Corpay Inc (CPAY) 2014 Q1 法說會逐字稿

Greetings. Welcome to the FleetCor Technologies, Incorporated first quarter 2014 earnings conference call. At this time all participants are in a listen-only mode. A brief question-and-answer will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Eric Dey, Chief Financial Officer for FleetCor Technologies. Thank you, Mr. Dey, you may begin.

Thank you Operator. Good afternoon everyone, and thank you for joining us today. By now everyone should have access to our first quarter 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, adjusted net income, and EBITDA. This information is not calculated in accordance with GAAP, and may be calculated differently than other companies similarly titled non-GAAP information. Quantitative reconciliation 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 2014 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 2014 guidance, new products and fee initiatives, and potential 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 and Form 8-K filed with the Securities and Exchange Commission. Others are discussed in our Annual Report on Form 10-K. These documents are available on our website as previously described, and at www.SEC.gov. With that out of the way , I would like to turn the call-over to Ron Clarke, our Chairman and CEO.

Okay Eric. Thanks. Again good afternoon everyone, and as always, appreciate you joining today. So up front here I'm going to plan to cover just two subjects, so first off, I'll comment on the quarter and our full year outlook, and secondly, I'll comment on today's Shell Europe and Chevron announcements. Okay. So on to the quarter. So Q1 results were very good. We reported revenue of $254 million, that's up 31%, and cash EPS of $1.12, that's up 25%. So 31% top line, 25% bottom line.

The growth in the quarter was really driven by two things, first off, our biggest businesses performed quite well. Our North America fuel card business grew revenue 11%, our UK fuel card grew revenue 19%, and our CLC business grew revenue 16%. So really strong organic growth performance from three of our biggest businesses. Second driver for the quarter was the new revenue from our 2013 acquisitions, so the most significant contributions would have been from VB Brazil, Epyx in the UK, and Nextraq here in the US. So growth from big business performance and contributions from our new deals.

We also had a few headwinds in Q1, so, first, the environment, I characterize the environment's impact on our numbers as slightly negative, probably in the range of a few million negative, second, as you probably expect, our Russia business' performance was not great in the quarter, particularly among our major oil partners there, whose businesses and volumes were kind of noticeably off in the quarter, compounded with the ruble, which was also quite unfavorable in the quarter. Lastly, we had an unfavorable tax compare this quarter. Our effective rate, 30.5% this quarter versus 28.6% last Q1, so that obviously depressed our earnings growth rate a couple of points. Eric will follow up on this a bit more.

But look, in summary, despite the few headwinds I just cited, we're off to a very good start, and very pleased with these results. So let me transition to full year guidance. So today we're raising 2014 cash EPS guidance $0.07 to $5.02 at the midpoint. That reflects our Q1 bead. While we remain conservative, really, on the rest of the year outlook. So even though we're running ahead of our expectations, we do see a few headwinds looming for the balance of the year, so first off, you know, Russia, we expect that will likely remain soft and behind plan. Second, Latin America FX will likely remain unfavorable. And lastly, we do plan to make some start-up investments to launch our Shell Germany initiative. So if you take all of these together, I'd say we're still very confident in a full year cash EPS number that's above 5. So a good quarter, and a positive outlook for the full year.

Okay. Let me transition now over to the Shell announcement we made a bit earlier today. First off, this is very exciting news for us. We've been at it quite a long time, trying to secure a meaningful, a full outsourcing deal in Europe that could serve as a launching pad for us, and now we have it. So let me just run through the deal, the benefits of the deal, and provide just some rough sizing for 2014 and beyond. So we signed definitive documents to acquire Shell's private label card business of smaller clients in Germany, in what we term a full outsourcing deal. In addition, we signed a broader framework agreement that would enable us to acquire Shell's portfolios in an additional 12 European markets, including sizable geographies like France, Poland, and the Netherlands, so a big opportunity. In terms of benefits, I characterize them as primarily market entry-related. These are big European markets, and historically have been very difficult for us to gain access to. So now we'll enter Germany, which we've targeted for some time. The number five market in the world, and have a full FleetCor base of operations, to build out our product line and market reach over time. Then obviously the opportunity to expand into France, Poland, and the Netherlands in particular, quite interesting.

In terms of financial sizing, we're expecting the Shell Germany conversion launch kind of late this summer, August, September, expecting a contribution of a few million in revenue this calendar year, but that will be more than offset by our start-up investments to get the project going. Over time, as Germany and the other 12 markets are rolled out, we expect this deal could contribute in the range of $20 million to $30 million of annualized revenue. So, look, this is an important milestone with Shell. Their decision to selected us for this important assignment, could lead to more work over time with them, potentially in other geographies, or in other customer segments.

The announcement today may also serve as a catalyst to other European major oils, who view this as further proof that Fleet has the systems, the operational presence, and most importantly, the to how to help them manage their fuel card portfolios. So, all in all, quite an important development for us. We also announced after the close that we signed a long-term fuel card processing contract with Chevron International. That covers six Asia Pac markets and South Africa. So it's exciting for us to broaden our global relationship with Chevron, and also extend the number of clients that we have running on GFM. So really good news there.

So, in closing, we continue to execute on our plan to build, buy, and partner, and target earnings growth north of 20% annually, so Q1 we beat our January guidance and grew earnings over 20%. We announced this partnership deal with Shell, giving us access to a number of major European markets, as well as broadening our global Chevron relationships, and in total, over the last 12 months, we've signed eight new partner deals, eight, and closed seven acquisitions. So we're staying quite busy on the business development front. So with that, let me turn the call back over to Eric, so that he can provide some additional information on the quarter, and the rest of the year outlook. Eric.

Thank you Ron. For the first quarter of 2014, we reported revenue of $253.9 million, an increase of 31% from the first quarter of 2013. Revenue from our North American segment increased 25.6% to $126.4 million from $100.6 million in the first quarter of 2013. Revenue from our international segment increased 37% to $127.5 million from $93.1 million in the first quarter of 2013. For the first quarter of 2014, GAAP net income increased 16% to $75.1 million, or $0.88 per diluted share, from $64.7 million, or $0.77 per diluted share in the first quarter of 2013.

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 or cash EPS. Adjusted revenues equals our GAAP revenues less merchant commission. We use adjusted revenues as a basis to evaluate the Company's revenues, net of the commissions that are paid to merchants to participate in certain card programs. The reconciliations of adjusted revenues and adjusted net income to our GAAP numbers are provided in Exhibit 1 of our press release. Adjusted revenues in the first quarter of 2014 increased 31% to $236.3 million, compared to $179.8 million in the first quarter of 2013.

Adjusted net income for the first quarter of 2014 increased 28% to $96.1 million, or $1.12 per diluted share, compared to $75.2 million, or $0.90 per diluted share in the first quarter of 2013. For the first quarter of 2014, transaction volumes increased 18.1% to 87.6 million transactions compared to 74.2 million transactions in the first quarter of 2013. North American segment transactions grew 5.7%, driven primarily by organic growth in our US businesses and the telematics transactions we completed in April and October of 2013. Transaction volumes in our international segment grew 31.5%, and were positively impacted by acquisitions closed in 2013. Adjusted revenue per transaction for the first quarter of 2014 increased 11.2% to $2.70 from $2.42 in the first quarter of 2013.

Revenue per transaction can vary based on geography, the relevant merchant and customer relationship, the payment product utilized, and the types of products or services purchased. The revenue mix is influenced by our acquisitions, organic growth in the business, and fluctuations in the macroeconomic environment. When we talk about the macroeconomic environment, we are referring to the impact that market spread margins, fuel prices, foreign exchange rates, and the economy in general can have on our business.

During the first quarter, lower fuel spread margins and lower fuel prices primarily in the US resulted in unfavorable impact to revenues. And although we cannot calculate precisely the impact of these changes, we believe it negatively impacted our revenues by approximately $2 million to $3 million for the quarter. Changes in foreign exchange rates were mix and overall we believe negatively impacted our revenues by approximately $2 million during the quarter. Foreign exchange rates for Brazil and Russia were unfavorable for the quarter, but were partially offset by favorable exchange rates in the UK pound Sterling.

Revenue per transaction for the first quarter was up in both North America and the International segment. Revenue per transaction was up 18.9% in North America, due primarily to the positive mix impact of signing up customers who use higher revenue per transaction products than the average. Organic revenue growth in many of our higher margin products and acquisitions completed in 2013 that have higher revenue per transaction products than the average. These positive factors were partially offset by the impact of lower fuel prices and fuel spread margins during the quarter. In the international segment, revenue per transaction increased 4.2%, due primarily to organic revenue growth in several lines of business, particularly in the UK and acquisitions closed in 2013, some of which have products with a higher overall revenue per transaction versus our line average. Partially offsetting was the unfavorable foreign exchange rates in the quarter.

Now let's shift over and discuss some of the other drivers of our first quarter performance. First, in our North American segment, most of our lines of business performed well, resulting in a 25.6% revenue growth rate in the quarter versus prior year. Some of the positive drivers in North America revenue during the quarter were similar to last year, including the exceptional performance of our MasterCard product, which had revenue growth of approximately 29% over the first quarter of 2013, driven primarily by increases in volume. The CLC Group, provider of our lodging and card programs had another solid quarter, with 16% revenue growth over the first quarter of 2013. This revenue growth was driven primarily by increases in our check in direct product, which targets smaller accounts.

The first quarter also benefited from strong performance of our partner business, and a positive impact of a telematics acquisitions closed in April and October of 2013. Results in our international business were positively impacted by strong organic growth in our UK businesses, which posted double-digit revenue growth over last year. Results for our international businesses were also positively impacted by acquisitions in Brazil, the UK and Russia that closed in 2013.

I am sure a number of you are wondering how our business in Russia has been impacted by recently announced regulatory changes and US sanctions. As of now, our business in Russia does not appear to be adversely affected by any changes in regulations by the Russian or US governments, nor do we do business with any persons or entities that have been sanctioned. However, we are affected indirectly, as the Russian economy is softening, we are experiencing a slowdown in volumes. Our international business has also been impacted by unfavorable foreign exchange rates in Russia, as well as Brazil.

FleetCor is a very diversified company geographically, by product, and by business model. We anticipate the unfavorable economic conditions in Russia will continue for the balance of the year, and that foreign exchange rates in Russia and Brazil will continue at current levels, and also be unfavorable for the balance of the year. However, we expect these negative impacts will be offset by our other businesses, which are off to a strong start in 2014.

Moving down the income statement, total operating expenses for the first quarter were $139.8 million, compared to $99.4 million in the first quarter of 2013, an increase of 40.6%. As a percentage of total revenues, operating expenses increased to 55.1% of revenue, compared to 51.3% in the first quarter of 2013. Included in operating expenses are merchant commissions, processing expenses, bad debt, selling and general administrative expenses, and depreciation and amortization expense. Included in operating expense for the first quarter of 2014 was $10.6 million of noncash stock compensation expense versus $4.2 million in the first quarter of 2013. The increase was due to new share grants issued. Also included in 2014 operating expenses was approximately $2 million of derelated expenses versus approximately $1 million in the first quarter of 2013.

Credit losses were $5.6 million for the quarter or 11 basis points, compared to $4.5 million or 9 basis points in the first quarter of 2013. Our bad debt now has stabilized around the 10 to 11 basis points range. Depreciation and amortization increased 67%, to $24.4 million in the first quarter of 2014, from $14.6 million in the first quarter of 2013. The increase was primarily due to amortization of intangible assets on acquisitions closed in 2013. Total interest expense increased 58% to $5.5 million in the first quarter of 2014 from $3.4 million in the first quarter of 2013. The increase was primarily due to additional borrowing for acquisitions closed in 2013, and a slight increase in the interest rate in our term loan, due to an increase in our leverage ratio in the first quarter.

Our effective tax rate increased to 30.5% compared to 28.6% for the first quarter of 2013. If you recall, in the first quarter of 2013, there was a reversal of $1.9 million of tax booked in the fourth quarter of 2012, related to the controlled foreign corporation look-through exclusion expiring for FleetCor on December 1st, 2012. Excluding the impact of this one-time tax reversal, our tax rate in the first quarter of 2013 would have been approximately 30.6%.

Now, turning to the balance sheet, we ended the quarter with approximately $330.2 million in total cash, approximately $46.8 million of which is restricted, and are primarily customer deposits. The Company also has a $500 million Accounts Receivable securitization facility, which was amended on February 3rd, 2014, to a new maturity date of February 2nd, 2015. And March 31st we had approximately $394 million borrowed against the facility. We also had $490 million outstanding on our term loan and $499 million drawn on our revolver, leaving $351 million of undrawn availability. As of March 31st, our leverage ratio was 1.84 times EBITDA, well below our Covenant level of 3.25 times EBITDA. We intend to use our free cash flow to temporarily pay down the balance on our revolving credit facility and securitization facility, and maintain liquidity for acquisitions and other corporate purposes. Finally, we are not a capital intensive business, and we spent only $5.6 million on CapEx during the first quarter of 2014.

Now on to our outlook for 2014. We expect total revenues to be between $1.075 billion and $1.095 billion, up from our previous guidance range of $1.070 billion and $1.090 billion. Adjusted net income to be between $422 million and $432 million, up from our previous guidance range of $418 million and $428 million. And adjusted net income per diluted share to be between $4.97 and $5.07, up from our previous guidance range of $4.90 and $5.00. Our adjusted net income per diluted share guidance at the midpoint of the range represents a 24% growth rate over the $4.05 per diluted share reported in 2013. Also to remind everyone, our 2013 results included approximately $5.7 million, or $0.07 per diluted share of favorable nonrecurring income tax items. In the first quarter was a $1.9 million benefit that I previously described. In the third quarter of 2013, legislation was passed in the UK that reduced the statutory income tax rate, which resulted in a $3.8 million reduction in tax expense booked in the third quarter. Without this favorability, our 2014 revised guidance represents a 26% growth rate over 2013.

Some of the assumptions that we have made in preparing this guidance include the following. Continued weakness in our Russian business and unfavorable foreign exchange rates in Russia and Brazil at current levels over the balance of the year, a start-up investment related to Shell build out of approximately $2 million, fuel prices equal to 2013 average, market spreads equal to the 2013 average, we are also assuming fully diluted shares outstanding of 86 million shares, a slight increase from our prior guidance of 85.6 million shares. Also an 1% increase in our effective tax rate from 29.5% in 2013 to 30.5% in 2014, and as always, no impact related to future acquisitions or material new partnership agreements.

In summary, we are off to a very good start to 2014, in spite of the headwinds that we have discussed. Our guidance reflects our continued confidence in the ability of our business to grow and execute, while at the same time recognizing that there are macroeconomic conditions that will continue to challenge us. And with that said, Operator, we'll open it up for questions.

Thank you. (Operator Instructions). One moment while we poll for questions. Our first question is from Ramsey El-Assal from Jefferies. Please state your question.

Hi, guys, congratulations on a great quarter. In terms of the Shell deal in the broader framework sort for additional regional portfolios as you mentioned, what's the timing of the broader roll out? Are there additional signoffs required, or is it just a matter of scheduling? Does Germany have to perform well for the other markets to open up, or does it just kind of roll out as they come?

Yes, I think Ramsey, it's Ron, it's really an IT planning issue, and basically both us and Shell's ability to absorb the IT work, so we'll probably have a clearer answer when we get to the summer, but I would guess probably a couple more markets later this year, and then the balance in 2015.

Is there any reason why they held back the broader commercial portfolio, and are starting with just the small business? Is it sort of a test of sorts, or is it just, are there any other factors to consider there?

Yes, I mean, I think they hold honestly their larger account relationships closer, A and B, I think they view us as specialists in the small market, so I think those are the couple of reasons they started us here.

One last one for me, just to be clear, the payments regulation that recently moved through the Duma in Russia, mandating the in-country processing, it sounded like that just does not include your business?

Yes again we're not probably the right legal guys, but I'd say our interpretation is that we would be not impacted by the law the way that we operate there. We would not fall under those regs.

You already have a data center in Russia, right?

We do. We actually process and settle locally, and again, more than half of the business that we have there is basically supporting major oils and other issuers, really is kind of a software network provider. We're not even really in the issuing side of the business. So I think for both, all three perspectives, kind of legally what we do, I don't think we classify as a globe payment system, two, we basically process and settle locally, and then three, a big part of our business is really supporting issuers.

Fantastic. That helps a lot. Thanks a lot.

Next question. Tien-Tsin Huang, JPMorgan Chase.

Hi, thanks. Just to follow-up on question on the Shell piece of it, the $20 million to $30 million I'm assuming is post rolling out all of the different countries, and then would you also have country-specific setup costs to stand those businesses up post the acquisitions of those countries? Do you follow my question?

Yes and yes, Tien-Tsin, are the short answers, so yes, that the $20 million to $30 million as we basically put all of those markets online, although as you can imagine, there's concentration, so some of the larger markets would obvious represent a much Larger piece of that thing, and then B yes, there will be some start-up costs, but they'll be less because we'll be kind of replicating the model basically that we're using in Germany, so still cost but lower than the start-up one.

Okay. Good to know. And then I guess just to ask also a regulatory question as it relates to Europe, we're getting some questions today about all the stuff in Europe, PSD2, et cetera, what's your current understanding, I know the rules are still getting debated and it's not yet law in Parliament, but where do you think we are with how commercial cards will be treated in the interchange cap discussion in Europe?

Yes, I'd say, Tien-Tsin we're in the same place you are, which is we don't know. We've heard probably like you have that they're still pushing that to be a carve-out, because consumers are obviously the higher target but we don't know. Again, the good news, as you know, is all of our deals there are fundamentally proprietary, so it wouldn't be swept into that legislation, although clearly it wouldn't be helpful to us if there's pressure across kind of general purpose cards, that would not be helpful long-term.

Yes. Agreed. Agreed. I figured I'd ask since you're closer to it than we are. And then just maybe a housekeeping for Eric, just organic growth in the quarter, did you provide that?

Hey, Tien-Tsin, this is Eric. I would say the organic growth in the first quarter was in line with our prior guidance, so it's, I would say just around the 10%, or just under the 10% range.

Terrific. I appreciate that.

Thanks, buddy.

Next question from Glenn Fodor, Autonomous.

Thanks for taking my question. Some of the SG&A, Eric, just to be cleaner, last quarter I believe you said stock comp would be $27 million for the year, and more evenly distributed I think throughout the quarter, so we're starting this year at around $10 million and just a slight drop-off from the fourth quarter's abnormal level, because there was a true-up there. How should we be thinking about this $27 million for the year? Is that still in place and just take this down evenly for the next three quarters? Is that a fair way to forecast?

Hey, Glenn. The number is actually going to drop after this quarter, so it gets into more of the $6 million to $7 million range for the last three quarters of the year, however, I mean, we do still have some plans to issue some new stock grants in the second quarter, so again, if those numbers change in any material way, we'll let you know, but effectively they are going to step down a little bit starting in Q2, again just assume around $7 million.

Okay. And then can you, I don't know if you did quantify this, but the FX impact for the year as it relates to guidance, did you put a number on that or can you help give us some parameters? I know what you said about the currency rates and your assumptions, but how does it translate to dollars and revenues?

Yes, in the first quarter, we were unfavorably affected by FX to the tune of about $2 million, so clearly that trend I mean, we're anticipating that to continue over balance of the year, so I would take that number, obviously times four and you'll probably get into the ballpark, and maybe a little higher as we step into the higher volume months, so probably closer to $10 million or so.

Okay. Last question for Ron, Ron, with respect to 2013's acquisitions, how would you characterize, I know cross-selling is a big part of your model there, and it's been fruitful in the past, but are these assets and sales force training, is that all in place such that the cross-selling is happening, and can you share any sort of successes with us or contributions to revenue from again, perhaps cross-selling the products that you have access to and now in 2013 and pushing across the rest of your portfolio? Thanks.

Yes, Glenn, it's a good question. I'd say again it's pretty early, alright? Most of that stuff we closed in the fall, so I'd say we're underway Point1, Point 2 is, every one of those deals had a thesis for more revenue and more profits this year, and I'd say report that we're on plan for the deals internally for Q1. And B, as part of our internal forecasting, I'd say we're still anticipating the 2013 deals to be, quote, on plan, for the balance of the year, so I'd say early, but so far so good.

Good to hear. Thank you.

Next question, Darrin Peller of Barclays.

Yes, hi, thanks for taking my question. Let me just start off on the front around the head winds in Russia, just a little more color on what you would expect that to actually impact the business by? I know you mentioned in the contest of a few, and maybe you can frame that around with regard to the revenue guidance range, obviously you had a very good quarter. How much of the Russia trends you're seeing is actually holding you back on that front?

Hey, Darrin, it's Ron. Let me start. So first off again, just to create some context, Russia is kind of circa 5% of FleetCor, kind of point 1. Point 2, although I called out that it was behind plan, which it was for Q1, and it's going to be behind our plan for rest of year, call it in the maybe $7 million to $10 million range miss from our plan. The good news is, it's still growing, so for the first quarter in local currency, that business was still ahead, top and bottom, and we're still forecasting the thing to be ahead top and bottom, so I want to make sure it's clear that, A, it's not large, and B, it's far, in our minds, from, quote, some kind of a meltdown. It's just a reverse in being a high growth big opportunity for us this year, which is what we had planned, and then you pile the ruble, which is down, what, Eric, 12% or something?

That's correct.

So when you comp out, Darrin, the FX, those are the two things that kind of depress us, vis-a-vis the plan.

Alright. That's helpful. Maybe just one more question on the organic side, you know, you mentioned the Company is still growing just under, I think 10% for the whole business. Is there a way you can maybe just parts out the international organic trends, in terms of maybe versus the company-wide organic growth? Obviously North America looks very strong, but then we see 30%-plus transaction growth internationally, and revenue per transaction up, although obviously a lot of deal related and acquired revenue there, so a little more context would be great?

Yes hey, Darrin, this is Eric. Again, I would say, first, on a consolidated basis, it's running kind of in the high single digits to just kind of under 10%, and as you would imagine, those numbers vary by geography. The United States had at a very, very strong first quarter. We were growing, I would say, in the low to mid single will duties from an organic growth perspective, and then when you look at rest of world, it was growing more in the mid kind of single-digit range, with some of the headwinds that we experienced around the world.

Okay. Alright. That's really helpful. Thanks very much.

Next question from Smitti Srethapramote, Morgan Stanley.

Thank you. A couple of questions on the recently announced deals. So on the Shell deal can you help us think about the potential lift to revenue per transaction, as you transition from only transaction processing to more of a full outsourcing type situation in the German portfolio?

Yes, Smitti, it's Ron. I'd say you guys should think about that as kind of a round line average. It will probably start a smidge below, and then kind of grow to line average to a bit above, and the reasons it takes us a little bit of time to kind of put the FleetCor playbook in, but again from day one, since we're acquiring the book, and the deal is kind of fixed, we should be just south of our line average right off of the bat.

Got it. And on the Chevron contract, can you talk about the factors that led you to win it, how much of it had to do with pricing technology, capabilities through your platform?

Yes, I'm always a little remiss on these calls that blow our own horn, but we're obviously delighted. They're a hugely important client here for us in the US, and the prior vendor had a position and was servicing them, so we were quite pleased when they decided to pick us. And I'd say, if you listen to the playback, I think it's the product. I think we've got a product that works and is working, and I think again, that these big oil companies are incredibly cautious and risk averse, and so I think our edge is real, that we have a product that actually works, and so I think ultimately that's the call. That's why we're getting picked.

Okay. Thanks.

Next question, David Togut, Evercore.

Thank you, good afternoon, Ron and Eric.

Hey David.

Nice to see the 29% growth in direct MasterCard revenue in the quarter. Is this a rate of growth you expect to sustain for the balance of the year?

Yes, that was Dave, it's Ron. That basically was virtually 100% volume, so I think I mentioned in the last call, we decided to kind of calibrate, any kind of rate work in there and basically just go run that business hard, and so that business is almost pure volume growth. So the answer would be yes, I would say that our plan is to kind of sustain that 25% to 30% compounded growth.

Is that rate of growth sustainable beyond this year?

Yes, again I think I've said this to you before, it's really just completely related to our sales investment, right? So we have a base of X, we sell point whatever, 0.4 X, and so that's what creates the overall revenue growth, and so for us there's just all kinds of market opportunity, it's just really how much we want to spend to produce that 0.4 X. So I'd say the old levers are in our hand.

Got you. And then shifting over to CLC, 16% revenue growth in the quarter, solid but down a little bit from what we've seen historically which has been around 20%, any factors behind that slowdown? Are these short or long-term in nature?

I'm happy. I mean it may seem like a slowdown, but that business has been growing 15% or 20% for kind of as long as we've owned it, so I would say, when we reviewed that a few weeks ago, it's hitting on every cylinder the big account business is getting healthier, we've got a big railroad base there that's healthy, we're selling this to small we call it check in direct product like crazy, so I'd say that although 16 may not seem as much because the basis may be getting bigger, that we're still selling a lot, we had record sales in that business in the first quarter, so I'd say we're feeling good, David, about the performance there.

Good. And just to revisit a prior question I think from last quarter, you were working on a new product, I believe in CLC. Where does that stand in terms of launch?

Yes, it's a good follow-up, they're still in test. This is a product that we call a brand-wide where instead of having a network of thousands of hotels that you have to kind of look up, you'd have call it five or six brands when you went into any city that you could go to, that we think appeals to a different segment, a more convenience-oriented segment, so I think we probably will have some report for you when we talking about next quarter on how that's going, but I'd say we're in the final stages of getting that thing put together and tested.

And would that be priced at a premium to your existing product, like direct check-in?

No, remember all of these products are actually priced at a discount. If you went as an user here and looked at this product, effectively you're getting guaranteed 15% to 20% off of the lowest kind of street price for the current product. This thing would actually have, I'd say a little bit shorter discount, again, because we're trying to push the convenience and the simplicity of just picking any five brands in the city, and we don't have as much volume, obviously, on the thing because we're launching it, so I'd say the discount won't be quite as aggressive, but we're hoping that people are going to like the convenience.

Good. Well, I certainly look forward to seeing that. Just shifting over to the Shell fuel card acquisition in Germany, you've long had a goal to kind of use Germany as a platform to expand more into Europe, and I'm wondering whether this could be the launching pad for a direct Visa card in Europe, and if so, when might that happen?

Yes, again, I don't know if we telegraphed it, but this has been a personal crusade of mine for quite some time, I mean, we've said it before, those four or five big western European countries are huge in this business that we're in of fuel cards, and they're dominated by major oils, there's no kind of all star CCS type companies on the continent itself, so getting a seed there, and getting a book of business and being able to fund a group of people in sales, it's just, I can't describe it. It's a huge deal for us in terms of getting positioned to make things work. We've got a system that works and now we've got people literally who will be sitting there that can sell. So it's what you said, it's the reason that we've been in the kitchen for the last you know year-plus, cooking kind of our version two auto card. We need to go to market plan, right? For our capability, and so we're hoping to join those two things up, right? As we build out bodies in that place, we'll then bring that product. So that's the game plan.

Would that be by end of this year?

I'd say probably not. I'd say ask me again, we've got a huge update on that this month, so if you can remind me to answer it again, I'll give you a better view next time.

Understood. Thanks so much.

Good talking to you.

You too.

(Operator Instructions). Our next question is from Phil Stiller from Citi. Please state your question.

Hi, guys. I guess I wanted to follow up on Shell, perhaps the last time. The 12 countries that just want to clarify, those are all continental Europe, and then can you disclose the planned purchase price for all of the assets that you're acquiring?

Phil, it's Ron, yes and no would be the short answers. They're all continental Europe and no, we're under an NDA with Shell, so no on the second one.

Okay. Perhaps more broadly, can you talk about the acquisition pipeline for this year? I think you had said you want to spend about $500 million a year. How does the pipeline shape up relative to that goal?

I'd say good. We actually just had a review of that in the last couple of weeks, so I'd say we've got a series of kind of small, medium and large deals that are kind of, next couple of quarters, if they come to pass, so I'd say we're feeling good about where we're sitting in terms of 2014 activity. We took a little bit of a breather in the fourth quarter to digest what did we do, seven deals last year?

Correct.

But I'd say we're in a good place, Phil, now to kind of move forward on some things.

Okay. And then lastly on Brazil, I know you guys are facing some currency headwinds there, but can you give us an update on how that business is performing from a revenue growth and margin perspective?

Yes. We ended up, as you know, acquiring kind of two new businesses there, and I'd say on plan so far, and the good news is kind of no surprises, both in Q4 last year and Q1, and I'd say the exciting part again, is not so much what we bought, but really our launch of our own fuel card product, which we haven't had before, and a broader launch of a food card product, which we've repapered in a new format, so I'd say those two literally will launch this quarter or early next, so I'd say that the base deals are tracking to plan, and the exciting kind of new product rollouts are kind of 90 days away now.

Is the fuel card product there incremental to the reselling relationship you have with Good Card?

That's what it is. It's basically we signed a deal with them, whatever, seven or eight months ago, and we've done the IT work to basically connect their network product into our issuing system, so we're about ready now to go prime time and launch a FleetCor fuel card in that space finally.

Okay. Great.

It's a big deal for us to get an actual fuel card. We bought that CTF, which is a different kind of heavy truck gidget centric kind of solution. This is a traditional kind of FleetCor fuel card to go after the SME markets so we're quite excited.

Okay. Great. Thank you.

Your next question is from Tim Willi of Wells Fargo.

Thank you, good afternoon. Two questions, first one, just going back to Europe overall with Shell, could you talk about the sales in general, how you see that opportunity to put that in place and grow the business past the conversion? Is there anything you have to do dramatically different from the playbook you used in the US, or is it going to be pretty similar with the efforts you've enjoyed domestically?

Tim, it's Ron, again another good question. I think the first thing I'd say is, I think that's why Shell picked us, right? They obviously look at some other people, so I think that our capability, not only here, but remember our second biggest market is the UK, where we have the same set of sales channels working, so yes, our plan is to in this case leverage their brand right through the digital, through the web channels, leverage their sites, they've got a big branded network, obviously in that geography, and our claim to fame is kind of our telesales kind of sourcing and recruiting, so those are the three kind of big channel plays, that to your point we're pretty tuned up on. So we're working now kind of to get those things ready for the conversion this summer.

Question just to follow-up on that, part of my second one. In the UK when you did the acquisition a couple of years ago in that market you talked about investing in the sales platform, because it's sort of a tired asset in terms of acquiring customers, et cetera. How should we think about like maybe an average growth of accounts in the UK? I know the revenue there has been impacted by pricing and product development, but how do we think about like your account acquisition success in the UK after buying Allstar, is that double digit account growth as you got into the marketing/sales engine of that entity?

Yes I'd say in the couple of businesses, Tim, we had before were probably, again probably around a 10% organic growth rate, and I'd say in Allstar we're not. I'd say our volumes are not up. And again the reason is, we try to get that business repositioned. We put it on our platform, we crushed the cost structure, we changed the rates, and now basically what we're doing is it's taken us a year to create a couple of brand new products for that business. We have a product called Allstar Premiere, which combines universal coverage with about 20% of the sites having a deep discount, so a client can now buy one product that basically gives them universal acceptance, but the big advantage pricing in some select locations, and then B, next month we're launching finally the Visa chip and pin specs, so we'll have an actual, normal, if you will, in European standards, commercial chip and pin card, and so we've been building up basically investment to get behind those two new products, so again, ask me the question in a few months whether our sales rate in that thing is picking up. So I'd say it's on our plan, it's exactly what we planned that business, what did we quote, grew 19% for the quarter?

That's correct.

So, again, we're delighted with both the revenue and the profits, and as we say, we are moving to what we call our Phase 2 of that thing now, where we're in kind of the volume growth phase instead of the restructuring phase.

Great. Thanks. Just a last question on CLC, is there a path or a thought at some point, can that product be in Europe? You're obviously building out that presence on the fleet side, logically at some point through acquisition or just organic, you try to take CLC over to Europe or the UK?

Another good question, Tim. I'd say we haven't figured that out yet. As you know, all of these products which create the sensibility in our game, and also creates the difficulty per my Shell comments is the network, and so the struggle for us is to find a hotel network, where we can get the advantaged economics that we get here in the States, so I'd say no clear idea but if you've got one, call me.

If lightning strikes, I'll let you know. Thanks for the time.

Thanks.

There are no further questions at this time. I'll turn it back over to you for closing comments.

Thank you everybody for joining us today, and we'll see you next quarter.

Thanks, guys.

This concludes today's conference. Thank you for your participation.