FleetCor Technologies, Inc. (FLT) Acquisition of CTF Technologies Conference Call May 2, 2012 11:00 ET Executives Eric Dey – Chief Financial Officer Ron Clarke – Chairman and Chief Executive Officer Analysts Phil Stiller – Citi Tien-Tsin Huang – JPMorgan Glenn Fodor – Morgan Stanley Tim Willi – Wells Fargo Roman Leal – Goldman Sachs Robert Napoli – William Blair Presentation Operator
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In addition, during the course of this conference call, we may make reference to non-GAAP financial information, including adjusted revenues and adjusted net income. This information is not calculated in accordance with GAAP and maybe calculated differently than other companies similarly titled non-GAAP information. Quantitative reconciliation of our historical non-GAAP financial information to the most directly comparable GAAP financial information are included in our filings with the SEC which are also available through our website. We also ask that you limit your questions to only the acquisition. We will be hosting an earnings call next week to discuss the first quarter.With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO. Ron? Ron Clarke – Chairman and Chief Executive Officer Thanks, Eric and thanks everyone for joining the call today. I've got to say we were really excited to announce the CTF deal and to get it signed up. We have been on this transaction for quite sometime and have gotten to know the Founder, his team, and the business pretty well and we like what we see. We have said previously that our objective is to enter attractive markets, developing economies, so I hope it's clear upfront that this CTF deal is deal about entering Brazil and we like Brazil a lot. We think it sets up well for what we do in fuel cars. So, with that, let me briefly describe the CTF business and our reason for doing the deal. So, first off, CTF is a 14-year-old business operating exclusively in Brazil. It's core business is to provide fleet payment services to mostly over the road heavy trucks. It's the big company. It processed over 3 billion leaders in 2011 and it's the clear market leader in this OTR segment. Its payment services are accepted by the two leading major oil retailers, Petrobras and Ipiranga. And together, they represent over 60% of all retail fuel purchases in Brazil.
In addition, the money movement, CTF settlements are handled by some of Brazil's largest banks, which is great. It leaves CTF out of the receivables financing in the credit extension business which we like. We also like the fact that the vast majority of CTF's revenue was fee-based. So, that's the core business.In addition, CTF also operates the second business, which we call fuel control in which they use virtually the same fuel payment technology as the core business. And in this business, CTF has two very large clients. First, Vale, which is Brazil's largest mining company, and in this case, CTF helps control Vale's fuel usage really at its mines all throughout Brazil. And the second client, Petrobras is Brazil's largest oil company, and here CTF helps to control fuel movements between the ships that go out to the offshore drilling platforms. So, really a couple of businesses at CTF. CTF is a steady stable business. It's got over 90% client-retention and very satisfied customers. And as part of this acquisition, we are getting some really attractive assets. The brand, the CTF brand, it's well-known and well-regarded among its core segments and its logo is displayed prominently at a number of the retail gas stations. We are getting a proven technology to control fuel purchasing in high-def markets. We are getting great long-term relationships with these two top major oil companies in Brazil, which is obviously critical to a fuel card company. We are getting a large, diverse, and satisfied client base and we are getting a good team, where we're getting an experienced team and a creative team. So, really a lot of good assets that constitute this platform for us. So, now let me transition over to why we are doing this deal? And simply put we are doing this deal for one reason, which is to establish a position in Brazil and do it through a business that we know. This Brazil fuel card market is very attractive. It's large. It's about 20% the size in the U.S. market in terms of diesel consumption. It's growing. New vehicle sales are growing at about 15% per year and it's under-penetrated. It's predominately a cash voucher and house accounts market. So, really an attractive fuel card market. We also see a number of near-term upsides in growth opportunities for CTF. We are considering launching a traditional card-based fuel card program that would target smaller local fleets versus their current focus on heavy fleets. Read the rest of this transcript for free on seekingalpha.com