Corpay Inc (CPAY) 2014 Q3 法說會逐字稿

Greetings and welcome to the FleetCor Technologies third-quarter 2014 earnings conference call. (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 third-quarter press release. It can be found at www.fleetcor.com under the Investor Relations section.

Throughout this conference call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income, adjusted net income per diluted share, and 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 and preliminary 2015 guidance on a non-GAAP basis.

Finally, before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. This includes forward-looking statements about our 2014 and 2015 guidance, new products and fee initiatives and expectations regarding business development and acquisitions. They are not guarantees of future performance, and therefore, you should not put undue reliance on them.

These results are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today's press release in 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 discussed and at www.SEC.gov.

With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO.

Okay, Eric. Thanks and good afternoon, everyone, and as always, appreciate you joining the call. Up front here, I'll plan to cover two subjects. First, I will comment on our Q3 results and our 2014 full-year guidance. And then second I will provide an update on the Comdata acquisition, along with our outlook for 2015.

Okay. So on to the quarter. Let me start by saying we're very pleased with our Q3 results. We reported earlier Q3 revenue of $295 million, up 31%, and cash EPS of $1.37, up 27%. So 31% top line, 27% bottom line.

There was quite a lot going on in the macro environment this quarter, although on balance we'd say the environment was effectively neutral in terms of its impact on our results.

We did get a lot of help from above average market spreads in the range of $5 million, but that was all offset by lower US fuel prices, higher interest rates, and an unfavorable tax compare. This Q3 our tax rate was 30% versus last year, 27%, so that again reduces our earnings growth rate by about 6%. So, again, reporting 27% earnings growth versus 33% at a constant tax rate.

The drivers of our Q3 performance were quite similar to our previous quarters. So first, organic growth. Consolidated we had organic growth of 13% in Q3, and that has accelerated from earlier in the year. Inside of that, our US business was even better with organic growth of 19%, and that's driven by the above average market spreads, continued 27% volume growth in our MasterCard products, and continued mid-20%s CLC growth.

Second driver, acquisitions, we were helped by our three largest 2013 acquisitions, which is Nextraq here in the US, Epyx in the UK, and VB in Brazil. So collectively these three deals accounted for about half of the revenue growth for the quarter.

Lastly, our Russian business continues to hang in, and we did report positive growth in local currency for the quarter. So, hanging in there.

We did have a few highlights as well in Q3. We announced last month that we went live with Shell in Germany, and we're now fully converted their SME portfolio on to our systems and operations. And this one market will contribute approximately $10 million of incremental revenue in 2015.

Shell is quite happy with this initial conversion, and thus we expect to convert Shell market number two, which will be Austria, hopefully before year end.

A second highlight in the quarter, we did acquire Pac Pride on August 1, so this is a nice tuck-in acquisition for us that has, we think, bright prospects for next year.

We also went live with our new Voyager Universal card project. So we finished up the testing, and we're now fully operational with this second Universal product. So, again, a great alternative for us to our Universal MasterCard product.

And then lastly, we progressed quite a bit with our Husky Canada and Ultramar Canada new partner conversions, and we expect both of these new partners to be fully converted by year end. So a pretty exciting set of developments this quarter.

Okay. Let me transition over to Q4 and our 2014 full-year guidance. So today we are raising guidance again. We're taking cash EPS guidance up from $5.07 at the midpoint to $5.09 at the midpoint for full-year 2014. This implies $1.33 in Q4 cash EPS. So assumed in this Q4 guidance is approximately $0.05 of FX headwind, that it is our major currencies stay at the current levels. So obviously we would have guided to $1.38 in Q4 had we been at constant currency.

For the quarter, we're expecting lower US fuel prices to continue, but that will be offset by above average market spreads in Q4. And, again, really that's a natural hedge for us. So if we achieve the $1.33 in Q4 EPS and $5.09 in full-year 2014 cash EPS, that would result in 26% cash EPS growth versus 2013. And if you look back at FleetCor's cash EPS earnings history since our December 2010 IPO, we could report four years of cash EPS profit growth well in excess of our 20% annual target.

So in 2011, 31% profit growth; 2012, it was 38%. Last year, 35%. And as I mentioned, we're out looking at 26% here in 2014.

So, look, we're quite pleased with the consistency of our profit growth since we've gone public.

Okay. Let me transition over to Comdata and give you an update on that transaction. Since we spoke to you last in mid-August, we've been working quite hard on our integration plans and our financial forecasts for that business. And we can now report that we have officially cleared HSR and completed our new credit facility raise. So we are now in a position to close the Comdata transaction this quarter, Q4.

We don't expect any cash EPS profit contribution in the quarter, as integration costs, deal costs, and severance costs will likely offset any Comdata contribution. We must tell you, though, that we are feeling very good about the transaction today, probably even better than when we signed the deal. We really like this corporate payments business and its long-term growth potential. We've got more confidence in the synergy opportunities within the Comdata fleet business, and it looks like our financing costs will be favorable to our original model as we have achieved a higher mix of pro rata facilities versus Term B facilities.

I also want to tell you that the Comdata people have been terrific. They have embraced this transaction. They've been incredibly cooperative. They have been excited about the new ideas that we floated, and they are also accepting of the necessary changes that will be required to combine the companies and deliver the cost synergies that we anticipate. So really just great attitude.

Okay. So let's talk about what all this means then relative to our 2015 outlook. So let me start off by saying that we haven't finished our 2015 budgeting process and still need to close the Comdata transaction. But with that, we are reconfirming today $6.35 in cash EPS guidance at the midpoint for 2015, and we're maintaining this guidance despite an expected $0.15 to $0.20 cash EPS headwind in our core FleetCor business. And this is the result of unfavorable FX and expected lower US fuel prices.

But on the Comdata side, we're now expecting stronger earnings next year, and that's driven by three things. One, the Company's better second-half performance than we were expecting, so a better exit rate. Two, our confidence to realize more synergies sooner than we had originally planned. And then, three, again, this lower expected financing cost due to the more favorable mix of our credit facilities. So, in total, we plan to stick with this preliminary 2015 cash EPS guidance of $6.35, again despite pretty unfavorable macro conditions.

The $6.35 cash EPS guidance would result in 25% earnings growth over our 2014 $5.09 full-year guidance, which could potentially give us five consecutive years of 20% plus earnings growth.

So with that, let me turn the call back over to Eric so that he can provide some additional color on the quarter. Eric?

Thank you, Ron. For the third quarter of 2014, we reported revenue of $295.3 million, an increase of 31% from the third quarter of 2013. The revenue from our North American segment increased 35.6% to $156.3 million from $115.3 million in the third quarter of 2013. Revenue from our international segment increased 26.4% to $138.9 million from $109.9 million in the third quarter of 2013.

For the third quarter of 2014, GAAP net income increased 21% to $95.5 million or $1.11 per diluted share from $78.6 million or $0.93 per diluted share in the third quarter of 2013.

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 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. 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 third quarter of 2014 increased 30% to $270.3 million compared to $208.2 million in the third quarter of 2013. Adjusted net income for the third quarter of 2014 increased 29% to $117.6 million or $1.37 per diluted share compared to $91.4 million or $1.08 per diluted share in the third quarter of 2013.

However, to remind everyone, in the third quarter of 2013 was the impact of a one-time income tax benefit of approximately $0.05 per share due to the reduction in the tax rate in the UK. Without this one-time adjustment, our adjusted net income per diluted share would have been $1.03 in the third quarter of 2013, and our year-over-year growth rate would have been approximately 33%.

For the third quarter of 2014, transaction volumes increased 12% to 94.4 million transactions compared to 84.3 million transactions in the third quarter of 2013. North America segment transactions grew 4.5%, driven primarily by organic growth in our US businesses and the telematics acquisition we completed in October of 2013. Transaction volumes in our international segment grew 19.8% and were positively impacted by acquisitions closed in 2013. Adjusted revenue per transaction for the third quarter of 2014 increased 15.9% to $2.86 from $2.47 in the third quarter of 2013.

Revenue per transaction can vary based on the 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.

Revenue per transaction for the third quarter was up in both North America and the international segment. Revenue per transaction was up 29.8% in North America, due primarily to higher fuel spread margins during the quarter, the positive mix impact of signing up customers who use higher revenue per transaction products than the average, organic 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 in the quarter.

In the international segment, revenue per transaction increased 5.5%, due primarily to organic revenue growth in several lines of business, particularly in the UK, and acquisitions closed in 2013, some of which had products with a higher overall revenue per transaction versus our line average.

In addition, foreign exchange rates in the quarter were mixed, but overall had a slightly positive impact on international revenue per transaction. As previously stated, higher fuel spread margins in the US resulted in a favorable impact to revenues in the third quarter. And although we cannot precisely calculate the impact of these changes, we believe it positively impacted our revenues in the North America segment by approximately $5 million for the quarter.

Changes in foreign exchange rates were mixed, and overall we believe positively impacted revenue during the quarter by approximately $1 million to $2 million. And foreign exchange rates were favorable in the UK and neutral to down in most other geographies.

Now let's shift over and discuss some of the other drivers of our third-quarter performance. For our North American segment, most of our lines of business performed well, resulting in a 35.6% revenue growth in the quarter versus prior year. Approximately 19% of this growth was organic growth in the quarter.

Some of the positive drivers in North America revenue during the quarter were similar to the last several quarters, including the exceptional performance of our MasterCard product, which had revenue growth of approximately 36% over the third quarter of 2013, driven primarily by increases in volume.

The CLC Group, provider of our lodging and card programs, had another solid quarter, with 27% revenue growth over the third quarter of 2013. This revenue growth was driven primarily by increases in our check-in direct product, which targets smaller accounts.

The third quarter also benefited from our acquisition of Nextraq, a telematics business acquired in October of 2013.

And finally, the decrease in the wholesale cost of fuel resulted in an increase in fuel spread margins and we believe positively impacted our revenue for the quarter by approximately $5 million, as I mentioned earlier.

Results in our international business were impacted by strong organic growth in our UK business, which posted double-digit revenue growth over last year. Results for our international businesses were also positively impacted by acquisitions in Brazil and the UK in 2013.

I am sure a number of you are wondering how our business in Russia has been performing. As of now, not much has changed since the second quarter. The economy in Russia remains soft, and foreign exchange rates continue to get worse. However, in spite of these headwinds, our business in Russia is actually up slightly from the prior year.

As most of you know, the dollar has been strengthening against most foreign currencies over the last month, and if this continues at the current rate, we believe it will have an unfavorable impact on our revenue and results in the fourth quarter. I will discuss this in greater detail when I discuss full-year guidance.

Now moving down the income statement. Total operating expenses for the third quarter were $151.1 million compared to $113.9 million in the third quarter of 2013, an increase of 32.7%. As a percentage of total revenues, operating expenses increased to 51.1% of revenue compared to 50.6% in the third 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 the third-quarter operating expense was approximately $2.6 million of mostly one-time costs related to the Shell Germany startup, deal-related expenses, severance, and other miscellaneous items versus approximately $2.2 million of mostly deal expenses in the third quarter of 2013. There were also $9.9 million of stock compensation expense in the third quarter of 2014 versus $5 million in 2013.

Credit losses were $5.8 million for the quarter, or 12 basis points, compared to $4.9 million or 11 basis points in the third quarter of 2013. The slight increase in bad debt was primarily due to additional bad debt booked in our Russia business due to the slowdown in their economy.

Depreciation and amortization increased 42% to $25.7 million in the third quarter of 2014 from $18.1 million in the third quarter of 2013. The increase was primarily due to amortization of intangible assets on acquisitions closed in 2013.

We also have a line on our P&L related to our equity method investment, which represents the loss reported on our minority investment in Masternaut for the third quarter. Our loss was driven primarily by additional amortization booked in purchase accounting related to this investment. The Masternaut investment had a slightly positive impact on adjusted net income for the quarter.

Our effective tax rate for the third quarter of 2014 was 30.1% compared to 27% for the third quarter of 2013. The increase in the effective tax rate was due primarily to the decrease in the UK rate in the third quarter of 2013 that I discussed earlier.

Now turning to the balance sheet, we ended the quarter with approximately $346.5 million in total cash, approximately $42 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 3, 2014, to a new maturity date of February 2, 2015. At September 30, we had approximately $394 million borrowed against the facility.

We also had $476 million outstanding on our term loan and $478 million drawn on our revolver, leaving $372 million of undrawn availability.

As of September 30, 2014, our leverage ratio was 1.62 times EBITDA, down from the 1.86 times in the second quarter, due primarily to the paydown from the free cash flow generated in the business. The 1.62 times EBITDA is 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 $6.7 million on CapEx during the third quarter of 2014.

On October 24, the Company signed documents to enter into a new $3.335 billion credit facility consisting of a Term A loan of $2.020 million, a revolving credit facility of $1.035 billion, and a Term Loan B facility of $300 million. These new bank facilities will be used to refinance our existing Term Loan A and revolving credit facility and help finance the Comdata acquisition. These facilities will close in conjunction with the closing of the acquisition.

At the time of closing, the rate on the Term Loan A and revolving credit facility will be LIBOR plus 200 basis points, and the rate on the Term Loan B facility will be LIBOR plus 300 basis points, with a floor of 75 basis points.

Now on to our outlook for 2014. We are increasing our guidance as follows. We expect total revenues to be between $1.100 billion and $1.110 billion, up from our previous guidance range of $1.082 billion and $1.097 billion; adjusted net income to be between $434 million and $440 million, up from our previous guidance range of $432 million and $438 million; adjusted net income per diluted share to be between $5.07 and $5.11, up from our previous guidance range of $5.04 to $5.10. Our adjusted net income per diluted share guidance at the midpoint of the range represents a 25.7% 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, from two favorable, nonrecurring income tax items. So using a more normalized tax rate in 2013, our growth rate is projected to be approximately 28%.

As we enter the fourth quarter, we have headwinds and foreign exchange rates that were not accounted for in the guidance given during our second-quarter call. Our guidance for the fourth quarter reflects foreign exchange rates at current levels, which will have an unfavorable impact on our results of approximately $0.05 per share in the fourth quarter versus our previous assumption.

As a result, our revised guidance assumes $1.33 in adjusted net income at the midpoint for the fourth quarter. Without this headwind, we would have guided to around $1.38 for the quarter.

Some of the other assumptions that we have made in preparing this guidance include the following: continued weakness in our Russia business; fuel prices at current levels and market spreads slightly better than the year-to-date average as the decrease in the wholesale cost of fuel should result in more favorable fuel spread margins. We expect that the decrease in fuel price will mostly offset more favorable fuel spread margins.

We are also assuming fully diluted shares outstanding of approximately 86 million shares and a full-year effective tax rate of 30.4%. This tax rate assumption does not include any potential year-end tax adjustments and, as always, no impact related to future acquisitions or material new partnership agreements not already announced.

We have also not included any impact related to the closing of the Comdata acquisition in our guidance. As Ron mentioned earlier, we have cleared HSR and have secured the financing for the transaction. As a result, we now believe that we will close the Comdata acquisition around December 1. However, given the significant amount of closing costs we will incur in the acquisition, we believe that the Comdata acquisition will have no impact to our bottom line in the fourth quarter.

Now, I am sure you are all wondering about 2015. While we're not done with our internal budget process, we did want to offer the following observations related to comments previously made about 2015. There are a few unexpected headwinds, primarily foreign exchange rates and fuel prices that we are seeing now and we expect to continue into 2015. At current levels, these are estimated to negatively impact our bottom line by approximately $0.15 to $0.20 in adjusted net income for the year.

However, as we continue to work toward wrapping up the Comdata acquisition, the business is performing better than our expectation, and we are growing more confident around the synergies we can achieve from the combined organizations.

In addition, our cost to finance the acquisition is lower than we originally anticipated. As a result, we believe these will net each other out and believe the $6.35 adjusted net income estimate for 2015 we gave you previously in conjunction with the Comdata announcement is still reasonable. We are planning to talk in more detail about 2015 on our fourth-quarter earnings call.

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

(Operator Instructions). Ramsey El-Assal, Jefferies.

Congratulations on a great quarter. When you do close Comdata, will a percentage of your overall revenues that are exposed to fuel price volatility go up or change in any measurable way?

Yes, it's Ron. They will go down slightly. Comdata is in the 15% affected by fuel price, and I think our number is right around 20%.

That's correct. Yes, so in total, we're about 17%, give or take, combined.

Okay. And any update on divesting the SVS gift card asset that you had mentioned previously?

Yes, not yet. Again, we don't own the company, so I'd say we've done some additional evaluation work in prepping things, but not much progress on that.

Is that still something that's strategically you are pretty intent on doing, or could you change your mind on that depending on how the market receives the asset?

Yes, the latter. Again, it's a good business, Ramsey. For us it's a fit. Question about we're good at what we're good at. So if people like it more than we do, then we would unload it, and if not, we'll work with it.

Okay. Last one for me, and I think you may have commented on this earlier and I can't quite remember. But the incremental markets you are rolling out with Shell, the costs associated with rolling out those markets has largely been expended in developing the platform for Germany. Is that correct, or are there incremental costs that you will need to incur to roll the additional countries out?

Yes, they will be incremental, so our early plan is in the four to five additional markets next year in 2015. And if you think about it, there is -- separate from the platform -- there is conversion. You've got to go into the specific market and convert data. There is incremental staffing to handle those languages, those services and stuff.

So I'd say that we'd model the thing probably at a push. It will probably add $4 million to $5 million of incremental revenue and probably cost us about the same next year.

Okay. And all that is contemplated in guidance, I'm assuming?

It is.

All right. Fantastic. Thanks a lot, guys.

David Togut, Evercore.

If I heard correctly, Ron, I thought you said MasterCard volume growth was up 27%, and Eric, you cited 36% revenue growth for the MasterCard product?

Ron quoted volume and I quoted revenue. So volume was up 27%, but revenue was up 36%.

So did you put through a significant price increase, or did you just have higher average ticket in the quarter?

Yes, Dave, it's Ron. Two things. One, I'd say again is it is some mix. When we started that product, we started out by selling more in the middle market where we get lower fees, and we're selling a pile of that. So we're selling more smaller accounts where we get more fees. So the first one I think is mix. And then second we've added a few transaction fees selectively, so we've done a little bit of rate work as well.

I see. And as a result, is a mid-30%s revenue growth rate for this product sustainable?

I don't have it in front of me, but I'd say probably our model for next year is high 20%s, maybe 30% in revenue at constant fuel price.

Got it. And CLC was up mid-20%s in the quarter. Anything to call out there in terms of what drove the growth, and is that growth sustainable?

Yes, again, I'd say, as we've commented before, it's really, David, across the board. That new product that we talked about that is kind of targeted at the middle size traveler group is off on a tear. And then our small account, we call it check-in direct, that thing is again -- we're just selling a pile of it. So I'd say the best thing about that business is it is growing the right way, which is demand for it, and we're selling a lot of it. So, again, we model that thing to be up plus 20% again next year.

Got it. And, Ron, you called out the introduction of a new Universal card product, the Voyager product. Can you tell us a little bit about that and how that will be marketed relative to direct MasterCard?

Yes, the way we think about this thing, Dave, is probably like the banks. We think about the Chase, the BofA, the Wells Fargo guys, they have a primary network, let's say MasterCard, but they keep Visa for 10% or 20%. And then they package the products in terms of offers and marketing in certain ways, and they keep both guys because it helps them obviously negotiate. I'd say that that's exactly how we think about it. We think about the product as another very good alternative that fundamentally works the same way, has the same Universal network.

We'll package, market, and price it basically the same way, and we've already been doing that. We've got a large number of our salespeople selling it. For us, again, it's good to have that option, that alternative. Again, it mutes interchange risk, pricing risk from MasterCard. So we like having it, and depending on how those couple of guys play with us, we'll move either more volume one way or the other. But customers like it I'd say probably about the same as they do the MasterCard product.

Got it. And then just shifting to the UK, any update on the rollout of the new Allstar Visa chip card?

Yes, that's a great question. It's funny. We literally last week went live on what we call our customer pilot. I'll make up the number, but call it 100 of our existing accounts went live last week with the product, and I saw some of the email stream, which is good. A few people going, wow, finally, an easy card to use. Because it works like the consumer card. So that thing is officially live and out of the blocks, and we'll start converting a large group of accounts probably in Q1.

Understood. And then just shifting over to Comdata cost savings, I think, Eric, you called out expecting more cost savings sooner. Can you ballpark for us what the cost savings as a whole might be might be for 2015?

Yes, hey David. Yes, we haven't really quantified that at this time. As you know, we haven't closed the acquisition yet, and we do believe we'll probably close that transaction before or around December 1. So we will have obviously a lot more to talk about on the Q4 earnings call. We can have a discussion about that more then.

Understood. Just a quick final one for me. On the macro for 2015, you called out pressure from FX and lower fuel prices. Do you expect any benefit next year from higher fuel price spreads?

Yes, David, it's Ron. So the answer to that is no, we haven't planned it. As you know, spreads come about due to volatility. Fuel prices have to move basically to create spreads going one way or the other.

And so the worst situation for us would be low fuel prices just staying low, nothing happening. And what that would cause is we'd lose on the business models that are sensitive to absolute fuel price, and we'd probably run what we call average market spreads. And so, it's the volatility price, the seesawing up-and-down that create the spread opportunity.

Understood. Thank you very much.

Smitti Srethapramote, Morgan Stanley.

Yes, just wondering if you could give us a high level, your latest thoughts on telematics now that you've had Nextraq and Masternaut for some time. Can you talk about where you see the opportunity in the space in the US and in -- outside the US?

Yes, Smitti, I'd say we're getting a bit smarter. Our original thesis is we'd like the space because it nests so close to what we do. And I think we've learned a lot since we acquired the Nextraq business about a year ago. So, it's been a lot of learnings about is the value in our customer relationships or is the value in our sales relationships. And so, for example, on that one, we've learned that the sales and the money we spend and the contacts we make and the window that those people are in is actually more valuable to help them sell telematics than quote, cross-selling to our existing customers.

So I guess I'd say that we're still in the evaluation phase of the business in terms of deciding whether we want to play in it in a big way or not.

But I would add that we're delighted with this Nextraq company that we bought. The numbers are up. The profits are up -- what? Three times?

Correct.

3X, I'd say, over the quarter a year ago, and the thing is performing well. There's good growth, much better profitability. So I'd say from the one that we own, although it's not very big, we like what we see so far.

Got it. And maybe you can give us also an update on Chevron Asia and where the rollout stands at the moment?

Yes. So the two big GFN or processing deals we announced was Caltex in Australia and then five or six markets for Chevron in Asia. We've got a big relationship with Chevron here in North America. And the target date for both of those projects is basically go live next summer. So we are in the middle of customizing our product to meet the specific requirements of those clients and dialoguing with them. And as we get into the early spring, we will get into the testing and the training of stuff. So, I'd say we're halfway through those projects and are on track to go live next summer.

Got it. And maybe a final question from our side is just regarding the increase in confidence on the synergy opportunity in the Comdata. Just wondering what you've seen that gives you the increased confidence in extracting the synergies.

Yes, I think the short answer is it's just getting closer, right? When you're doing diligence with a company and requesting data -- we are kind of math guys at FleetCor, so we have a bunch of ideas and we did what we did. But once we signed definitive documents and got it working closer with their people, we get into I'll call it another level of detail, and we've done this before.

So I'd say that the ideas we have, the fact base we have, gives us just higher confidence that we can do things and get the money that we planned.

And can you comment on whether you are getting more confidence in synergies on the revenue side or on the cost side?

Yes, I'd say it's both. The issue for us on the cost side is really going to be timing, so we've obviously identified the low-hanging fruit, the things that are clearly overlapping that are easy. But some large amount -- I will say a third of all Comdata spending is around the technology area, which is a big number and a much bigger number than FleetCor.

And so the systems planning and the systems integration part of this thing and the vendors around IT are a bigger part of that cost takeout equation. So I'd say the cycle time on that is going to be longer. So we'll take some of the cost money right away, and then I'd say the IT timing is still not certain yet.

Okay. Thank you.

Jim Schneider, Goldman Sachs.

I was wondering if you could talk longer-term about the deal pipeline that you are seeing right now? I think you mentioned before that you still have other things you are considering actively, so can you maybe talk about the activity levels in terms of negotiations and discussions you might be having? And in terms of what areas -- is it more international, is it more North America, is it more traditional fleet or other spaces?

Yes, I'd say it's kind of same old, same old here. We've got a big group of people, and, again, we know all the people, Jim. And so we've got a pipeline of things that we're working on, and as I look at the list here in front of me, they are mostly in other places outside of the US. And it's the same thing. A couple of them are large and a couple of them not so large. So I'd say it looks like our pipeline looks all the time. We're out there and we're rattling the bushes and finding stuff. And so that with the financing approach we took leaves us, what, about a half, $500 million basically of liquidity?

Yes, at least. At least.

So our target, Jim, again, is to invest $500 million a year on average, $1.5 billion over the forecast. So we've got money even at the close of this thing to chase these things down in the pipeline, so I'd say we're probably in the same place that we normally are.

That's helpful, thanks. And then just as a follow-up, you mentioned the revenue transaction grew very nicely in the quarter, and I understand that a decent chunk of that is increased fuel price spreads. But can you maybe talk about the contribution you saw from cross sell of telematics or cross sell of others servicers into the existing customer base?

Yes, I would say there is probably not a lot of that. Again, we're still in the testing mode on the cross sell. I think it's just fundamentally healthy assets. So in the US, the MasterCard thing, we've quoted the numbers, as growing crazy. We brought online, we think we told you, a bunch of new partners that finally contributed to revenue that hadn't shown up before. I mentioned the Nextraq thing we like. That's grown high double digits since we bought it. The CLC thing is rocking. So all the US businesses, it's not really about cross sell; they are just healthy.

Some of the new things we bought like the Epyx business is way up. We put a bunch of programs in that. Our Mexico business is way up. So I think generally -- our down under businesses are way up. So I think it's more just the programs that we have in place and the sales that we have in place are just basically working in the businesses. And then we just got a couple of headwinds. Russia is not great because of the environment, and Brazil is not as great with their economy in the check business. So we've got two or three places that are kind of soft mostly because of the environment, but I'd say the rest of them, Jim, they are just working.

That's great. Thanks so much.

(Operator Instructions). Phil Stiller, Citi.

I guess I wanted to ask about Brazil. You haven't talked too much about it so far. Just an update on how your businesses are performing down there.

Hey, Phil, this is Eric. I would say first our business there is being impacted somewhat by the economy and the election that was taking place. So I'd say some of our volumes are softer than what we originally anticipated. But what I would say in addition to that is we're still very, very bullish on the prospects of that geography. We've got a bunch of new products that are in the beginning stages of being rolled out.

We partnered with a company called Good Card last year, and we are now going to be reselling what is the number one small to midsized fleet card in Brazil. We also partnered with a company called Edenred, and we're going to be cross-selling their food card product as well to our own customer base.

We're also in the process of finalizing the rollout of a new national toll tag technology. So that hopefully will be ready to be rolled out as we get into the first quarter next year.

So I would say it's a couple things. One, it's the economy is a little bit softer than we had originally anticipated impacting our volumes. But we're well-positioned as we move forward into the next year and the years beyond with a bunch of new products that we're going to help to grow a much bigger business down in that geography over time.

Okay. That's helpful. Could you guys perhaps comment on the partner pipeline, both in the US and internationally?

Yes, Phil, it's Ron. I'd say we're probably early innings. We've got some conversations going on both here in the US and in Canada, and we've got some conversations going on in Europe. But I'd say we're early in a lot of those. I think some of these conversations, particularly the Europe ones, have come as a result of the Shell and the Exxon announcements in the last year or two. So I'd say nothing imminent, but again, I think more of the oil companies are taking notice of this outsourcing idea. And I think, frankly, waiting for the kind of news that we are reporting today on the Germany, for example, that we've gone into a country and it's been quiet and it's worked and all that. But more proof that outsourcing is good for these clients I think is what the doctor ordered.

Okay, great. And then last question, and I think when you originally gave the preliminary 2015 guidance, you talked about like a 10% organic revenue growth number. And I assume that still holds, excluding the impact of fuel and FX. But just wondering, it seems like you have a lot of good momentum exiting the year, that the organic growth was better this quarter. You have some partner deals ramping. You have new products rolling out. How conservative is that 10% number as we look at the next year?

Yes, the first thing I'd say, Phil, it's still early days here at whatever we are, late October. We actually start what we call pass due of budgets next week, so ask me a different day. But I'd say the early view is yes. So in our early passes here, we could reconfirm with you that our global organic target is -- in constant FX and constant fuel price, which is how we set the thing up -- at the 10% or 10% plus. So we feel good about the overall health.

And I think one of the questions for us in the budget process is do we want to -- what do we want to do on the expense and the investment side? Do we want to spend more money in IT and more money in sales, particularly behind some of these Europe markets and some of our new cards there, and same in Brazil? We like the business we have okay, but I love the product line that we -- this new product.

So I think one of the big open questions for us communicating with you guys, again, is, are we going to spend any money, or are we going to continue to run at these margins?

Okay, great.

And also, there's a wildcard here obviously on the FX and the fuel price. This is almost a 30-day phenomenon in terms of what's happened to both of those metrics. So I'd say we're like you: we're watching both of those pretty closely.

Sure. Make sense. Thanks.

Ladies and gentlemen, that's all the questions we have today. All parties may disconnect. Have a good evening. Thank you.