Greetings, and welcome to the FleetCor Technologies Third 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 third quarter press release. It can 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, adjusted net income per diluted share 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 and preliminary 2015 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 and 2015 guidance, new products and fee initiatives, and expectations regarding 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, and good afternoon, everyone, and as always, appreciate you joining the call. Upfront here, I'll plan to cover 2 subjects: first, I'll comment on our Q3 results and our 2014 full year guidance; and then second, I'll provide an update on the Comdata acquisition along with our outlook for 2015. Okay. So onto the quarter. Well, let me start by saying we're very pleased with our Q3 results. We reported earlier Q3 revenue of $295 million, up 31%; and cash EPS of $1.37, up 27%. So 31%, top line; 27%, bottom line. There's quite a lot going on in the macro environment this quarter. Although on balance, we'd say that the environment was effectively neutral in terms of its impact on our results. We did get a lot of help from above-average market spreads in the range of $5 million, but that was all offset by lower U.S. fuel prices, higher interest rates and an unfavorable tax compare. This Q3, our tax rate was 30% versus last year, 27%. That again reduces our earnings growth rate by about 6%, so again, reporting 27% earnings growth versus 33% at constant tax rate. The drivers of our Q3 performance were quite similar to our previous quarters. So first, organic growth. Consolidated, we had organic growth of 13% in Q3, and that has accelerated from earlier in the year. Inside of that, our U.S. business was even better with organic growth of 19%, and that's driven by the above-average market spreads, continued 27% volume growth at our MasterCard products and continued mid-20s CLC growth. Second driver, acquisitions. We were helped by our 3 largest 2013 acquisitions, which is NexTraq here in the U.S., Epyx in the U.K. and VB in Brazil. So collectively, these 3 deals accounted for about half…

Thank you, Ron. For the third quarter of 2014, we reported revenue of $295.3 million, an increase of 31% from the third quarter of 2013. Revenue from our North American segment increased 35.6% to $156.3 million from $115.3 million in the third quarter of 2013. Revenue from our International segment increased 26.4% to $138.9 million from $109.9 million in the third quarter of 2013. For the third quarter of 2014, GAAP net income increased 21% to $95.5 million or $1.11 per diluted share from $78.6 million or $0.93 per diluted share in the third quarter of 2013. The other financial metrics that we routinely use 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 to participate in certain card programs. A reconciliation of adjusted revenues and adjusted net income to GAAP numbers are provided in Exhibit 1 of our press release. Adjusted revenues in the third quarter of 2014 increased 30% to $270.3 million compared to $208.2 million in the third quarter of 2013. Adjusted net income for the third quarter of 2014 increased 29% to $117.6 million or $1.37 per diluted share compared to $91.4 million or $1.08 per diluted share in the third quarter of 2013. However, to remind everyone, in the third quarter of 2013 was the impact of a onetime income tax benefit of approximately $0.05 per share due to the reduction in the tax rate in the U.K. Without this onetime adjustment, our adjusted net income per diluted share would have been $1.03 in the third quarter of 2013, and our year-over-year growth rate…

[Operator Instructions] The first question comes from Ramsey El-Assal with Jefferies.

When you do close Comdata, will the percentage of your overall revenues that are exposed to fuel price volatility go up or change in any measurable way?

Yes. Ramsey, it's Ron. They'll go down slightly. Comdata is in the kind of 15% affected by fuel price, and I think our number is right around 20%.

That's correct. So in total, we're about 17% give or take combined.

Okay. And any update on divesting the SVS gift card asset that you'd mentioned previously?

Yes. Not yet. We, again, we don't own the company so I'd say we'd done some additional evaluation work and kind of prepping things but not much progress on that.

Is that still something that strategically you're pretty intent on doing? Or could you change your mind on that depending on how the market receives the asset?

Yes. The latter. Again, it's a good business, Ramsey. For us, it's a fit question about, we're good at what we're good at. So if people like it more than we do, then we would unload it, and if not, we'll work with it.

Okay. Last one for me, and I think you may have commented on this earlier, and I just -- I can't quite remember. But the incremental markets you're rolling out with Shell, the costs associated with the rolling out of those markets has largely been expended in developing the platform for Germany. Is that correct? Or are there incremental costs that you'll need to incur to roll the additional countries out?

Yes. They'll be incremental, so our early plan is in the kind of 4 to 5 additional markets next year in '15. And if you think about it, there's separate from the platform, there's conversion. You got to go into the specific market and convert data. There's incremental staffing to handle, those languages, those services and stuff. So I'd say that we've modeled the thing probably at a push. It will probably add $4 million to $5 million of incremental revenue and probably cost us about the same next year.

Okay. And all that's contemplated in the guidance, I'm assuming?

Yes, it is.

Our next question comes from David Togut with Evercore.

If I heard correctly, Ron, I thought you said MasterCard volume growth was up 27%. And Eric, you cited 36% revenue growth for the MasterCard product?

Ron quoted volume and I quoted revenue. So our volume was up 27%, but revenue was up 36%.

So did you put through a significant price increase? Or did you just have higher average ticket in the quarter?

Yes. David, it's Ron. So kind of 2 things. One, I'd say, again, that it's some mix. When we started that product, we started up by selling kind of more in the middle market, where we get lower fees, and we're selling a pile of that. So we're selling more smaller accounts, where we kind of get more fees. So the first one, I think, is mix. And then second, we've added a few transaction fees selectively, so we've done a little bit of rate work as well.

I see. And as a result, is the mid-30s revenue growth rate for this product sustainable?

I don't have it in front of me, but I'd say probably our model for next year is high-20s, maybe 30% in revenue at constant fuel price.

Got it. And CLC was up mid-20s in the quarter. Anything to call out there in terms of what drove the growth? And is that growth sustainable?

Yes. Again, I'd say, as we've commented before, it's really, David, across the board. Our -- that new product that we talked about that's kind of targeted at kind of the middle-sized traveler group is off on a tear. And then our small account, we call it CheckINN Direct, that thing is, again, just -- we're just selling a pile of it. So I'd say the best thing about that business is it's growing the right way, which is demand for it, and we're selling a lot of it. So again, we modeled that thing to be up plus 20% again next year.

Got it. And Ron, you called out the introduction of a new universal card product, the Voyager product. Can you tell us a little bit about that? And how that will be marketed relative to direct MasterCard?

The way we think about this thing, David, it's probably like the banks. So you think about the Chase, the BofA, the Wells Fargo guys, they have a primary network, let's say, MasterCard, but they keep Visa for 10% or 20%. And then they package the products in terms of offers and marketing in certain ways, and they keep both guys because it helps them obviously negotiate. I'd say, that's exactly how we think about it. We think about the product as another very good alternative that fundamentally works the same way as the same universal network. We'll package, market and price it basically the same way, and we've already been doing that. We've got a large number of our sales people selling it. So for us, again, it's good to have that option, that alternative. Again, it mutes interchange risk, pricing risk from MasterCard, so we like having it. And depending on how those couple of guys play with us, we'll move either more volume one way or the other. But customers like it, I'd say, probably about the same as they do the MasterCard product.

Got it. And then just shifting to the U.K. Any update on the rollout of the new AllStar Visa chip card?

That's a great question. It's funny. We literally, last week, went live in what we call our customer pilot, and I'll make up the number, but call it, 100 of our existing accounts went live last week with the product, and I saw some of the email stream, which is good. A few people going, "Wow. Finally, an easy card to use." Because it works like the consumer card. So that thing is officially live and out of the blocks, and we'll start converting large group of accounts probably in Q1.

Understood. And then just shifting over to Comdata cost savings, I think, Eric, you called out expecting more cost savings sooner. Can you ballpark for us what the cost savings as a whole might be for 2015?

Yes. David, yes, we haven't really quantified that at this time. I mean, as you know, we haven't closed the acquisition yet. And we do believe we'll probably close that transaction before or around December 1. So we'll have obviously a lot more to talk about on the Q4 earnings call, and we can have a discussion about that more then.

Understood. Just a quick final one for me. On the macro for 2015, you called out pressure from FX and lower fuel prices. Do you expect any benefit next year from higher fuel price spreads?

Yes. David, it's Ron. So the answer to that is no, we haven't planned it. As you know, spreads come about due to volatility. You have to -- the fuel prices have to move basically to create spreads going one way or the other. And so the worst situation for us would be low fuel prices just staying low, nothing happening. And what that would cause is we'd lose on the business models that are sensitive to absolute fuel price, and we'd probably run kind of what we call average market spreads, and so it's the volatility price, that's seesawing up and down, that create the spread opportunity.

Our next question comes from Smitty Srethapramote with Morgan Stanley.

Just wondering if you could give us a high-level -- your latest thoughts on telematics now that you've had NexTraq and Masternaut for some time. Can you talk about where you see the opportunity in the space in the U.S. and outside the U.S.?

Yes. Smitty, I'd say we're getting a bit smarter. Our original thesis is we like the space, right? Because it nests so close to what we do, and I think we've learned a lot since we acquired the NexTraq business about a year ago, so there's been a lot of learnings about -- as the value in our customer relationships or as the value in our sales relationships. And so for example, on that one, we've learned that the sales and the money we spend and the contacts we make and the window that those people are in, is actually more valuable to help them sell telematics than "cross-selling" to our existing customers. So I guess I'd say that we're still in the evaluation phase of the business in terms of deciding whether we want to play in it in a big way or not. But I would add that we're delighted with the -- this NexTraq company that we bought. The numbers are up. The profits are up, what? 3x.

Correct.

3x, I'd say over the quarter a year ago, and the thing is performing well. There's good growth, much better profitability. So I'd say from the one that we own, although it's not very big, we like what we see so far.

Got it. And maybe you can give us also an update on the Chevron Asia? And where the rollout stands at the moment?

Yes. So the 2 big GFN or processing deals we announced was Caltex in Australia and then 5 or 6 markets for Chevron in Asia. We got a big relationship with Chevron here in North America. And the target date for both of those projects is basically go-live next summer. So we are in the middle of kind of customizing our product to meet the specific requirements of those clients and dialoguing with them. And as we get into the early spring, we'll get into the testing and the training and stuff. So I'd say we're kind of halfway through those projects and are on track to go live next summer.

Got it. And then the final question from our side is just regarding the increase in confidence on the synergy opportunity in the Comdata. I'm just wondering what you've seen that gives you the increased confidence and then tracking [ph] synergies.

Yes, I think the short answer is it's just getting closer, right? So when you're doing diligence with a company and requesting data, we're kind of math guys at FleetCor so we kind of -- we have a bunch of ideas, and we did what we did. But once we signed definitive documents and got -- working closer with their people, we get into, I'll call it, another level of detail, and we've kind of done this before. So I'd say that the ideas we have, the fact base we have, gives us just higher confidence that we can do things and get the money that we planned.

And can you comment on whether you're getting more confidence in synergies on the revenue side or on the cost side?

Yes, I'd say it's both. I mean, the issue for us on the cost side is really going to be timing, so we've obviously identified the low hanging fruit, the things that are clearly overlapping that are easy. But some large amount, I'll say, 1/3 of all Comdata's spending is around the technology area, which is a big number and a much bigger number than at FleetCor. And so the systems planning and the systems integration part of this thing and the vendors around IT are a bigger part of that cost takeout equation. So I'd say the cycle time on that is going to be longer, so we'll take some of the cost money kind of right away, and then I'd say the IT timing is still not certain yet.

Our next question comes from Jim Schneider with Goldman Sachs.

I was wondering if you could talk longer term about the deal pipeline that you're seeing right now. I think you mentioned before that you still have other things you're considering actively. So can you maybe talk about the activity levels in terms of negotiations and discussions you might be having? And in terms of what areas? Is it more international? Is it more North America? Is it more traditional fleet or other spaces?

Yes, I'd say it's kind of same old, same old here. We've got a big group of people, and again, we know all the people, Jim, and so we've got a pipeline of things that we're working on. And as I look at the list here in front of me, they're mostly in other places outside of the U.S., and it's the same thing. A couple of them are large and a couple of them kind of not so large, so it's -- I'd say it looks like our pipeline kind of looks all the time. We're out there, and we're rattling the bushes and finding stuff. And so that with the financing approach we took leaves us, what, about a half -- $500 million basically of liquidity, Eric?

Yes, at least. At least.

So we -- our target, Jim, again, is to kind of invest $500 million a year on average, $1.5 billion over the forecast. So we've got money even at the close of this thing to chase these things down in the pipeline. So I'd say we're probably in the same place that we normally are.

That's helpful. And then just as a follow-up. You mentioned the revenue transaction grew very nicely in the quarter, and I understand that a decent chunk of that is increased fuel price spreads. But can you maybe talk about the contribution you saw from cross-sell telematics or across all of other services into the existing customer base?

Yes, I would say there's probably not a lot of that. Again, we're still kind of in the testing mode on the cross-sell. I think it's just, fundamentally, a kind of healthy asset. So in the U.S., the Mastercard thing we quoted the numbers has grown crazy. We brought online. We think we told you a bunch of new partners that finally contributed to revenue that hadn't shown up before. I mentioned the NexTraq thing. We like that's grown high-double digits since we bought it. The CLC thing is rocking. So all the U.S. businesses, it's not really about cross-sell. They're just healthy. Some of the new things we bought like the Epyx business is way up. We put a bunch of programs in that. Our Mexico business is way up. So I think, generally, our Down Under businesses are way up. So I think it's more just the programs that we have in place and the sales that we have in place are just basically working in the businesses, and then we just got a couple of headwinds. Russia is not great because of the environment, and Brazil is not as great with their economy, and the Czech business. So we got 2 or 3 places that are kind of soft mostly because of the environment. But I'd say the rest of them, Jim, are just -- they're just working.

[Operator Instructions] Our next question comes from Philip Stiller with Citi.

I guess I wanted to ask about Brazil. You haven't talked too much about it so far. Just an update on how your businesses are performing down there.

Phil, this is Eric. I would say first, our business there is being impacted somewhat by the economy and the election that was taking place, so I'd say some of our volumes are softer than what we originally anticipated. But what I would say in addition to that is we're still very, very bullish on the prospects of that geography. We've got a bunch of new products that are in the beginning stages of being rolled out. We partnered with a company called Good Card last year, and we're now going to be reselling what is the #1 small to mid-sized fleet card in Brazil. We also partnered with a company called Edenred, and we're going to be cross-selling their food card products as well to our own customer base. We're also in the process of finalizing the rollout of a new national toll tag technology, so that hopefully will be ready to be rolled out as we get into the first quarter next year. So I would say it's a couple of things: one is, the economy is a little bit softer than we had originally anticipated, impacting our volumes; but we're kind of well-positioned as we move forward kind of into the next year and the years beyond with a bunch of new products that we're going to help to grow much bigger business down in that geography over time.

Okay. That's helpful. Could you guys perhaps comment on the partner pipeline both in the U.S. and internationally?

Yes. Phil, it's Ron. I'd say we're probably early innings. We've got some conversations going on both here in the U.S. and Canada, and we've got some conversations going on in Europe. But I'd say we're early in a lot of those. I think some of these conversations, particularly the Europe ones have come as a result of the Shell and the Exxon announcements in the last year or 2. So I'd say nothing imminent, but again, I think more of the oil companies are taking notice of this outsourcing idea, and I think frankly, waiting for the kind of news that we're reporting today on the Germany, for example, that we've gone into a country and it's been quiet and it's worked and all that, so -- but more proof that outsourcing is good for these clients, I think, is what the doctor ordered.

Okay. Great. And then last question. I think when you originally gave the preliminary 2015 guidance, you talked about like a 10% organic revenue growth number, and I assume that still holds excluding the impact of the fuel and FX. But just wondering, it seems like you have a lot of good momentum exiting the year. The organic growth was better this quarter. You have some partner deals ramping; you have new products rolling out. I guess how conservative is that 10% number as we look out to next year?

Yes. I mean, the first thing I'd say, Phil, is that it's still early days here at whatever we are. Late October, we actually start what we call pass 2 of budgets next week, so ask me a different day. But I'd say the early view is yes, so in our early passes here, we could reconfirm with you that our global organic target is in constant FX, in constant fuel price, which is how we set the thing up at the 10% or 10% plus. So we feel good about the overall health. And I think one of the questions for us in the budget process is do we want to -- what do we want to do on the expense and the investment side? Do we want to spend more money in IT and more money in sales, particularly behind some of these Europe markets and some of our new cards there and same in Brazil? We like the business we have, okay, but I love the product line that we -- this new product line. So I think one of the big open questions for us communicating with you guys again is: are we going to spend any money? Or are we going to continue to kind of run at these margins? And also there's a wildcard here, obviously, on the FX and the fuel price. This is almost a 30-day phenomenon, right, in terms of what's happened to both of those metrics, so I'd say we're like you. We're watching both of those pretty closely.

Ladies and gentlemen, that's all the questions we have today. All parties may disconnect. Have a good evening. Thank you.