counterparties. The changes in fair value related to these instruments are recorded in revenues, net in the Consolidated Statements of Income.

Refer to the Revenue footnote on page 66 of this Form 10-K for additional information.

Financial Instruments-Credit Losses. Our current expected credit loss methodology for measurement of credit losses on financial assets measured at amortized cost basis, replaces the previous incurred loss impairment methodology. Our financial assets subject to credit losses are primarily trade receivables. We utilize a combination of aging and loss-rate methods to develop an estimate of current expected credit losses, depending on the nature and risk profile of the underlying asset pool, based on product, size of customer and historical losses. Expected credit losses are estimated based upon an assessment of risk characteristics, historical payment experience, and the age of outstanding receivables, adjusted for forward-looking economic conditions. The allowances for remaining financial assets measured at amortized cost basis are evaluated based on underlying financial condition, credit history, and current and forward-looking economic conditions. The estimation process for expected credit losses includes consideration of qualitative and quantitative risk factors associated with the age of asset balances, expected timing of payment, contract terms and conditions, changes in specific customer risk profiles or mix of customers, geographic risk, economic trends and relevant environmental factors. Refer to the Financial Instruments-Credit Losses section in the Summary of Significant Accounting Policies footnote on page 60 of this Form 10-K for additional information.

Impairment of goodwill and indefinite-lived assets. We complete an impairment test of goodwill at least annually or more frequently if facts or circumstances indicate that goodwill might be impaired. Goodwill is tested for impairment at the reporting unit level. We first perform a qualitative assessment of certain of our reporting units. Factors considered in the qualitative assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, sustained decrease in our share price, and other relevant entity-specific events. If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required. We then perform the goodwill impairment test for each reporting unit by comparing the reporting unit’s carrying amount, including goodwill, to its fair value which is measured based upon, among other factors, a discounted cash flow analysis, as well as market multiples for comparable companies. Estimates critical to our evaluation of goodwill for impairment include forecasts for revenues, net, and earnings before interest, taxes, depreciation and amortization (EBITDA) growth, and long-term growth rates, as well as the discount rates. If the carrying amount of the reporting unit is greater than its fair value, goodwill is considered impaired.

We also evaluate indefinite-lived intangible assets (primarily trademarks and trade names) for impairment annually. We test for impairment if events and circumstances indicate that it is more likely than not that the fair value of an indefinite-lived intangible asset is below its carrying amount. Estimates critical to our evaluation of indefinite-lived intangible assets for impairment include the discount rate, royalty rates used in our evaluation of trade names, projected revenue growth and projected long-term growth rates in the determination of terminal values. An impairment loss is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date.

Refer to the Impairment of long-lived assets, intangibles and investments section in the Summary of Significant Accounting Policies footnote on page 60 of this Form 10-K and the Goodwill and Other Intangible Assets footnote on page 76 of this Form 10-K for additional information.

Income taxes. We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the

43

enactment date. We have elected to treat the Global Intangible Low Taxed Income (GILTI) inclusion as a current period expense.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences become deductible. We evaluate on a quarterly basis whether it is more likely than not that our deferred tax assets will be realized in the future and conclude whether a valuation allowance must be established.

We account for uncertainty in income taxes recognized in an entity’s financial statements and prescribe thresholds and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50 percent likelihood of being sustained. We include any estimated interest and penalties on tax related matters in income tax expense. Refer to the Income Taxes footnote on page 81 of this Form 10-K for additional information.

Business combinations. Business combinations completed by us have been accounted for under the acquisition method of accounting, which requires that the acquired assets and liabilities, including contingencies, be recorded at fair value determined as of the acquisition date. The excess of the purchase price over the fair values of the tangible and intangible assets acquired and liabilities assumed represents goodwill. The results of the acquired businesses are included in our results of operations beginning from the completion date of the transaction.

The estimates we use to determine the fair value of long-lived assets, such as intangible assets, can be complex and require significant judgments. We use information available to us to make fair value determinations and engage independent valuation specialists, when necessary, to assist in the fair value determination of significant acquired long-lived assets. The estimated fair values of customer-related and contract-based intangible assets are generally determined using the income approach, which is based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows. The discount rates used represented a risk adjusted market participant weighted-average cost of capital, derived using customary market metrics. These measures of fair value also require considerable judgments about future events, including forecasted revenue growth rates, forecasted customer attrition rates, contract renewal estimates and technology changes. Acquired technologies are generally valued using the replacement cost method, which requires us to estimate the costs to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustments in value for physical deterioration and functional and economic obsolescence. Trademarks and trade names are generally valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenues for the related brands, the appropriate royalty rate and the weighted-average cost of capital. This measure of fair value requires considerable judgment about the value a market participant would be willing to pay in order to achieve the benefits associated with the trade name.

While we use our best estimates and assumptions to determine the fair values of the assets acquired and the liabilities assumed, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in our Consolidated Statements of Income. We also estimate the useful lives of intangible assets to determine the period over which to recognize the amount of acquisition-related intangible assets as an expense. Certain assets may be considered to have indefinite useful lives. We periodically review the estimated useful lives assigned to our intangible assets to determine whether such estimated useful lives continue to be appropriate. Refer to the Acquisitions footnote on pages 73 of this Form 10-K for additional information and the Goodwill and Other Intangible Assets footnote 76 of this Form 10-K for additional information.

Stock based compensation. We routinely grant employee stock options and restricted stock awards/units as part of employee compensation plans. Stock options are granted with an exercise price equal to the fair market value on the date of grant. Options granted have vesting provisions ranging from one to five years and vesting is generally based on the passage of time, performance or market conditions, or a combination of these. We use the Black-Scholes option pricing model for estimating the grant date fair value of stock option awards. Awards of restricted stock and restricted stock units generally have vesting provisions of one to four years and vesting is generally based on the passage of time, performance or market conditions, or a combination of these. The fair value of restricted stock where the shares vest based on the passage of time or performance is based on the grant date fair value of our stock. The fair value of restricted stock units granted with market based vesting conditions is estimated using the Monte Carlo simulation valuation model. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the requisite service period based on the number of years over which the requisite service is expected to be rendered. For performance-based and restricted stock awards/units and performance-based stock option awards, we must also make assumptions regarding the likelihood of achieving performance goals. If actual results differ significantly from these estimates, stock based compensation expense and our results of operations could be materially affected. Refer to the Stock Based Compensation section in the Summary of Significant Accounting Policies footnote on page 63 of this Form 10-K and Stock Based Compensation footnote on page 70 of this Form 10-K for additional information.

44

Material Cash Requirements and Uses of Cash

Material cash requirements primarily consist of debt obligations and related interest payments, along with lease obligations. Refer to the Debt footnote on page 78 and Leases footnote on page 83 of this Form 10-K for more information. The Company estimates interest payments for our interest rate swap cash flow contracts (the "swap contracts"), using the fixed interest rate on each swap less the one month LIBOR rate in effect on our term loans at December 31, 2021, are expected to be $26.5 million and $12.7 million in 2022 and 2023, respectively.

Deferred income tax liabilities as of December 31, 2021 were approximately $564.4 million. Refer to Income Taxes footnote on page 81 of this Form 10-K for more information. Deferred income tax liabilities are calculated based on temporary differences between the tax bases of assets and liabilities and their respective book bases, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, scheduling deferred income tax liabilities as payments due by period could be misleading, as this scheduling would not relate to liquidity needs. At December 31, 2021, we had approximately $47.0 million of unrecognized income tax benefits related to uncertain tax positions. We cannot reasonably estimate when all of these unrecognized income tax benefits may be settled. We do not expect reductions to unrecognized income tax benefits within the next 12 months as a result of projected resolutions of income tax uncertainties.

Management’s Use of Non-GAAP Financial Measures

We have included in the discussion above certain financial measures that were not prepared in accordance with GAAP. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Below, we define the non-GAAP financial measures, provide a reconciliation of each non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP, and discuss the reasons that we believe this information is useful to management and may be useful to investors.

We have defined the non-GAAP measure adjusted net income as net income as reflected in our statement of income, adjusted to eliminate a) non-cash stock based compensation expense related to share based compensation awards, (b) amortization of deferred financing costs, discounts and intangible assets, amortization of the premium recognized on the purchase of receivables, and our proportionate share of amortization of intangible assets at our equity method investment, (c) integration and deal related costs, and (d) other non-recurring items, including unusual credit losses occurring largely due to COVID-19, the impact of discrete tax items, impairment charges, asset write-offs, restructuring costs, gains due to disposition of assets/businesses, loss on extinguishment of debt, and legal settlements.

We have defined the non-GAAP measure adjusted net income per diluted share as the calculation previously noted divided by the weighted average diluted shares outstanding as reflected in our statement of income.

We use adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. We believe it is useful to exclude non-cash share based compensation expense from adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and share based compensation expense is not a key measure of our core operating performance. We also believe that amortization expense can vary substantially from company to company and from period to period depending upon their financing and accounting methods, the fair value and average expected life of their acquired intangible assets, their capital structures and the method by which their assets were acquired; therefore, we have excluded amortization expense from our adjusted net income. We also believe that integration and deal related costs and one-time non-recurring expenses, gains, losses, and impairment charges do not necessarily reflect how our investments and business are performing. We adjust net income for the tax effect of each of these non-tax items. Adjusted net income and adjusted net income per diluted share are supplemental measures of operating performance that do not represent and should not be considered as an alternative to net income, net income per diluted share or cash flow from operations, as determined by U.S. generally accepted accounting principles, or U.S. GAAP. Adjusted net income and adjusted net income per diluted share are not intended to be a substitute for GAAP financial measures, and our calculation thereof may not be comparable to that reported by other companies.

Organic revenue growth is calculated as revenue growth in the current period adjusted for the impact of changes in the macroeconomic environment (to include fuel price, fuel price spreads and changes in foreign exchange rates) over revenue in the comparable prior period adjusted to include or remove the impact of acquisitions and/or divestitures and non-recurring items that have occurred subsequent to that period. We believe that organic revenue growth on a macro-neutral, one-time item, and consistent acquisition/divestiture/non-recurring item basis is useful to investors for understanding the performance of FLEETCOR.

Management uses adjusted net income, adjusted net income per diluted share and organic revenue growth:

•as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis;

•for planning purposes, including the preparation of our internal annual operating budget;

•to allocate resources to enhance the financial performance of our business; and

•to evaluate the performance and effectiveness of our operational strategies.

45

Reconciliation of Non-GAAP Revenue and Key Performance Metric by Solution to GAAP. Set forth below is a reconciliation of organic growth by component, calculated using pro forma and macro adjusted revenue and transactions to the most directly comparable GAAP measure, revenue, net and transactions (in millions):

[[GREPCENT_TABLE]]
[["","","Revenue","","Key Performance Indicators"],["","","Year Ended December 31,*","","Year Ended December 31,*"],["(Unaudited)","","2021","","2020","","2021","","2020"],["FUEL - TRANSACTIONS"],["Pro forma and macro adjusted","","$","1,154","","","$","1,059","","","463","","","443"],["Impact of acquisitions/dispositions","","\u2014","","","(2)","","","\u2014","","","(1)"],["Impact of fuel prices/spread","","7","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","20","","","\u2014","","","\u2014","","","\u2014"],["As reported","","$","1,180","","","$","1,057","","","463","","","442"],["CORPORATE PAYMENTS - SPEND"],["Pro forma and macro adjusted","","$","589","","","$","505","","","92,368","","","74,775"],["Impact of acquisitions/dispositions","","\u2014","","","(71)","","","\u2014","","","(10,034)"],["Impact of fuel prices/spread","","1","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","10","","","\u2014","","","","","\u2014"],["As reported","","$","600","","","$","434","","","92,368","","","64,741"],["TOLLS - TAGS"],["Pro forma and macro adjusted","","$","322","","","$","292","","","6","","","5"],["Impact of acquisitions/dispositions","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of fuel prices/spread","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","(16)","","","\u2014","","","\u2014","","","\u2014"],["As reported","","$","306","","","$","292","","","6","","","5"],["LODGING - ROOM NIGHTS"],["Pro forma and macro adjusted","","$","310","","","$","248","","","29","","","25"],["Impact of acquisitions/dispositions","","\u2014","","","(41)","","","\u2014","","","(4)"],["Impact of fuel prices/spread","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["As reported","","$","310","","","$","207","","","29","","","22"],["GIFT - TRANSACTIONS"],["Pro forma and macro adjusted","","$","179","","","$","154","","","1,187","","","1,045"],["Impact of acquisitions/dispositions","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of fuel prices/spread","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["As reported","","$","179","","","$","154","","","1,187","","","1,045"],["OTHER1 - TRANSACTIONS"],["Pro forma and macro adjusted","","$","254","","","$","244","","","37","","","41"],["Impact of acquisitions/dispositions","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of fuel prices/spread","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","4","","","\u2014","","","\u2014","","","\u2014"],["As reported","","$","259","","","$","244","","","37","","","41"],["FLEETCOR CONSOLIDATED REVENUES"],["Pro forma and macro adjusted","","$","2,808","","","$","2,502","","","Intentionally Left Blank"],["Impact of acquisitions/dispositions","","\u2014","","","(114)"],["Impact of fuel prices/spread2","","8","","","\u2014"],["Impact of foreign exchange rates2","","18","","","\u2014"],["As reported","","$","2,834","","","$","2,389"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["* Columns may not calculate due to rounding."],["1 Other includes telematics, maintenance, food, payroll card and transportation related businesses."],["2 Revenues reflect an estimated $53 million positive impact from fuel prices, partially offset by an approximately $46 million negative impact from fuel price spreads. Revenues were also positively impacted by favorable movements in foreign exchange rates of approximately $18 million."]]
[[/GREPCENT_TABLE]]

46

Reconciliation of Non-GAAP Organic Growth by Segment to GAAP. Set forth below is a reconciliation of organic growth by segment, calculated using pro forma and macro adjusted revenue to the most directly comparable GAAP measure, revenue, net and transactions (in millions):

[[GREPCENT_TABLE]]
[["","","Revenue"],["","","Year Ended December 31,*"],["(Unaudited)","","2021","","2020"],["NORTH AMERICA"],["Pro forma and macro adjusted","","$","1,909","","","$","1,694"],["Impact of acquisitions/dispositions","","\u2014","","","(112)"],["Impact of fuel prices/spread","","1","","","\u2014"],["Impact of foreign exchange rates","","11","","","\u2014"],["As reported","","$","1,921","","","$","1,582"],["BRAZIL"],["Pro forma and macro adjusted","","$","387","","","$","344"],["Impact of acquisitions/dispositions","","\u2014","","","\u2014"],["Impact of fuel prices/spread","","\u2014","","","\u2014"],["Impact of foreign exchange rates","","(19)","","","\u2014"],["As reported","","$","368","","","$","344"],["INTERNATIONAL"],["Pro forma and macro adjusted","","$","511","","","$","465"],["Impact of acquisitions/dispositions","","\u2014","","","(2)"],["Impact of fuel prices/spread","","6","","","\u2014"],["Impact of foreign exchange rates","","27","","","\u2014"],["As reported","","$","545","","","$","463"],["FLEETCOR CONSOLIDATED REVENUES"],["Pro forma and macro adjusted","","$","2,808","","","$","2,502"],["Impact of acquisitions/dispositions","","\u2014","","","(114)"],["Impact of fuel prices/spread","","8","","","\u2014"],["","","18","","","\u2014"],["As reported","","$","2,834","","","$","2,389"]]
[[/GREPCENT_TABLE]]

* Columns may not calculate due to rounding.

47

Reconciliation of Non-GAAP Measures. Set forth below is a reconciliation of adjusted net income and adjusted net income per diluted share to the most directly comparable GAAP measure, net income and net income per diluted share (in thousands, except per share amounts)*:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(Unaudited)","","2021","","2020"],["Net income","","$","839,497","","","$","704,216"],["Net income per diluted share","","$","9.99","","","$","8.12"],["Stock based compensation","","80,071","","","43,384"],["Amortization1","","215,456","","","196,106"],["Net loss on disposition of assets/business","","\u2014","","","294"],["Investment gain","","(9)","","","(30,008)"],["Loss on extinguishment of debt","","16,194","","","\u2014"],["Integration and deal related costs","","30,632","","","12,020"],["Restructuring and related (subsidies) costs","","(2,103)","","","4,215"],["Legal settlements/litigation","","5,772","","","(144)"],["Write-off of customer receivable2","","\u2014","","","90,058"],["Total pre-tax adjustments","","346,013","","","315,926"],["Income taxes3","","(75,703)","","","(57,914)"],["Adjusted net income","","$","1,109,807","","","$","962,228"],["Adjusted net income per diluted share","","$","13.21","","","$","11.09"],["Diluted shares","","84,061","","86,719"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["1 Includes amortization related to intangible assets, premium on receivables, deferred financing costs and debt discounts."],["2 Represents a bad debt loss in the first quarter of 2020 from a large client in our cross-border payments business entering voluntary bankruptcy due to the extraordinary impact of the COVID-19 pandemic."],["3 Represents provision for income taxes of pre-tax adjustments. 2021 year includes remeasurement of deferreds due to the increase in UK corporate tax rate from 19% to 25% of $6.5 million. 2020 year includes a tax reserve adjustment related to prior year tax positions of $9.8 million."],["* Columns may not calculate due to rounding."]]
[[/GREPCENT_TABLE]]

48