FleetCor Technologies' CEO Discusses Q1 2012 Results - Earnings Call Transcript

FleetCor Technologies, Inc. (FLT)

Q1 2012 Earnings Call

May 9, 2012 5:00 pm ET

Executives

Eric Dey - CFO

Ron Clarke - Chairman, President and CEO

Analyst

Philip Stiller - Citi

Glenn Fodor - Morgan Stanley

Roman Leal - Goldman Sachs

Tien-Tsin Huang - JPMorgan

Wayne Johnson - Raymond James

Presentation

Operator

Welcome to the FleetCor Technologies, Inc., first quarter earnings conference call. (Operator Instructions) At this time, I'd like to turn the conference over to Eric Dey, Chief Financial Officer.

Eric Dey

Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our first quarter 2012 press release. It can also be found at www.fleetcor.com under the Investor Relations section.

Throughout this conference call, we will be presenting non-GAAP financial information, including adjusted revenues and adjusted net income. This information is not calculated in accordance with GAAP and may be calculated differently than other companies similarly titled non-GAAP information. Quantitative reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today's press release and on our website as described previously. Also, we are reviewing 2012 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 2012 guidance. They are not guarantees of future performance and therefore you should not put any undue reliance on them. These statements 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 8-K filed with the Securities and Exchange Commission. Others are discussed in our Form 8-K, which is available 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. Ron?

Ron Clarke

Okay, Eric. Thanks. Hello everyone and thanks for joining the call today. I thought I'd cover just a couple of subjects here in my opening remarks. First, I'll provide a little more color on our Q1 results. And second, I'll provide just a bit of an update on our acquisition and partnership initiatives. I don't plan to comment specifically on our pending CTF, Brazil, acquisition because we spoke about it at some length last week, but of course we're happy to take questions you might have once we get to that section of the call.

Our Q1 results were very good. We reported revenue of $146 million, up 32%. We reported cash EPS of $0.60, up 27%. Obviously, growth well ahead of our 10% and 20% stated growth targets.

The environment in Q1 was a bit of a mixed bag for us. Market spreads, which affect our Fuelman and KeyFuels businesses were below planned levels and below historic levels. So not great. FX rates were unfavorable versus last year. But on the good news front, fuel prices were favorable to both our plan and to last year. So net-net, we'd say the environment was probably neutral in terms of its impact on our Q1 performance.

In terms of our U.S. businesses, all were up in Q1. Our U.S. Direct Business revenue grew over 20% for the quarter, driven by further MasterCard penetration and really record sales. Our U.S. partner business, that's our business that serves major oil leasing companies and independent markers, was also up due to continued adoption of our extended network cards. And CLC, our hotel cards business, continued its growth mostly driven by further penetration of its check-in direct product, which is targeted at small and mid-sized businesses.

On the Europe front, our U.K. and Czech businesses mostly treaded water for the quarter, although both of those businesses met their internal Q1 budgets. Our Russian business continues to perform well and grow fast. As you might remember, Russia is still purchasing two-thirds of all its commercial fuel via cash and vouchers. So that should provide a long runway for card adoption. And we're constantly looking at ways to deepen our position in that attractive market.

On the sales front, Q1 sales were outstanding, record breaking in fact. U.S. fuel card sales grew 27% in the quarter, and the non-field channels, not field salespeople, contributed over 60% of all of U.S. sales in the quarter. Europe as well had a great sales quarter, growing 53% for the quarter. So really a terrific new sales client acquisition quarter.

So I guess we'd say in summary, it feels like things are working. The company is performing and we're executing really to our plan pretty much across the board. So let me step back from the quarter and provide an update on our acquisition and partnership initiatives.

Last year's acquisitions are AllStar and Mexico deals, are performing right in line with our expectations. Both of these businesses have really terrific upside potential. The Mexico market is under-penetrated just like Russia. Business is there by fuel predominantly with cash and vouchers despite government tax incentives to use cards. And the fuel card business there is mostly prepaid and the economics are attractive, because both merchants and clients pay for the program. So we're really delighted to be positioned in that market.

We spoke at some length last week of our recent Brazil signing and look forward to closing that deal and getting going in that market. Obviously lots of opportunity there. And finally, on the acquisition front, we still have the pipeline of new acquisition opportunities, again mainly outside of North America, and hope to bring you some news on that front over the coming quarters.

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