WEX Inc (WEX) 2005 Q2 法說會逐字稿

Good day, and welcome everyone to the Wright Express Corp. second-quarter 2005 earnings results conference call. Today's call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to the Vice President of Investor Relations, Mr. Steve Elder. Please go ahead, sir.

Good afternoon and thank you for joining us. With me today is our CEO, Mike Dubyak and our CFO, Melissa Goodwin. Mike will summarize our financial results and review the Company's operations for the second quarter, then Melissa will discuss the financials, and we will open the call for your questions. Before we begin I would like to remind you that that we will be making statements about the Company's future results during this call. These statements constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements represent only the Company's views as of today, July 27, 2005 and are based on current expectations in light of the current economic environment. While the Company may choose to update forward-looking statements in the future, we specifically disclaim any duty to do so. You should not rely upon these forward-looking statements as representing the Company's views as of any later date.

Forward-looking statements and projections are inherently subject to significant economic, competitive and other uncertainties and contingencies which are beyond the control of Wright Express. The Company cautions that such statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements. Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements and projections are specified in the prospectus filed by the company on February 16, 2005 in connection with the initial public offering and subsequent filings including our form 10-Q for the first quarter of 2005.

In addition, during the call the company will be using certain non GAAP financial measures as defined under SEC rules. We are required by these rules; we have provided the reconciliation of the non GAAP measures to the most directly comparable GAAP measures as exhibits 1 and 2 in the press release dated today, July 27th. The release can be found out our website at WrightExpress.com. A copy has also been submitted as an exhibit to an 8-K with the SEC. With that I would like turn the call over to our CEO, Mike Dubyak.

Thank you, Steve. Hello everyone and thanks for joining us this afternoon. We released our second-quarter financial results only a short while ago, so I will begin with a brief summary of the results and key metrics. During the second quarter revenues increased 21% to $57.3 million from $47.2 million for the second quarter of 2004. Net income to common shareholders on a GAAP basis was $15 million or $0.37 per diluted share compared with net income of 13.6 million or $0.34 per diluted share for Q2 last year. The Company's adjusted net income for the second quarter of 2005 was $11.2 million or $0.27 per diluted share. This non-GAAP figure excludes an unrealized $6.6 million mark-to-market gain on our derivative contracts before taxes.

The second quarters of 2005 and 2004 are not directly comparable due to the non-cash earnings fluctuations associated with our fuel price derivative contracts. To provide a more meaningful comparison exhibits 1 and 2 in today's press release present adjusted net income for the second quarter of '05 and non GAAP net income for the second quarter of 2004. Melissa will discuss our results in more detail.

Next I will turn to the key metrics we look at in evaluating the Company's performance. Average number of vehicles serviced increased 8% from the second quarter last year to approximately 4 million. Total transactions processed increased 10% from Q2 a year ago to 56.8 million. Average expenditure per payment processing transaction for Q2 increased to $44.03, an increase of 21% from the same period last year. Average retail fuel price for Q2 increased 18% to $2.20 per gallon compared with $1.86 for the same period last year. Total MasterCard purchase volume grew to $225.7 million, an increase of 32% from Q2 last year.

We also paid $15 million in principal on our long-term debt balance during the second quarter of 2005. This fall with a $20 million payment in Q1. Our results this quarter once again demonstrated the power of our front-end sales and marketing engine. We produced solid growth for all three of our marketing channels, co-brand, private-label and direct and concluded the quarter with a strong sales pipeline in all three of our core markets, large, midsized and small fleets. Everyone tends to focus now on rising fuel prices and with good reason. But higher fuel prices were not the only reason for the 21% revenue increase we posted for the quarter.

We also posted another quarter of solid organic growth, growth in the total number of transactions processed, vehicles serviced and MasterCard purchase volume. This is attributable to the great work our team is doing in all of our sales channels, direct and indirect to maintain a strong pipeline of new businesses and prospects. Some people view fleet cards as a mature market, but that is really not the case. If you look at the overall fleet market large, midsize and small, there are roughly 27 million commercial and government vehicles on U.S. roads today. Based on our understanding of the market, approximately 8 million vehicles are using true payment processing fleet cards. With the remainder still purchasing with other forms of payment.

As prices rise fuel becomes a more significant factor in fleet operating costs, and our value proposition becomes increasingly attractive. In contrast to other forms of payment we operate a proprietary closed network and provide our customers with powerful e-commerce tools. This provides our fleet customers with security and control at the point-of-sale and also provides customized reporting and on demand, web based vehicle monitoring capabilities they can use to manage their fleet operations more effectively. Compared with the large and medium-size fleets, the small fleet market is relatively under penetrated. We view small fleets as a prime growth opportunity; total vehicles serviced in the small fleet market increased 9% from Q2 last year. This was a good quarter for growth in the large and medium fleet markets as well. The number of vehicles serviced in large and medium fleets grew 7% from Q2 last year.

Our newest fleet market is the private carrier segment of the heavy truck market. This is a space where traditionally we have not been focused. We've been working to improve our positioning with some aggressive marketing and sales initiatives that are producing good results. In Q2 we continue to generate solid growth in diesel fuel transactions along with a 32% year-on-year increase in the number of heavy trucks we serve.

Overall, we concluded the quarter with a strong pipeline of future business and have locked in long-term contracts with our major strategic relationships whose existing contracts were set to expire this year. As expected, we're continuing to see price pressure in the large fleet marketplace, and we've made some concessions in order to lock in some of our long-term relationships. This is something that we've managed effectively by growing in segments that are under penetrated. This growth coupled with the scalability of our business model has resulted in solid net income margin over the years.

One of our newer growth opportunities is to extend beyond fuel purchasing into vehicle maintenance expenditures by continuing to expand the Wright Express service network. Our traditional value proposition is to help fleets improve their operating efficiency through control over fuel purchasing, and we think it makes sense to apply the same value add to maintenance costs. We're doing market testing with a number of major nationwide and maintenance chains including Goodyear and Jiffy Lube, and we are working to add new service relationships. Using Wright Express cards for vehicle maintenance is a paradigm shift for us and for our customers. So it will take some time and testing to perfect. We view this as an attractive future growth opportunity.

As we announced last week, we're pursuing another early stage opportunity with our new Wright Express business card. The business card program is another way to enhance our marketing to small fleets. In this case offering the benefits of a fleet card to businesses that have a small number of vehicles and don't think of themselves as fleets. We've also been very successful in executing on our diversification strategy, developing products and services that meet specific market needs. Growth in our MasterCard business continue to accelerate in the second quarter with the strongest gain centered in purchasing and T&E cards, our most profitable areas.

In the second quarter we added 18 new purchasing and T&E customers. I will note that one of our MasterCard partners, Jackson Hewitt Tax Services, did not renew their contract in Q2. This was a stored value program that contributed approximately $1 million in revenue in the fourth quarter of '04 and approximately 2.6 million year-to-date in '05. However, the program is expected to generate about $200,000 in net income this year. While we do not like to lose any customer, clearly this will not have a material effect on our earnings in the future.

Overall we feel very good about where we are with our core MasterCard program. We concluded the second quarter with a strong pipeline, and we expect to see continued solid growth in volume and revenue for the balance of the year. In addition to pursuing diversification opportunities, we're working to enhance the scalability and flexibility of our operations with the overall goal of adding to our top-line momentum while continuing to grow our adjusted net income and free cash flow.

As I mentioned last quarter, one of the highlights is a project to enhance our technology platform. It is designed to give our customers and strategic partners more seamless access to their information along with more customized and powerful tools for managing that information. In addition, we are now ready to start our first portal integration with one of our strategic relationships. Others are in the pipeline for later this year. This will allow their fleets to leverage our powerful online tools.

Before turning the call over to Melissa, I will conclude with a brief comment on the announcement we made July 12 concerning the revised fuel price risk management strategy. The new derivative instruments are the first purchase in what we expect to be a phased program to manage the Company's fuel price related earnings exposure going forward. Ultimately we expect to lock in approximately 90% of our adjusted net income exposure every quarter on a rolling basis and this first purchase initiates the strategy for the first three quarters of 2007. Our goal is to enhance the visibility and predictability of our cash flow and future earnings, and we believe this program moves us in that direction.

In summary, Wright Express is performing very well. Our front end growth engine is producing strong organic growth. We're meeting our deleveraging and margin objectives and going forward our risk management strategy should significantly improve our long-term earnings visibility. With that, I will now turn the call over to Melissa.

Hello, and good afternoon, everyone. I will start with the details on total revenues which increased 21% to $57.3 million from $47.2 million for Q2 last year. Payment processing revenue grew 27% year-over-year to $41.8 million. This is quality growth, driven in large part by a 12% increase in the number of transactions to 40.9 million from 36.6 million a year ago. We also continue to see growth in the average expenditure per transaction which increased to $44.03 from $36.32 for Q2 of 2004. The increase in the average expenditure was driven primarily by an 18% increase in the retail price of fuel. It also reflected an increase in the average number of gallons per transaction from 19.6 to 20, a 2% increase, largely related to a continued growth in the private carrier heavy truck market.

As Mike said, our MasterCard products did well this quarter contributing $3.4 million to payment processing revenue. This comparable number for Q2 last year was $2 million. The increase in revenue was driven by the 32% increase in the spend volume across our MasterCard products. Our transaction processing revenue was up slightly over Q2 of last year, turning to other sources of revenue which include account servicing, finance fees and other revenue, the total for Q2 was $11.2 million, up 11% from 10.1 million a year ago. The majority of the increase is due to finance fee income, this results from higher average past due balances resulting from the increasing fuel prices. In addition we had a 10% increase in account servicing revenues. This was comprised of the 8% increase in the number of vehicles serviced we referenced earlier and a 2% increase in the average fee per vehicle.

Now let's look at our operating expenses for the quarter. On a GAAP basis total operating expenses were $31.3 million compared with 24.9 million in Q2 last year. The two periods were not directly comparable because last year's Q2 operating expenses did not include incremental public company costs, as well as a number of other items that were included in Q2 of '05. We detailed these numbers in exhibit 2 in today's press release, which reconciles non GAAP net income to GAAP net income for the second quarter of 2004.

Apart from these costs the year-over-year increase in operating expenses primarily reflects rising interest rates on our operating debt, it also reflects growth and depreciation expense on our technology platform as well as increases in sales and customer service personnel to support new business. I will note that transactions per FTE were 89 million in Q2 2005 compared with 84 million in Q2 2004, a productivity lift of 6%. Our provision for private losses in Q2 of '05 was $1.9 million, holding steady with Q2 2004. However, credit losses as a percentage of total payment processing expenditures and the fleet related businesses declined from 14.5 basis points in Q2 of '04 to 11.3 basis points in Q2 this year. This reflects our continued success in managing the short-term credit exposure of our customer base. Our Accounts Receivable continues to be paid within 30 days.

Turning to depreciation and amortization, the total is $2.7 million for the second quarter of 2005, an increase of 30% from 2.1 million in Q2 last year. As we continue to invest in upgrading our technology platform we expect to see an increase in depreciation. Our effective tax rate on a GAAP basis, which has remained relatively constant over the past year, was 39% in Q2 versus 39.1% for the second quarter of 2004. Adjusted net income for the second quarter of '05 was 11.2 million or $0.27 per diluted share. Our non GAAP net income for Q2 of last year totaled $10.8 million; in determining non GAAP net income for the second quarter of 2004, the major adjustments were the new costs of operating as a public company, as well as financing costs related to the debt we incurred to pay dividend of $306 million to our former parent prior to the IPO.

The Company's adjusted net income for the second quarter of 2005 of 11.2 million would have represented a 3% increase over the $10.8 million of non GAAP net income in Q2 last year. Year-over-year adjusted net income for Q2 '05 reflected higher interest rates in both operating and financing debt, which contributed an additional $2 million to expenses before taxes and $600,000 in additional depreciation expense as I mentioned earlier.

In addition, the second quarter of this year compares to an unusually strong second quarter last year. Pulling all this together the adjusted net income margin for the second quarter of 2005 was 20% compared with 23% a year ago on a non GAAP basis. Mike mentioned the revised fuel price risk management strategy which we outlined in detail in a press release on July 12. The non-cash mark-to-market adjustment associated with our derivative instruments will continue. As a result the Company's quarterly GAAP net income may be prone to significant fluctuation and may not properly reflect operating results for that particular quarter.

During the second quarter we recognized a realized loss of $3.9 million before taxes and an unrealized gain of $6.6 million. There was no significant difference between the additional revenue we recognized due to 2Q higher fuel prices compared to the realized cash loss on our derivative instruments. Our derivative instruments can also generate realized gains and losses even after offsetting revenues on a cash basis. These gains and losses result from the mismatch between changes in the wholesale and retail fuel prices during any given quarter. Our risk management strategy is designed to minimize this phenomenon.

Turning now to financing activity, in connection with our IPO and the special dividend to our former parent, we placed a $350 million senior credit facility. We paid $15 million in principal during Q2, closing the quarter with a balance on the term note of $185 million. The balance in the line of credit was $50 million with an additional 13 million in letters of credit used to secure our derivative instruments. We are currently paying LIBOR plus 175 basis points on the outstanding amount and 37.5 basis points on the unused portion of the line of credit. These rates will drop as our leverage ratio drops.

During the second quarter we renegotiated the credit terms we have with our counterparty to the derivative instruments. This resulted in our counterparty granting us $20 million of unsecured credit, allowing us to reduce the amount of letters of credit we have in place. If we had not done this we would have required $33 million in letters of credit to secure the derivative instruments.

Turning now to the balance sheet, total assets were $1.3 billion as of June 30, 2005. They consisted mainly of 607 million in accounts receivable, net of reserve for credit losses and 489 million in deferred income taxes arising primarily from our tax receivable agreement with our former parent company. Total liabilities were $1.3 billion consisting primarily of $283 million in accounts payable, $534 million in total debt and $409 million payable to our former parent company under the tax receivable agreement.

I will conclude the Company's prepared remarks with our updated guidance. Let me remind you that our forecast for the third quarter and full year 2005 are valid only as of today and are made on a non GAAP basis that excludes the impact of non-cash mark-to-market adjustment on the Company's fuel price-related derivative instruments. The fuel price assumptions are based on the applicable NYMEX future price. Our estimates are as follows.

For the third quarter of 2005 we expect to report revenues in the range of 57 to $60 million. This is based on an average retail sale price of $2.26 per gallon. We are raising our revenue guidance for the full year of 2005 and expect to report revenues in the range of 222 to $227 million. This is based on an average retail fuel price of $2.17 has per gallon. As for earnings for Q3 of 2005 we expect to report net income before unrealized gain or loss on derivative instruments in the range of 11 to $12 million. Our earnings per diluted share in a range of $0.27 to $0.29. For the full year 2005 we expect to report net income before unrealized gain or loss on derivative instruments and the nonrecurring charges from the first quarter in the range of 44 to $46 million, our earnings per diluted share in the range of $1.08 to $1.13 based on approximately 41 million shares outstanding.

With that we will be happy to take your questions. Operator, you can proceed with Q&A now.

(OPERATOR INSTRUCTIONS) Paul Bartolai of Credit Suisse First Boston.

Good job in the quarter. Mike, you mentioned of the 27 million vehicles out there that are potential customers and the 8 million that already have fleet cards, is there any reason to think that that remaining balance that doesn't use a fleet card is a potential customer?

We believe they are all potential customers with the different products we have in both kind of the retail side, the heavy truck side and knowing we are also now targeting the small fleets.

Okay, and it seems like you are having some pretty good progress on the heavy truck market. Can you talk a little bit about the competition and any hurdles you're seeing there?

Yes, I think there is plenty of competition on the heavy truck card side. I think the advantage we have is we are not trying to go to the over the road, long haul trucking companies. It is more kind of the regional companies that we focus on, a beverage company, a food store chain that maybe is just going from their warehouse everyday out to their different locations, their different stores every day. That is our customer base. We are able to identify 40,000 diesel locations at the gasoline stations that accept our cards and have diesel pumps, plus we have the truck stop chains. So there is competition but we think the product we have, the breadth of our network and the overall value proposition we are competing very aggressively and doing very well in that marketplace.

All right, great. And then you had mentioned some of the pricing concessions you gave up to renew some of your larger customers. I think there might have been one co-branded customer left that was to be renewed. Has that been renewed, or are there any other large ones coming up?

There are no other large ones coming up. We have either signed contracts or have agreements in principal; we are just finalizing signings on those contracts.

And one last question if I may. Melissa, the interest expense was about 1 million higher than we were expecting. Was there anything unusual or onetime in there in terms of (indiscernible) cost or fees for the swaps that impacted that number?

The only thing that -- I wouldn't call it unusual, but we are amortizing the fees related to the debt issuance through our financing interest expense, and we are doing that through the effective interest methods. So as we accelerate our payments, that is accelerating through the expense.

So can you give us some guidance in terms of what we should expect for interest expense in the second half of the year? A similar level, just adjusting for the debt you should be paying down? From Q2?

Yes, obviously adjusting for whatever you're presuming LIBOR's going to be.

Okay, great. Thanks. Good job.

Pat Burton, Smith Barney.

Congratulations, as well, on the quarter. Could you provide us an update, now that you've entered into these hedging contracts into '07 as to where you stand for the four quarters of '06? For example, is the first quarter of '06 more than half hedged?

All of '06 is hedged.

So 100% of each quarter is hedged?

Yes.

Okay, and as we move forward you will hedge each of the four quarters in '07?

Right, right now we've hedged three quarters in '07, so we are basically at the 90% level for the first quarter of '07, at the 60% level for the second quarter of '07, and 30% for the third quarter. And then as we get into the fourth quarter this year we will layer in 30% more if you will for the second quarter, the third quarter, and then we will have 30% for the fourth quarter of '07.

Okay, thank you. And on your comments about the potential pipeline, Mike, have you seen any pickup as the price of gas has gone up, that potential in-house fleets are looking to take on a better management of this cost to their business?

It's primarily in the small market, the mid market where maybe they were using other forms of payment, maybe using a house account with a local station or using cash where they now want more control. So what we are seeing there is more hits on the website as we do solicitations, and we are seeing higher close rates when we find cash customers in particular.

Thank you.

Tien-tsin Huang of J.P. Morgan.

It looks like a pretty nice uptick in payment processing transactions in the quarter. What exactly is driving that? Is it really from new wins or strong organic growth? Maybe you can elaborate a little bit more there.

It is organic growth, and we are also seeing some level of increase even in our current customers using more volume with us if you will. But a lot of it is just in the markets we have. As we said, we had growth in co-brand, private-label and WEX, and we had growth in large fleets, midsize fleets and small fleets. So just seeing it across the board.

Okay, good, and any change in customer retention either voluntary or involuntary?

No, the voluntary -- we talked about overall over 3% for the last three years. Right now this year it's running under 2% on the voluntary and the involuntary is actually down from last year.

Okay, great. And the last question, how much of an impact did rebates have in the quarter?

The rebates actually were only a slight increase over the first quarter and most of that was due to the price of fuel.

Very good. Thank you.

Greg Smith, Merrill Lynch.

The account servicing fees, what is the outlook there for those fees? Do you think you'll be able to continue to charge those fees when you bring on smaller fleets?

We have actually seen the account servicing fees hold steady for the smaller fleets, so it is causing the price increase in the mix. But it is something we haven't seen an erosion over time, even though we have seen some erosion in the larger fleets.

Okay, and then do you -- Melissa, is it possible to give us a revenue growth number on a normalized basis, as if fuel prices were steady year-over-year?

Sure. Actually, if you were to adjust out the price of gas, there is a table in our first quarter queue that I'm going to reference. The price of gas last year was $1.86 compared to 2.20 this year. Everything over $1.95 is hedged. So that is an increase of $10.1 million or 21%, about 5.7 million of the increase is due to the price of fuel. So if you take that out we would see a 9% increase in revenue.

Okay, perfect. And then can we get -- is there any color as to why Jackson Hewitt did not renew the contract?

As I said, we hate to lose any customer. The understanding we have is the competitor that won in this case it was a matter of build versus have in place. They had some of the tools Jackson Hewitt was looking for already in place in the market. We would have to have built those tools; I think Jackson Hewitt made the decision to go with somebody that had some sort of proven track record.

Okay, and then just one last one. On the hedge you had an unrealized gain on the hedge this quarter. It seemed to me that that would be a loss just given the increase in fuel prices. I am a bit confused. Can you help me?

It was what had occurred with the futures market from the point of the end of our first quarter to the end of the second quarter caused us to have a gain. It is really the timing of what is happening in the market.

So it may not track as directly with overall fuel prices?

Right, it is whatever the market is interpreting to be going on with fuel prices long-term.

Okay, so it is just more based on sort of the forward curve per se rather than the spa (ph) prices?

Yes, absolutely.

Great. Thanks a lot, guys.

(OPERATOR INSTRUCTIONS) Abhi Gami, Banc of America Securities.

Good performance. A couple questions. First on Wright Express the service network, can you talk a little bit about what are the hurdles or challenges to getting faster growth in that part of the business? Are there things you need to do still, or you need the clients to do something to ramp up that business?

Yes, it is a couple of things. First of all, when we initially were selling our basic product we did a pretty good job selling fleets on a fuel-only option. So we have a lot of fleets today that now it is a matter of coming out with different options in the future, like fuel and oil only. Or some other options they can choose on their product sets. So as we are signing up new business, though, we are able now to sign some of these fleets up at least with the opportunity to start to sell the service network to them directly.

The other aspect is that is only on the Wright Express card. We are still working the strategy to put in place the service network with the private-label partners and eventually we also hope with the co-brand partners. So it is only focused today on the Wright Express side of the business and again we kind of have that hurdle to overcome on the fuel only programs.

Is pricing on the service network similar, or the same as fuel?

Overall, the interchange is higher.

Higher, okay. Great. What other reasons do clients, would clients give you to not use the card for that purpose?

Well, I think a lot of it is that it is a matter of getting to the current fleet base we have with marketing campaigns. That is why we are doing some of these tests as I said with Jiffy Lube and Goodyear to try to convince them now to start changing their patterns. The market is very different. The upper end of the market again, I talked about only the Wright Express card has the service network today. The large fleets on the Wright Express card are primarily using the fleet management and fleet leasing companies to do that business, or they maybe have their own in-house fleet management program. The smaller fleets are where I was talking were to penetrate those smaller fleets; we've got to now convince them since they were locked into a fuel only card to kind of convert over to a card that will allow them to buy the service maintenance needs if you will.

Great. When you sign up a service location to accept the card, do they automatically deploy that to all their locations, or is that something else you need to push on?

It depends. Some of the major chains as they roll it out electronically they roll it out to all their locations. Some of the smaller ones they may have dealers or franchisees which are a little bit more fragmented. So we may have to use a telephonic program initially and then eventually try to roll out a point-of-sale device.

One last question on that front. You talk about the 90% coverage you have in the fuel market. What is the kind of magic number you need to get to in the service side before usage from your fleet customers will ramp up? Is there some sort of tipping point?

It depends on what part of the market. But we have critical mass on the national chains, over 40,000 locations accepting our card. When you get to the small fleets, though, they may have relationships with their local garage which becomes a little bit more problematic. And there are strategies we're putting in place to address that, as well. But that is where it becomes more fragment.

Great. Thanks very much.

Michael Weisner (ph) of IMG Crestwood Capital.

Would you help me out on revenues per payment processing transaction? Melissa, you did a calculation that shows that the organic growth ex pricing was about 9% for payment processing in the quarter?

9% of total revenue.

Okay, and I guess if I did it for payment processing I was taking -- if it's right -- I was taking the 3.9 million unrealized storage and taking it off revenues. And that would get me 52.8 million, which would be 11% growth on payment processing. Is that the right way -- is that a right way of doing it? Actually that would be for total revenues, I'm sorry.

It is a way of doing it; I'm doing a comparison point from last year just to get a growth percentage off last year.

Well, in any case the number of payment processing transactions were up 12%. So if the revenues were up 9, that would imply lower revenues per transaction ex fuel prices. Yet in just hearing you talk that doesn't seem to be the case at all.

The only thing that is affecting us, I should say the primary thing that is affecting us that would be a negative trend from a pricing perspective is as Mike said, we on a year-over-year basis are seeing pricing pressure with some of the strategic relationships. So based on those long-term contracts there has been a pricing decline.

Okay. And I guess am I right in trying to quantify that would equate to about 3%? I am taking the difference between your average payment processing growth -- payment processing transaction growth of 12 and the organic revenue growth of 9 that you had mentioned. Is that the right way of looking at it?

I think that is a way to look at it. We will still reference back to looking at 9% growth as kind of our viewpoint of how we're doing against the market (multiple speakers) the price of gas.

There's nothing wrong with 9% top line. I am just -- the implications would be you are going to have to grow transaction growth slightly faster than the revenue growth. Is that something that is likely to be maintained?

On a forward-looking basis, I guess we would point back to what we've done historically and we've seen those numbers to track pretty consistently; the transaction growth may be aimed just a little bit higher.

Okay, so it was 3% this quarter if the math is right, but it might be a slightly lower differential going forward?

We haven't provided any specific guidance on anything other than our total revenue number.

Right. I realize that. I am just trying to understand how the business model works.

What you are saying is true, the transactions would be the primary driver of our business. So that would be one point, and then looking at all the different points of price (indiscernible) the price of gas being one obviously. And secondarily what we're seeing for a payment processing fee and then some of the other fees.

As well as the average transaction size.

Right.

Okay. Let me move on. One number I missed, what did you say was your growth in small fleets?

We said it was 9%.

9%, great. And the Jackson Hewitt business, where did that come out of in the second half?

It is being recorded for us in a bunch of different areas. When you see our Q you will see it is a separate segment within MasterCard. So I think that will actually give you the cleanest view. But there is some in payment pricing processing revenues; there is a little bit in transaction processing and some in other.

So it will be across the board there. All right. Thanks a lot.

It appears there are no further question at this time. I would now like to turn the call over to our speakers for any additional or closing remarks.

We have one adjustment that we need to make. The transaction per FTE number is 89,000 in Q2, 2005 and 84,000 in Q2, 2004, 6% productivity lift.

Thanks again, everyone. That concludes our call. Have a great night.

That does conclude today's conference. We would like to thank you all again for your participation and wish you a great day.