Greetings, and welcome to the FleetCor Technologies, Inc. First Quarter 2016 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, Mr. Eric Dey, Chief Financial Officer with FleetCor Technologies, Inc. Thank you. You may 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, 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 information appears in today's press release and on our website, as previously described. Also, we are providing 2016 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 2016 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 Security 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 that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO.

Eric, thanks, and thanks to each of you for joining the call today. Up front here, I plan to cover 3 subjects: first, I'll comment on our Q1 results; second, I'll discuss our 2016 guidance; and finally, I'll update you on our company's strategic progress. Okay. So on to the quarter. We're delighted to report Q1 revenue of $414 million versus $416 million last year, so essentially flat. We reported Q1 cash EPS of $1.53. That's versus $1.45 last year, so up 6%. So that earnings result is a bit better than our guidance. On a macro neutral basis, that is adjusted for fuel price, fuel spreads and FX, revenues actually grew 10%. That's excluding SVS. And cash EPS grew 20%. So growth of 10% on the top and 20% on the bottom on a constant macro basis. We called the macro environment right for the quarter. Fuel prices and FX came in virtually on our plan. Fuel spreads were a bit worse than planned because fuel prices started to rise in mid-March but basically as we planned. There were 5 primary drivers of growth in Q1. So first, the MasterCard business. A great quarter. Volume was up 17%, helped by Uber. And revenue was up 48% on a constant macro basis for the quarter. So that product continues to have legs. Second, Comdata was solid. Comdata trucking fuel card business up 11% in the quarter and corporate payments business up 13%, excluding health care. So a good Comdata quarter. Pac Pride, a business we acquired about 1.5 year ago, doubled revenue in the quarter versus last year. A good result. The Shell Europe outsourcing business was up 150% for the quarter, mostly due to the rollout of additional markets. So a lot of help from Shell. And then lastly,…

For the first quarter of 2016, we reported revenue of $414.3 million, relatively flat to the $416.2 million in the first quarter of 2015. The revenue from our North American segment increased 1.6% to $303.5 million from $298.8 million in the first quarter of 2016. Revenue from our International segment was down 5.7% to $110.7 million from $117.4 million in the first quarter of 2016. For the first quarter of 2016, GAAP net income increased 16.8% to $110 million or $1.17 per diluted share from $94.2 million or $1 per diluted share in the first quarter of 2015. 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. We prepare adjusted net income to eliminate the effects of noncash items that we do not consider indicative of our core operating performance. 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 2016 of $386 million were relatively flat compared to $388.8 million in the first quarter of 2015. Adjusted net income for the first quarter of 2016 increased 6% to $144.3 million or $1.53 per diluted share compared to $135.9 million or $1.45 per diluted share in the first quarter of 2015. Included in the first quarter results was the impact of the macroeconomic environment, which continued to be unfavorable versus the prior year. When we talk about the macroeconomic environment, we are referring to the impact that…

[Operator Instructions] Our first question comes from the line of James Schneider with Goldman Sachs.

Good performance in the Comdata fleet business again, I think, 12% growth you called out versus 13% growth last quarter. That's an improvement after you acquired it, clearly. But as we go into the back half of the year, how would you expect that business to trend? Would we see a deceleration there down to the high single digits or 10% range? Or is that a little bit too aggressive?

James, it's Ron. I would say if you looked at our plan, we'll probably step it up a point or 2 as we have through the year.

Okay. That's a fair enough. And then maybe you could just update us on the same-store sales trend that you saw in the quarter. I don't think you broke it out, but you did last quarter. Any improvement then in the verticals that you touched on last quarter that was driving headwinds? Or is it pretty much same old, same old there?

Yes, it's a little better. I think our consolidated number for Q1 is kind of minus 1%. So still a bit of a headwind. But I'd say it's more pocketed. There are places that are kind of okay to good and then some other places like CLC with the railroads and Russia, Brazil that are still quite bad, 7%, 8% negative. So it's not kind of an average across the board. It's quite pocketed.

And then just one last one, if I could. Can you maybe just comment on the overall pricing landscape with respect to your different customer segments? Do you feel like you're sort of maxed out there in terms of what you were able to achieve in terms of pricing actions? Or do you feel there's a little bit more in some areas you can do?

Yes, James, there's always more. It's just the decision of, like we say, how -- where to push and how to push. I'd say we're pretty comfortable where we are, but I would say there's always more opportunity.

Our next question comes from the line of Sanjay Sakhrani with Keefe, Bruyette, & Woods.

This is actually Steven Kwok filling in for Sanjay. Just the first question is around STP. What was the next steps that you need to take in order to close the deal?

Steven, it's Ron. So I'd say there's some set of kind of closing conditions, a handful of closing conditions with the primary ones being antitrust approval. So we have filed that a few weeks back and our quote in that process, our best estimate again is kind of early Q3. So I'd say that's probably the long pole.

Got it. And then just if you could comment around like same-store sales trends. Have you seen any diverging trends within, whether it's the U.S. or the rest of the world?

Yes, I mean, that was the comment I made. I'd say again that kind of on a weighted consolidated basis, we were minus 1%. But if you looked across our 15 or 20 businesses or geographies, there are a number that were in the plus column, some that were kind of flat and then a few that I called out were still quite negative, Brazil, Russia, the CLC railroads, 7%, 8% softness. So a mixed bag on same-store.

Got it. And then last question just around the M&A landscape. Any particular areas you are looking at?

Yes, I mean, I think we sound like a bit of a broken record. I'm actually looking at our deal pipeline page sitting here on the call. So I would repeat again that we have a number. So more than 2 things that are "active" in our pipeline beyond STP. And I'd say to looking at the list, it runs the gamut, we've got a couple, 2, 3 kind of tuck-ins, small things that are in markets we're in, a couple of things that get us into a new geography. So again, I'd say it's a range of different opportunities.

Our next question comes from the line of David Togut with Evercore ISI.

Could you comment on AllStar performance in the quarter? You've been rolling out a chip card with AllStar through Visa. I'm wondering if that's affecting same-store transactions at all. And/or are you seeing any incremental revenue per transaction as you upgrade from max right to chip card?

David, it's Ron. I'd say it's probably still on the disappointing side. Not much different than I think when we spoke last. I don't have it in from of me, but I'd say the U.K. was probably south of 5% organic for the quarter, and it's mostly just pace. I think it's the same comments in the last call that the pace of conversions, we have about half the book converted, and then getting people to use the card properly that gives us the advantaged economics as a bit of a learning and then again getting the incremental salespeople to sell more of that product. So it's the combination of the 2 or 3 things that will create lift are still getting worked. So I would hope and our plans here that thing will trend up as we move through the year.

Got it. And then staying on International. Could you comment on the big oil pipeline a bit, whether you're seeing any movement in that? And what are the some of the big oils looking for in Europe to make a decision to outsource?

Yes, I think we mentioned although this thing is glacial, there are actually a couple opportunities, partner opportunities that have moved from kind of RFI to RFP. And I would say that we think there would be at least a couple, 2 partner decisions that would happen in this year in 2016. So we'll obviously be back here. But I'd say that the good news like there were a couple over the last couple of years, it appears that at least a couple have moved far enough ahead that they're going to make a decision.

And would those be more on the SME portfolio like Shell? Or could you see some of the larger fleet business being outsourced?

There's actually a couple of flavors in the 2. There's one that's got a more traditional take the program, and there's another one that looks more like the Exxon and Shell model.

Got it. Just a quick final question on Uber. I think you were -- Eric called out Uber as a growth driver. Could you put some numbers around that so we can understand how substantial that is and what the outlook might be?

Yes, Eric, you might have the numbers. I'd say, David, the thing again is rocking, right? We introduced it not quite a year ago. And both the adoption of drivers and usage has been high. And then Uber has continued, because people like it, drivers like it, to extend the offer to more drivers. So the thing is literally building sequentially. I mean, it is -- I would say it's probably 1 of the top 3 or 4 largest clients that we have now in terms of volume in North America already. And it's not a year old. And obviously, as you know, I mean, although not agreed or whatever, the opportunity to take that thing beyond the U.S. is still another huge opportunity if Uber gives us a call for that.

David, this is Eric. Just to add on to that, although Uber does have a lot of gallons and it is progressing very, very nicely, it is a lower revenue per tran product, just so you're clear. So it's not as revenue intensive as some of the other products that we have.

Our next question comes from the line of Danyal Hussain with Morgan Stanley.

It sounds like macro is in line. So were there any surprises in the quarter on a fundamental basis versus your expectations? Or is growth broadly in line?

Yes, Danyal, it's Ron. I'd say of the key macros, again, fuel price and FX was kind of spot on our plan. We did a little bit of headwind, I think, call it, $4 million or $5 million lower than our plan on spreads because fuel prices ticked up kind of starting mid-March. So that obviously contracted spreads a bit. So I'd say that's the only macro thing in the quarter. And then I'd say again, if you looked at our plan versus the consolidated thing, I'd say most, virtually all, businesses kind of are where we expected. So I'd say in the past few years, this was about as ratable a period as we've had in terms of our expectations against the actuals.

Got it. And you called out being in now 12 of the top 20 fuel markets. Can you give some color or examples of what the other 8 are and if those countries even have fuel cards or what the sort of path might look like to penetrate those markets?

Yes, I mean, the first thing I'd say is to have started out the first 7 years in the company being in the U.S. and to be in 12 of the top 20, and said repeatedly, of those 12, 6 of them we're just barely in. So the first point is there's enormous runway in the 12 served. But of the 8 not served, I mean, the biggest block would be obviously Asia. So the first 3 to come to mind would be China, Japan, South Korea. So we're not in those 3. Obviously, 2 of those are huge. And then in Continental Europe, a couple that jumped off to me are Italy and Spain that we're not in. I think Turkey as well is a top 20 that we're not in. And then I guess the last one that comes to mind that's huge that we're not in is India, which, I think, is a lot farther away. So I would say that we are chasing hard a couple of European geographies that we're not in. And I'd say the Asia one's probably a bit more difficult.

Got it. And Eric, maybe you can just clarify the tax benefit in the quarter. It sounded like it was $3 million of total benefit and is it -- of which $1.2 million was planned and might recur over the course of the year. And maybe you can just give, I guess, some guidance on what the full year rate might look like.

Yes, I think you're correct the way you said it. We worked on a couple of tax projects last year, and those tax projects concluded toward the end of the year last year. We did have some carryover effect to a couple of the projects where we booked some favorability into the first quarter. That really pertained to last year. It was kind of a couple of -- or $3 million that we called out. In addition to that, the tax projects will have an ongoing favorable impact to our tax rate of about, call it, $1 million or so per quarter, which we called out as well. And that will be ongoing. The balance of the year tax rate, expect something in the 31.9% range.

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

A couple of questions. First, just going back to CLC. I think that 7% number is probably one of the lowest at least I can recall in a while. And I know you called out oil and sort of energy markets as a drag. Could you maybe -- if you were to separate that vertical or those industries, what would the rest of CLC look like on an underlying basis? Just approximation if you don't have it exactly.

Yes, Tim, it's a Ron. So the short story on CLC, which was run in kind of mid-teens, mid- to high teens, so this softness started, call it, Q3 last year. So kind of 3 quarters in, Q3, Q4, Q1. And basically again, CLC is a business with 2 portfolios. One, it's got 25, 30 big clients. It's been around a long time, do huge volumes that include railroads, trucking firms, some oil companies, et cetera. And then it's got thousands and thousands of SMBs that's got 10, 15 cards. So the problem is in the first group where that group is quite soft and causing about 8% softness versus Q1 the prior year. So effectively, if those accounts were doing the volumes they were a year ago, that business would be at 15% again organic for the quarter. So the other half of the book is growing high teens and revenue close to 20%, and the larger account book is obviously not growing much because it's negative 8% softness.

Okay. And a follow-up on this and then I have one more. I can't remember is if this was asked on a prior call. But within those large enterprises, I'm thinking about the Comdata customer base, can you just refresh our memory if you talked about it before, the cross-sell opportunity, are they there or are a lot of those big Comdata customers already CLC customers?

Yes, that's a great question. We actually -- I think I did mention this. We private-labeled or Comdata-labeled the CLC program starting in Q4. So we took the CLC thing. We created a way to use the Comdata cards at the hotels. We trained up the Comdata sales group, and they've been out selling to both big and small accounts. And the last review I had a couple of weeks ago, I think we've on-boarded 300 new accounts in the first, whatever, 90, 120 days. So yes, we've had trucking -- CLC had trucking clients before we own Comdata, but now we packaged the product for Comdata and targeted our salespeople back to the Comdata base. And so the early views are great. The clients like that we have something else to offer them that's got some value, and a bunch of them are taking us up on it.

Great. And then I had my last one just going to sort of the corporate payment side at SVS. I know you referenced the growth rate ex health care. Just sort of curious, now that you've had that asset, I guess, for a little bit over a year now, 15 months, give or take, have any new specialized verticals emerged for that application in terms of growth opportunities or anything around the sales side, just generally speaking, around corporate payments? Or are you sort of making the investments and maybe we're on the cusp of some things happening? Or is it going to be more sort of just steady as she goes kind of performance there ex health care?

Are you on SVS or you're on corporate payments, Tim?

I am on corporate payments, the corporate payments business.

Yes, so the corporate payments business, again, is a bit of a tale of 2 cities. The health care thing continues to be soft. A couple of big accounts we called out a year ago. One of those has kind of gone for good, and the other one is kind of slowly coming back. We got a bit of it, but we'll see more as we exit the year. So that business is really down, that little subsegment. But the rest of the business is up crazy amounts. The construction business is up 20% to 25%. The reseller business is up 30%. So we are -- I think I mentioned we're pouring. I think we doubled the sales headcount in that business in the last 6 months in terms of people literally on the street today. So the "business without health care" is growing well. And I'd say the sales, which is the lead indicator for revenue, are quite good. So again, I think we like it a lot other than the stub we had in health care.

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

The growth in your MasterCard offering has been -- was obviously incredibly impressive in the quarter and has been helped for a long time. Can you once again help us think through the drivers of that growth? Maybe have those drivers changed over time? And also just a little bit of color on the sustainability of the growth. I know you mentioned Uber was a contributor this time around. But should we expect this kind of healthy revenue growth in this product category to just continue as far as the eye can see? Or what are your thoughts there?

Yes, Ramsey, it's Ron. So yes, I would probably say no to 48%. I think we sounded a little bit like Google with that. But I'd say we're super bullish on that thing being high teens, low 20s grower for kind of as far as we can see because it's a product that just fits everybody, right? Every geography, every size, group. So it's really we dialed that product in to be a really attractive product. The drivers of it are sales. We poured sales in it. So the volume, I think, I quoted up 17%. Some of that Uber, some of that is just again the sales investment. It's mix again. We're pouring money into digital. So we're going down market a bit. And some of that volumes were getting obviously much better rate as the mix keeps getting smaller in that portfolio. And then lastly, we did pour some rate stuff in Q1 of '15 when we saw the fuel prices tank. And so we're at a point here where we have that rate kind of sitting in Q1 of '16 and it didn't sit all that much in Q1 of '15. And so I'd say that the 48% is a bit artificially high for those couple of reasons. But again, this is a long-term grower for us.

Great. That's super helpful. A couple of quick ones on Sem Parar. How did the company do in the quarter?

It's funny. We reviewed that. I'd say it was exactly on expectation. So as part of our acquisition and theses, the company had a budget, and we -- FleetCor built a model. And what they've shared with us is basically spot on what we thought, which was quite comforting.

And last one also on Sem Parar. Any changes in the financing terms on that transaction? If I'm not mistaken, it seems like spreads have gotten a little bit more favorable since you announced the deal. I'm not sure if that's the case or not, but any incremental view on financing costs there?

No, it's about the same. We're financing that transaction through our existing debt facilities. So rates are effectively fixed in that facility. So expect to see something at LIBOR kind of plus 175 from a rate standpoint for that deal.

Our next question comes from the line of Tien-tsin Huang with JPMorgan.

Great. My name was terrifying for the operator, I'm sure. Yes, so a lot of good details as always, guys. Just the sales, the booking dollars, I think, Ron, you said up 27%. Where are you putting -- where are you seeing some of that good sales performance? Is it more international, domestic? Is it in the same areas or maybe some new areas? Just trying to understand that better.

Yes, Tien-tsin, it's literally almost across the board. I've got the page here in front of me. I mean, the U.S. numbers were up big, part of it is because we a good quarter a year ago. The Comdata bookings were way, way up, right, because we made big investments both in the trucking line of business and in the corporate payments business. Shockingly, even our Russia sales are way up as that thing has started to stabilized a little bit, the people stabilized, the sales are way up. So I'd say other than Brazil, most other areas, the CLC business had a rocking up 34% over the prior year. So it's -- I don't know, investors are not as focused because it doesn't make its way into the P&L. But for us, it's the single best indicator of health, right? Shop your stuff today and the people want it and so it's quite encouraging for us to be up that much.

Sure. I know it sets the stage for growth to come, which is why I want to ask on the international side, organic growth. I think, Eric, you said it was 6% with some of the new sales and sales and marketing going into different areas. Can we see that improve? Or is it really going to be more of a macro cyclical thing that drives it?

Yes, Tien-tsin, it's a little of both. I mean, obviously, the macro impacted a lot of our international segments pretty dramatically in the quarter and same as last year. The good news is we are building some sales momentum in some of those geographies that we're investing more money in. As Ron called out, Russia as an example. We're pouring more money into places like the U.K. and hope to see some better results as we look kind of for the rest of the year. And I would say if we had one spot where we need to improve, again, it's kind of Brazil where we're seeing a bigger macro impact. But all in all, the sales were kind of really good in the quarter, and those will eventually translate into revenue as we move along.

Thank you. Ladies and gentleman, that's all the time we have for questions today. This does conclude today's teleconference. I'd like to [indiscernible]. You may disconnect your lines at this time. Thank you for your participation.