Good morning. My name is Natalie, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX Inc. Second Quarter 2013 Financial Results Conference Call. [Operator Instructions] Mr. Steve Elder, CFO, you may begin your conference.

Good morning. With me today is our CEO, Mike Dubyak. We will also be joined by our President, Melissa Smith, who will participate in the Q&A portion of the call. The press release we issued earlier this morning is posted in the Investor Relations section of our website at wexinc.com. A copy of the release has also been included in an 8-K we submitted to the SEC. As a reminder, we will be discussing a non-GAAP metric, specifically, adjusted net income, during our call. For this year's second quarter, adjusted net income excludes unrealized gains on fuel price derivatives, amortization of acquired intangible assets, the adjustments attributed to noncontrolling interests and the tax impact of these items. Please see Exhibit 1 included in the press release for an explanation and reconciliation of adjusted net income to GAAP net income. I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our annual report on Form 10-K filed with the SEC on March 1, 2013. While we may update forward-looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. With that, I'll turn the call over to Mike Dubyak.

Good morning, everyone, and thanks for joining us. Earlier today, WEX reported strong results for the second quarter of 2013. Revenue came in above our expectations, while adjusted net income was at the top end of our guidance range as we accomplish a number of objectives against our long-term vision. Q2 revenue increased 16% over the prior year to $178 million and adjusted net income increased 5% to $1.05, driven by stronger volumes, including the acquisition of Fleet One. Throughout the quarter, we executed on our long-term growth initiatives, focusing on the expansion of our Americas fleet business while broadening our international footprint and further diversifying our revenue streams. In our fleet payment segment, we achieved strong Q2 revenue growth of 14%, driven by the acquisition of Fleet One. During the quarter, we saw increased volumes resulting from vehicles coming online through new customer wins over the past 12-plus months. This success carried through to the second quarter of 2013 as we continue to win new business, particularly on the private label side, most recently evidenced by the signing of CITGO. We also saw positive momentum in our same-store sales, which were up 0.6% over last year, rising for the second consecutive quarter. Our twofold differentiation of providing enhanced product features and functionality and maintaining long-standing customer relationships has allowed us to effectively manage and grow portfolios. As a result, we are consistently seeing interest in the marketplace for WEX and its capabilities. The integration of the Fleet One business has been a top priority this year, and our progress is beginning to achieve tangible results. Our history, expertise and brand recognition in the fleet space, combined with Fleet One's strong relationships in the over-the-road market, have created a collaborative environment that is opening up meaningful opportunities. From a financial…

Thank you, Mike. For the second quarter of 2013, we reported total revenue of $178.3 million, an increase of $25.2 million from the prior year period and above the high end of our guidance range of $170 million to $177 million. This performance was driven primarily by strong payment processing growth in our fleet business, including the acquisition of Fleet One, versus the prior year. Net income to common shareholders on a GAAP basis for the second quarter was $42.2 million or $1.08 per diluted share. Our non-GAAP adjusted net income increased to $41.1 million or $1.05 per diluted share. This compares to our guidance of $0.98 to $1.05 per diluted share and $1 per diluted share reported in Q2 last year on an adjusted net income basis. Taking a look at some key performance metrics, which includes Fleet One. Validated fuel transactions increased to 12.1% over the prior year. Consolidated payment processing transactions increased 15.5% over the prior year, primarily due to the strong organic growth in our America fleet business and the acquisition of Fleet One. The consolidated net payment processing rate for Q2 2013 was 1.4%, which was down 23 basis points versus Q2 2012 and up one basis point versus the first quarter of 2013. Similar to last quarter, this reduction was primarily due to the lower rate charged by Fleet One on their diesel transactions, which are larger volume transactions given the nature of the vehicles serviced. Finance fee revenue in the fleet segment increased $2.1 million compared to Q2 last year due to the addition of Fleet One's factoring business. Excluding the factoring business, our late fee revenue has remained relatively flat as compared to Q2 2012, even though fueling volumes have increased more than 30%. This speaks to the very healthy condition of…

[Operator Instructions] Your first question comes from the line of Julio Quinteros.

It's Roman in for Julio. First question on the competitive environment. It seems like you're seeing a pretty healthy pipeline out there, and you mentioned it was both international and domestic in terms of potential partnerships. I was just curious, does this include Europe? And how healthy is the European pipeline, given that we know there are a lot of major oils out there considering moving some of their private labels carts -- off-sourcing that? Any update there, or any positive developments there?

Yes. Nothing that I can report specifically. I think we've been very consistent working with the European international oil companies on leveraging our brand and our value proposition. We probably both could say the timelines have been a little frustrating on getting to some decision. But we're very optimistic about future opportunities, even to the point that we believe there's opportunities for them to outsource more of the value chain than they were looking at, say, a few years ago, when we were starting down this path. So we feel good about taking over more of the value proposition, which means more direct control of the customer, higher levels of revenue opportunities and being able to bring to bear our value proposition. So nothing to report specifically, but, again, optimistic about our chances in the future.

Okay. And I guess there's 2 quarters in the row now where same-store sales are positive. Just curious, is this tracking kind of in line with your expectations or a little bit ahead of that? How does this compare with your internal kind of forecast and what kind of same-store sale projections are you embedding in your second half guidance?

Yes. We're pretty much assuming that it will be in this range of flat to slightly up. We don't see anything on the economy that's going to change it dramatically. But we do -- as you see, the economy bumping along in a positive range, so that's kind of what we're assuming. Steve could be more specific, but I think we're pretty much in that range of about 0.5% positive to flat or something. The one thing I will mention that was interesting, the numbers aren't that dramatic. But of the 5 regions, we saw 3 regions that were positive, which I think is the first time we've seen 3 regions positive in 6 to, whatever, 8 quarters. And the other 2 regions, the Midwest and the West, that were down were down less than 0.5%. So you're starting to see, I think across the country, at least, a more ratable and even recovery, which was positive news for us.

Your next question comes from the line of Sanjay Sakhrani. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc., Research Division: I guess the first question was on the other payment solutions purchase volume. It seems like the growth was a little bit weaker than what we were thinking. Are there any specific call-outs for this quarter? And then maybe you could help us, Steve, with kind of the trajectory going forward. And then second, as far as like inorganic expansion of the fleet business, are there opportunities out there. And which geographies perhaps you were looking at? And maybe you could just characterize whether or not it's over-the-road type stuff or kind of smaller vehicle?

On the first one,I would say that we still feel good about our 20% growth rate in the other payment solutions and even in the virtual side. We talked about 23% revenue growth overall. We saw actually greater than 20% revenue growth on the virtual card itself. So quarter-to-quarter, sometimes, the spend numbers can move around a little bit. But we look at the expansion opportunities, Steve mentioned in Europe, able to work with some of our customers to put them on a new issuing strategy to get rid of cross-border fees. So we look at that as being a positive for us as we start to move these opportunities around the globe. We've been very specific on the wins. When you talk about Australia even the Wotif, they're the largest Australian online travel company that we signed. We have others in the pipeline. In Europe, we feel good about what we've done in Spain so far, others in the pipeline there that we're comfortable that will come to fruition over time. Brazil, we feel good about what we're doing there. We said by the end of the year, we'll be able -- through UNIK, to be able to start our issuing our virtual card, which means that some of our current customers, as well as new OTAs in that marketplace. And health care is meeting our expectations, maybe slower than we anticipated going into the year, but still feel confident about health care playing a role in our overall virtual card growth over time. So we still feel good, even though you saw the spend kind of go down a little bit. But overall, revenue on virtual was still over 20%.

And then as far as the fleet opportunity.

I'm sorry. Yes, the acquisition side -- I guess you had the other part of the question. Clearly, fleet is a big piece of what we will be looking at, both domestically and internationally. I think internationally, it would still be the areas of Asia Pac and Europe and, possibly, Latin America. It could be on the heavy truck side. It could be on kind of this -- we've classified the local side. So if there are good strategic opportunities to meet our strategic lens, we will be aggressive going after those opportunities, and we see some of those in our pipeline today. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And just a follow-up on that first question's response. So looking ahead, we should expect 20%-ish growth in purchase volumes for the remainder of the year?

I would say, in revenue, we feel that's where we would stake in and say we feel comfortable with our 20% growth rate in the future.

Your next question comes from the line of Phil Stiller.

Just following-up on the other payments division. I guess the interchange rate stepped up a little more than we thought in the quarter as well. It seems like you're getting more customer incentives. Is that sustainable through the course of the year? And then, Steve, perhaps you could clarify what the interchange assumption is for the remainder of the, given the step-down we'll have with the litigation settlement?

Yes. I mean, the main reason for the increase over last year is the incentives that we're getting, and we do believe that, that is essentially sustainable through the year. When you look at the impact of the interchange -- or the merchant litigation settlement will have on our interchange rate, 10 basis points is the number -- it will apply to about 2/3 of our total volumes. So you'll see a 6- to 7-basis-point impact for that. And so you will see that coming through in the next couple of quarters. So it'll step down a little bit.

Okay. And then on the full year guidance, the math suggests -- I guess based on my math, that the margins -- the overall operating margins for the company should be roughly similar in the second half of the year relative to the first half. Is that right? And then I guess, why shouldn't we see better numbers in the second half of the year, given all the investments that you made in the early part of this year?

I think the margins will be relatively similar to the first half of the year at -- in the second half of year. I think the investments that we've been making have been pretty ratable through the year, and you'll see them continue through the -- to the end of this year. We'll -- we will hopefully pick up some revenue from the virtual card product as we expand it internationally, but I don't think it will be very significant, certainly in the first quarter or 2, by any means. So those things will pay off over time, and we're very confident in those paybacks. But it's not a real quick hit in the second half of the year.

Okay. And then last question for me. Fleet One, what was the revenue and transaction contribution in the quarter? And then any updates on your thoughts for integration costs or synergies this year?

I'd say on the first part of your question, Phil, I mean, we haven't broken out the specifics around Fleet One. I would say the run rates we gave back at the time of the acquisition and the $60 million annually kind of range for revenue is still in the ballpark. Obviously, they are growing some but it's still in a ballpark. In terms of the integration costs, we've said in the -- for the year, $5 million to $6 million is the total. I'd say we're probably trending towards the lower end of that range right now, but no real change in the forward guidance.

[Operator Instructions] Your next question comes from the line of Bob Napoli. Robert P. Napoli - William Blair & Company L.L.C., Research Division: Just on the -- the payment transaction growth was a little bit better, payment processing transaction growth, than what we were looking for. And I guess I was trying to get to an organic number. I know you gave the same-store sales of 0.6%. If you took out Fleet One, what is that -- what was the organic growth?

Yes, it's Melissa. I'll answer that one. So the organic growth of the business -- I guess what we're trying to do is talk a little bit more about revenue growth. And if you look at the last 5 years, we've grown, on average, 13%. The fleet business this last year has been growing at an accelerated rate because of Fleet One, and we do expect that to be growing less than 13% over time. It will be buffeted based on when we do portfolio adds, which we expect we're going to do, as Mike said, on a global basis and then acquisitions. But it's then, for us, a single-digit grower, if you strip all of that out. But it will move up into double digits over time, based on some of these other factors. Robert P. Napoli - William Blair & Company L.L.C., Research Division: Okay. So you're getting mid-single digit -- I mean, if you took out Fleet One, it was mid-single-digit transaction growth there I guess, please?

Yes, a little better than that. Yes. Robert P. Napoli - William Blair & Company L.L.C., Research Division: Okay. And so that's from adding new customers, obviously.

Yes. Robert P. Napoli - William Blair & Company L.L.C., Research Division: And just your -- I'm sorry, go ahead.

No, that's okay.We've had a significant amount of success just growing the business organically, bringing in not just the portfolio wins that we've been announcing, but bringing in new fleet business. And you're seeing just the accumulation of that in our transaction growth. Robert P. Napoli - William Blair & Company L.L.C., Research Division: The number of vehicles was down for the second quarter in a row, I guess. And I guess, to me, is that, that mean -- it doesn't make sense relative to the positive trends on transactions. Is that just cleanup of inactive vehicles and you're reporting 7.4 million versus 7.5 million last quarter, 7.6 million at year end?

That's exactly what it is, Bob, is we've started in the last few months of cleaning out just accounts that hadn't been used in several years. So we're taking those out. Robert P. Napoli - William Blair & Company L.L.C., Research Division: okay. How does July look? I mean, do you feel like the economy is getting a little bit better, or do you think it's just stable and -- but no signs of improving? It sounds like -- I mean, if you could give a little color on July and your thoughts on -- broadly, on the overall economic environment in the U.S.?

Yes. I would say that July looks -- nothing robust. There's nothing happening that says it's going to spur up any further. I think as I talked about same-store sales, we're forecasting that to just be flat to positive for the rest of the year. Quite frankly, same-store sales were down a little bit in July, but one month in a quarter doesn't make a quarter. So we're not seeing anything robust in July, but we're not seeing anything materially different. Robert P. Napoli - William Blair & Company L.L.C., Research Division: Okay. And then in Brazil, UNIK -- looking at the -- your minority interest piece, it looked like it had a pretty good quarter. What's going on with UNIK? What kind of growth are you getting there, and what products are growing?

Yes. UNIK is another double-digit grower, and it's growing in part because of their payroll card product that they have within Brazil. They are also expanding into the freight cart marketplace, and so they've seen some volumes from that business, although small. There have been some regulatory changes in Brazil that made that particularly attractive to enter at this point in time. And then they are out there building a pipeline for the virtual card product and travel. And so they are facilitating the process to become, as Mike said, the issuer, and we expect them to be able to both issue and settle in Brazil towards the latter part of this year. And so we think that they're -- if you look at the places that we, as a business, corporately are in, UNIK is also moving down that path. Robert P. Napoli - William Blair & Company L.L.C., Research Division: Okay. And then just on your new business efforts in the U.S. Are you -- you've announced a number of important wins. So what does the pipeline look like, and how would you break that out between small companies, midsize companies, large companies? Are you more focused on one area than another?

No, we're hitting all parts of the market. You don't hear us talk about some of the small customer wins because their names you won't recognize. But if you look at the business that we're adding to rapid! PayCard, a lot of those are actually relatively small businesses. Our inside sales group on the fleet side is continuing to add smaller fleets. We do that through the channel relationships that we have, as well through the private label relationships and some of the co-branded relationships and so really covering all aspects of the marketplace.

Your next question comes from the line of Tien-Tsin Huang. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: I just -- I guess, Steve, I just wanted to make sure I got the ups and downs right on the guidance revision. What's changing exactly? How much of the change is coming from spot fuel versus FX versus -- any change to your non-fuel expectations?

Yes. And clearly, we re-forecast every quarter, and there's lots of ups and downs. But the 2 pieces that really matter are the ones you just talked about. So for the full year, our fuel price assumption is up $0.20 from $3.49 to $3.69. And kind of using the rule of thumb we've given you in the past, that would add about $0.10 of EPS. Offsetting that is the foreign exchange rates. So like I said, our biggest exposures are in Australia and Brazil. Those guys -- those currencies are both down about 12% since our last guidance. And including a bit of a tax rate impact in there as well, that's about $0.07 negative to our EPS. So those 2 things net out to about $0.03 positive. At the top end, we added $0.02, so there's $0.01 of other stuff, but those are the 2 big moving pieces. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: Okay. So nothing else too unusual beyond that. Just on a go-forward basis, Steve, just -- is there a sensitivity or rule of thumb that we can use on FX to the bigger currencies?

Well, the biggest one would be the Australian dollar. We haven't given out specific numbers out there. But we can work to ballpark something in the future, I guess, is how I'd leave it at that. We expect that currency to remain in the range where it currently is, if not, weaken a little bit further even. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: Yes. No, that makes sense. I asked because I'm assuming you do have some expenses there as well to offset, obviously, the revenue side. So I was just trying to understand the flow-through.

Yes, absolutely. It is a -- I would say from a margin perspective, the Australian fuel business is pretty similar to the U.S. It's a high-margin place. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: Got it. And then just 2 more quick ones. Just -- I heard Sanjay's questions around the spend around MasterCard and virtual. Is the -- was the difference in the volume may be related to some of the weaker eTravel trends that we've observed from some of the public names? Sorry, if you said that already, Mike, but I'm just trying to clarify.

We -- you didn't say that specifically, but it definitely factors into some of the volume that you're seeing, the growth in volume from period-to-period. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: Okay. So we'll just keep watching that. I mean, it sounds like it was explainable, but secularly, still good. The last one just -- for anyone just EC proposed legislation. It seems like that could be good for deal pipelines down the road. I don't know if -- Mike, if prior comments had any of that and your thinking as well. But any implications you can call out off from that, that would be great. That's all I had.

You're talking about some of the interchange rules in the EC? Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: Yes. The caps and the rules. And I know it doesn't apply to commercial cards, but I guess surcharging will come in. But interchange -- banks may come under pressure, and -- I don't know. It felt like given all the complexity, maybe that might drive some sourcing opportunities. But tell me if I'm way off base.

No, I think it's true. And I think, also, if you think about the CorporatePay product, some of the reason they stood that product up, which is a prepaid virtual card, was because some of the low-cost carrier airlines were surcharging for credit virtual or credit payments, and the prepay plays a nice strategy in that marketplace. So having both a credit and a prepaid product, as I said in my remarks, has played heavily in our wins with Globalia and Grupo. So we think there would be trends that we could take advantage of in that marketplace, even if there are some caps on interchange. You're right. It doesn't affect, from what we see, the corporate side, but I still think it gives us opportunities to find expansion with some of these online travel virtual opportunities.

Your next question comes from the line of Tom McCrohan.

Just a follow-up to Tien-Tsin's question. The online travel product, is that viewed as a 4-party network in the eyes of the new European Commission ruling?

I'm not sure.

Okay. And then just to wrap up on the guidance and the outlook for the online travel and the prospects of health care. Can you rank order them? Like which one is going to be more impactful in nearer terms? Is it going to be the online travel globalization effort or just kind of building on health care?

They're both, actually, going to be significant opportunities, we believe. No, we just have a lot more track record in the online travel space. If you look at the size of the market, it's about $72 billion worth of spend just in the OTA marketplace on a global basis. And so we only have about 12% market share. And we're just recently completing our ability to issue and settle, Steve talked about, within Europe, but we can also do that now in Thailand, Singapore and Malaysia, where soon it'll include Hong Kong, Brazil. So we're rapidly increasing our global capabilities in that marketplace. And so just in terms of the more experience we have are our proven model. We would talk about travel. But then more broadly, on health care, it's a huge market. It's a $2.8-trillion market. When we think about $800 billion of that is addressable. And it's got characteristics that's similar to the travel payment ecosystem, so large population of payees, current payment mechanisms that are inefficient and large card acceptance. So while that's going slowly, and we'd still say it's still a bit in a test phase to prove the concept out there, we feel very bullish about the long-term opportunity there. And we've seen many more wins with our partners adding a new partner and then adding significant business into the relationship that we have with PaySpan. So both of those things, we think, are good opportunities for us going forward.

And on the online travel, concept's already proven out. It's just a matter of execution. It sounds like health care huge addressable market is just -- that's still early innings as far as proving the concept out. So what -- can you talk a little bit about that? Like it seems like there's a lot of inefficiencies. And what are you seeing out there in terms of feedback you're getting as far as proving the concept out?

Yes. I think that -- to us, to prove, and that we've said this before is we're going to market there through these channel partners. And so the experience that we've had working with PaySpan, which, we think, is a really synergistic partnership, is -- they're finding interest in adoption. And in fact, when they're adding business, they're seeing a pretty high level of adoptions with those customers that they were adding. And so while it's been slower than what we had originally anticipated, I think that that's similar to experience we've had when we're going to market through other channels, if you kind of reflect back, because they have more direct control with that relationship. So there's interest in the market, and we think that our combined product set is meeting that need. Whether that's going to be as big in terms of just total revenue, which is what we're seeing with online travel, that's the part, I'd say, that we're proving out still, just the size of the opportunity.

And when will you think you'll have more of a conviction on kind of the revenue potential from the health care, mid next year, early next year? Is there any kind of sense for that?

Yes. I think we've seen actually a lot more, just within the last quarter. And the conversation that we're having with our partners is really to get a lot more experience through the end of this year. So let's say, yes, by mid next year, which should give us a pretty good indicator.

At this time, we have no further questions.

Okay. I just want to say thanks to everyone for joining us once again this quarter, and we look forward to speaking with you the next quarter.