Greetings, and welcome to the FleetCor Technologies Fourth Quarter 2014 Earnings Conference Call. And 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.

Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our fourth 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 adjusted EBITDA. This information is not calculated in accordance with GAAP and may be calculated differently than other companies’ similarly titled non-GAAP information. Quantitative reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today's press release and on our website as previously described. Also, we are providing 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 are described in our Annual Report on Form 8-K (sic) [ 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. Good afternoon, and as always, we appreciate you joining today. Upfront here, I'm going to plan to cover 3 subjects: first, I'll comment on the quarter on Q4; second, I'll review some of our highlights from 2014; and then finally, I'll discuss our 2015 outlook. Okay, so onto the quarter. We reported Q4 results that were very strong and actually beat against our internal forecast. We reported revenue of $377 million, up 47% and cash EPS of $1.39, up 29%. So 47% top line, 29% bottom line. So a good way to think about the quarter is in 3 distinct pieces, which we described in Q4 Exhibit #4, which accompanies our press release. So in that, component number one, the base or the core FleetCor business reported $1.45 in cash EPS for the quarter. Component 2, Comdata, which we owned for about 6 weeks in the quarter, contributed $70 million revenue but actually minus $0.06 in cash EPS. As you may recall, we had expected Comdata to be about a cash EPS push, but higher integration, bonus, severance and advisory fees caused a bit of a negative return here. Then lastly, component 3, where a set of unusual adjustments that were quite positive to GAAP earnings in the aggregate but had no impact, 0 impact on our cash EPS. Eric will cover these unusual items in some detail in the section. So let me go back and talk a bit about the base or the core, FleetCor business in the quarter, which is really the story of a pretty wild macro environment. So in the quarter, and particularly in December, we saw U.S. fuel prices plunge, FX weaken even more, but market spreads actually expand to really unprecedented levels. The net effect of these 3 factors, though,…

Thank you, Ron. For the fourth quarter of 2014, we reported revenue of $376.7 million, an increase of 47% from the fourth quarter of 2013. Comdata, which was acquired on November 14, 2014, contributed approximately 27 percentage points of the revenue growth or $70 million to the fourth quarter of 2014 results. The revenue from our North American segment increased 97% to $246.7 million from $125.4 million in the fourth quarter of 2013. Revenue from our International segment was approximately flat at $130 million in the fourth quarter of both 2014 and 2013, due primarily to unfavorable foreign exchange rates in the quarter. For the fourth quarter of 2014, GAAP net income increased 61% to $109.5 million or $1.21 per diluted share from $68.1 million or $0.80 per diluted share in the fourth quarter of 2013. Included in GAAP net income in the fourth quarter of 2014 was an estimated loss of approximately $19 million related to the Comdata acquisition, including all deal-related expenses of approximately $26 million, and approximately $29 million in gain from unusual items reflecting adjustments to purchase accounting entries for contingent consideration and tax indemnifications for the company's 2013 acquisitions of DB and VB in Brazil. 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 fourth quarter of 2014 increased 44% to $343.4 million compared to…

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

Thank you for providing the helpful detail on macro factors. You said that your plan would have been $7 in cash EPS, excluding the 3 macro factors you called out, which would have been about a 36% gain in cash EPS for 2015. Can you talk about the underlying assumptions behind the $7, just so we can understand where the business would have been on a constant currency basis and holding fuel price and fuel spread impacts flat year-over-year?

Yes, Dave. It's Ron. So in constant currency, the plan is basically organic revenue growth was targeted at 10% for this year, for '15. And then second, we have, as you can imagine, some initiatives, both revenue and cost synergies, both in the Comdata deal and some of our previous assets. So those will be the 2 core drivers, basically, of the growth.

And you called out 20% expected growth in Comdata earnings for this year. What would that have added up to just on an accretion basis on a per share metric?

Yes, we're not going to provide the exact number, but what I would say is that thing is penciling out to be a bit better than the numbers we quoted back in the fall. I think we gave you $0.50 to $0.60, if I recall, and I'd say it's coming in a little bit stronger, Dave, than that. And remember, the reason why is that the Comdata has obviously 0 FX impact because it's all here. And then b, there's kind of only one line of business that has any kind of significant fuel price impact. So it's not affected nearly as much as the core FleetCor business.

I see. And then...

We bought that. It's a good thing to buy in this macro environment.

It certainly helps. If I -- If we look at international, you had over 60% growth in earnings internationally. Was there any benefit from higher spreads from AllStar in the quarter?

Yes, there's almost no spread impact. There's only one business there, which we call TSEC, that has any spread impact and it was de minimis, call it $1 million.

Got it. And then in this environment, Ron, with oil prices down so much, are you seeing an increased propensity to outsource by the big oil companies?

You know I think there's more talk, David. Obviously, they're looking for all kinds of ways to reduce costs. We've actually gotten some calls, as you can imagine, the last 30 days. But I'd say it's still early days.

Understood. And then just shifting gears to possible Visa Europe card, which you've talked about in the past. Any update there now that it seems that the European regulators will exclude commercial cards from regulations?

Yes, which is obviously a little bit of "good environmental news." So the update there, again, we have 2 different products. So in the U.K., we have a deal with Visa and that product, which we call our AllStar Premiere card, is actually in market. I think we have 2,000 to 3,000 cards actually live, working. So we've got that kind of in a controlled environment to make sure it works well. And then second is our more generic universal card, which -- what we've launched in Germany, and that thing is in kind of its final field test now. And we expect to put clients literally live on that product next month in Germany.

And then do you have a specific plan to roll that out throughout Europe as you roll out the Shell business?

Yes. The plan, just to remind, is to go into another 5 or 6 markets later this spring, kind of May, June. And so if we have success with the universal card in Germany, the idea would be to follow along and launch it in those other markets.

Just a quick final question for me. Do you have growth assumptions for 2015 for direct MasterCard and CLC?

Yes. And they're both, as you can imagine, high, both high double-digits again for 2015.

And next question comes from Philip Stiller of Citi.

Appreciate all the detail and the guidance. So I guess one thing I was wondering about was the assumptions around SVS. Perhaps, if you could give us some detail in terms of revenue or earnings contribution for the time of ownership that you're assuming? And then if there's any assumptions in the guidance about use of proceeds if you do end up selling the business?

Hey Phil, this is Eric. I would say, first and foremost, from a contribution perspective, I mean, it wasn't a lot. It's a smaller, obviously, piece of the business from a profit respective. So it was low single-digit cents in cash net income for the quarter. And what's the second part of that your question again, Phil?

Any details in revenue, and then if you're making assumptions about paying down debt with any percent you might get?

From a revenue perspective, we didn't provide any specific detail on one product or one particular line of business. So we're really not going to comment on that specifically. And regarding sale, if we do sell the business, what we would do with the proceeds. We do not have any of that built into our guidance. So obviously, if we took cash proceeds and paid down debt, that would have an incremental benefit to our P&L.

Okay, great. And something you guys might be able to provide a little bit more detail in terms of Comdata synergies. I know it's obviously a big target of yours. Just wondering if you could tell us what you're assuming in the guidance. And then, Ron, I think maybe you said the Comdata earnings would grow 20% beyond '15. So I just want to make sure we're not pushing stuff into this year and the growth beyond this year is not 20%.

Yes, we've accelerated. So we basically have gotten the cost synergies locked. There's of bunch redundant things we chase, so that's in the sort of $10 million to $15 million range. But I think I told you this, we've elected in our plan to basically reinvest those dollars into sales and marketing because we want to try to grow the businesses. So from the cost synergy side, we've got that money, but we've kind of turned around and poured it back in the growth. And I'd say, we've made good progress on the revenue synergy side and again, we've accelerated a bit of that into this year because of these headwinds. And that's quite a bit bigger than the cost synergies, so it is -- I'd say, it's pretty significant. And in terms of yes, earnings, so the number 20% that we quote is basically excluding SVS. We take kind of the pro forma from '14 without SVS, look at our plan for '15, net things up in earnings; pretax, above 20%. And yes, our 3-year model is to grow that thing 20%-plus, '15, '16 and '17, which again was a key for us to do that trade so that asset could grow at the FleetCor line average target, which again is 20%.

Good to hear. Last question, and then I'll turn it over. You mentioned price realization. Just wondering, I guess, is this something that's kind of a nice byproduct of the lower fuel price environment that perhaps allows you to push that further this year?

Yes, look, I think whenever an end client's total bill drops by 30%, to someone spending $100,000 a month on fuel and the thing goes down to $70,000 to get a couple of bucks for what we do, I think, is easier. But I wouldn't say it's super easy. Everybody's pinching pennies. And so we've been very, very thoughtful as part of that pieces of where Comdata maybe has opportunities that didn't take advantage of, and that's where we have gone. We're trying be very, very careful in protecting those -- the relationships and the volume, but basically, kind of taking money where we can. So again, a lot of that is really already in place, sitting here the 1st of February. So I'd say, our confidence is pretty high there.

And next question comes from Ramsey El-Assal of Jefferies.

A bit of a follow-up question. You mentioned that one of the levers, obviously, that might be able to work to offset some of the macro headwind is price. Can you be any more specific about sort of which parts of your business contain the larger pricing opportunities? Anything about specific segments or geographies or products? Or is it more of a uniform statement across-the-board? Or how should we think about that?

Yes, Ramsey, that's a good question. I would say that we obviously looked everywhere, right, when we saw these headwinds at the end of last year. I'd say that probably some fair amount of it is planned here where the fuel price impact is greater. But I'd say, of the total number that we're chasing, 40% of it is International, maybe 60% is here. And obviously, we looked at all kinds of things. We look at floors, on merchant contracts, when prices drop, we look at rebate levels we give people -- we look at interest rate levels. So we look across every lever, everywhere and decide which things impact kind of customers least to make sure we kind of spread the thing around, and we're obviously testing our way into a bunch of those things to make sure there's not a big impact. But I'd say, again, it's ground that we've covered before and I think, again, we've got pretty good confidence in it.

Okay. Switching gears on SVS. Is there a probability we should assign to you guys hanging on to this asset on a more permanent basis? Or are you really still quite set on divesting it, just taking your time trying to find the right opportunity? Or how should we think about SVS long term?

Yes, again, I'd say, the honest answer is we don't know. I'll give you a bit of not of an update that we think there's more interest in the asset than maybe we had thought. And so I'd say that it's probably more likely than not that we would sell that asset. But I'd say it's still too early to call. Ask me in 60 days.

Okay, last one for me is just about the M&A pipeline in '15. I mean, granted it's not on an organic basis but it could also theoretically contribute to closing some of the gap from numbers from the macro environment. What is the -- how would -- how should we gauge the kind of quality of your M&A pipeline here and your appetite to kind of to do deals while you're digesting Comdata? Are you moving on parallel tracks? Or is this something that we should kind of not expect as much of this year than prior cycles?

No, no. Our appetite is high. Again, we did a lot of that work as we signed last summer and we've got into the target that we had kind of 3x and obviously, we're delevering from here. We've got, Eric, what? $400 million, $500 million in liquidity in the current lines that we have today?

Yes, that's correct.

So I -- and we've transitioned, Ramsey, most of the Comdata integration work to our ops people, if you will, not our deal team. So I'd say that our plan and the objective for me and that deal team is to put $1.5 billion to $2 billion to work over 3 years. And I'd say that this is the game we're in. We like assets and getting assets and doing things. And so sitting here today in front of me, we've got 3 or 4 conversations on the deal side and looking at, call it, 3 or 4 conversations on the partner side now that we're in. I'd say, I characterize them as generally earlier innings. I wouldn't say any of these are kind of Q1, but I would say that our expectations is we're going to try to do something on both partners and deals in this year. We've got the liquidity, we've got the management. And so if one of these things looks right, then we'll go forward.

And next question comes from Tien-tsin Huang of JPMorgan.

So just a follow-up to Ramsey's question. The strong dollar, Ron, does that entice you to be more aggressive in bidding on International assets?

Yes, we like that, Tien-tsin. Yes, for sure.

Spending money is good.

Yes, so that does open things up. But it sounds like the pipeline hasn't changed too much. Is that a fair statement?

Yes, it's always, Tien-tsin, if you're looking at what we look at, right, there's things coming in and some that's frozen out as fuel prices collapse, so sellers decide to hold, new things come in. So I'd say that even though we say to you guys, "Hey, we're looking at some number of things," don't -- obviously don't assume it's the same 3 or 4 things today that we were looking at last summer when you would have asked. But we've got people out. Like I've said, we've got relationships everywhere, so we're active in contacting people and trying to get people into conversations all the time.

Okay. That's good to know. And then I heard that Russian came in up 9%, but International growth looked like it was slowed a little bit to 2%, as I see this right here. So what's -- was that a surprise relative to plan?

Yes, it's FX, Tien-tsin. So again, if you look at our Russia business in the quarter, frankly, we -- I was a bit shocked just to see that business was, with everything going on, up 9% local currency. It's not in front of me, but I think the thing was still up something for the full year in local currency. But I think the currency is down, Eric, close to what, 50%? 3-year?

Yes, typically...

So when you convert the thing, it's obviously way down, Tien-tsin, for both the quarter and the year.

How about just overall transaction growth for International?

Yes, transaction growth, Tien-tsin, in the quarter and internationally was a couple of percent and obviously, it was lot higher than that on a full year basis, around 18%. So it's going to vary by geography as you would imagine. So some parts of the world are a little stronger than others. The U.K. is performing fairly well and then there's other parts of the world that have been a little softer, like Brazil. I think we've called that out on a couple of other calls. The economy there has softened, which has certainly impacted volumes. The Czech Republic is a little bit soft as well. But again, that's just the way it goes. Some businesses are doing -- are very strong and some are impacted by economies in some other geographies.

Yes, Tien-tsin, I'd just add, which is a little bit funny. When we're kind of closing out our budget with our board at the end of the year, and the world was moving, right, moving the wrong way, the that's kind of fascinating is we were able to take up our numbers a bit because the fundamentals, both volume and rate, sans the fuel price and the FX, are actually better and we're exiting, as I said in my comments, better than we thought. So if you can wave away all the smoke here, I'd say things are actually healthier here at FleetCor than they've been.

All right, great. That's good to hear. Just one more if you don't mind. Just the tax rate, I guess, is going up. You didn't call that out as a headwind, but it looks like it's $0.17 drag to our numbers. So tax rate is going up to 32%, is that a sustainable level?

Yes, Tien-tsin, I mean, it really isn't changing a whole lot from 2014. We had kind of $9.5 million tax favorability that we recognized in the quarter related to some purchase accounting true-ups in Brazil. So it's a one-time noncash favorability. We had to book the tax expense. Excluding that, taxes came in more in the 30%, 31% range. And the difference between where we ended the year and next year is purely due to Comdata, which is mostly in the United States. And, as you know, it's a much higher tax rate than we would expect internationally.

The next question comes from Darrin Peller of Barclays.

Just a quick -- very quickly to follow up on all the discussion around deals. I mean, I think in the past, you've been saying now $750 million potential capital use per year for acquisitions. Is that still on track despite sort of all the noise in the environment? And then just a couple of more operating questions.

Darrin, it's Ron. Kind of the goal we have in the company is we think about spending our free cash flow. I don't have it in front of me, but I think the number's around $600 million this year. And if you look at our model, that thing, obviously, is growing 20%. So that's the right zip code, kind of $600 million, $700 million, $800 million, call it, $1.5 billion to $2 billion over 3 years. And I think the appetite question was a good one earlier. It's what we do, right? A big part of the game of the company is finding assets that we know and working them. And so I'd say, that we're still eager to do that.

Great. Just -- like, I mean, just to help deconstruct this extra $0.50 embedded in your guidance basically, given that you're really only moving it by 30 despite $0.80 headwind. Again, you broke down pricing potential exit run rate being stronger and then synergies from Comdata. I guess I'm just trying to figure out, is this basically -- usually, you guys still maintain and leave some conservatism from synergy potential from deals. I mean, would this kind of use it all up in a way, is what I'm kind of getting at, or is there still more opportunity in Comdata than what maybe you're even potentially including here that could come? And then maybe just help us deconstruct if there's -- how much of this is from pricing? Or just overall core strength in the business versus Comdata would be really helpful.

Yes, I think that's a good question. I'd say that we've spent an awful lot of time studying the Comdata business and had a whole set of ideas of how to improve profit performance. And I'd say that the major difference is just pace. So when you look at the kind of the 3-year plan, we had kind of staged, "Hey, we're going to do 1, 2, 3 in '15 and we're going to do 4, 5, 6." And I'd say because of these headwinds, we elected to accelerate a few of the things that we had thought about initially, sooner. So I'd say that there's still a bunch of things that we haven't pulled the trigger on there because we kind of -- we're looking at it over a 3-year plan. So I'd say that the one is about pace. And then on the rest of the question, I'd say, think about it as, call it, 1/3 of the clawback is through fundamentals and exit rates, and kind of the other 2/3 is Comdata and kind of price recovery. And I think my comment earlier is we study everywhere globally, tweak prices and not do a lot with the clients. So again, I think we've picked what we think is smart and balanced and, of course, we could always push harder. But we pick what we've analyzed. I could have pushed and kept guidance the same. But I think we're trying to run the company to make profit growth 20% every year, not just this year. And so I think we took what we think makes some sense.

And that's really helpful. Just one last question. Moving away from Comdata, the -- it looked like International margins were strong. So just a quick comment on the sort of synergies remaining internationally from some of those deals will be helpful. And the I'll just turn it back to the queue.

Darrin, this is Eric. Yes, I want to remind everybody, if you go back and listen to my script, we had some one-time favorabilities that were booked into the quarter, and they were International. So we have booked about $30 million of, I would say, purchase accounting reserve reversals into the quarter. And unfortunately, GAAP rules now require us to take those adjustments to the P&L versus to the balance sheet and leave it in purchase accounting. So again, we had about $30 million of one-time favorability in there.

Darrin, let me just -- it's Ron, let me just add to that. I think sitting inside of Eric's comments, remember, we have 3 or 4 assets that we would still call new, relatively new that are getting treated. And so if you look at the U.K., we bought a company called Epyx, was it, just over a year or a couple of months ago?

Just over a year ago.

We've bought a couple of companies down under in Australia and New Zealand, and we went live with that Shell Germany thing that the cost structure has been in the business but not the revenue. And so I'd say that certainly, in Q4, if you looked at those assets versus the prior Q4, they are all way up in profits. I mean, way, way up in profits because we've had a chance, basically, to put our kind of Phase 1 transformation stuff into those sets of businesses and get traction. So those things, for sure, boost the margins.

But again, I want you to be sure, be clear here that the margins are up if you look at one of the schedules in the press release, 70%. The profit is up internationally, but 30 points of that is the one-time favorability that I was mentioning.

The next question comes from Jim Schneider of Goldman Sachs.

With respect to some of the benefits you eventually expect to roll on towards the end of this year, namely pricing and Comdata revenue synergies, can you maybe talk about first, on the pricing, when do you expect to be able to sort of realize some of the pricing and contract actions, and when you can realize those sort of all at once given the contracts you have existing that are already in place? And then on the Comdata revenue side, is that just small over-the-road customers? And do we expect that's going to be kind of the middle of this year, or is it going to be out to the end of 2015 and into 2016 before you recognize some benefit there on the revenue side?

Yes, Jim, it's Ron. I'd say that we are, again, pretty far along on those set of revenue synergies. And I would say, think of them as big contracts that take time. We're looking everywhere, we went to obviously, both the merchant side and the customer side. We look at rebates. And so there's a whole series of places where there are -- we're more immediate. When I used the word accelerate, kind of more immediate pricing actions. So I'd say, you should think about a lot of that, kind of most of that being in our run rate, certainly, by the start of Q2.

Okay. So that's both pricing and revenue from Comdata, right?

Correct. And the other comment I made earlier, which we built a bit into the plan, we basically took the cost savings, the redundancy savings and poured that back in the sales and marketing and management investments. So we are stepping up on adding people to make sales. So clearly, as you get to the back half of the year, we're assuming we're going to get some return on that incremental $10 million to $15 million.

That's helpful. And then maybe as a follow-up, can you maybe comment on the European oil company partnerships, specifically? And what opportunities do you see there, whether you see there's a chance that bids could come in the first half the year, or is it more of a second half kind of phenomenon?

Yes, I mean, the first comment I'd make, I think, is the Shell one -- Shell, I think, was kind of the first guy in Europe that gave us chance on the system side. They had a project called H3 and picked our global fuel card system, call it, 3 years ago. So we've got that in x number of markets. And then maybe being first, they decided, call it, a year ago to let us do kind of a full outsourcing deal in 11 or 12 countries. And I'd say that, that second thing, and even I got the Shell guy in the room with me has gone exceptionally well. We've done those conversions, we didn't miss a beat, we didn't bum out customers. We had all the service people in place. We put sales people in place to sell. So I think the feedback, both from the customer, the partner perspective and ours, which I commented it generated a few million of brand new revenue in Q4, I think that thing is off to a good start and I think that success is making its way into the conversations that we're having with some of the other guys there, I can remember if it was Phil or someone earlier in the call who said "Hey, does the lower fuel price motivate oil companies to look for other cost reduction ideas?" and I think the answer is yes. And so I've said it before, us having success and giving partners confidence that we can do good work, I think, is the key to them picking us.

This concludes our time for questions on today's call. Thank you for your participation. You may now disconnect your lines at this time.