Welcome to the FleetCor Technologies, Inc. Second Quarter Earnings Conference Call. [Operator Instructions] At this time, I'd like to turn the conference over to Eric Dey, Chief Financial Officer. Please go ahead.

Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our second 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 and adjusted net income per diluted share. 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 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 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 on Form 8-K filed with the Securities and Exchange Commission. Others described in our Annual Report on Form 10-K. These documents are available on our website as previously discussed and at www.sec.gov. With our standard disclosures out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO.

Okay, Eric. Thanks. Good afternoon, everyone, and appreciate you joining the call today. Upfront here, I'm going to plan to cover 3 subjects: First, I'll comment on Q2; second, I'll provide a bit of an update on SVS; and then third, I'll talk about the second half and our raise in full year 2015 guidance. Okay. So onto Q2. We reported Q2 revenue of $405 million, up 48%, and cash EPS of $148 million, up 16%. So 48% top line, 16% bottom line. The quarter finished a few cents better than our expectations, but that was primarily because we got a little help from higher fuel prices in the quarter, at least higher than our internal plan. But when you look at the macroenvironment versus the prior year, it's actually quite negative. We estimate that unfavorable FX and lower fuel prices negatively impacted our Q2 cash EPS by approximately $0.28 a share. I'm not a big fan of could have, would have, should have stuff, but our cash EPS would have been $1.76 versus the $1.48 we reported, up 39% on a constant like-for-like basis. Let's look at the 4 drivers of our growth in Q2. So first off, our high-growth businesses continue to perform well. Our direct MasterCard business grew 30%. That's on a constant fuel price. Our CLC business was up 13%, and our Mexico business was up 14% in local currency. So good performance across those 3 businesses. Two, our new oil partner wins delivered some incremental revenue in the quarter. First off, our Chevron Asia and Caltex Australia new processing relationships began to generate some revenue. Our Husky and Ultramar relationships in Canada continued to build and add volume and revenue. And our Shell Europe outsourcing program was extended in the 3 additional countries in the…

[Technical Difficulty] For the second quarter of 2015, we reported revenue of $404.6 million, an increase of 48% from the second quarter of 2014. The revenue from our North American segment increased 104.9% to $284.6 million from $138.9 million in the second quarter of 2014. Included in the second quarter results was the impact of Comdata, which was acquired on November 14, 2014. Revenue from our International segment decreased 10.9% to $120 million from $134.6 million in the second quarter of 2014. For the second quarter of 2015, GAAP net income increased 11.4% and $98.7 million or $1.05 per diluted share from $88.5 million or $1.03 per diluted share in the second quarter of 2014. 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 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. 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 second quarter of 2015 increased 51% to $382.9 million compared to $253.2 million in the second quarter of 2014. Adjusted net income for the second quarter of 2015 increased 28% to $138.9 million or $1.48 per diluted share compared to $108.9 million or $1.27 per diluted share in the second quarter of 2014. Elements of the macroeconomic environment had a significant impact on our results in the second quarter, specifically market fuel spread margins, fuel prices and foreign exchange rates. In the aggregate, we estimated that these macroeconomic items negatively impacted our business in the second…

[Operator Instructions] Our first question today comes from David Togut of Evercore ISI.

Could you quantify the growth in Comdata earnings that you expect for 2015 as a whole?

David, we really haven't disclosed that information anywhere. I think we have provided some relative range in the past. I think what we've said is we want to exit kind of 2015 in that kind of 20% trajectory. Our objective is to invest more money in sales and marketing and take that business from what was a kind of historical 6% organic grower and kind of get it into that 10% range. So we are in the process of investing more money in sales and marketing, and we tend to kind of build that sales engine throughout the year. And we hope to kind of exit in a much better place as we get into 2016.

David, it's Ron. I probably guided, call it mid-teens. We had planned kind of 10% and 20%. And although we don't have that number handy, we back off of a tad on the corporate payments things. So that would be our estimate, kind of mid-to high teens.

Got it. And then on the corporate payments, could you give a more granularity in terms of what you're seeing with the opt-outs on the health care side and virtual, and then also just a little more on the RFID rollout, which you called out in Q1 as well.

Yes, I think the good news is it stabilized. So kind of the surprise we got, that we mentioned in the last call in the first quarter, it's kind of not much new. So I'd say that the health care piece is basically stabilized. And I'd say we've got a 50% chance of getting that account back that I called out. So I'd say that's the update.

Got it. And then you called out 125 salespeople added year-to-date. Could you give us a sense of what businesses you added them and any perspective you have on the OTR business at Comdata, particularly given the 3% decline in WEX's same-store sales in OTR?

Yes. So the -- I think I've mentioned it in the opening, David, but we went into kind of the emerging markets, at least emerging for us, which will be Brazil, Mexico and Australia, and we put some fair number into Comdata -- in the both businesses in Comdata. So those 4 areas got the majority of the 125. And that was a follow-up on OTR, was that the second part of the question?

That's right, given what we heard from WEX on their call.

Yes, that revenue was up on a pro forma basis. It's funny. Yesterday, I was reviewing something and we're looking at that exiting in Q4 well above 10%. So in the forecast that we've given, I've got good news to report that, that forecast that we have, had that line of business over Q3 and Q4 growing double-digit, which was the goal we had. So I'd say we're on track to get that done this year.

That's very encouraging. You mentioned Uber, 75% adoption rate. Can you dimension for us what Uber might mean from a revenue and earnings perspective once you have a full year of that contract under your belt?

Yes. Not so much because of the confidentiality with them, but I would say that the client Uber and us were delighted. I mean, to go out to 100 people with an offer and get 75 to take it and get 40 to actually use it in the first 60 to 90 days, I think, speaks to the promotion that they've done and the interest in the thing. So it is way, way ahead, David, of what we thought it would be over the last 2 or 3 months. And we're standing by for their call to try to take it to additional places. So it's off to a great start.

That's great to hear. Just a quick final question. Where do you stand with some of these big oil companies in Europe with respect to outsourcing, particularly as oil prices continue to decline?

Yes, I'd say not much new to report. I think we -- it sounds like we could just tape record the prior session that I think of at least 2 or 3 of them are still kind of waiting to see how we do with Shell, and how WEX does with Exxon. But I think I mentioned in the last call that we are in conversations with a couple of big ones that are evaluating go in the same way. And my guess is they'll make some decision later this year or next as they get a chance to see more. So I think again, we still view it as kind of really big opportunity with a million dollar question being when, when will they pull the trigger?

The next question comes from Phil Stiller of Citi.

You guys introducing new products in Europe over the last couple of quarters in the U.K. and Germany. Maybe you could talk about how those products are being received thus far?

Yes, Phil, it's Ron. I'd say still early days on the universal card in Germany, which is we think a big, big opportunity. I'd say we're still in the kitchen testing, trying to get the product right, kind of get level 3 and that capability into the version 1.0. And second, we're trying to get the sales team and the message buffed up so that we can get some traction. The good news is the stuff is working. We've obviously got pilot clients running on the product and we've got people selling it. So I'd say that so far, so good. And on the U.K., I think the reception has been terrific, and we expect to convert a very sizable part of our base in the second half over this new AllStar 1 product. They really like it. They've been waiting quite a while because it was quite complicated, changing the platform to Visa from proprietary and chip-and-pin and adding a discount network to it and getting all that to work on one card on a system we put in 1.5 years ago, was a 10 in terms of difficulty, but we've got it all working and all rolling now and it's -- the thing we like is it's not only good for customers because they get more benefits, but it's good for us because we get improved economics. So that'll roll, as I said, in the second half.

Okay. That sounds encouraging. Can you provide an update on Shell? So you're in 5 countries, and I think you have a few more rolling out. Like how would you grade your progress thus far? And I guess, how does that play into what David asked about in terms of further discussions with other companies?

That's a funny one because I grade all of our execution progress and staff meetings. And that one, if you said in the meeting is an A. So the couple of guys running that is our Europe guy and our CIO because it's pretty technical. And they not only have gotten to the conversion schedule a 5 to date and 2 more, 7 this year, but we've gotten to the revenue plan in terms of the timing. So I'd say of all the new things we do, that's been about as good as anything we've done. And I'd say that we communicated or I did, that, that project would deliver, I believe $20 million to $30 million of new incremental annualized revenue. And I'd say we're highly confident it'll exit this year into '16 inside of that range. So A, A to A minus on that project.

Okay, good. Last question and I'll turn it over. Just M&A pipeline, obviously the balance sheet improved, given the cash flow you produced since Comdata. Any update on the pipeline?

Yes. I guess we could say that we got a number of deals that are active. A couple of those are getting to be pretty late innings. As you said, I think our comfort level, I don't remember -- recall Eric's number 2 7, I think, with the ratio, Phil. But we're projecting that thing to be under 2 5 as we exit the year and, b, we got capacity back for management absorbing the things. So I'd say that it feels good to be doing something now. And second, I want to call out earlier that the newest things we've done is Epyx and Pac Pride, we haven't lost our touch, right? They're up 26% and 30%. So when we buy stuff, we seem to do something with it.

The next question comes from James Schneider of Goldman Sachs.

Following up on the theme of the earlier questions. With respect to Shell and the proof points that you think other oil companies in Europe look to, what are some of the key metrics? Is it just productivity per account or is it growth in accounts? Or what are the metrics or dimensions that you think that the other oil companies are looking to in that proof? And I guess, maybe you can give us any kind of internal metrics you might be using to grade that beyond the letter grades?

Yes, James. It's Ron, again. I think that's a good question. I'd say the 2 primary metrics would be around reliability and satisfaction. So the first one is, "Hey, I moved a big part of my portfolio over to you, Mr. Outsourcer. How are you doing with it?" Are they happy, the cards work and the call is being answered, the bill is accurate, all the mechanics of running a program reliably and in a satisfactory way. And then 2, I'd say volume in sales. They hired us to try to build these files, so are we selling or are we producing new business. Because a lot of the other pieces of their decision were already in the contract, like the economics and some of the other things. So they already know those as part of the contract. So I'd say those will be the 2 primary gates for other people to want to study.

Yes, that's helpful. And then just as a follow-up. Specifically on Comdata, I know that growing the small fleet business within Comdata in OTR was kind of always a big priority for you. Can you maybe talk about where you are in terms of those initiatives, what you've done to grow that business and where do you think you might be as we go into 2016 in terms of driving some kind of absolute amount of revenue from that?

Yes, again, I think -- I've said that last time and I'd say it again. I think the best surprise -- the happiest surprise for us in the Comdata deal is the -- what we call the North America Trucking business, that the -- not only its progress, as I outlooked, it will be double-digit Q3, Q4 off a pro forma. But I think, as I said before, the set of ideas that we have now to grow that thing are longer. We weren't quite as smart in diligence. And so I'll give 1 example beyond the salespeople. So we studied our CLC business a quarter or so ago and saw a large concentration of trucking companies in there. So went to the Comdata trucking clients and found a massive demand if we could put the hotel purchasing capability onto the Comdata fuel purchasing card, kind of make that into 1 card. So that be an example of something that is, we think, super interesting to that client base that was not in our plans, that we expect to have out in the second half. So there's 2 or 3 of those kinds of things that are kind of big new ideas that leverage this leading position Comdata has, that we like a lot.

The next question comes from Darrin Peller of Barclays.

Look, I know it might be a little bit of a repeat, but if you could help explain some of the drivers underneath the 8% organic growth. I know you went through some of the revenue per transaction items, but some of it was without Comdata or SVS. And I guess, just building -- the building blocks up to that 8% just given all the moving parts again and the revenue growth rates, I think that's just be helpful really, what's driving that? And then just the bigger picture question after.

Yes. Darrin, this is Eric. I think we try to answer those on the call and I think they're similar to the last quarter, last several quarters. And that is, in the United States, as an example, we've been very successful growing our MasterCard business and we continue to grow that very successfully and it was up another 30% in the quarter. Similarly, CLC continues to do very well and that was up kind of 13%. Even the Comdata business, if you look at it, first, call it excluding the SVS business was up about 6% or 7% organically, and probably about 6% or 5% or 6% organically with the SVS business because that was relatively flat in the quarter. So overall, the U.S. businesses grew. Again, excluding Comdata for a second, grew organically in the 11% range. But again, driven primarily by the same couple of businesses that they have in the past. And then internationally, the organic growth was around 9% and again, driven by specifically a couple of things that we called out. Shell Europe is doing very well, we're into 5 different countries. We closed on this Epyx deal a while ago. We're seeing a lot of success and in doing some of the things we do around those new businesses, and that business was up call it around 30%, again, helping to drive some of that. Our Mexico business was up double-digit as an example. And even Russia, as bad as that economy is doing, you even look at that on a constant currency basis, that business was even up still kind of around 4%. So a lot of things kind of just -- we're kind of chugging along and doing okay, but I think the things that have always performed well continue to perform well.

That's helpful. I think it's just the -- you hear about transaction growth rates, like international being down 4% and you kind of wonder a little bit if seems like it's really a compilation of just all the other -- all these other drivers.

Yes. I mean, the transaction growth were down internationally, I mean, because there's a couple economies that are soft. You look at Russia as an example. And we've got a product in Russia that has a lot of transactions but lower revenue per tran. So our transaction volumes are actually down in that particular business, but they're actually up in the business that we're investing more sales and marketing dollars in and it's a much higher revenue per tran business. So it's a trade-off kind of bad calories for good calories there. And similarly, in Brazil, although you know what's going on there, the economy is very soft and our transaction volumes have been impacted kind of there as well, but we've also been doing a lot of the things we do to help improve those businesses. And we're seeing improvements in kind of revenue per tran in the businesses that we have although transaction volumes have been down.

That's helpful.

Darrin, it's Ron. Let me just give you maybe just a different, maybe simpler cut. Hey, we've got these 20 businesses and we tell you we're growing 10% on a constant environment pre-Comdata. Another way to think about it is, from a portfolio perspective, 1/3 of our businesses are growing super, 15%, 20% plus and we call them out, MasterCard, CLC, virtual card, Comdata, Epyx, the new deal, Mexico, oil partners that we didn't have before. So we tend to call out things to try to help you guys see, "Oh, my God", so 1/3 or more of this company is growing big and they're calling it out. A lot of us say there's another 1/3 that's kind of growing low to mid-single-digits. Telematics, Brazil because of the economy, whatever. And I think the other big turnaround which we didn't call out is, we had some stuff that was going the wrong way, right? Czech, Russia, some other portfolios that now basically have gotten back to neutral. So it's a lot easier to grow a business when you don't have 2 or 3 businesses basically going the other way. But I mean, the way we think about it in the company is it's a portfolio of businesses and the goal is to kind of get all of them, we've called out the Comdata thing up to this minimum 10% and we've got some set of high fliers that we called out, some that aren't quite there yet and others that have lot longer way to go and that's the work that we're on.

All right. That's really helpful, Ron. Look, I mean, just one follow-up for you, Ron, I guess. With regard to the sort of added additional pillars that might help the story out in acquisition terms or even organic, but I think more acquisition terms, you mentioned you're kind of late stage on some. I mean, obviously you also have some different things shifting around with SVS now. So I'm just curious, I mean, what are the types of things you're looking at right now in terms of both whether it's industries or it's size?

Yes, again, I think the primary thing, Darrin, that we want to communicate as always is we're looking at stuff we know. So the main thing, I think, for any investors that read this or hear this is, we're not going way far afield and trying to buy stuff that we don't understand or more importantly, that we can't make better. So I'd say everything that's working into the later stages that we're looking at is something that we know and can make work. With that, I'd say we're always chasing obviously geography, trying to get positioned in places that are big or attractive. And then second obviously is to get positions with products that are in this high performance, right kind of category. And so I'd say that we were fortunate enough in our pipeline to have a few deals that fit that screen. And so the question is can we get them out the other side now? But I'd say we're in a good place and I think as I said earlier is that the leverage ratio and the capacity are in a much better place now for us to pull the trigger.

Yes. So that $750 million capital outlay per year average, I think you had discussed that maybe in the last couple of comment around potential deals, that's still about right, the right way to think about it?

Yes, I think it will be bumping. We could come and announce something bigger than that or some series of smaller things. I think again, the structural model thing that we're trying to do is design a company that can grow 10 and 15 organically and that we can add more than 5% on the bottom. And so our math says if we simply invest the free cash flow, which is circa what, Eric? 600, 700, 800 year, over the 3 years, Darrin, that makes the math work and can we can keep deliver in the 20% plus, so that's the basis for the target.

The last question comes from Smitti of Morgan Stanley.

So it looks like your processing costs came down quite a bit sequentially. Can you talk about the factors that led to the decline in that line item?

Smitti, this is Eric. A lot of that had to do with the inclusion of the Comdata business. I don't have the specific items in front of me that were in there. But bad debt as an example of actually in processing if you're looking at the specific line in the P&L and bad debt for Comdata run substantially lower than it does for the FleetCor average. So if you recall, we averaged, what, 4 basis points this quarter and historically, we're probably in the 12, 13, 14 basis point range, so things like that are actually more favorable. But again, the Comdata business as a whole and the makeup of that business is just a little bit different than the legacy FleetCor business was. So that's all that's driving that. There wasn't anything unusual going on there.

And just to follow up on just the growth rate within a particular division, in CLC. I think you called out, you guys called out that CLC grew at 13% last quarter, which is -- seems to be a deceleration from the growth rates that we've heard about in the past. Can you just talk about the potential for growth in that business over a longer term and is there a potential to accelerate the growth rate in the coming quarters?

Yes, it's me. It's Ron, again. I'd say the explanation there is similar to last quarter. So there's nothing different than that, business has gotten bigger, obviously quite a bit bigger because it's been growing 20% plus. And I think I mentioned in the last call that as part of the '15 plan, we put another 50% sales investment in that business to get better aligned with the base, the size of the business. And basically, we were a little late doing that. And so that group of sales -- new sales producers haven't started to produce enough yet to grow that base to 20%. But I'd say that stay tuned for their progress in the second half and then stay tuned for things, like, again taking that product and bringing it to a new market like Comdata's trucking market. So we continue to love that business and are just finding the right way to invest more in it.

The next question comes from Meghna Ladha of Susquehanna Financial.

Quick question, Eric, on guidance. What's the revenue contribution from SVS in the second half? And can you quantify the benefit from higher fuel price assumption?

Yes. To answer your first question, we're not going to provide that specific of guidance regarding SVS. As you know, we're trying to do some things with that business, so getting very specific with some of that information is not helpful to us in this process. So we're going to -- we're not going to disclose that. Regarding the -- what was the second part of your question again, I'm sorry?

Fuel price.

Fuel price. Yes, our assumption was that fuel prices are going to average kind of $2.80 over the balance of the year. And our assumption is kind of consistent with the way we always kind of think about and then provide guidance historically, meaning we don't try to speculate where fuel prices are going. So effectively, we put a stake in the ground and wherever that price is at the time we do our forecast, we assume that, that price is going to stay where it is over the balance of the year. That $2.80 price is up very slightly from the assumption that we had in Q1. So we're not looking for any sort of meaningful additional contribution related to higher fuel prices or that change in assumption, I would say.

Yes, it's Ron. Let me just add to that again, I don't know if you guys track this, but we did get a little help in Q2, as I mentioned, from fuel price being up a bit, but it's backtracked again. So if you look at kind of the first quarter, which we -- the first month of Q3, it's receded again another $0.10 or $0.15 back. So it's kind of back more where we expected it to be in the second quarter, which is why we've kind of stay put with the guidance.

Got it. So the $0.12 guidance that you raised for the EPS, it reflects Q2 beat [ph] SVS ex-FX, correct?

You got it. That's the math.

Okay. And then how should we think about the margins in the second half now that you will be retaining the SVS business through the year -- through the rest of the year?

Yes. I would just assume that the margins we have in the second quarter kind of continued through the balance of the year, I mean, they're not going to be dramatically off of that, up or down.

But they will be a little bit better in the second half because of the revenue growth on that.

Okay. Just a quick question, a clarification rather. So one of the -- the WEX, they saw weakness in domestic same-store sales in the OTR space, I may have heard this either correct or wrong, please correct me if I'm wrong, but do you still expect 10% organic growth in the OTR space and you are not seeing any weakness in same-store sales here?

Yes, the answer is in the Comdata Trucking business, we had kind of neutral same-store volumes, which means the trucking companies were able to add enough additional drivers to compensate for some of the fuel efficiencies. So that was basically a push. But the incremental growth is coming from more sales in the second half, more price and then again, some of these new products. So it's not coming from same-store sales, but again, we're not getting hurt from that.

Got it. And did you quantify the contribution from Comdata in this quarter?

From a revenue -- we did not. But from a revenue perspective, it contributed approximately $139 million in revenue in the quarter.

This concludes the time allocated for questions on today's call. This also concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.