Corpay Inc (CPAY) 2011 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the FleetCor Technologies, Inc. third quarter 2011 earnings conference call. During today's presentation, all parties will be placed in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions). This conference is being recorded today, Wednesday, November 9 of 2011. I would now like to turn the conference over to Eric Dey, Chief Financial Officer. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us today. By now everyone should have access to our third quarter 2011 press release. It can also 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 and adjusted net income. 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 described previously. Also, we are reviewing 2011 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 2011 guidance. They are not guarantees of future performance, and therefore you should not put any undue reliance on them. These statements 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 8-K with the Securities and Exchange Commission. Others are discussed in our Form 10-K, which is available 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. Ron?

Okay, Eric, thanks. Hello, everyone, and thanks for joining us today. I thought I would cover just three subjects here in my opening remarks; first, our Q3 results; second, our Q4 outlook and full-year 2011 guidance; and then, finally, provide an update on our strategic initiatives.

So first off, our Q3 results -- for the quarter, we reported revenue of $134 million, up 20%, and cash EPS of $0.56 a share, up 36%. So these results represent a beat against our internal plan and a beat against Street consensus. So obviously, we're pleased to report another good quarter and really pleased to be ahead of the financial estimates we provided when going public last December.

If we step back and look at the first nine months of 2011, FleetCor revenue was up 16% year-to-date September and cash EPS is up 32% year-to-date September. So that is year-to-date 16% and 32%, which is well ahead of our 10% and 20% stated growth targets.

So let me shift to the drivers of our Q3 results, and at a high level, I would say it's really more of the same. First, the environment continues to help us. We have had relatively stable and steady economies in our served markets. Fuel prices have continued to run higher than previous periods, good market spreads, good FX rates and continued low interest rates. So all in all, the environment has been pretty positive and helpful to our Q3 numbers.

Secondly, we had a number of individual businesses that performed well this quarter. Our US fuel card business, which is made up of our direct and partner businesses -- they were way up for the quarter. Combined, their revenue grew over 25%. Our hotel card business, CLC, grew over 20%; and our Russia business, PPR, grew over 70%.

The third driver of our Q3 performance is our extended network card initiative. We are continuing to make great progress in increasing the number of clients using our extended network cards. And in fact, the number of active extended network cards almost tripled in Q3 versus the prior year.

Lastly, we got a little bit of help in revenue from our Mexico prepaid acquisition that closed September 1.

So in summary, a lot of the same drivers that contributed to our Q2 performance also contributed this quarter.

Now let me transition over to our views on full-year guidance. So for full year 2011, we are outlooking revenue between $500 million and $510 million and a cash EPS midpoint of $2.10. With that, you can see we are expecting Q4 to finish roughly in line with current Street estimates, mainly because Q4 historically is a bit softer quarter as a result of the holidays. Also, FX rates have been trending lower recently; and lastly, we expect to make some additional growth investments in Q4 to help further jump-start 2012.

We're also not expecting any meaningful profit contribution from our recent Mexico acquisition in the quarter as we digest both deal-related and some initial restructuring costs.

Okay, lastly, let me provide just a bit of a strategic update. As a reminder, FleetCor's strategy is unchanged. We grow through a combination of build, buy and partner. That is, we build the assets that we own, we buy attractive targets with attractive models and we run them the FleetCor way. And we add new partner relationships, many that come to us with an already existing customer portfolio.

So as we reflect on our strategic progress for 2011, I tell you we are feeling pretty good. So we expect to grow our core assets approximately 16% and 30% for the full year versus our stated target of 10% and 20%, so really a good year on the build objective. Second, we announced this prepaid Mexico acquisition in September -- obviously delighted to have this newest asset join the FleetCor family.

But the real attraction to us in this deal is the Mexico market itself. It's in a very early stage of card adoption, and even earlier in terms of commercial fuel card adoption. The government there provides VAT tax savings that make fuel cars extremely attractive for businesses. And the fact that the gas station network is 100% franchised leads to both high barriers to entry, as you have to sign up stations one at a time, and it leads to very attractive discount rates. So we are bullish on the growth prospects for Mexico and expect this asset to add at least $0.05 EPS next year.

Finally, as you will recall, we signed a new partnership agreement with Shell, announced last February. We have been underway with application development work that began in the spring and is now nearing completion, and we should be on track to begin initial market implementation starting in Q2 of next year. So I tell you, we also feel good about the client relationship that we are building with Shell, and it may lead to additional opportunities with them over time.

So in closing, we are pleased with our Q3 results. We are raising full-year 2011 guidance and we continue to progress against our three-pronged growth strategy. All of this leads to a very positive outlook for 2012.

So with that, let me now turn the call back over to Eric to cover our financial results in more detail. Eric?

Thanks, Ron. For the third quarter of 2011, we reported revenue of $134.2 million, an increase of 20.2% from the third quarter of 2010. For the third quarter, net income increased 21.3% to $40.5 million from $33.4 million in the third quarter of 2010, or $0.48 per diluted share compared to $0.41 per diluted share in the third quarter of 2010.

The other financial metrics that we routinely use to measure our business are adjusted revenues and adjusted net income, which we sometimes also refer to as cash net income. Adjusted revenues equal our GAAP revenues less merchant commissions. We use adjusted revenues as a basis to evaluate the Company's revenue net of the commissions that are paid to merchants who participate in certain card programs. Commissions paid to merchants can vary when market spreads fluctuate in much the same way some of our revenues can vary when market spreads fluctuate. For this reason, we believe the adjusted revenue financial metric is a more effective way to evaluate the Company's performance.

Adjusted net income is GAAP net income adjusted to eliminate non-cash stock-based compensation expense related to share-based compensation awards, amortization of deferred financing costs and intangible assets, amortization of the premium recognized on the purchase of receivables and the loss on early extinguishment of debt.

Adjusted revenues in the third quarter of 2011 increased 23.4% to $120.9 million compared to $97.9 million in the third quarter of 2010. Adjusted net income for the third quarter of 2011 increased 37.5% to $47.3 million or $0.56 per diluted share compared to $34.4 million or $0.41 per diluted share in the third quarter of 2010 on a pro forma basis. 2010 adjusted net income on a pro forma basis provides comparability by including the public company expenses included in the third quarter of 2011, additional non-cash compensation expense related to our new option plan, increases in the effective tax rate to equal the effective tax rate in the third quarter of 2011 and fully-diluted shares equal to those in the third quarter of 2011, all of which are described in Exhibit 1 of our press release.

For the third quarter of 2011, transaction volumes increased 9% to 54 million transactions compared to 50 million transactions in the third quarter of 2010. Adjusted revenues per transaction for the third quarter of 2011 increased 13% to $2.23 from $1.97 in the third quarter of 2010. Adjusted revenues are defined as reported revenues less the commissions paid to merchants who participate in certain of our card programs.

Adjusted revenue per transaction can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which will be influenced by our acquisitions, organic growth in the business and fluctuation in environmental factors such as foreign exchange rates, fuel prices and fuel price press. During the third quarter, adjusted revenue per transaction was positively impacted by organic growth in certain of our payment programs and the generally positive environmental factors in the quarter.

Also during the third quarter, the Company completed the acquisition of a Mexican prepaid fuel card and food voucher business which contributed to the increase in transaction volume and adjusted revenues. However, the Mexican business produces a lower revenue per transaction product and, when combined with our other businesses and revenues, results in a lower revenue per transaction than would have resulted without the acquisition.

I also want to note that the third quarter of 2010 transaction volumes and revenues have been adjusted for the wind-down of a partner contract in Europe inherited from an acquisition which we chose not to renew. This partner had a high number of transactions and very little revenue. A reconciliation of this contract wind-down is contained in Exhibit 2 to the press release.

In light of the Company's solid results in the third quarter, I would like to give some examples of how we achieved this performance. First, our combined US fuel card business performed extremely well during the quarter, growing 27% versus the third quarter of 2010. Helping drive this performance was revenue generated from our direct market MasterCard product, which was approximately 80% compared to the third quarter of 2010. This increase was also driven by strong new customer sales and existing customer same-store growth, resulting in higher transaction volumes as well as the effect of higher fuel prices over the prior year.

CLC Group, a provider of lodging management programs, had another solid quarter and grew revenues by approximately 24% over the third quarter of last year. This increase was primarily driven by an increase in same-store sales, higher sales volumes and our higher-margin products and higher revenues due to the restructuring of certain customer contracts. In our international business, our independent fuel card provider based in Russia, PPR, grew revenues approximately 64% over last year in local currency. This increase was driven primarily by an increase in same-store sales and strong new customer sales, resulting in higher transaction volumes as well as the impact of higher fuel prices.

Also in the third quarter, the Company entered the Latin American market by acquiring a prepaid fuel card and food voucher company in Mexico. With this acquisition, FleetCor is one of the largest providers of fuel and food card voucher services to businesses and government entities in Mexico. The acquired company serves over 10,000 businesses with over 800,000 cardholders and beneficiaries. Purchases are predominantly prepaid and, similar to most of our other businesses, revenues are earned both from customers and merchants. The Mexican fuel card market is large, under-penetrated and allows full tax deductions for companies with a submission of electronic fuel card invoices. Results from the Mexican business are reported in our international segment. This acquisition will be accretive to revenues but not earnings in 2011, as acquisition deal costs and restructuring-related costs will offset most of the Company's profit in 2011. However, in 2012 we expect this business to be accretive to our 2012 revenue and profit.

In certain of our businesses, a portion of our revenue involves transactions where we derive revenue from fuel price spread, which is the difference between the price charged to our customer for a transaction and the price paid to merchants for the same transaction. In these transactions, the price paid to the merchant is typically based on the wholesale cost of fuel. We experience fuel price spread contraction or expansion typically when the wholesale cost of fuel increases or decreases at a faster rate than the fuel price we charge our customers. In the second quarter earnings call, we noted a favorable fuel price spread variance of approximately $3.8 million. However, in the third quarter, fuel price spreads returned to more historical levels and were in line with our expectations.

Now moving down the income statement, total operating expenses for the third quarter were $63.4 million compared to $53.7 million in the third quarter of 2010, an increase of 18%. Included in operating expenses are merchant commissions, processing expenses, including bad debt, selling expenses and general and administrative expenses. The increase in operating expense in the third quarter of 2011 is due primarily to additional non-cash compensation expense related to our new stock option plan, incremental public company-related costs and additional costs to support the growth of our business.

Credit losses in the third quarter of 2011 and 2010 were $4.8 million, 20 basis points for the quarter ended September 30, 2011, and 27 basis points for the quarter ended September 30, 2010. The 7-basis-point, or 26% improvement in credit losses, was primarily due to the improvement in collections and a shift in our marketing and sales strategy emphasizing slightly larger fleet prospects.

Depreciation and amortization increased 1% to $9.1 million in the third quarter of 2011 from $8.9 million in the third quarter of 2010. The increase was primarily due to the impact of amortization of intangible assets related to two small acquisitions completed during 2010 and the Mexican acquisition in the third quarter of 2011.

Interest expense decreased 44% in the third quarter to $3.1 million from $5.6 million in the third quarter of 2010. This decrease was due primarily to the expiration of an interest rate hedge in November 2010, lower principal balance during the quarter and the impact of refinancing our term loan in June 2011 at a more attractive rate. Our effective tax rate increased to 31.5% of pre-tax income in the third quarter of 2011 from 24.4% of pre-tax income in the third quarter of 2010. The increase in the effective tax rate was primarily due to the favorable impact on the third quarter of 2010 rate of reversing $2.1 million of additional taxes provided during the first two quarters of 2010 related to the expiration of the controlled foreign corporation look-through execution, which expired in December of 2009 and was not extended until December of 2010 and was retroactive back to the beginning of 2010.

Now turning to the balance sheet, we ended the quarter with $195 million of total cash, $57 million of which is restricted and are primarily customer deposits in our Czech Republic business. The Company also has a $500 million accounts receivable securitization facility. At the end of the quarter, we had $150 million drawn on the facility and had the ability to draw an additional $186 million based on eligible receivables pledged against the facility. We also have $296 million outstanding on our term loan and nothing drawn on our $600 million revolver. As of September 30, our leverage ratio was 1.1 times EBITDA compared to 1.5 times in the third quarter of 2010. The Company intends to continue to use its free cash flow to temporarily pay down the securitization facility balance and maintain liquidity for acquisitions and other corporate purposes.

Finally, we are not a capital-intensive business, as we spent approximately $2.5 million on CapEx during the quarter and only expect to spend approximately $11 million for the full year of 2011.

Now turning to financial guidance, given our strong results for the quarter and year-to-date, the continued positive environmental factors and our progress in our growth initiative, we are again raising our financial guidance for 2011. Our guidance for 2011 is now as follows -- revenue between $500 million and $510 million, up from our previous guidance range of $480 million to $490 million; adjusted net income between $173 million and $178 million, up from our previous guidance range of $168 million to $173 million; and adjusted net income per diluted share between $2.08 and $2.12, up from our previous guidance range of $2 to $2.05. This full-year guidance produces a 16.4% full-year 2011 revenue growth rate and 28% cash earnings per share growth rate at the midpoint of our guidance range versus 2010 on a pro forma basis.

The Company's full-year 2011 guidance includes approximately $2 million of incremental cash operating costs in 2011 for public company costs that did not exist in 2010. Full-year guidance also assumes a 2.3% increase in our effective tax rate from 28.7% of pre-tax profit in 2010 to 31% of pre-tax profit in 2011.

Finally, we had an increase of 2.9 million diluted shares outstanding from 80.8 million shares in 2010 to 83.7 million shares in 2011, due to stock vesting in conjunction with the IPO and stock option exercises in 2011.

The Company's full-year 2011 guidance includes the anticipated impact of our Mexican acquisition but does not reflect the impact of any future acquisitions or material new partnership agreements. In addition, our full-year guidance assumes similar macroeconomic and business conditions exist in the fourth quarter as existed at the end of the third quarter.

And with that said, operator, we will open it up to questions.

(Operator instructions) Tien-Tsin Huang, JP Morgan.

Good evening, guys; it's actually [Reggie] filling in. Thanks for taking my question. I guess I'm trying to understand the international transaction growth. It accelerated quite a bit this quarter, and I think it may be from the Mexican acquisition. Is that correct?

That's correct, Reggie. Our international segment includes the impact of our Mexican acquisition. Obviously, it had a high number of transactions during the quarter. But the transactions that we actually produce from that acquisition and earn a lower revenue per transaction amount. So you can see also that that schedule shows an actual decrease in revenue per transaction. But it's simplistically mixed.

Right, so is that one month of transactions? I guess, how should we think about the quarterly run rate of transactions in that segment? Is there any seasonality there or --

Well, there is seasonality to our business in general. The fourth quarter typically is a little bit lower than the rest of the quarters. But to answer your question, our Mexican acquisition closed, effectively, September 1, so there is one month worth of transaction activity in the third quarter.

That's pretty impressive.

Reggie, it's Ron. That business actually has a bigger Q4 than the rest of our business. It's a seasonally a strong quarter for them.

Okay. And then I guess looking at the cash flow statement, I see an acquisition -- is that -- if I look at the differential between what you had for acquisitions in the second quarter and the third quarter, is that a fair approximation of the price of that acquisition? Because I also look at the balance sheet and I see a pretty substantial step-up in, I guess, goodwill and intangibles. So I'm trying to, I guess, figure out what the cost of that deal was.

We will leave that to your creative analytical skills. I think we said the last time around that for privacy to the seller, we have decided not to disclose that. But you are a good math guy, so we trust you will probably get close.

On the cash flow statement, Reggie, that business came with a lot of cash because of the prepaid nature of the business. So if you're looking to get the purchase price from the cash flow statement, you are really not going to be able to get there.

Okay, okay, and then I guess, finally, this is obviously a great deal you talk about, if you have $0.05 accretive next year. Is there any update on anything else internationally that you guys may be looking at or thinking about?

I'd say, same as the last call, we are working on a number of interesting partners, some of them that are pretty close. And as always, we are continuing to process some M&A opportunity, and most of those are outside of North America. So I'd say the pipeline is still pretty busy on both fronts.

Okay, perfect, I'll hop back in the queue, thank you.

Julio Quinteros, Goldman Sachs.

Hey, this is actually Roman in for Julio. Thanks for sharing the $0.05 commentary on the Mexico business as far as contribution you expect next year. But I wanted to see if maybe you can give us sort of even a high-level level of contribution that it had this quarter, and maybe that you expect the next year in terms of the revenue contribution and the transaction contribution. Obviously, we saw what one month's worth can look like. And it had, you know, a significant impact on its recession and on the revenue per trend. So anything you can help us out there with would be helpful.

From a contribution perspective for the quarter, from the remarks that we made, it had almost no impact at all on the quarter from a profit perspective. There was a number of deal-related costs that we booked in conjunction with the transaction and some restructuring costs that are going to be booked in conjunction with it. So we are not anticipating it would have any sort of significant impact to our results of operation in 2011. And, as Ron indicated, we're obviously expecting it to be accretive to our results in 2012.

Yes, Roman, it's Ron again. We're sorry; we're just -- I know we're not being helpful, which is we decided to provide a little bit of help there. So really, no profit contribution in September or for Q4 and think, and think at least $0.05 for next year. That's really kind of all the help we can give you.

Okay, that's fine. And in terms of your guidance for the full year and what that implies for the fourth quarter, I guess -- is it safe to assume that overall transaction trends, if you look at it on a sequential basis in the fourth quarter, should it look a little bit like the sequential growth we saw in 4Q 2010? But, given all the things you are doing to an increased revenue per trend, that should be pretty healthy fourth quarter versus third quarter?

Yes, Roman, it's Ron again. I think what we try to say is the guidance kind of at the midpoint of the range Eric gave is $2.10. So if you take the year-to-date cash EPS number, that obviously gives you a target for Q4, which I think I said is in line with what you guys have for us for Q4. And the reason that that number is lower than what we reported here is Q4 is a slower quarter seasonally. The FX has ticked down, and we plan to spend some additional money this quarter for next year, basically. So we'll -- those three things will dampen profits a bit versus Q2 and Q3.

But still in line with our previous guidance.

Got it, thank you.

Glenn Fodor, Morgan Stanley.

Congratulations on another good quarter. Thanks for taking my question. On the lower-yielding Mexico business, is the story here being able to increase that over time, or is it simply it's just always going to be a lower-yielding business but it's growing so fast that it's still good overall? Or, is it a combination of both?

Yes, Glen, it's Ron. So be careful, again, with lower revenue per tran, implying lower margins in the business. Those two metrics are not necessarily related at all. Right? So I'd say be careful with that. But yes, it is -- it's dramatically lower than the international line average, and we expect it to grow dramatically faster than the rest of our business next year.

Because of the combination of just transaction growth and yield growth, or mostly transaction?

Yes (multiple speakers) as I said, I mean that market compared, let's say, to the US, is just so early, and these tax incentives that I referenced are so strong and the brand there that owns all the gas stations called PEMEX creates a lot of incentive to move people to electronic payments. So there's just a lot of wind really at our back to add cards there. And obviously, we know some FleetCor ways to increase yield, as you've seen. So it will be both of those things.

Glen, this is Eric. I think, to start with, I think the operating margins there will be a little lower than the line average. And then, as Ron indicated, as we get into the business we will be able to restructure the business and hopefully to get it more to the line average for our businesses.

Understood, okay. And then, when you think about acquisitions on the international front, now you've planted seeds in Mexico, would you be more biased to just continue to build out Mexico and the surrounding areas, or could you just go somewhere else entirely?

I think the latter, but I think we stated a year ago when we were on the road that the strategy of the Company is to acquire positions in interesting and attractive places like Mexico. And so we have put the majority of our emphasis going to those places, you know, quote, the brick kind of places. So that's really where our pipeline is, where we have been focused last year or so.

Okay, then finally, just if you could expand that a little bit, you said on the fourth quarter you're making some investments and that will affect the cost line. Can you shed a little light on where you are investing? Anything you want to call out? And is any of this kind of unexpected, say, versus six months ago? Or is this always part of the plan?

Yes, I would say some of it is unexpected. I think we've decided basically, because we are obviously earning a lot more than we budgeted and planned, we've seen some opportunities to invest, really, in sales and marketing and to step on the conversion, this extended card conversion a bit more. We've found some other segments that seem to like this product. And so those would be the two primary areas. So it's not overhead related, it's really growth spend that we are planning.

That's good to hear. Thanks a lot, appreciate it.

Phil Stiller, Citi.

Obviously, you commented on the Russian business being very strong. I was wondering if you could comment on the UK and Czech businesses as well, how they performed in the quarter?

Obviously -- hey, Phil, good to have you on the call for the first time.

Thanks.

You know, the European businesses have been impacted somewhat by the recession that is occurring across Europe right now. I think our Czech Republic business is kind of holding its own right now, and I think we're seeing a little bit of softness in the UK business.

Okay. And then on the deal pipeline, specifically in Europe, have you guys seen any impact on that as result of what's going on there as well?

Yes, Phil, it's Ron. Not really. Again, the people that we are dealing with in these large, you know, healthy companies, you know, just march on. So I'd say that we continue to progress with them. And my guess is that some of these conversations are going to land. So they seem to be moving ahead really just fine, despite the environment. They're big, they make a ton of money, they like, obviously, high oil prices. So our prospects are actually very, very healthy.

Just on that topic, do you think that some of these potential contracts are waiting to see what happens with Shell before they pull the trigger? Or do you think that the two aren't related?

You know, I think there is -- I think it's a fair question -- I think there is some relationship. Obviously, people change jobs between those companies, so people know each other, right, in Europe across the top five or 10 oil companies and obviously talk both formally and informally. So that announcement we made, as I said, sped up some conversations.

But I would say that, although people look at the other guy, they all do their own homework as well. So I'd say, in some ways, yes, it helped get us into the conversation. But I think some people will decide to go ahead prior to us launching with Shell -- which is not that far away. I'm not sure if I said it or not, but we expect to be in the first set of markets as early as Q2 next year, live. So it's not far off.

Okay, that's great. Thanks, guys.

(Operator instructions) Darrin Peller, Barclays Capital.

This is actually Adam filling in here for Darrin. Just wanted to ask a quick question of you guys, looking at the North American segment and just kind of seeing -- it's kind of like the second quarter in a row where we've seen a higher revenue per trans number, and just trying to parse out what's actually driving it. Is it really the MasterCard product here? Is this kind of a run rate that we could see going forward?

It's Ron, Adam. I think, as I said before, the US fuel card, which is both our directed partner business, was up, what, 25%, Eric --

That's correct.

-- for the quarter? So that was a mix. I don't think we separate it, but the direct business itself had volume growth of almost 9%. So it's a pretty healthy volume growth in the business.

But the two biggest drivers were the extended network card, as I mentioned. It has tripled point to point, and obviously is much richer economically. And then, two, obviously fuel prices point to point, to the extent that we are on interchange-based products was way up point to point. So it's really those three things that caused the US to be up.

Great, that's helpful, guys. And then just a quick follow-up -- what was the exact dollar contribution from FX during the quarter?

You know, I don't have the exact number are in front of me, but it has returned more to the line average, particularly toward the end of the third quarter. And it has actually turned a little unfavorable as we are getting into the fourth quarter. But the contribution in Q3 as a whole was not as great as it had been in the prior quarters.

We can get that, though.

Yes, I can get it for you; I just don't have it in front of me.

And then in terms of your guidance for the full year 2011, you're just assuming that rates remain relatively constant?

That's correct. My assumption is that rates in the fourth quarter kind of are going to be equal to the exit rate of the third quarter, which obviously, in some cases, are actually trending a little unfavorable. So in Q4 we are really not expecting to get a lot from FX, if anything at all.

Great guys, really appreciate it, thank you.

Wayne Johnson, Raymond James.

Hi, yes, good afternoon, great results all around, and North America very strong as well. But when we look at the headlines, we read the newspapers, doesn't feel as good. Could you -- if you wouldn't mind just commenting on the economic outlook, competitive dynamics that are going on in the market right now just in the US and how do see that affecting your business, if at all?

Yes, Wayne, hey, it's Ron. I know it does seem a little strange that the Company has grown earnings 30%, and we are in the -- Italy is melting down or whatever. But I think we've said that if you unbundle our numbers, we are not seeing really any growth in our same-store clients. I think we have repeatedly said that both last year and this year, we are lucky globally if our existing clients basically give us the same volume and transaction as the prior period. So obviously, we are growing despite that flat economy through, obviously, selling more than we lose, right, so it's the sales engine of having more clients than we did before.

And then, second, it's really this product mix. What we are selling the clients creates more revenue and more profit. So we are growing basically through things we are doing, which is a harder way to grow, obviously, than growing because all boats are rising. So please call me the day that you see the planet tick up.

(laughter) well, I'll be on the lookout for that. The part of your message has been, in prior presentations, about the ability to improve efficiency or efficiencies within your network. Can you address that as it relates to the Mexico transaction? Can you give us any kind of sense on how that's all going to work?

Yes, I think we obviously built up a pretty detailed acquisition case for that business and studied it. And I would say that in some ways it was not managed the same way that, quote, FleetCor would manage the asset. So we when we go in and tear the network economics apart, we see things in the distribution, where there's opportunities to move merchants to more attractive rates. And, again, it's a fractured, fragmented group of merchants that own one, two, three gas stations.

So I would say that that deal looks a lot like most of the deals that we do, where they have built up a pretty good network and a pretty good client base, but maybe have underleveraged the position that they've built. And we plan to do that over the next 12 to 24 months.

Great, thanks.

Thank you, and that is all the questions that we have at this time. So ladies and gentlemen, this does conclude our conference for today. We thank you for your participation at this time. And at this time, you may now disconnect.