Greetings, and welcome to the FleetCor Technologies, Inc. Second Quarter 2016 Earnings Conference Call. 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. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our second quarter press release. It can be found at www.fleetcor.com under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income and adjusted net income per diluted share. This information is not calculated in accordance with GAAP and may be calculated differently than other companies' similarly titled non-GAAP information. Quantitative reconciliations of historical non-GAAP financial information to the most directly comparable information appears in today's press release and on our website as previously described. Also, we are providing 2016 guidance on both a GAAP and non-GAAP basis with a reconciliation of the 2. 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 and on our quarterly report on Form 10-Q 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 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, and thanks to each of you for joining the call today. Upfront here, I plan to cover 3 subjects. First, I'll comment on our Q2 results. Second, I'll update you on our acquisition and business development progress. And lastly, I'll provide some updated 2016 full year guidance. Okay. So onto the quarter. So earlier, we reported Q2 revenue of $418 million and cash EPS of $1.56. So this represents 3% top line and 5% bottom line on a reported basis. On a macro neutral or like-for-like basis, organic revenue growth was 9% and cash EPS growth was 16%. So 9% top, 16% bottom, which would be spot on our organic growth targets. We did finally get a little bit of help from the macro environment. U.S. fuel prices averaged $2.31 for the quarter, which was a bit above our internal plan, and we got some recovery of the Brazilian reai in Q2, which strengthened quite a bit. So nice to finally see a little macro recovery for FleetCor. Unfortunately, our same-store revenues continued weak in the quarter, down approximately 2% versus the prior year. The weakness was concentrated in oil and gas, railroads, health care and then more generally, in the Brazilian and Russian economies. The growth drivers in the quarter were similar to what they've been. So first, great U.S. MasterCard quarter, again, up 27% on constant fuel prices. A healthy 9% CLC quarter, that's despite this ongoing softness from our large railroad accounts. Terrific Comdata performance. Our 2 biggest businesses, North America Trucking and Corporate Payments, both double-digit growers in the quarter. And last, we did get some help from the Shell Europe outsourcing program, which continues to move forward. In terms of sales for the quarter, we had a very strong new bookings quarter,…

Thank you, Ron. For the second quarter of 2016, we reported revenue of $417.9 million, up 3% compared to the $404.6 million in the second quarter of 2015. The revenue from our North American segment increased 6% to $301.1 million from $284.6 million in the second quarter of 2015. Revenue from our International segment decreased 3% to $116.8 million from $120 million in the second quarter of 2016. For the second quarter of 2016, GAAP net income increased 16% to $114.2 million or $1.21 per diluted share from $98.7 million or $1.05 per diluted share in the second 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 or nonrecurring 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 second quarter of 2016 were $395.6 million, up 3% compared to $382.9 million in the second quarter of 2015. Adjusted net income for the second quarter of 2016 increased 6% to $147.1 million or $1.56 per diluted share compared to $138.9 million or $1.48 per diluted share in the second quarter of 2015. Included in the second quarter results was the impact of the macroeconomic environment, which continued to be unfavorable versus prior year-over-year. When we talk about the macroeconomic environment, we are referring to…

[Operator Instructions] First question comes from David Togut with Evercore ISI.

Nice to see the pickup in CLC revenue growth, 9%, up from 7% in Q1. Could you talk about the drivers that led to the acceleration in growth at CLC? And how will you expect CLC to perform for the balance of the year?

Yes, David, it's Ron. It's the same tale of 2 cities, right? So the large account business there continues to be a bit of a drag. The top 4 or 5 accounts that are railroad accounts are still 20% to 25% down from a year ago. So what that does is bring down the growth rate of the SME piece, which is in the 20%-plus range, down to this 9% or 10%. So basically, I think, going forward, as we lap the big account business, the growth rate should keep picking up.

That's encouraging to hear. Just shifting gears over to AllStar in the U.K., last quarter you talked about a transition towards the Visa chip card program. What was the growth in AllStar like in terms of revenue in the quarter and how would you see that progressing?

I'd say we're probably more disappointing. And I think I could literally restate, David, what I said last quarter. So better, I think, it picked up a point or 2 from last quarter, but we're still trying to do 2 things there. One, move the rest of the base over to this new product, which we call AllStar 1, that we have better economics. And then 2, train the users how to use the card at the point of sale, which gives them cents off and gives us better economics, so those are still 2 priorities. If we get that done, which the plan is to get it done in the second half then those numbers will start to pick up.

Got it. And then if you could update us on the contribution to transaction revenue from the Uber account, if you could give us a sense of how rapidly you expect that to ramp in the back half of this year and '17?

Yes, I mean, it's still from a volume perspective, growing like a weed sequentially, so every quarter that we look, it's up significantly versus the prior year. We think it will still grow. Uber has indicated some interest in maybe expanding the driver pool that they offer the program to because the feedback has been so positive, and we continue in discussions about the idea of maybe offering it beyond the U.S. So I would say those are the couple upsides to really continue growth next year. But with that said, remember it's not a big revenue per tran kind of account for us, so although it delivers a lot of volume, it delivers a lot less than line average revenue.

Got it. Quick final question for me. If you could update us on the pipeline in Europe, particularly with the big oils and any insight you have into Shell? I noticed that WEX announced a prepaid card deal with Shell in Europe and Asia. You have the SME business in Europe. If you could update us on how you see Shell progressing and maybe the broader landscape with the big European oils?

Yes, that's a good question. So I'd say on Shell, the good news is, we're coming to the conclusion of this Shell Europe outsourcing program, so the original idea was to convert 12 or 13 of their markets. They ended up selling off a market so the total ended up being 11. We're actually live in 9 of the 11 and plan late this month, so before August is over, to be in the remaining 2. So call it by September we'll have completed the entire conversion of that program in what, 2 to 2.5 years from contract signing, Eric, somewhere in that range. So I'd say, David, that's the good news and we've done a good job getting the thing over. And if we perform well, right, both in terms of the technology conversions, which we have, the service level and probably most importantly, the sales of new business, my guess is, they'll probably throw more our way, but they'll want to see their performance first. So I'd say that, that's a subject to revisit probably next year. In terms of beyond Shell, I think, I mentioned in our prior call that there were a couple of major oil RFPs. Hopefully, we'll take the mystery out of one of those, which we announced earlier, which leads. There's still a decision we believe to be made this fall by another company. So I'd say that's the status kind of 1 significant thing still to be decided.

The next question comes from Ramsey El-Assal with Jefferies.

Was the Speedway win, was that a competitive takeaway or were they doing it in house prior?

Ramsey, it's Ron. So I guess the answer is both. So yes, they were doing it internally and yes, it was a competitive process among outsourcers.

Okay, okay. And then I know it's a small part of your business, but Pac Pride revenue is up 80%, I mean, that's a big number. What are the drivers there? How did you guys enter that?

Yes, again, I think the short story, when we bought that, is kind of copying the playbook from CFN. So the 2 companies that are in kind of this card lock business, CFN and Pac Pride, we proved that by offering an extended network, a more convenient network to these kind of private label cardholders that they would you sometimes the convenient network, if you will. And then in the CFN case, they use a kind of, I don't know, 20% of the time. And so we did the same thing with Pac Pride. We reengineered the cards so that it could work beyond the 1,500 or so Pac Pride locations and work in a network of an additional call it 30,000 locations. So as the transactions grow in the convenience network, so do our revenues. So we expect that business to continue to grow for the foreseeable future.

Okay. Lastly, from me, you've spoken about this in the past, but can you remind us what are the revenue synergy opportunities with STP?

Well, there are all kinds. I mean, the most obvious one for us would be both cross-selling of the client base and utilization of their sales force. So again, they've got call it 100,000 business clients. So when we look at those, the overlap against our own fuel card and food card business is pretty small. So the first thing we would do is, obviously, talk to the existing STP corporate accounts and offer up the other FleetCor products. And then the second one is, they have a field sales group for both consumer and business of about 1,500 people, both field people and people located like in mall kiosks and stuff. Same idea, it's kind of a single product selling machine today, selling kind of electronic toll. So the idea would be to take some select set of people and locations and again start to offer the rest of the FleetCor product line. So I'd say those are the 2 kind of obvious marketing and sales ideas.

And is any of that contemplated in your accretion guidance?

It's not.

The next question comes from Jim Schneider with Goldman Sachs.

I was wondering if you separately from the outsourcing deals that you mentioned, can you maybe talk about portfolio sales and whether you see any more asset availability in the market and potential pricing for those assets relative to what you are willing to pay?

I'm not sure, Jim. Say the question again, I'm not sure I got it.

In terms of the potential portfolio of sales rather than outsourcing...

What does that mean portfolio? Oh, you're saying like the Shell example?

Correct.

Yes, okay. Is there an opportunity for more of those?

Yes. And do you see any more of those assets kind of on the horizon and kind of what are you thinking about the valuation levels that you're seeing in the market?

Yes, so the short answer is, yes. In fact, that's really in essence what the Speedway transaction is. It looks really identical structurally to the Shell outsourcing deal. So I think that's a model that the oil companies are starting to move to. And yes, some of the additional RFPs and interest that's out there in the marketplace is of that same variety.

Fair enough. And then you mentioned corporate payments up 13% in that Comdata business. Obviously, you've seen some health care headwinds there, but you've also mentioned about the doubling in the sales. So can you maybe talk about how long dated that backlog is? And what you think a normalized growth rate might be in that business as we get a little further out a year or 18 months in the future?

That's a great question. So the first off is, we've lapped the health care surprise we had whatever a year ago. So that health care segment is fundamentally stable or flat now. So fundamentally the rest of our corporate payments business is, obviously, growing faster than 13%, so that's good news. Two, as I mentioned, we doubled sales. We doubled fundamentally the headcount in that business from when we bought it, people selling corporate payments and the install cycle on that is way longer than fuel cards. I'd say in our models think 6 to 12 months maybe a peg, Jim, other thing might be 9. So if we made sales in Q2, think of that converting fully to revenue call it 3 quarters later. So your last question, stock question was growth rates. So hey, we posted 13% now, which is faster without the health care business. So I would say, again, it's fundamentally a function of our investment, but I would say that should be accelerating certainly into the high teens as we move through the year and into next year. And I think it's a function of how much we elect to invest in 2017. But again, when you double the sales of something we've it said before, it's an early stage big opportunity that's really just a function of marketing investment and implementation investment, a lot of demand for the product.

That's helpful. And then just lastly, just on the same-store sales down 2% a little softer than Q1. I think it was down 1%. Can you maybe talk about any leading indicators you're watching to see whether that business could be inflecting or improving in terms of a global basis?

Yes, again, it's tough, Jim, because it's really incredibly pocketed. So if you looked across all of our segments that add up to that minus 2, 75% of our clients are flat to up. So you'd be like well, that seems great. But there were a few verticals like the railroads or oil and gas that are way down, right, 20%, 25% kind of down. And then you've got these 2 markets, Brazil and Russia, which albeit small, again, are way down. Softness levels in literally in the 10% to 15% range across all their clients. And so it's those kinds of crummy economies or crummy verticals that are bringing the line average kind of below the waterline. So I don't know if we have a good guess on either of those when either those verticals in the U.S. will recover or frankly when those 2 economies will recover. Well, your guess is as good as ours.

The next question comes from Darrin Peller with Barclays.

I know I've asked this before, but could you just touch further down the runway around the MasterCard product. Just any reason why that may or may not continue at this pace? And then I just want to follow-up with a couple -- one other one.

Dan, hey, it's Ron. I'd say, again, I think, we said this in the last quarter, we would see that the growth rates that we've shown in Q1 and Q2 will go down. The main reason is, again, there's some fair amount of price that we put into that product line a year or plus ago to combat the headwinds that we had. So that will decelerate as we lap some of that pricing. And there's, obviously, some amount of Uber helping us in there as well. But I'd say the main driver is just again sales investment that product of kind of all our products is the product like for everybody, little accounts with 5 cards like because it's convenient, joint accounts because it works everywhere and it's controlled like it. And so unlike some of our other products, you can sell it in every geography to every segment. And so I guess we like the prospects of kind of double-digit for as long as we can see assuming we can keep investing enough in sales, right, as the base keeps getting bigger.

Even with the anniversary of those price changes which I'm assuming is second half this year, is still going to be well into the double-digit in your view?

Yes, I'm not sure I've actually looked at that product line in the forecast in and of itself. So I would say probably, but it will step down as we anniversary this pricing, which, I think, begins this quarter in Q3. But again, it's an incredibly healthy, it's an incredibly healthy in-demand product.

Yes. And then just on the Speedway announcement, I know you mentioned you'd give us an update for '17, but can give us any preliminary thoughts on the sort of magnitude or materiality of that?

We've got to be a little careful, right, because the client is sensitive. So I try to guide you a little bit with their size as a business. So like their #5 so you can obviously name like Shell, Exxon, BP, Chevron, the 4 biggest oil companies. So they're behind them. And then 2, they've got a really strong commercial card business. And then the comment that they'll be the third largest, they've got 8 or 9 different oil company portfolios in our North America business, they'll be #3. So I'd say it's a meaningful, it was kind of a portfolio acquisition and outsourcing agreement. So it’s kind of full value chain. So it's meaningful for a couple of the reasons. One, it will contribute. You'll see it in our guidance next year. But 2, I think, for us, it's just really reaffirming, right? As the game plays, we get the call and so for us, as more of these come up, to try to win our fair share, it feels pretty good.

Just last question. I know that, you're just about barely to close the STP deal. But with that in mind, I mean, how far off do you think we are from the next bigger acquisition of meaningful size?

You know we're like always in some conversations, but I'd say that over the next 6 months, Darrin, we're going to really focus on eating that. It is a big, big financial business and a massive set of assets business for us. And so we've got pretty bold integration plans. So starting with myself, I put a large group of people plus some outside consulting people, we're going to spend a lot of time trying to get that trajectory to stay great. So I'd say that short-term, call it next 6 months that will be a big part of our focus. And then second, I don't know if Eric mentioned it, but kind of pro forma STP we're going to get into the low 3s at the close. So call it 3 2, just to pick a number. And so I think we told you that we want to run this company kind of around 3. We might spike up temporarily for the right kind of assets. So I'd say that we're not full, we still have liquidity. We've still got an accordion in this new facility. So we're staying out there, but I'd say it's not our highest priority to go get another $1 billion deal over the next 6 months.

The next question comes from Tien-tsin Huang with JPMorgan.

Congrats on the Speedway. Just a follow-up on Darrin's question. Just the [indiscernible] shows its actually a top 4 fleet issuers. So is this just an outsourcing contract, guys? And how much growth potential do you see for the portfolio to grow either organically or by you doing more with the accounts?

You want Speedway, Tien-tsin?

Yes, Speedway. Sorry.

Yes, I mean -- I'd say, a lot, right? So we, obviously, have the fact base of how Speedway ran the thing and how they invested and how they priced the thing and did all the different things. So I'd say that our investment and channels that we have, the ability to use, for example, websites that have 6 or 8 products on it is an advantage that a clearinghouse company like us has, that an independent, a single brand can't do. And our investment with hundreds, hundreds of people in card telesales. They've had more of a field groups. So I'd say that the investment that we plan to make in sales and marketing is behind really a great brand that they've got great locations kind of in this Midwest footprint. We think we'll step that up a lot. And then B, they're squarely opportunities around how we package and price different parts of it. So I'd say that we're quite bullish on the revenue growth potential there.

Okay. Good to know. And then I think new sales up 18%, does that include Speedway?

No, because again, we haven't converted it. We've only both signed the contract, Tien-tsin, so, no.

Okay. A bigger question there was -- because I get the question a lot. How does the 18 and the 27 in the first quarter in terms of bookings, how does -- how can we use that figure to translate that into revenue next year? Is there the rule of thumb of any sort? Obviously, it's a big number, but just trying to contextualize that for.

No, again, I think, we've laid this out before. The math that you really need is the relationship of new to the base, right? So if the base of our company were call it $2 billion and we told you we were selling 20% or something, we told you, hey, we're selling $400 million, and we told you what we are losing, you could kind of model revenue. What, I think, we're trying to do with the sale thing that we're disclosing here is to give you guys a sense of sales investments that we're making. I think, we told them what $20 million to $25 million, Eric, incremental this year?

Yes. Told them that.

So we're growing sales, Tien-tsin, almost as fast. If you take the first and second quarter, I think, we're 20% or something through the first half up, so where the first headline is, we are selling more, right, than we were in the prior year. And then the second one, which, I think, is good for investors is, it's the single best indicator of health, right, if you can sell a card program in July of 2016 then your offers are relevant. And so we call out sales to let people know, people still that are making decisions like the product line that we have in the market today, we're not living off of the past. So those are the couple of the reasons for the disclosure.

Understood. Just one more, just the STP. I think, you said $0.15 accretive now. I thought it was $0.10 before. Did something change or did I just have it wrong?

Yes, it's the FX. I don't have it in front of me, but I think we guided in March when we announced I believe kind of $0.10 to $0.13 was the range. And so if you take the FX, which was just under 4, I think, it was 3 9. I think we use 3 23 if I recall last week to model that so the range has just moved up to whatever, 13 to 17 call it from 10 to 13. So it's up kind of $0.03 or $0.04 really on FX. But the business is kind of where we thought, I disclosed what's out there publicly on the company. When you think about a company in that economy with that kind of softness, that I called out growing revenues 11% in the first quarter. But the thing is just powering through a pretty tough place. And so what we haven't really taken up their core forecast for the balance of the year just really made the FX adjustment.

The next question comes from Ashish Sabadra with Deutsche Bank.

My question was on the SVS. SVS also grew pretty solid this quarter, if I back in the number I get more like 17%. And I thought this was more like a low single-digit grower. So I was just wondering if you can confirm my numbers were right and what's driving the growth there?

Ashish, this is Eric. You're in the ballpark. To correct, SVS had a very good quarter. There is, obviously, a lot of seasonality to the gift card business and effectively what happened in Q2 was, there were some card purchases that would normally have taken place in the third quarter that were actually accelerated into the second quarter, which kind of drove the growth in the second quarter. Unfortunately, that will probably impact the growth of that business in the second half of the year.

No, that's great. And then once we have STP, post STP, the way -- the STP you said grew organically 11% and so once we have that in the numbers, the pro forma international growth that should go not -- is that a way to think about it that we could see that go more into the high single or even low teens, like international growth?

Are you talking about organic growth as a whole, Ashish?

Yes, including -- assuming STP you had in the prior year, so the perform organic growth for the international business.

Yes, I mean, I don't know. I mean, again, I think, the international business right now growing organically on a constant macro basis probably in the mid-single digits. This is, obviously, a meaningful acquisition for us. But it may take some time. Obviously, we are going to spend time integrating the business over the next 12 months kind of as Ron indicated. And obviously, we want to maintain that certainly that double-digit growth into the foreseeable future so we're going to try and do that. Whether that the mix impacted that translates to kind of double-digit is who knows, we want to get to the budget cycle before we can make a judgment on that.

The next question comes from Oscar Turner with SunTrust.

So you mentioned corporate payments revenue was up 13% and bookings nearly doubling. Can you talk about, which verticals are driving this growth? And that also, how much of this growth is being driven by new customers?

Sure. It's Ron. I'd say that the construction vertical is gangbusters for us and was a big part of the sale that I called out for Q2. So I'd say, there are 2 or 3 verticals that we target that, that would be the leadings for Q2.

Okay. And also just, is all of that growth being driven by new customers?

You mean versus kind of same-store, the existing accounts growing?

Correct. Correct.

Yes. As I mentioned, the health care thing is probably a little bit soft. So, yes, the corporate payments growth is fundamentally just adding more spend from new accounts.

Okay. And then also you have great growth across a number of products like you mentioned MasterCard up mid-20% range; CLC up, 9%; Pac Pride, 80%; Comdata, I think, like low to mid double digits. Could you help us understand how fast the close loop fuel products are growing to get us to the 9% constant macro growth rate?

Yes, I don't think we think about the world in terms of closed loop because in a bunch of markets we'd have products that are "both". But I guess what I would say is, yes, we've tried to call out some of the businesses that are growing so you guys can see how the consolidated number is at 9. I guess I'd answer it a bit different way that we have still a set of businesses, particularly the ones in Brazil and Russia that are still going backwards. And we have some other businesses we called out before like check that's inching forward now and our Fuelman business, which is an old U.S. business kind of inching forward. So we have 3 or 4 businesses that are either kind of flattish because they are mature or the economies are crummy like Brazil and Russia, which were supposed to be when we did those transactions. BRIC markets, that we're going to grow double digits. So I'd say that's the contributor that's causing the consolidated number to be 9.

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