WEX Inc (WEX) 2011 Q2 法說會逐字稿

Good morning, my name is Jennifer and I will be your conference operator today. A this time, I would like to welcome everyone to the Wright Express second quarter 2011 financial results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Elder, you may begin your conference.

Good morning, with me today is our CEO, Michael Dubyak. The financial results press release we issued early this morning is posted in the Investor Relations section of our website at wrightexpress.com. A copy of the release has also been included in an 8K we submitted to the SEC. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income, during our call. For this year's second quarter, adjusted net income excludes non-cash, mark-to-market adjustments on our fuel price-related derivative instruments and the amortization of acquired intangible assets as well as the related tax impact. Please see Exhibit 1 included in the press release for an explanation and reconciliation of adjusted net income to GAAP net income.

I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors including those discussed in our press release, our most recent Form 10-K and other SEC filings. While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not rely on these forward-looking statements after today. With that, I will turn the call over to Mike Dubyak.

Good morning, everyone, and thanks for joining us. The second quarter was yet another quarter that exceeded our expectations with revenue growing 55% year-over-year to $141 million and adjusted net income growing 33% to $35.5 million or $0.91 per share. Our performance relative to our expectations was driven by continued stellar growth in our corporate charge card products and an increase in fleet transaction growth. Starting with some key metrics, consolidated payment processing transaction, which include Wright Express Australia, increased 15% over the prior year and in North America, we saw an increase of 8%. This 8% increase is very positive when realizing the existing customer fleet fueling transaction, or same-store sales, was down slightly from a year. After two consecutive quarters of positive same-store sales, Q2 same-store sales was down roughly 0.5% which we believe is somewhat reflective of what we are seeing in the broader economic picture.

Looking at same-store sales by SIC codes, our biggest industries, construction and business services, were better performing industries while manufacturing underperformed. On a regional basis, the Northeast saw solid activity for the quarter, posting positive same-store sales growth while all other regions showed same-store sales declines. The total number of vehicles serviced averaged $6.3 million, increasing 29% from the second quarter of 2010. In addition to the acquisition of Retail Decisions, and the earlier launch of BP in New Zealand, vehicle growth was driven by the successful growth of BP Australia during the second quarter of 2011. We also had consistent fleet wins from our sales team in North America including wins from Ferrellgas and NCR. We have a significant pipeline of regional oil companies that will continue to be an opportunity for us going forward.

Our recently announced agreement with Wawa, a chain of 580 convenience stores is a good example of this. The addition of Wawa increases or capability to penetrate the small fleet market. After assessing customer demand for a fleet card program, Wawa selected Wright Express as a private label partner for our product offering and also highlighted our customer-centric focus as an advantage. As partners and customers continue to recognize the value, convenience, security and control that our partner issued and Universal Fleet Card Programs provide, not to mention our unrelenting focus on customer satisfaction, we believe we are well poised for continued growth.

On the international front, Wright Express Australia continues to meet expectations. In addition, as I just mentioned during the quarter, we brought on the BP portfolio in Australia and the implementation process has gone extremely well. As evidence of this, we are now performing some customization work to the processing system at their request which is driving incremental revenue. On the fleet side, we continue to look for opportunities in this market and we have been successful at growing our customer base. Additionally, we continue to believe there are opportunities outside of Australia and the Asia Pac region but these opportunities are still in the exploratory phase.

Turning to other payment solutions segment, we continue to see significant growth in the segment, largely driven by our corporate charge card product. This product continues to surpass our expectations with spend volume in the second quarter increasing 83% over the prior year to $1.9 billion. This growth has been largely due to our single-use electronic payment product specifically in the online travel vertical. While we expect this vertical will continue to be the predominant growth factor here in the short term, we are vigorously working on diversifying our customer base into additional verticals for our payment solutions as well as expanding into new payment markets.

In the last year, we have doubled our marketing investment in the electronic corporate payments area and by the end of Q3 2011, we will have increased our sales team dedicated to this line of business to help further achieve our diversification growth strategy. High-priority expansion targets include -- claims payment processing for the insurance and warranty verticals and payment processing for the healthcare and education sectors. Given the aggressive roll-out of new portfolios by our partners in the online travel vertical, we are adjusting our growth expectations for this segment in 2011 to now be in the range of 60% to 70%. Longer term, we expect growth to moderate.

Moving on to the prepaid business, our most recent acquisition, Rapid PayCard, is performing in line with our expectations. As I have previously mentioned, one of the attractive aspects of this business was the synergies we saw between our target markets and our customer base. Case in point, Rapid has experienced compressed sales cycles since joining our team with leads coming out of existing clients. In addition, we've seen several cross-sell successes over the last few months. While these are small and the traction we are seeing is very early stage, we are cautiously optimistic about the potential in this pace and will continue to push forward as we believe it is representative of our strategy to leverage our existing strengths into new markets and verticals.

Looking ahead, we will continue to execute against our growth strategy by expanding our core fleet business, diversifying our business, and further building our international offering. In terms of expanding our core fleet business, while this business continues to perform well, we are focused on taking advantage of the opportunities we see in the marketplace to further penetrate fleet markets. For example, we have a new product launching this year called OTR PRO. The OTR PRO card addresses the needs of long haul fleets, providing a closed loop, diesel card program with value-added services including load matching, licensing, log auditing, and dispatch software solutions, to name a few. Only about 2% of our existing customer base is comprised of long haul fleets. And this new product offering will help us increase market penetration with over-the-road fleets and offer a new option to our existing customers that have mixed fleets.

We are working with Sky Capital, a recognized industry leader in the over-the-road truck market. Sky Capital and their family of companies provide operational service support and online services for all segments of the long haul market in North America and have significant penetration in the over-the-road market. Internationally, while we continue to have ongoing conversations with major oil companies, we believe the greater near-term opportunity lies in building our on the ground presence overseas. As such, we will continue to pursue this initiative through strategic alliances and/or acquisitions. Our continued execution against this multi-pronged growth strategy has also resulted in the expansion of our business and today, roughly 34% is generated outside of the North American fleet card business.

We are also exploring opportunities to expand our other payment solutions in select markets. Our focus remains on providing superior products and unmatched customer satisfaction. While a fair amount of uncertainty has crept back into the broader macro economic environment, we believe we are in an excellent position to continue to drive performance across our businesses. As we continue to tap into additional opportunities out on the horizon, we believe they position Wright Express well to drive future growth. With that, I will turn the call over to Steve to discuss our financials in greater detail and to provide our outlook for 2011. Steve?

Thank you, Mike. For the second quarter 2011, we reported total revenue of $141.3 million, an increase of $49.8 million from the prior year period. This was solidly above our guidance range of $132 million to $137 million, primarily due to our other payment solutions segments. Fuel prices for the quarter were in line with our guidance and therefore, not a factor. Net income to common shareholders on a GAAP basis for the second quarter was $40.6 million or $1.04 per diluted share. Our non-GAAP adjusted net income increased to $35.5 million or $0.91 per diluted share which was above our guidance range of $0.83 to $0.89 per diluted share. This compares to $0.68 per share reported in Q2 last year.

Before I highlight a few of our key statistics, I would like to briefly touch on the changes to the fleet statistical reporting table located in Exhibit 2 of the press release. As you will see in the Exhibit note, there has been a slight change to the historical numbers related to transactions and vehicle counts in the press release as we have refined our business intelligence reporting processes. That said, I want to stress that the revisions have no impact on our revenue and earnings as it is only a change to our statistical reporting. With that out of the way, let's move on to some key stats which are consolidated to include Wright Express Australia. During the second quarter, total fleet transactions continued to grow nicely, increasing 19% which was above our expectations.

Our net payment processing rate for Q2 2011 was 1.64%, which was down 11 basis points versus Q2 2010 and down 4 basis points from the first quarter of 2011. The rate will vary with fuel prices due to impacts of our hybrid pricing contracts. The reason for the decline in our rate for each of the comparable periods is due to higher fuel prices. Revenue in the other payment segment was up 112% year-over-year to $27.6 million. This increase in revenue was driven by our corporate card product, which was up 86% from Q2 last year and the acquisitions of Rapid PayCard and Wright Express Australia.

The net interchange rate on our corporate charge card for Q2 was 0.97%, down 12 basis points year over year, primarily due to the mix of contracts, and higher foreign spend, which has a lower interchange rate. We continue to remain focused on diversifying and growing our other payment solutions segment, which at this time is primarily being driven by our corporate charge product. The segment represented 19.6% of our total revenue in the quarter. Finance fee revenue in the fleet segment was up $2.6 million compared to Q2 last year. However, as a percentage of total dollars of fuel purchased, it was significantly lower domestically than last year. The average balances that are past due and incurring late fees continue to be smaller when adjusted for changes in fuel prices. And the number of customers that are paying late has continued to decrease compared to the same period last year.

Moving down the income statement, total operating expenses, on a GAAP basis, for the second quarter were $80.1 million versus $52.1 million last year. Roughly half of the increase in operating expenses during the quarter were driven by the acquisition of our Australian businesses in Q3 last year. The remainder of the increase is due to higher salary costs, service fees and credit losses. We continue to focus on tightly controlling our underlying cost structure while making incremental investments in growth initiatives including research, marketing, and international business development.

Salary and other personnel costs for Q2 were $26.4 million compared with $20.4 million in Q2 last year. The majority of the increase is due to the addition of the employees in Australia. We also have additional headcount in the US in the sales and marketing group and have increased our estimates for performance-based bonuses and stock-based compensation for the year. Service fees were up $8.7 million over last year to $18.2 million. The majority of this expense increase was driven by the significant increase in revenue of our corporate charge card. In addition, we also had increases for the acquired businesses and the costs related to our telematics product as it continues to gain penetration in the market. Domestic fleet credit loss was 12 basis points for the second quarter compared to 7 basis points in the prior year period and was in the middle of our guidance range.

In total, credit loss for the second quarter was $6.1 million compared with $2.9 million in Q2 last year. Total domestic charge-offs in the quarter were $4.6 million and recoveries were $1 million. Both of these were generally in line with our expectations. The aging of our receivables was trending towards historical levels from the very low delinquency rates we saw last year. Our effective tax rate for Q2 on a GAAP basis was 36.4% compared with 37.5% in the second-quarter of last year. Our adjusted net income tax rate this quarter was 35.8% compared with 37.5% for Q2 a year ago. The decrease in the rate compared to the prior year is due to the mix of international earnings.

We expect our A&I tax rate will be approximately 36% for the year. Briefly on our derivatives program, during the second quarter of 2011, we recognized a realized cash loss of $7.6 million before taxes on these instruments and an unrealized gain of $13.9 million. We concluded the quarter with a net derivative liability of $17.8 million. We have hedged approximately 80% of our domestic exposure through the second-quarter 2012 and portions of the third quarter and fourth quarter of 2012. For the portion of 2012 that we have completed, the average price locked in is $3.36 per gallon and increases each quarter as we move through the year. For the third quarter of 2011, we have locked in at a price range of $2.93 to $2.99 per gallon. For the fourth quarter of 2011, we have locked in at a price range of $2.97 to $3.03.

By hedging in an environment of increasing fuel prices, the Company's average hedged price of fuel continues to rise while protecting the Company against the volatility in both short-term fuel prices and cash flow. Given that our fuel price exposure in Australia is more limited and price fluctuations are not as volatile as in the US, we don't plan on hedging our exposure there. We will continue to target hedging 80% of our fuel price exposure in the US on a rolling basis, which will effectively cover 65% to 70% of our overall exposure. In addition, we have not hedged our Australian currency exposure which was a small benefit during the quarter.

Before moving onto guidance, I will touch on a few balance sheet metrics. We ended the quarter with a total balance of $386.5 million on a revolving line of credit and term loan. Our last quarterly call, we indicated our intent to refinance our credit facility which we subsequently completed and announced in May. The interest rate on this new facility is currently LIBOR plus 175 basis points and will fluctuate based on our leverage ratio. As of June 30, our leverage ratio was 1.7 times EBITDA, compared to 0.5 times at the end of Q2 last year. The increase is due to the acquisition of Wright Express Australia. In connection with the new facility, we wrote off $727,000 in deferred financing fees related to the old facility which was not included in the guidance we provided last quarter.

In addition, we saw an increase in financing interest expense due to an increase in the amortization of loan origination fees and a higher interest rate on our new facility. We believe our new credit facility increases our financial flexibility and will allow us to better execute on our strategic initiative, both domestically and internationally. While our near-term priority continues to be paying down debt, we continue to explore acquisitions as a way to further achieve our growth objectives. With respect to capital expenditures, during the second quarter, CapEx was $6 million and we are targeting a range of $28 million to $31 million in CapEx for the full year.

Now onto our guidance for 2011 which reflects our views as of today and are made on a non-GAAP basis. For the third quarter of 2011, we expect to report revenues in the range of $145 million to $150 million and adjusted net income in the range of $35 million to $37 million or $0.89 to $0.95 per diluted share. For the full year, we are updating our guidance. We expect revenues for the full-year 2011 in the range of $550 million to $560 million and adjusted net income in the range of $136 million to $141 million, or $3.50 to $3.62 per diluted share.

Our guidance assumes domestic fleet credit loss for the third quarter will be between 18 basis points and 23 basis points and the full year is expected to be in the range of 15 basis points to 19 basis points. The fuel price assumptions for the US are based on the applicable NYMEX futures price. For the third quarter, we expect fuel prices to be $3.72 per gallon. For the full year, we expect fuel prices to be $3.64 per gallon, which is down $0.03 from our prior guidance. We are also assuming that the Australian dollar will remain at a premium to the US dollar for the remainder of the year. With that, we will now open the call to take your questions. Jennifer, please proceed with the Q&A session.

(Operator Instructions) Sanjay Sakhrani with KBW.

I just had a question on the MasterCard business. I was wondering if you could just talk about where we are on the Expedia conversion through the end of the second quarter and what the assumption is in that 60% to 70% growth rate?

They have aggressively rolled out even beyond our expectations. Some of their business has now been fully rolled out. There is still some to roll out but it will be tailing off by the end of the year. So we will still see the full year impact next year for all of their business annualizing, if you will, but I would say that it has been very aggressive and we will see a tail off.

Okay, great. Then I think you guys at the beginning of the call talked about a little bit of a slowdown in terms of same-store sales. I was just wondering, is there any color that you could provide on that? Is it the higher gas prices that's driving that or is it just a slowdown in activity?

For us, people are going to use their vehicles to fulfill their needs in terms of what their business is. And I don't think it is higher gas prices. They'll try to conserve to some extent. I think it's more indicative of the economy. As you know, they have downward adjusted the second quarter in terms of GDP and people are talking about slowdowns and things like manufacturing which we are seeing. So I think it's more indicative of the different business sectors like manufacturing slowing down.

Okay, great. And then just one final question, if I may. Just, I think, Mike, you talked about exporting the business model, the MasterCard business model, into other verticals. Where are we in the process there? Do you expect meaningful gains in terms of business in other verticals at some point over the near term?

We have been successful with some of the initial verticals that we moved into, the warranty and the insurance business. I would say that it is still too early to say as we start looking at things like education and healthcare, that is still early on. There is a lot of competition but we are building our sales force to go after that market. And then we are looking at international so we have plans to also expand, if you will, some of our products, even OTA, into the international markets. That won't be until next year but those are other opportunities for growth on that business model.

Tien-Tsin Huang with JPMorgan.

It looks like your third-quarter guidance is a little below the Street. Had some questions about that. Any change in seasonal patterns or is some of this conservatism? I heard the credit loss guidance in the third quarter, a little bit above the full year. Maybe if you can just give a little bit of context on that.

Yes, Tien-Tsin, it's Steve. I would say we're watching the credit losses very, very carefully given all of these news about the broader macro economy. Just to give you a flavor, in July, we did see very low charge-offs and no large bankruptcies in July. That said, we did see a bit of a softening in the delinquency levels. More in the medium stage, if you will, not the late stage delinquencies, but the early to medium stage delinquencies. So we haven't changed any of our credit adjudication processes. We haven't changed any of our collection processes and practices, really, for a couple of years. But it bears watching. I don't think one data point is really enough to call it a trend and this can, historically, snap back very quickly. But again, it is something that we are watching closely.

Okay. That's good to know. And then you did tick up the full year a touch so fourth quarter is still strong. Is it safe to say that conversions from past wins are still ramping up on time in terms of deployments there or have you seen any slowdown there?

No, I think that is why we were mentioning in the call and we feel good about the fact that even though same-store sales are basically flat, to say our payment processing sector grew 8% in North America, we believe is indicative of all the new wins, like a ConocoPhillips, or mentioning NCR, Ferrellgas, or others. So we have been talking about the front end bringing in new business and I think it's indicative of that 8% payment processing growth rate we saw. So I think it's that, that we probably have confidence going forward as much as anything because same-store sales have flattened out. And by the way, in July, they are pretty much holding with what we saw in the second quarter on the same-store sales.

That's good to know. Last one and then I'll jump off. Just any guidance on discount rate in the next couple of quarters given the fuel exposure? I know you mentioned some of those metrics, but if you could just help with that. That's all I've got.

I think if you assume a steady fuel price then I would assume a pretty steady discount rate on the fuel side. I think you could see the net interchange rate on the corporate charge card probably continue to decline a little bit based on the mix. But the fuel side should be relatively steady if fuel prices remain steady.

(Operator Instructions) Tom McCrohan with Janney.

Great quarter and you raised the guidance for the full year. The stock is down. It's been weak the last -- since early July. I am assuming that is due to overall concerns about the cyclical sensitivity of your business to potential double-dip. So I'm wondering if you had anything to share with us on demand elasticity relative to gas prices back in '09 when you had the last slowdown. The average price of gas was the $2 range. So I was wondering if you had anything you could share with us, if the gasoline holds in line with your projections in the $3 to $4 range, what that will do for payment transactions?

I think we have said before that the high gas prices, as it becomes a drag on the economy, people are paying for higher gas prices, not buying other goods is where we see then an impact to our business. At this juncture, though, it's different today than it was back in 2008. I think we have both high gas prices and an economy that was basically doing a deep dive. We don't see that yet, as we said existing customers are flat. Our top 5 SIC codes, 4 were up. One was down, manufacturing so you have to watch that closely. So I think it has a drag but I don't think it's doing the same -- or having the same impact that it had in '08 when we also had an economy that was faltering pretty significantly.

Mike, is it fair to say that since that time, it's not like people were adding to fleets, right? People haven't really recovered fully from the last downturn so to the extent, it does go into a double dip and the economy does weaken a little more, do you anticipate the magnitude of any impact to be the less than what it was back in the '08, '09 time period?

I don't know if it is less. I think people have found ways to conserve already. I think it is really tied more to just what is GDP doing and what is economic activity doing than anything else. And if it does get severe, then we'll [feel] that on the existing customers. I think the good news is we are seeing growth from the new businesses we have been bringing on and talking about people like Wawa gives us lift because they help us get into more of the small businesses. The more we can bring more of these partner relationships on, that's what I think we are seeing with this 8% lift on payment processing.

Just to my last question. The other non-fleet revenues was about close to 20% of total revenues for the Company. Can you remind us what percent of revenues the non-fleet was back in, say, 2008?

I know somewhere back in that time frame, it was probably $30 million to $50 million total, I think --

Probably in the range of10% to 15% of the total.

So that's far as a big difference, that's going around the last, one of the difference is the diversity of revenues has improved from last downturn.

Definitely. You've got other things like the Rapid PayCard although it is small, it is a different stream and the telematics businesses are bigger. A lot of smaller diversification efforts that we put in there as well.

Robert Dodd with Morgan Keegan.

Just a few quick ones hopefully and then one longer one. First, I actually have a request. Any chance maybe in the Q or maybe in the next quarter, you could give us the normal metrics for fleet vehicles, et cetera, on a comparable reporting basis to how you are doing it now for prior periods? That would be very helpful for modeling. Just moving on the same-store sales, where you -- there's a slight deterioration in Q2. Any color on how that went monthly? Was it volatile intra-quarter or was there a steady deceleration as you went through the quarter in terms of overall trends there?

It was pretty much consistent to the quarter. A little bit -- June might have been a little bit down compared to the others but I think the good news in July, we are starting to see some of the SICs in July show better results than June. So there are some, there could be some bumpiness in sometimes the numbers.

Got it.

That is why I thought July was important to take a good look at that and see how that was doing against the quarter. It is still flat, but there are still our SICs that are showing growth even in July.

Got it. On the credit for Q2, this is the first time we've seen it up sequentially since Q1 in some time. Is that just related to the delinquencies aging or was there a bankruptcy or anything like that in Q2?

Obviously, there were some bankruptcies in the normal course of business but there were no significant ones that we would call out.

Got it. And then just another quick one, I'm following up. The growth in the MasterCard product and you mentioned here, you continue to see the Expedia thing ramp and do well. Is this quarter, do you think, likely to be the peak growth rate for that and then [deceleration]? Or is there still enough business still coming on that the growth rate could actually accelerate there in Q3 before tailing off a bit in Q4?

I think this is probably the peak. It is still going to be very, very healthy levels going forward for the last half of the year but I think the second quarter was probably peak.

Great. My last one, which is a bit more extensive. Can you give us some more color on the relationships with Sky Capital and how you are addressing their OTR products in the long haul. Historically, not something that you've targeted that aggressively. Obviously, there's a very entrenched competitor and some of the acceptance locations, you need to get the long haul stuff have been missing. You got the gas stations, but obviously, it's not some of the overnight spots, things like that. With Sky Capital, are they bringing that to you or is that something that still has to be added to the network? With Sky Capital, is it a JV marketing relationship, can you give us any more color on what you are doing in that segment?

Sure. I will start with, as we said, it hasn't been something that we have been able to penetrate because we didn't have all the product sets. You need more than just a card. You need some of the other things that I mentioned -- fuel tax, log auditing, licensing, permits, et cetera. We have looked at everything from building it ourselves and said that's probably not something we are going to invest in and try to do. We have looked at the potential of, are there acquisition opportunities and with Sky Capital, we came to the conclusion that they have these online services like fuel tax, log auditing, licensing, permits, freight matching, whatever, that they have built over the years, we think are great products. They have a very large customer base using those products today, over 1 million customers using that product. What they don't have is a fleet card.

We felt the matching of the 2 or the combining of the 2 in a partnership would make us a force in some of the segments of the marketplace. There is -- we are going to grow the acceptance base but we feel we already have enough coverage on the major highways now that any fleet using our product can find a convenient location. We will probably have around 2,000 locations by the end of the year accepting the product and that will continue to expand into next year and into the future. So what we are making sure of, because of a lot of their data, of where do we need to have coverage on the major highway systems and that is where we are targeting. That's where we're going to build our network based on demand.

(Operator Instructions) Julio Quinteros with Goldman Sachs.

This is Roman Leal on for Julio. 2 follow-ups on the macro concern here. Let me start with the SIC codes, you gave some color on the July trends. But if we focus on those 4 SIC codes that were relatively strong, anything you can add on the pattern or sequential increase or acceleration of that growth as we went through the quarter and into July, are strong segments getting stronger or do you see a slowdown there.

When you look at month to month, it is tough. It is hard to make a decision or say that it really determines a trend. I would say that construction probably slowed a little bit, still positive. Manufacturing in July is actually better than it was during the second quarter. Wholesale trade flattened out a little bit. Retail trade is up. Business services are up. But they are both in the range of slightly less than 0.5%, all in, for the second quarter and July if we look at all the SIC codes. So there are movements in different ones. You take some solace out of it, If all you did was look at July, and say well, manufacturing got better. But I don't think we would say that one month would make a trend, if that helps.

That's really helpful. Okay. On the SMB, on the small fleet side, do you see small businesses small fleets more or less interested in your products here just given all the macro concerns? Any difference at all?

We are doing very well in bringing on small fleets, both with our universal product with what we do with solicitations, mail solicitations, search engine marketing. What we have been able to do for a lot of our partnerships, they like the working capital aspect of having a card and paying it say, 30 days and then having the controls. So a lot of it is just how do we get to those fleets and how do we find a cash customer or someone using a general-purpose card to explain you can still get credit terms and you have better controls over the product? So, again, a lot of what we have been focusing on is trying to bring on different channel partners. Wawa is a good example. I'd say in the last 9 months, we probably brought on 6 to 8 of these partners that are focusing on small businesses.

Just one last one. On the international front, you mentioned you see a few opportunities in the Asia Pac region. Any updates on Europe or are you a little less attracted to that region in the near term, just given the macro headwinds there?

I think we are still looking at Europe as an opportunity but I think, as I said, we are looking at either alliances or acquisitions, a little bit like we did in Australia. I think the Retail Decisions acquisition gives us the opportunity to have a business that is accretive on its own but now allows us to start to explore with other services, either to major oil companies in that market or outside of that market. I think we will look at Europe doing some of the same things so we are still continuing to have dialogue with major oil companies, national oil companies. And we are even, as I said, looking at our other payment solutions business and believe we have a great opportunity. We have a presence in the market, we clearly have accounts that people would say they must be doing something right domestically and even with our large domestic partners on the online travel, well over $1 billion is being spent internationally so why should we leverage that with international companies. So we are looking at that as well and Europe would be a prospect for us on that.

Sanjay Sakhrani with KBW.

Just a quick follow-up. Just in terms of that last point in terms of acquisitions. Where are we in terms of potential acquisitions, how close are we and then maybe what your thoughts are on maybe buying back some stock given stocks have been weaker recently? Thanks.

Yes, and that is a fair discussion on the stock. We are looking at acquisitions, both domestically and internationally, and that's all I would like to comment on. You can't go beyond that because, as you know, things can change at any moment and when you are looking at things but we are inquisitive. We're looking at things strategically to see what can help us in markets to get a presence or what can help us diversify or grow even more in domestic markets. And clearly, as Steve said, we will pay down debt. We are looking at the acquisitions but with what's going on with the stock we do have authorization to buy back stock and we will consider that.

Robert Dodd with Morgan Keenan.

Actually, mine was about stock buy backs as well, so I'm covered. Thanks.

Tim Willi with Wells Fargo.

I apologize if this was asked. I got distracted a little bit earlier on the call but could you talk about maybe try to frame organic sales growth, I know you mentioned the new channel partners you've brought in and just a way to think about organic sales growth, year to date, or for the quarter as compared to last year? And just in terms of new selling, whether it would be in terms of vehicles on the backlog or anything along those lines just to frame the front-end sales efforts?

I would say that across the board with small, medium and large, we are feeling very comfortable with the pipeline and what we have done to grow the transactions as we have because the fact is, the existing customers are not expanding, they are flat. So a lot of what we are bringing on would be new direct business as well as business through channel partners. And still feel very bullish about what is in the pipeline and others that we will be bringing on as the year rolls out, both fleets and partners.

And just to give you a little bit more, Tim, if you look just in North America which we would consider all organic, you're talking about 8% growth in payment processing transactions this year. It's probably more like 6%, 7% last year. So it's a little bit better than it was last year.

And that's transaction growth, right?

Correct.

But how would we think about the actual number of new vehicles that you've sold and brought in because obviously -- well, you had said you had flattish same stores so that 8% would probably be as good as we can get there. And then second, just on pricing and competition, any shift you have seen in the landscape there, one way or the other?

No, I think they are still the same competitors who are still strong competitors in the marketplace. We continue to try to differentiate ourselves with the products we have continued to deliver and invest in, and the high level of customer satisfaction that I think resonates with both partners and fleets in the services we supply. But I don't think there has been much of a change in terms of competitors or pricing in the marketplace.

(Operator Instructions) There are no further questions. This does conclude today's conference call. You may now disconnect.