Greetings, and welcome to the FleetCor Technologies, Incorporated First Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Eric Dey, Chief Financial Officer for FleetCor Technologies. Thank you, Mr. Dey. You may begin.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our first quarter press release. It can also be found at www.fleetcor.com, under the Investor Relations section. Throughout this conference call, we'll 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 reconciliation 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 2014 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 2014 guidance, new products 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 results are subject 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.

Okay, Eric. Thanks. Again, good afternoon, everyone. And as always, I appreciate you joining today. So upfront here, I'm going to plan the cover just 2 subjects. So first off, I'll comment on the quarter and our full year outlook. And secondly, I'll comment on today's Shell Europe and Chevron announcements. Okay. So on to the quarter. So Q1 results were very good. We reported revenue of $254 million, that's up 31% and cash EPS of $1.12. That's up 25%. So 31% top line, 25% bottom line. The growth in the quarter was really driven by 2 things. First off, our biggest businesses performed quite well. Our North America fuel card business grew revenue 11%. Our U.K. fuel card business grew revenue 19%, and our CLC business grew revenue 16%. So really, strong organic growth performance from 3 of our biggest business. Second driver for the quarter was the new revenue from our 2013 acquisitions. So the most significant contributions would have been from VB Brazil, Epyx in the U.K. and NexTraq here in the U.S. So growth from big business performance and contributions from our new deals. We also had a few headwinds in Q1. So first, the environment. I'd characterize the environment's impact on our numbers as slightly negative, probably in the range of a few million negative. Second, as you probably expect, our Russia business performance was not great in the quarter, particularly among our major oil partners there whose businesses and volumes were kind of noticeably off in the quarter. Compounded with the ruble, which was also quite unfavorable in the quarter. Lastly, we had an unfavorable tax compare this quarter. Our effective rate, 30.5% this quarter versus 28.6% last Q1. So that obviously depressed our earnings growth rate a couple of points. Eric will follow-up…

Thank you, Ron. For the first quarter of 2014, we reported revenue of $253.9 million, an increase of 31% from the first quarter of 2013. Revenue from our North American segment increased 25.6% to $126.4 million from $100.6 million in the first quarter of 2013. Revenue from our International segment increased 37% to $127.5 million from $93.1 million in the first quarter of 2013. For the first quarter of 2014, GAAP net income increased 16% to $75.1 million, or $0.88 per diluted share, from $64.7 million, or $0.77 per diluted share, in the first quarter of 2013. 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 or cash EPS. Adjusted revenues equal our GAAP revenues less merchant commission. 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 first quarter of 2014 increased 31% to $236.3 million compared to $179.8 million in the first quarter of 2013. Adjusted net income for the first quarter of 2014 increased 28% to $96.1 million, or $1.12 per diluted share, compared to $75.2 million, or $0.90 per diluted share, in the first quarter of 2013. For the first quarter of 2014, transaction volumes increased 18.1% to 87.6 million transactions compared to 74.2 million transactions in the first quarter of 2013. North American segment transactions were 5.7%, driven primarily by organic growth in our U.S. businesses and the Telematics transactions we completed in April and October of 2013. Transaction volumes in our…

[Operator Instructions] Our first question is from Ramsey El-Assal from Jefferies.

In terms of the Shell deal and the broader framework sort of for additional regional portfolios you mentioned, what's the timing of the broader rollout? Are there additional sign-offs required? Or is it just a matter of sort of scheduling? Does Germany have to perform well for the other markets to open up? Or is it just kind of they're just going to roll out as they come?

Yes. I think, Ramsey -- It's Ron. It's really an IT planning issue, and basically both us and Shell's ability to absorb the IT work. So we'll probably have a clearer answer when we get to the summer. But I would guess, probably a couple more markets later this year and then the balance in '15.

Is there anything -- is there any reason why they held back the broader commercial portfolio and are starting with just the small business? Is it sort of a test of sorts? Or is it just -- are there any other factors to consider there?

Yes. I mean, I think they hold obviously their larger account relationships closer, a; and b, I think they view us as specialists in the small market. So I think those are a couple of reasons they started us here.

Okay. One last one from me. Just to be clear, the payments regulation that recently moved through the Duma in Russia, mandating the in-country processing, it sounded like that just does not include your business.

Yes. Again, we're not probably the right legal guys. But I'd say, our interpretation is that we would be not impacted by the law -- the way that we operate there. We would not fall under those regs.

You already have a data center in Russia right?

We do. We actually process and settle locally. And again, more than half the business that we have there is basically supporting major oils and other issuers, really as kind of a software and network provider. We're not even really in the issuing side of the business. So I think for both -- all 3 perspectives, kind of legally, what we do, I don't think we'd classify as a co-payment system. Two, we basically process and settle locally. And then 3, a big part of our business is really supporting issuers.

Next question is from Tien-tsin Huang, JPMorgan Chase.

Just a follow-up on Ramsey's question on the Shell piece. So the $20 million, $30 million I'm assuming is post rolling out all of the different countries? And then would you also have country-specific set up costs to stand those businesses up post acquisitions of those countries? Did you follow my question?

Yes and yes, Tien-tsin, are the short answers. So yes, that -- the $20 million to $30 million as we basically put all those markets online. Although as you can imagine, there's concentration. So some of the larger markets would obviously represent a much larger piece of that thing. And then b, yes, there will be some startup cost but they'll be less because we'll be kind of replicating the model basically that we're using in Germany. So still cost, but lower than the startup one.

Okay. Good to know. And then I guess just to ask also a regulatory question as it relates to Europe. We were getting some questions today about all the stuff in Europe, PSD2 et cetera. What's your current understanding? I know the rules are still getting debated and it's not yet law in parliament, but where do you think we are with how commercial cards will be treated in the interchange cap discussion in Europe?

Yes. I'd say, Tien-tsin, we're on the same place you are, which is we don't know. We've heard, probably like you have, that they're still pushing that to be a carve out -- because consumers are obviously the higher target. But we don't know. Again, the good news, as you know, is all of our deals there are fundamentally proprietary. It wouldn't be swept into that legislation, although clearly it wouldn't be helpful to us if there's pressure across kind of general-purpose cards. That would not be helpful long term.

Yes. Agreed. Agreed. I figured I'd ask since you're closer to it than we are. And then just maybe a housekeeping for Eric, just the organic growth in the quarter. Did you provide that?

Tien-tsin, this is Eric. I would say the organic growth in the first quarter was in line with our prior guidance. So it's -- I would say just around the 10% or just under the 10% range.

Next question from Glenn Fodor, Autonomous.

Just on the SG&A, Eric. Just to be clear, last quarter, I believe you said stock comp would be $27 million for the year and more evenly distributed, I think, throughout the quarter. So we're starting this year at around $10 million and just a slight drop-off from the fourth quarter's abnormal level because there was -- gets a true-up there. How should we be thinking about this $27 million for the year? Is that still in place and just take this down evenly for the next 3 quarters? Is that a fair way to forecast?

The numbers actually are going to drop after this quarter. So it gets into more of the $6 million to $7 million range within the last 3 quarters of the year. However -- I mean, we do still have some plans to issue some new stock grants in the second quarter. So again, if those numbers change any material way, we'll let you know. But effectively, they are going to step down a little bit starting in Q2. Again, just assume around $7 million.

And then can you -- I don't know if you did quantify this, but the FX impact for the year as it relates to guidance -- I mean, did you put a number on that? Or can you help -- give us some parameters? I know what you said about the currency rates and your assumptions, but how does it translate to the dollars on revenues?

Yes. In the first quarter, we were unfavorably impacted by FX to the tune of about $2 million. So clearly, that trend -- I mean, we're anticipating that to continue over the balance of the year. So I would take that number obviously times 4, and you'll probably get into the ballpark, and then maybe a little higher as we step into the higher volume months. So probably closer to $10 million or so.

Okay. And then a last question for Ron. Ron, with respect to 2013's acquisitions, how would you -- I know cross-selling is a big part of your model there, and it's been fruitful in the past. But are these assets and the sales force training, is that all in place such that the cross-selling is happening? And can you share any sort of successes with us or contributions to revenue from, again, perhaps cross-selling the products that you have access to now in 2013 and pushing it across the rest of your portfolio?

Yes, Glenn. It's a good question. I'd say, again, it's pretty early. Right? Most of that stuff we closed in the fall. So I'd say we're underway, point 1. Point 2 is every one of those deals had a thesis for more revenue and more profits this year, and I'd say -- report that we're on plan for the deals internally for Q1. And b, as part of our internal forecasting, I'd say we're still anticipating the 2013 deals to be "on plan" for the balance of the year. So I'd say early. But so far, so good.

Next question, Darrin Peller of Barclays.

Let me just start off on the front around the headwinds in Russia. Just a little more color, if you can give us, on what you'd expect that to actually impact the business by? I mean, I know you mentioned it in the context of a few. And you can maybe frame that around with regard to the revenue guidance range. Obviously, you had a very good quarter. How much of the Russia trends you're seeing is actually holding you back on that front?

Darrin, it's Ron. Let me start. So first off, again, just to create some context, so Russia is kind of circa 5% of FleetCor, kind of point 1. Point 2, although I called out that it was behind plan, which it was for Q1 and it's going to be behind our plan for rest of year, call it in the maybe $7 million to $10 million range miss from our plan. The good news is it's still growing. So for the first quarter in local currency, that business was still ahead top and bottom, and we're still forecasting the thing to be ahead top and bottom. So I want to make sure that it's clear that, a, it's not large; and b, it's far in our minds from "some kind of a meltdown." It's just a reverse in being a high-growth big opportunity for us this year, which is what we had planned. And then you pile on the ruble, which is down, what, Eric? 12% or something?

Yes. That's correct.

So when you compound, Darrin, the FX, those are the 2 things that kind of depress us vis-a-vis the plan.

All right. That's helpful. Maybe just one more question on the organic side. You mentioned the company is still growing just under, I think, 10% for the whole business. Is there a way you can maybe just parse out the international organic trends in terms of -- maybe frame it versus the company-wide organic growth? Obviously, North America looks very strong, but then we see 30-plus percent transaction growth internationally and revenue per transaction up, although obviously a lot of deal-related acquired revenue there. So a little more context would be great.

Yes. Hey, Darrin, this is Eric. Again, I would say, first, on a consolidated basis, it's running kind of in the high single digits, just kind of under 10%. And as you would imagine, those numbers vary by geography. The United States had a very, very strong first quarter. We were growing, I would say, in the low to mid-single digits from an organic growth perspective. And then when you look at rest of world, it was growing more in the mid kind of single-digit range with some of the headwinds that we experienced around the world.

Next question from Smitti Srethapramote, Morgan Stanley.

A couple of questions on the recently announced deals. So on the Shell deal, can you help us think about the potential lift to revenue per transaction as you transition from only transaction processing to more of a full outsourcing-type situation in the German portfolio?

Yes, Smitti. It's Ron. I'd say you guys should think about that as kind of around line average. It'll probably start a smidge below and then kind of grow to line average to a bit above. And the reason is it takes us a little bit of time to kind of put the FleetCor playbook in. But again, it's -- from day one, since we're acquiring the book and the deal is kind of fixed, we should be just south of our line average right off the bat.

Got it. And on the Chevron contract, can you talk about the factors that lead you to win it? How much of it had to do with pricing technology, capabilities of your platform?

Yes. I'm always a little remiss in these calls to blow our own horn, but we're obviously delighted there, a hugely important client here for us in the U.S., and the prior vendor had a position and was servicing them, so we were quite pleased when they decided to pick us. And I'd say -- if you listen to the playback, I think it's the product. I think we've got a product that's works and is working. And I think again, that these big oil companies are incredibly cautious and risk averse, and so I think our edge is real. We have a product that actually works. And so I think ultimately, that's the call. That's why we're getting picked.

Next question, David Togut, Evercore.

Nice to see the 29% growth in direct MasterCard revenue in the quarter. Is this is a rate of growth you expect to sustain for the balance of the year?

Yes. That was -- David, it's Ron. That basically was virtually 100% volume. So I think I mentioned in the last call, we've decided to kind of calibrate any kind of rate work in there and basically just go run that business hard. And so that business is almost pure volume growth. So the answer would be yes, I would say that our plan is to kind of sustain that 25% to 30% compounded growth.

Is that rate of growth sustainable beyond this year?

Yes. Again, I think I said this to you before. It's really just completely related to our sales investment. Right? So we have a base of x. We sell point, whatever, 0.4x. So that's what creates the overall revenue growth. And so for us, there's just all kinds of market opportunity. It's just really how much we want to spend to produce that 0.4x. So I'd say the old levers are in our hand.

Got you. And then shifting over to CLC, 16% revenue growth in the quarter, solid but down a little bit from what we've seen historically, which has been around 20%. Any factors behind that slowdown? Are these short or long term in nature?

Yes. I'm happy. I mean, it may seem like a slowdown, but that business has been growing 15%, 20% for kind of as long as we've owned it. So I would say, when we reviewed that a few weeks ago, it's hitting on every cylinder. The big account business is getting healthier. We've got a big railroad base there that's healthy. We're selling this small inn -- we call CheckINN Direct product like crazy. So I'd say that although 16% may not seem as much, because the bases may be getting bigger, we're still selling a lot. We had record sales in that business in the first quarter. So I'd say we're feeling good, David, about the performance there.

Good. And just to revisit a prior question, I think, from last quarter, you're working on a new product, I believe, in CLC. Where does that stand in terms of launch?

Yes. It's a good follow up. They're still in test. This is a product that we call a brand-wide, where instead of having a network of thousands of hotels that you have to kind of look up, you'd have, call it, 5 or 6 brands when you went into any city that you could go to, that we think appeals to a different segment, a more convenience-oriented segment. So I think we probably will have some report for you when we talk next quarter on how that's going. But I'd say where in the final stages of getting that thing put together and tested.

And would that be priced at a premium to your existing product like Direct CheckINN?

No. Remember, all these products are actually priced at a discount. If you went as a user here and looked at this product, effectively, you're getting guaranteed 15% to 20% off the lowest kind of street price for the current product. This thing would actually have, I'd say, a little bit shorter discount, again because we're trying to push the convenience and simplicity of just picking any 5 brands in the city. We don't have as much volume obviously on the thing because we're launching it. So I'd say the discount won't be quite as aggressive, but we're hoping that people are going to like the convenience.

Good. We'll certainly look forward to seeing that. Just shifting over to the Shell fuel card acquisition in Germany. You've long had a goal to kind of use Germany as a platform to expand more into Europe, and I'm wondering whether this could be the launching pad for a Direct Visa card in Europe. And if so, when might that happen?

Yes. Again, I don't know if we've telegraphed it, but this has been a personal crusade of mine for quite some time. I mean, that -- we've said it before, those 4, 5 big Western European countries are huge in this business that we're in of fuel cards, and they're dominated by major oils. There's no kind of AllStar CCS-type companies on the continent itself. So getting a seat there and getting a book of business and being able to fund a group of people and sale is just -- I can't describe it. It's a huge deal for us in terms of getting positioned to make things work. We've got a system that works, and now we get people, literally, that'll be sitting there that can sell. So it's what you said. It's the reason we've been in the kitchen for the last year plus cooking kind of our version 2.0 card. We need a go-to market plan, right, for or capability. And so we're hoping to join those 2 things up. Right? As we build out bodies in that place, we'll then bring that product. So that's the game plan.

Would that be by end of this year?

I'd say probably not. I'd say, ask me again. We've got a huge update on that this month so if you can remind me to answer it again, I'll give you a better view next time.

[Operator Instructions] Our next question is from Phil Stiller from Citi.

I guess I wanted to just follow up on Shell perhaps the last time. The 12 countries, I just want to clarify, those are all Continental Europe? And then can you disclose the planned purchase price for I guess all of the assets that you're acquiring?

So, Phil, it's Ron. Yes and no would be the short answers. They're all Continental Europe. And no, we're under an NDA with Shell. So no on the second one.

Okay. Perhaps more broadly, can you talk about the acquisition pipeline for this year? I think you said you want to spend about $500 million a year. How does the pipeline shape up relative to that goal?

Yes, I'd say good. We actually just had a review of that in the last couple of weeks. So I'd say we've got a series of kind of small, medium and large deals that are kind of next couple of quarters if they come to pass. So I'd say we're feeling good about where we're sitting in terms of '14 activity. We took a little bit of a breather in the fourth quarter to digest the -- what, we do 7 deals last year?

Correct.

But I'd say we're in a good place, Phil, now, to kind of move forward on some things.

Okay. And then lastly on Brazil. I know you guys are facing some currency headwinds there, but can you give us an update on how that business is performing from a revenue growth and margin perspective?

Yes. We ended up, as you know, acquiring kind of 2 new businesses there. And I'd say on plan so far. And the good news is kind of no surprises both in Q4 last year and Q1. And I'd say the exciting part, again, is not so much what we bought but really, our launch of our own fuel card product, which we haven't had before, and a broader launch of a food card product, which we repapered in a new format. So I'd say those 2 literally will launch this quarter or early next. So I'd say that the base deals are tracking the plan, and the exciting kind of new product rollouts are kind of 90 days away now.

Is the fuel card product there incremental to the reselling relationship you have with Good Card?

That's what it is. It's basically -- we signed a deal with them, whatever, 7 or 8 months ago, and we've done the IT work to basically connect their network product into our issuing system. So we're about ready now to go prime time and launch a "FleetCor fuel card" in that space finally. So it's a big deal for us to get an actual fuel card. We bought that CTF, which is a different kind of heavy truck, gadget-centric kind of solution. This is a traditional kind of FleetCor fuel card to go after the SME market. So we're quite excited.

Our next question is from Tim Willi of Wells Fargo.

Two questions. First one, going back to Europe overall with Shell. Could you talk about I guess sort of the sales again and how you see the opportunity to put that in place and grow the business past the conversion? Is there anything you'll have to do dramatically different from the playbook you used in the U.S.? Or is it going to be pretty similar with the efforts you've enjoyed domestically?

Yes, Tim, it's Ron. I think you hit again another good question. I think the first thing I'd say is I think that's why Shell picked us, right? They obviously looked at some people. So I think that our capability, not only here -- but remember, our second biggest market is the U.K., where we have the same set of sales channels working. So yes, our plan is to -- in this case, leverage their brand right through the digital, through the web channels, leverage their sites. They've got a big branded network obviously in that geography, and our claim to fame is kind of our telesales kind of sourcing and recruiting. So those are the 3 kind of big channel plays that, to your point, we're pretty tuned up on. So we're working now kind of to get those things ready for the conversion to summer.

Could I ask a question, just a follow-up on that? Sorry to do my second one. In the U.K., when you did the acquisition a couple of years ago in that market, you talked about investing in the sales platform because it was sort of a tired asset in terms of acquiring customers, et cetera. How should we think about -- like maybe an average growth of accounts in the U.K. I know the revenue there has been impacted by pricing and product development, but how do we think about like, your account acquisition success in the U.K. after buying AllStar. Is that double-digit account growth as you got into the marketing and sales engine of that entity?

Yes. I'd say in the couple of businesses, Tim we, had before, were probably -- again, probably around a 10% organic growth rate. And I'd say, in AllStar, we're not -- I'd say our volumes are not up. And again, the reason is we tried to get that business repositioned. We put it on our platform, we crushed the cost structure, we changed the rates and now, basically, what we're doing is -- it's taken us a year to create a couple of brand-new products for the business. We have a product called AllStar Premier, which combines universal coverage with about 20% of the sites having a deep discount. So a client can now buy one product that basically gives them universal acceptance but big advantage pricing in some select locations. And then b, next month, we're launching finally the Visa chip and PIN specs. We'll have an actual -- normal, if you will, in European standards, commercial chip and PIN card. And so we've been building up basically investment to got behind those 2 new products. So again, ask me the question in a few months whether our sales rate and that thing is picking up. So I'd say, it's on our plan. It's exactly what we planned that business when we go through 19% for the quarter.

That's correct.

So we're -- again, we're delighted with both the revenue and the profits. And as we say, we are moving to what we call our Phase 2 of that thing now, where we're in kind of the volume growth phase instead of the restructuring phase.

And then just the last question on CLC. Is there a path or a thought at some point? Can that product be in Europe? You're obviously building out that presence on the Fleet side. I just didn't know if logically, at some point, through acquisition or just organic, you try to take CLC over to Europe or the U.K.

Yes. Another good question, Tim. I'd say we haven't figured that out yet. As you know, all these products, which creates the defensibility in our game and also creates the difficulty, per my Shell comments, is the network. And so the struggle for us is to find a hotel network where we can get the advantaged economics that we get here in the States. So I'd say no clear idea. But if you got one, call me.

Gentlemen, there are no further questions at this time. I'd like to turn it back over to you for closing comments.

Thank you, everybody, for joining us today, and we'll see you next quarter.

Thanks, guys.

This concludes today's conference. Thank you for your participation.