Greetings, and welcome to the FleetCor Technologies Inc. First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Eric Dey, CFO. Thank you. Please begin.

Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our first 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 are 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 thanks for joining the call today. Upfront here, I'll plan to cover 3 subjects: first, I'll comment on Q1; second, I'll provide a general update on Comdata, our Shell Europe outsourcing program, along with some of our new product introductions; and then lastly, I'll discuss our 2015 guidance. Okay, so onto Q1. We reported earlier on Q1 revenue of $416 million, up 64% and cash EPS of $1.45, up 29%. So 64% top line, 29% bottom line. We built our plan for the quarter on a number of assumptions: fuel price; fuel spread; FX assumptions. And fortunately, we call the environment right, and although FX was a bit worse than planned, fuel prices were a bit better than planned and spreads were basically on plan. So in aggregate, the environment's impact at least versus our plan was effectively neutral for the quarter. When you look at the macroenvironment's impact versus the prior year, it's quite a different story and it's very negative. So fuel prices in the U.S. were down about $1 per gallon versus last year. FX was obviously very weak. We did get a little bit of an offset from positive fuel spreads. But that collection of factors created a cash EPS headwind of about $0.16 in the quarter. So if you thought about our business in a constant environment, like-for-like environment to last year, we'd be reporting a fleet cash EPS of $1.61 or $0.16 higher, which would produce a 44% profit growth, so pretty big environmental impact. Okay, let me transition to the drivers for the quarter. There were basically 3. So first, our biggest businesses performed well. Our North America fuel car business was up 17% in the quarter, obviously helped by wide spreads. Our U.K. businesses grew…

Thank you, Ron. For the first quarter of 2015, we reported revenue of $416.2 million, an increase of 64% from the first quarter of 2014. The revenue from our North American segment increased 136% to $298.8 million from $126.4 million in the first quarter of 2014. Included in the first quarter results was the impact of Comdata, which was acquired on November 14, 2014. Revenue from our International segment decreased $10.2 million or 8% to $117.4 million from $127.5 million in the first quarter of 2014. For the first quarter of 2015, GAAP net income increased 25% to $94.2 million or $1 per diluted share from $75.1 million or $0.88 per diluted share in the first 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 car 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 first quarter of 2015 increased 65% to $388.8 million compared to $236.3 million in the first quarter of 2014. Adjusted net income for the first quarter of 2015 increased 41% to $135.9 million or $1.45 per diluted share compared to $96.1 million or $1.12 per diluted share in the first quarter of 2014. Elements of the macroeconomic environment had a significant impact on our results in the first quarter, specifically market fuel spread margins, fuel prices and foreign exchange rates. In the aggregate, we estimate that these macroeconomic items negatively impacted our…

[Operator Instructions] Our first question comes from the line of David Togut with Evercore.

Ron, you mentioned a couple of factors at Comdata that were a little below plan, the -- I guess, higher-than-expected health care opt-out and slower-than-expected POS rollout. As you take a step back and look at Comdata relative to your initial plan from an earnings accretion perspective, how do you stand today versus at the time, I guess the last earnings conference call, let's say from a 1- and a 2-year accretion perspective?

Dave, I'd say we're probably in about the same place. We built an internal plan that had Comdata earnings in the high 20s. And our best guess now is that thing is still going to land about 20% for the year. So we had said, when we did the transaction that we wanted to grow EBITDA in that business 20% plus through the midterm and I think year 1 will be that.

Got it. And then I was pleased to hear that you're rolling out direct MasterCard. I thought you're actually going with Visa in Europe. Was that -- was there a last-minute change there?

Yes, if you remember there's 2 different things. We actually are going with an extended card in the U.K. with Visa. And on the continent, we're actually going with MasterCard. So there are 2 different programs with 2 different networks. But it is finally live in Europe. We've been in the kitchen a long time with that product, so to have a quote in the market and start testing, it's great news.

How do you assess the revenue potential of the direct MasterCard on the European continent versus what you've seen in the U.S?

Again, on paper, David, it's a giant number, right? Again, the majority of Europe fuel card penetration, again, is on private label, oil company cards. There are not many independent universal products in any of the countries, and so the potential is enormous. The question is what's going to be the share. Our customers are on private label programs. In Germany, you're going to want a universal card. And so the answer in the U.S., as we told you is yes, almost all new accounts opt for the universal cards, but it's too early to call for Europe.

Understood. And then on CLC, you called out 17% revenue growth there. That had been running in the 20s, I believe, low to mid-20s. Any significant change there that would drive that?

No, just -- like always, the base is getting a little bit bigger. And we pumped some additional sales people into that business kind of a little later than we thought. So we're hoping, we'll kind of get back to that 20% as we work our way through the year. So it's really just the absolute size of the business getting bigger.

Got it. And then just a quick final question for me, on its earnings call, WEX called out some market share gains in Q1 in the OTR market. What are you seeing in the OTR market at Comdata? Are you preserving your share?

Yes, again, the property that WEX bought was called Fleet One, which targets fundamentally smaller, David, smaller fleets, think 10, 20, 30 vehicle fleets. And the majority of Comdata's business is, it's very large. I think they have 18 or 19 of the top 25 fleets. So the answer is, we're kind of in different segments, and then b, I'd say it's stable. We've had very little attrition last year and, in fact, over the last few years, very little attrition on that business.

Our next question comes from the line of Ramsey El-Assal with Jefferies.

I had a bit of a follow-up on one of David's questions. What does it mean exactly opt-out in the virtual card in Comdata's virtual card business? What's the context in which customers are opting out?

So the way to think about it, Ramsey, is the providers of health care, so think hospitals, docs, dentists, right, that actually receive the payments ultimately. So let's say, Comdata signs up with TPA who is paying Ramsey's doctor's office, he pays all 300 docs that he has, and then you basically call him and say, "Hey, I don't want to get paid with a virtual card." So an individual provider will basically tell his TPA, "Hey, I don't want to get paid that way. I don't want to get paid by check. I wanted get paid by ACH or wire," or whatever the guy says. And so basically, we plan and our business plans some opt-out rate, right, because, obviously, some people that go on this don't want to be on it and it's running higher than that plan that we build.

That makes sense. That helps. And can you break out the revenue and earnings contribution from SVS in Q1 and Q2? Just trying to get a better idea of sort of how it fits in. I know it's not a huge contributor to the bottom line.

Yes. Ramsey, this is Eric. And in Q1, just to give you some round numbers, I don't have the exact numbers in front of me, SVS contributed approximately $40 million, $42 million in revenue and $0.08 to $0.09 in cash EPS. And in Q2, again, there is a lot of seasonality to the business. And Q2 is traditionally the lowest quarter in terms of both revenue and profit by a pretty wide margin. So Q2 was more in the $30 million revenue range and around kind of, call it, $0.05 in cash EPS.

Because, obviously, Ramsey, the cost structure is pretty fixed in that business, so when revenue flexes down, obviously profits flex faster.

Okay. And on that business, you mentioned that you're evaluating final bids. Does that mean that the divestiture here is kind of imminent? Or is there still a chance you might hold on to the asset?

Yes, I'd say we're -- you got to always see, obviously, the final documents and understand where we are. So we're getting to the end. We're obviously in final documentation with the party. So I'd say we're still going to make a decision, but we'll be making a call in the next 30 to 60 days.

Okay. And then just last one from me. Are there any partnership or decent-size partnership or contract renewals that are coming up? Or are we in a good part of the cycle right now with that?

Yes, I'd say, in terms of new business, there's a couple of things that we're working on. I think we've said it historically, it's a long boil. So it's hard to say when, but we are in conversations with a couple of big people about helping them with their business.

Okay. But no existing large contracts that are coming up for renewal?

Correct, nothing imminent.

Our next question comes from the line of Smittipon Srethapramote with Morgan Stanley.

This is Danyal Hussain calling for Smitty. Just another follow-up on the virtual card opt-outs. Is this at all related to the change in control? Or is this just your typical attrition? And just in light of that, it seems like you're still seeing very robust growth rate. You had 32% corporate payments growth. So is that you're seeing growth above and beyond what you have expected elsewhere like in construction, or is that mostly in line?

Yes, the short answer is the second thing you said, right, it's not related to our involvement. And yes, you're right. Although we're calling out the opt-out rates running higher, what you said is right. The business still delivered 30% plus, and the full year forecast is in that kind of a range. So I don't want to give the view that it's not a terrific business because it's one of the core reasons we bought it. It's just not quite as super terrific as we thought. So it's just going to inch back a bit from our plan.

Got it. And then just following up on the direct MasterCard product. I know there were some differences, I think, in functionality, just given level 3 data isn't prevalent in Europe. So can you just talk about how that functionality compares to maybe what you have in the U.S?

Yes, there are -- I think the major difference again is the taxes, the VAT treatment in Europe. So we -- we've launched kind of version 1.0 that has, call it, 80% of the capability, and we hope to be out with kind of version 2.0, call it, another quarter that gets -- it gets us almost all the way there. So we are working to kind of equal the U.S. functionality.

Our next question comes from the line of Ashish Sabadra with Deutsche Bank.

Quickly on MasterCard. If I heard that number right, it was the growth 40%. That seems like an acceleration from the mid-20s that you've seen in the past few quarters. So I was just wondering if you could provide more color on that front?

Yes. Ashish, this is Eric. Yes. I mean, when we called out that 40% or when I called it out, that is normalized, assuming the same fuel price in 2015 as we had in 2014. So it's on an apples-to-apples basis. That product has been growing kind of in the mid-20s. I guess, if you go back and you look at the last several quarters, our growth rate has accelerated a little bit in the quarter. Again, it does bounce around kind of from quarter-to-quarter. So we saw growth in both transaction volumes and gallons during the quarter, and we also saw growth in revenue per transaction as well, which is kind of contributing to that increase. But it does bounce around a little bit from quarter-to-quarter.

That's great. Just quickly on the international front. It looks like the organic growth was pretty good there, 9%, but the transactions actually declined in the quarters year-on-year. So I was wondering if you can just provide some color on the transaction growth in international? And when do we see that trough and improving going forward?

Yes. I mean, if you go back and you look at the international business, I think Ron actually made some comments around this. I mean, certainly, there are some businesses that have softened a little bit. You look at our Russia business as an example, which is kind of flat to kind of down from prior year. We've also seen economies soften in places like Brazil, which have impacted transaction volumes. But we have other places where transaction volumes are actually performing well. I mean, the U.K. as an example, the rollout of euro shell into the couple of markets that we're already into. And when you add it all up, it kind of adds to around flat transaction growth. But again, I think it's more than anything else. It's just softened economy in a couple of places that's kind of driving the number.

Our next question comes from the line of Phil Stiller with Citi.

Ron, I think on the last earnings call you talked about accelerating some price recovery initiatives in the first quarter. Maybe you could talk about how that went, what the customer response was, and if there's any additional work to be done for the rest of the year?

Yes, I'd say, Phil, it's worked out pretty well, not perfectly, but I'd say, call it, 90% of what we had planned. I think the reaction has been good. We spent a fair amount of time testing our way kind of in the first quarter. So I'd say there's not much left for us to understand. Now we'll start to pick up some of the benefits of that kind of in Q2, 3 and 4. So, so far so good.

Great. In terms of Comdata, so obviously there's a couple of headwinds to deal with that you still said the earnings growth should be north of 20%. I'm just trying to understand, I guess, how much of that is from revenue growth versus synergies. So now that we consider a couple of the revenue headwinds, how much should the revenues in that business should be up this year?

Yes. Again, I think we called out when we did the deal, 10% and 20%. Right. There's a lot of operating leverage in that business below the line, so we built an internal plan that had total Comdata without SVS, call it, in the low teens on the top, and as I said earlier, kind of mid to high 20s on the bottom. And despite the opt-out thing that I called out, it'll still be, we think, 10-plus on the top and 20-plus on the bottom this year.

Okay, good to hear. Last question, I guess, on the acquisition pipeline. Balance sheet's starting to look better. How does the deals look in the pipeline?

They look the same, Phil. We are working on a series of things, some early, some kind of in the middle. And actually, we just had a board meeting last week to review our liquidity, and we've got plenty of liquidity there in our line that we can draw on to do transactions. And second, we're coming out a bit the other side of a lot of Comdata work. It's about, what, 9 months, I guess, since we signed. So I'd say we are eager if we can -- we could find the thing that we like.

Our next question comes from the line of James Schneider with Goldman Sachs.

I was wondering if you could maybe address the opportunities that you're seeing from European oil companies and any sense of the timing for when you could see more RFPs come to bid?

Yes, James. It's Ron. I don't think much has changed on that front. The same likely suspects are evaluating. Some are in RFI mode. Some are in RFP mode. And I'd say, as I mentioned, we're grinding along trying to brief them and get them comfortable. As I've said in some of the prior calls, I think all of them want to see how we and WEX do with Shell and Exxon and make sure we do a good job, have the right proof, the right kind of confidence. So I'd say again that there's big clients with big portfolios that are evaluating the thing, and we'll see when they'll finally pull the trigger.

That's helpful. And then on the virtual cards, could you maybe update us on your efforts to expand either different verticals beyond the kind of construction healthcare verticals you're in now? And maybe any talk about how the sales and marketing investments you're making in those 2 verticals are playing out?

That's a great question. We've identified a couple of others. I'm not going to call out what they are, but 2 additional verticals beyond the 2 that you named. It fit our screen in terms of the kind of clients, the kind of merchant that work the economics, the characteristics that make those attractive. And then second, we completed a big growth piece of work that we commissioned a couple of months ago and have started investing. We put millions into the budget, I think I've mentioned before, to step up spending in a bunch of areas. And so for example in construction, we've got a good position, but it's tiny against the potential. So we're doubling down on that vertical and also in the direct to the horizontal area. So we are eager to build up that business, and we're spending money right now to do it.

Our next question comes from the line of Matt Lipton with Autonomous Research.

Just the first on Brazil. I'm not sure it's been mentioned on the call. It's the number of other fintech companies this quarter have talked about -- that do business in Brazil have talked about becoming more cautious in the environment there. And you have unique products in Brazil. So I guess any update, either Ron or Eric, would just be helpful on Brazil first?

Yes, I think that call-out, Matt, is right. I think the thing went from a darling when we get in; whatever, 3, 4, 5 years ago to less so today, and obviously, that affects employment-related products right in the conversion of formal employment. So we would concur with other people that the environment is not the greatest. But for us, going from having, call it, a couple of products, including kind of a paper toll product to having the market-leading food card, the market-leading fuel card and now an electronic toll product, I'd say that the opportunity -- and again, we're pouring a lot of money in the opportunity for us to grow these new lines, despite kind of a flat economy, we still think is terrific. So the core business we have isn't going anywhere too fast because of those reasons, but we think the new lines of business will.

Just a quick follow-up there. When -- have you just launched the new lines in the electronic products, or have those been in the market for a while?

Yes. I mean, if you kind of run through the 3 products that we did a deal, we get a food card product which we started marketing in a big way in the fall, so call that 6 or 8 months; the new fuel card product went live, call it, a couple of months ago; and literally, as we're speaking here, the electronic toll product. So everything is, call it, 6 months new.

Okay, that's great. And then just a follow-up on M&A. On the last call, obviously, you talked about Comdata being what was holding up the corp dev team's plate. I think during the quarter you made some comments that, that was pushed down to the operating units. I mean, is SVS big enough that it's also a hurdle for the corporate development team to work on deals, or can those things happen in tandem?

Yes, they obviously can happen in tandem. We've got a bank that's helping us on the SVS work, which has given our guys some leverage. And again, we continue to work the relationships that we have, and we are actively looking at a set of things now. So we're back and busy on it.

[Operator Instructions] Our next question comes from the line of Glenn Greene with Oppenheimer.

Just a couple of questions. Could you give us a sense for what the Comdata revenue and margin contribution was in the quarter?

Yes. Glenn, this is Eric. In total, the Comdata revenue was approximately $145 million. From a margin contribution perspective, I don't have that number specifically. We have taken that business and kind of merged certain segments of the business with some of other FleetCor businesses, so it's kind of hard to dissect that. But as a general rule, when we bought that business, the margin profile was a little bit lower than FleetCor's. And obviously, our objective is to, through revenue synergies and cost synergies, obviously, to increase the profitability of that business and make it more in line with the FleetCor average. But to-date, it is a little below the FleetCor average.

Okay. And that $145 million, is there a way to frame that growth? Was is in that 10% range or a little bit lower than that and you're going to sort of build to that 10% range over time?

It's the latter. We grew that business. If you exclude the SVS business, I think that grew organically around 7% in the quarter. And obviously, it's our stated objective effectively to get to that business to grow more in the 10% organic range. And again, we've just started with the integration process and are starting to invest more money in sales and marketing, and it takes time to actually build up that capability. So we should see, hopefully, those numbers increase as we get towards the end of the year and into next year.

Just remind me, the corporate...

Mr. Greene, we lost your line. [Technical Difficulty]

Our next question comes from the line of Tim Willi with Wells Fargo.

First, I had one set of housekeeping questions, Eric, then a question for Ron on the virtual card. But I just want to make sure I have organic growth rates correct. You gave them out several times. I just want to make sure. You said North American fleet constant fuel price was 14% organic. Is that correct?

Correct.

That is correct.

Okay. And the 9% constant currency, constant fuel for international getting to 11% in aggregate for the corporation. Is that all correct?

Pre-Comdata.

Pre-Comdata. The 9%, post-Comdata.

Okay, 11% pre, 9% post. Got you. Okay. Great. Very helpful. Going next to the virtual card, and I get a follow-up. I think it was Matt's question. Ron, going back to sort of the opt-out and that question, obviously, that's a product that costs the recipient of the payments probably 2-plus percent and they balk at that because they know they're going to get their ACH filed for their checks. I guess, when you think about the profitability of that business versus the growth and driving the market particularly as you go to different verticals and more horizontal, is -- or what part of the game plan potentially be to sacrifice some of those economics either through rebates for people to accept it and/or to channel partners to get out there and push the product a lot more? Are you willing to try to protect the economics as they look now and just take it at whatever pace the market allows you?

Yes, I think, Tim, it's probably too early to call. I think you're on a good point. Obviously, there are some merchants who reject the payment method out right and then others who take it and then choose to opt out. And to your point, if you made a different proposal, like a Comdata direct that didn't have the same interchange or requiring rates you might get those people back. But I think, again, the thing is still roaring. It's early days. There's tons of markets. There's tons of merchants taking it. There's a lot of benefits versus taking pay for even ACH in terms of the recon and stuff. And so I'd say our early view is there's enough interest in the benefits of this thing and it's growing fast enough that we're going to kind of leaving it at as it is for now and take a look a different day.

And if I could just follow-up, obviously, you guys have shown to be very diligent about innovating and creating product on top of the fleet platforms and other stuff you bought into as you've gotten to know this business. You see lots of opportunities around this -- the core of the product for product innovation, whether it's software or data or what have you that would maybe help drive acceptance further?

That's a really, really good question. We're actually in the middle of that project right now. We've gone back and underwritten a huge study on both the AR and the AP side to try to understand whether we need a more holistic offering for AP people. And then your point, is there a different set of services we could provide on the supplier, on the merchant side to make them happier? And so we've got, as you can imagine, a number of ideas, and so we're kind of working through that. But the answer is, yes, we will clearly broaden the things we do for both sides of the wheel there over time.

Thank you. That is all the questions that we have in queue at this time. This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.