Good day, ladies and gentlemen. Thank you for standing by. Welcome to the FleetCor Technologies Incorporated Second Quarter 2013 Earnings Conference Call. [Operator Instructions] At this time, I'd like to turn the conference call over to Eric Dey, Chief Financial Officer. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our second quarter press release. It can also be found at www.fleetcor.com under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income and EBITDA. This information is not calculated in accordance with GAAP, and may be calculated differently than other companies’ similarly titled non-GAAP information. Quantitative reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today’s press release and on our website, as previously described. Also, we are providing 2013 guidance on a non-GAAP basis. Finally, before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. This includes forward-looking statements about our 2013 guidance, new product and fee initiatives and potential business development and acquisitions. They are not guarantees of future performance and, therefore, you should not put undue reliance on them. These statements are subjected to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today’s press release and Form 8-K filed with the Securities and Exchange Commission. Others are discussed in our annual report on Form 10-K. These documents are available on our website as previously described and at www.sec.gov. With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO.

Thanks, Eric. Good afternoon, everyone. And as always, appreciate you joining today. Upfront here, I'll plan to cover just a couple of things. First, comment on our Q2 results, along with our full year outlook and then second, discuss some of the recent developments in the company. Okay, so on to Q2. We released our Q2 results just a bit earlier and reported new all-time highs in both revenue and profit. We reported profit growth of 35% on a dollar and cash EPS, and revenue growth of 29% on $221 million in revenue. So 29% top line growth and 35% bottom line growth. The results -- these results were really a beat against our internal plan, and at a high level, driven by 3 things: First, strong U.S. performance, revenue growth up 11% with MasterCard up 30%, CLC, up over 20%. So again, continued strong U.S. Second, we had strong U.K. performance in the quarter, particularly our AllStar business, very, very good quarter. Certainly post the Q1 GFN system implementation that we just completed. Also happy that customer satisfaction levels there are now back in line with historic levels. Third driver would be the Russian, Brazilian and Down Under deals. So they're first time contributors here in Q2. And as a reminder, we did not own those last quarter, so obviously, some incremental lift. So in summary, strong U.S., strong U.K. and 3 new deals drove the growth in the quarter. Our Q2 sales where we onboard new clients were also at record levels in the quarter. The U.S., up 45%; CLC, up 25%; Europe, across the board, up 22%. So again, new sales levels like this reaffirm to us the market's overall interest in our products. We talk a lot about new asset performance in the company and our…

Thanks, Ron. For the second quarter of 2013, we reported revenue of $220.9 million, an increase of 29% from the second quarter of 2012. Revenue from our North American segment increased 11.4% to $119.5 million from $107.3 million in the second quarter of 2012. Revenue from our International segment increased 57.1% to $101.4 million, from $64.5 million in the second quarter of 2012. For the second quarter of 2013, GAAP net income increased 34% to $73.1 million or $0.87 per diluted share, from $54.4 million or $0.63 per diluted share in the second quarter of 2012. The other financial metrics that we routinely use to measure our business are adjusted revenues and adjusted net income, which we sometimes also refer to as cash net income. Adjusted revenues equal our GAAP revenues less merchant commissions. We use adjusted revenues as a basis to evaluate the company's revenues, net of the commissions that are paid to merchants who participate in certain card programs. The reconciliations of adjusted revenues and adjusted net income to our GAAP numbers are provided in Exhibit 1 of our press release. Adjusted revenues in the second quarter of 2013 increased 31% to $201.3 million, compared to $154.2 million in the second quarter of 2012. Adjusted net income for the second quarter of 2013 increased 33% to $84 million or $1 per diluted share, compared to $63 million or $0.73 per diluted share in the second quarter of 2012. For the second quarter of 2013, transaction volume increased 6% to 79 million transactions, compared to 74.2 million transactions in the second quarter of 2012. North American segment transactions grew 4.6%, driven primarily by organic growth in our U.S. businesses and the small Telematics business we acquired in April. Transaction volumes in our International segment grew 8.4%, and were positively…

[Operator Instructions] And our first question is from the line of David Togut with Evercore Partners.

Ron, could you drill down a little bit into the drivers of the 45% new sales growth from the U.S.? Were there particular products that contributed a large amount of that? And if also, if you could give us a sense of the drivers of the 22% gain in European new sales as well?

Hey David, it's really investment. We're just spending more in the new channels that we invest in, like telesales and web. In fact, I think, for the U.S., what we call the non-field channels, sales were actually up 100%, period to period. So it's really less about product and more about, a, total spend; and b, channel mix, what we're doing in terms of channels. It'd the same thing, if the follow-on was Europe. For example, the Russia sales, I think, were up 50% in the period. Same thing, we now have web working and some partner programs working there. So I'd say it's more marketing and sales driven than it is product driven.

I see. That helps. Can you maybe elaborate a little bit on direct MasterCard? I think that was up 47% year-over-year in Q1, up 32% year-over-year in Q2. Anything to read into that or was it just a difficult comparison?

Again, it's the same thing. It's just those growth rates are a function of the ratio or relationship between the base of that business, which continues to grow, and what we sell in new business, which also continues to grow. So for us to maintain, let's say, a 40% growth rate point-to-point, we'd have to continue, David, to spend more incrementally in sales to maintain that level. So it's really, for us, just an investment call. But the product has enormous potential geographically and really the limitation is just what we're willing to spend.

I see. Quick final question for me on the, I guess, on the CITGO departure in the quarter, can you give us some insight as to why CITGO went elsewhere, and is that material at all to revenue and earnings?

Yes, not so much would be, I guess, the headline. It is -- I think, as Eric relayed before, it's immaterial to our overall numbers and we just don't comment generally on individual contracts. What I'd say is we still are generally happy in terms of winning more than we lose. So when you're in a game, you're going to lose sometimes, so in this case, we did.

Our next question is from the line of Julio Quinteros with Goldman Sachs.

It's Roman in for Julio. First question on International, if we can drill down into the revenue per transaction strength there, even if we can ballpark what the revenue per transaction would have been without the new acquisitions that started to contribute this quarter just so we can see kind of the incremental contribution and also the new kind of run rate for the rest of the business?

Roman, this is Eric. If you exclude the impact of the acquisitions, the International revenue per tran would have been $2.30 versus $1.91 prior year, so up kind of $0.40 point-to-point.

Okay, so there's that piece of it growing and a positive mix shift of the new acquisitions. And what other new acquisitions -- what types of products are you offering there that have such a higher yield relative to the average in International?

We have many different kind of products. Again, if you go back and you look at what was not in our business last year, we have CTF, which we acquired in July of last year. It's a different kind of product. It's a RF-based technology so the transactions are much larger. So the revenue per transaction for that product is also much larger. And you look at our Russia business, which we added in June of last year, that has a different kind of model, as well, Roman. It's more software sales or it was a year ago, historically. So those transactions are a little lumpier but they can be higher revenue per transaction products. And our New Zealand and Australia business are more card-type products, so the revenue per tran there is more in line with our outline [ph] average.

Okay. That's helpful. And on the Visa Europe partnership, can you maybe give us an example of the type of maybe products or -- I mean, is this going to look a lot like the universal card product in the U.S. or is it going to be completely different?

Roman, it's Ron. So a couple of things. The first thing which we're a few years into developing, would be our AllStar card. So it looks like the AllStar card we had today, but instead of being magstripe, it would be a chip card. So in terms of the cosmetics, card design, it would look similar but when you get to the point of sale, obviously it will operate like a chip card. And by moving some intelligence down to the point of sale, you get advantages that you can't get basically on a mag card. So that would be kind of the first implementation, which we're expecting kind of early Q1 next year. And then second, the second question is, yes, we've got some plans with Visa to create cards that would work in "other markets" on the Continent but we're not going to describe in some detail yet what they are but they would be similar, I would say, to what you see here.

Our next question is from the line of Darrin Peller with Barclays Capital.

This is actually Adam Carron here for Darrin. Just a question on International growth, do you guys have an organic growth number for the quarter?

We do. If you exclude the impact of the acquisitions, our International business grew organically kind of in the 16% range, give or take.

Okay. So I'm just going to try and figure out, in terms of what types of synergies we should kind of still be expecting from some of these recent acquisitions. Obviously, AllStar and Efectivale continue to grow very well, you mentioned 25% during the quarter. I mean, is there any way to kind of ballpark where we're at with, I guess, the 4 acquisitions acquired in 2011 and 2012 from a synergy standpoint and how much you think is left to get out of these?

Yes, I'd say the way to think about it, in the first 1 to 2 years, it's pretty steep because we tend to transform the model and the structure of those businesses. And then kind of beyond 2 years or call it 1.5 years, where we are with AllStar and Efectivale, it's kind of Phase 2, which is our growth program where we introduce new products and new channels. So the stated goal we have is kind of doubling profits in every business within the first 2 years and then obviously, growing those businesses above line average, so call it 10% to 15% top line post the first 2 years would probably be a target.

All right. That's very helpful. And then last one for me. Just in terms of North America growth, I know the environment was in there for 1 million or 2 million. I think last quarter, you kind of mentioned that we should be kind of expecting a 15% type of growth rate over the balance of the year. I mean, does that still kind of hold here or you're looking for a growth more in line with what we're seeing this quarter?

Really, what we're referring to is kind of a full year average. I mean, the first quarter grew at such a high rate. We weren't expecting that for the balance of the year. We weren't saying it was going to be 15% a quarter as much as it was kind of going to average around 15% for the whole year, somewhere around there. So clearly, going to be a little bit lower the rest of the year.

Our next question is from the line of Phil Stiller with Citi.

I just wanted to follow-up on the Visa Europe deal. Can you talk about the potential impact to economics from a move towards Visa? And then as you think about moving it beyond AllStar, should we think about it primarily as a tool to get new oil partnerships or it's something that you might go direct to customers with?

Phil, it's Ron. Good question. I'd say in the U.K., it would be a plus. Economically, we think that the value basically, to the accounts is high as we introduce that, plus there's expense benefits like in fraud and so on. So I'd say it'd be a net plus in the U.K. And then on the second question, it would be both. We have oil partners interested in it and we obviously have direct aspirations for that product as well.

Okay. And then also in Europe, any comments on the EC proposal to cap the interchange there? It doesn't seem like there would be a direct impact on the business, but any tangential impacts that we could think about? And if you could ballpark roughly, what percentage of your business comes from merchant fees in Europe, that would be helpful.

Phil, this is Eric. First and foremost, I think we're not really anticipating any impact related to that new legislation. Obviously, that legislation was geared more toward commercial -- I meant consumer cards. So again, we're not anticipating any impact whatsoever. In terms of your second part of your question, I don't have that information with me right now, so maybe we can follow-up on that later.

Okay, sounds good. And then lastly for me, on the Shell extension to the U.S., should we think about it along the lines of what you're doing for them internationally where it's a processing relationship or is it something that's broader than that?

It's a new card program, Phil, that they're going to describe in some detail in a launch this fall, so it's a different service than we provide to them as part of that GFN contract. For us, it's just, again, I think we've touted this repeatedly that we value those giant relationships and to the extent that we can perform in one place. We're in a lot of other places that Shell's in. Our hope is they'll sign us up to work with then in additional places.

Our next question is from the line of Tien-Tsin Huang with JPMorgan.

I guess, sticking with macro, I think I always ask this, but let me ask about same-store growth. It looks like transaction growth picked up a little bit. Eric, you talked about organic growth getting a little better. Does it feel like, Eric, around that you're getting a little bit of a lift from same store in some of the regions, that more so than, say, last quarter or not really?

Tien-Tsin, this is Eric. As always, it's a bit of a mixed bag. I'd say in the United States, we're certainly seeing transactions, I would say, flat to up a little bit. So same-store sales, kind of picking up a little. And then when you look at it internationally, I mean clearly, it varies pretty dramatically in each of the markets and mostly Europe is still under a recession. So I would say, transaction volumes there or same-store sales are certainly flat-to-down, generally speaking in most of the markets.

Understood, so flat-to-down, okay. And just -- I know you've got a lot of questions on Visa Europe. Just curious, did not having the chip card capability preclude you from pursuing certain deals? Just trying to understand if there's any, I guess, pent-up demand associated with that beyond the technical benefits.

Yes, I just think it's late, Tien-Tsin. If you look at the Continent there, they've been a longtime now, the normal consumer walking around with a chip card, unlike us here. And fuel cards because they run on pretty old systems that are multi-country. And I guess, their view of the importance of that against their consumer-products have been late, pretty late to the party. So I'd say the oils over there have been talking and thinking about how to get their commercial businesses over for probably 4 to 5 years. And we, through this AllStar deal, have actually been working on this for probably 3 to 4 years in terms of creating a spec that works and is tested and has been deployed at a bunch of big brands there. And now the work has been integrating that with GFN so we have a processing engine. So I would say, we believe from conversations, that there will be a fair amount of interest if we can help the oils get the chip faster.

Okay, makes sense. And then just on the deal pipeline, more maybe the partner pipeline, organic deals, things of that nature. Did they look more like the Husky kind of arrangement or could they be smaller or larger? Just trying to get a sense of what's available potentially here at the second half of the year?

Yes. I'd say on both fronts, if you were looking at our partner pipeline, it is a mix, right, of a, GFN kind of processing type of opportunities; b, new card program like a chip card program would be as an opportunity; as well as a couple of call outsourcing opportunities. And I'd say the same thing on the acquisition side. We've got deals that are kind of small, medium, large that are being worked. So again, I'd emphasize that despite announcing a few things, we are kind of full up with work and it's a range of stuff.

Our next question comes from the line of Smitti Srethapramote with Morgan Stanley.

You guys have talked about potentially considering new products outside of the traditional fuel and lodging segment such as payroll. Can you give us an update of how you're far along in this initiative?

Yes. I would say that we have studied the set of other, what we call, workforce or employer payment products, right, where the employer is basically trying to control employee spending. And have identified a couple of those kind of products that we've got a high interest in. And our interest is they're virtually the same model as what we're in. They're sold to employers, they tend to run often times on proprietary networks, they have similar kind of economic structures split between merchants and customers. So I would say that directionally, people should expect us to head in that direction, to be in products beyond fuel cards and lodging cards.

Is this going to be sort of a 2014 event, 2015 event?

It could maybe even be sooner. Stay tuned on that question.

And maybe just a quick follow-up. Can you give us an update on how the heavy truck card product is faring?

Can you repeat that?

Yes, can you give us an update on how the heavy truck card product is faring?

Yes, I'd say that is still early for us. And again, it's something that we're trying to do selectively. We've got pretty good partner relationships there and so I'd say, we're treading relatively carefully in terms of channel conflict and stuff. So I'd say that thing is still pretty early for us.

Our next question comes from the line of Tim Willi with Wells Fargo.

I have 2 questions. One was going back to the CLC products. You talked about broadening out distribution, some innovation around product and even the breadth of the network. Could you just maybe sort of give an update about how you feel, where you're at in sort of maximizing all of those opportunities? If the 20% growth, could that accelerate further as this stuff comes along or do you feel like this is sort of the run rate of that business?

I'd say that the old line, until you're out of ideas, right? So we're not. But I'd say that the last couple of years, the big driver, Tim, has been that what we call those CheckINN Direct card or small account card. The thing is still on a tear and creating the majority of the growth. But we've done a couple of new things since. We've gone back and started to look at expanding the actual merchant network, so we're growing the network probably 10% or 15% this year from where it was a year ago. So that adds more trans and more dollars for us. And two, we're about to launch a new, what we call, brand-wide or branded product. So instead of having a network that Ron's Tree Cutting can look and find 50 hotels in Atlanta, he basically could stay in any one of these 4 brands in Atlanta. And so there is some appeal, basically, of repackaging that product, which is close to being launched. So I would say that the momentum is good in the basic products and channel stuff that we have and we have additional ideas, like always, to try to keep layering on it.

And is that -- just to think about modeling, if that were to come to fruition, is that generally the highest revenue per transaction product to have along your transaction based products?

Yes. The CheckINN Direct product would be the highest in the company.

Okay. That's good to keep in mind. Second question I had is just sort of going back to MasterCard and maybe just thinking about the growth you had there and the market. So you guys have done a tremendous job with that product. Is there anything that keeps other key companies from saying, "Geez look what FleetCor is doing, maybe we should think about doing a product like this and throwing some marketing dollars behind it?" Is it just focus? Is there something that you guys have that a Voyager or a WEX or a bank just really couldn't match and they really can't get into this product like you have?

Well, you mention people like Voyager and WEX, they've had -- the 2 of them -- I don't know how old those companies are, but they're 20 years plus. They've had kind of almost universal cards, Tim, for 20 to 25 years, and we've had one for 5. So obviously, whatever -- I don't know if they're going to do something new, but they've been at that game for quite a while and I think what it shows is that, like always, there's a lot more to a business than the product. There's a lot, obviously, around the marketing and sales and service model and there's a ton in the IP that we have around how you get money and make money in these businesses. So I wouldn't be so smug to sit here and say some other big bank or someone else couldn't get in, couldn't figure it out, but I'd say it's not easy. We've spent years figuring out, we've got a lot of people in this space and so look, there's a lot of room, we welcome other people. We're doing fine at it and it's not as easy as it looks, I guess, I'd say.

And then just the last follow-up and I'll hop off. Just relative to that product again. You talk about spending money on marketing channels, et cetera, it's probably as big a driver as anything. As you guys measure the marketing spend and ROIs, I mean, are we at a point where the absolute dollars of marketing versus the volume and the accounts that you get that, that relationship has become more favorable or should become much more favorable in terms of leveraging those marketing spends?

Yes. That's a really astute question. The answer is really it's a function, Tim, of how much incremental growth, how fast you try to grow a channel. So let's say that we were spending $10 million a year in a channel and I say, hey guys, I'll let you spend 10% more and you go to $11 million. Well, their productivity will be better next year because their group is aging and the production out of the first $10 million will be much higher next year than this year and they only have kind of $1 million in that example of kind of newbies and stuff. So that would be a much more productive situation. Contrary, if we said, hey, I'll let you increase it 50% from $10 million to $15 million and probably in total, in aggregate, the productivity would be worse next year. So it's a function really, of how steep the investment is.

[Operator Instructions] Next question is from the line of Glenn Fodor with Autonomous Research.

It's Matt Lipton in for Glenn. My question is also on the MasterCard product. Could you give us a sense of how much of your volume the MasterCard product represents and where you think this goes -- eventually go? I mean, the product has been growing 30% plus now for a few quarters and just trying to get a sense of how big a part of your business it's becoming?

We really -- unfortunately, we don't disclose product -- detailed product information like that. We've got a lot of different products in the company and we just don't disclose specific financial information. With all that being said, I mean, it's becoming a very meaningful contributor to our revenue and our bottom line. So it's becoming a pretty big thing.

I mean, the customers that use this, are they completely new to FleetCor or are they people switching between this and the standard FleetCor product?

Yes. In what we would call our direct business where we serve the end customer, the answer is yes, they would be new. And in the case of some of our partner relationships, they would be some new and some converted, right? Some accounts that are on a proprietary oil card might go to a branded universal oil card because they like it better. So it's a mix on the partner side and it's all new on the direct side.

Got it. And then just one housekeeping question. I think you said fall, the Shell contract starts being an economic contributor, so we should just think about that in the fourth quarter?

Yes. The contract's obviously been signed and their plan, the last I spoke to them, is to make a launch announcement, I think, as early as September. So I'd say stay tuned.

Our next question is a follow-up from the line of David Togut with Evercore Partners.

Just a quick follow-up. Are you planning to expand the direct MasterCard product internationally and in particularly, to Europe? And does your agreement with Visa on chip card technology, in any way, limit your ability to work with MasterCard, particularly in Europe on a direct MasterCard product?

Yes, David, it's Ron. That's another good question. So no, it's not an exclusive agreement. We could still choose to do something with MasterCard in Europe. There are obviously good friends and supporters here in the States. With that said, I'd say we are way down the road, though, with Visa Europe. Again, having started with them before we even owned AllStar years and then the couple of years that we've been involved, we've been kind of working with them. And then just remade this broader, kind of more ambitious agreement with them because we've been working together. So I'd say that although its nonexclusive, our plan would be, because we've been working with them, to run down the road with them for a while.

So in other words, to introduce a Visa direct product in Europe?

Yes. Again, I'm purposely being evasive there in saying the only thing we're kind of saying for sure today is that we're going to convert this AllStar mag book of business onto this Visa chip so it could obviously work outside of fueling stations, for example and has this chip capability. I'd say other than that, we've got a bunch of products in the kitchen and we want to keep them there until we're closer to launch. So we'll certainly be back to you when it's relevant.

Just a final one then. Is there anything different about the European market that would prevent you from introducing and growing a direct or universal card as you have in the U.S.?

Yes. There's obviously lots of differences in Europe versus the U.S. Some good things that would make it better and some bad that would make it worse. So for example, bad is it's a quilt, you got all those countries with all different currencies, tax laws, languages, so there's a lot more complexity, right, in launching a card across those markets. On the positive side, there are no universal products there. Unlike the United States, when we launched the MasterCard, there were 2 or 3 companies -- 3, I think, that have had universal cards for 5 or 10 years before us. In Europe, the answer is 0. There's no card like that, that works in Europe. So we like that. So I'd say, if you looked at our cheat sheet, there are some things that are better that make the opportunity better than here and there's some things that make it more difficult than here.

And at this time, I'm showing no further questions. Ladies and gentlemen, this does conclude the FleetCor Technologies Incorporated Second Quarter 2013 Earnings Conference Call. We'd like to thank you very much for your participation. At this time, you may now disconnect.