FleetCor Technologies Management Presents At 40th Annual J.P. Morgan Global Technology, Media And Telecom Conference (Transcript)

FleetCor Technologies, Inc. (FLT)

40th Annual J.P. Morgan Global Technology, Media and Telecom Conference

May 15, 2012 02:50 PM ET

Executives

Tenjin Wong – JPMorgan

Eric Dey – CFO

Presentation

Operator

Tenjin Wong – JPMorgan

All right. Sorry we're late. Thanks for joining us again. Tenjin Wong, Computer Services and IT Consulting at JPMorgan and the last one for the day. We have got FleetCor. Eric Dey, the CFO, is very happy to have Eric back with us. We've been overweight the stock, I think FleetCor has done, it's her job of managing their assets and acquiring new assets and trying sort of exploit and optimize some of the assets that they've acquired in a nice space that is expanding overseas. So, I figured we'd stock Eric maybe if you don't mind just given a quick rundown of FleetCor and some of the trends that you are seeing and then we can go into some more direct Q&A, if that's okay.

Eric Dey

Sure. I guess I'll start it out by for those of you who don't know the FleetCor story, I'll just spend literally about five minutes and just give you the 20,000 foot flyover. For those of you who don't know, we are leading global fleet cart company. We offer special purpose business charge cards primarily processing commercial fleet carts around the world. 90% of our revenue today is generated by the processing of those commercial fleet carts and then 10% of our revenue is driven by other specialty card products. We've got a corporate commercial hotel card product offering in the United States. We also processed a food card and voucher product in Mexico and we have a telematics product in Europe that we manage as well.

Our target customers are effectively every business and governmental entity around the world as well as we're targeting all of the major oil companies both in United States and around the world as well. We're a global company. We're well diversified. We're actually in 21 countries today and have 17 or so offices around the world. But our offices or our business is primarily in five geographies. We're in the United States, we're in the UK, we're in the Czech Republic, we're Russia, we have a business in Mexico that we acquired last year, I guess we're in six now, we're going to be six. A week or so ago we announced that we are in the process of acquiring a company in Brazil, so we'll be into Latin America kind of market as well.

Our company has a tremendous track record of growth. If I go back and look at over the last kind of seven or eight years, we've grown our revenue at a compounded annual growth rate from 2003 to 2011 at about 28% and more impressively we've grown our cash net income over that same period of time at a compounded annual growth rate of about 41% and in doing so we used a three plank growth strategy. We build the businesses that we own, we buy a new attractive penetrated geographies and we partner with new major oil companies as an example, United States, for those of you who don't know, we process commercial cards on behalf of Chevron, BP, Arco, Citgo and more recently we have signed an agreement to process transactions on behalf of Euroshell. So it's our first kind of entry into the European market from a private label and partnering perspective.

Just to kind of add a couple of other things, why do you want to invest in FleetCor. We own and operate in 10 proprietary merchant networks around the world. We're a difficult business to get into too. We spend 10 or 20 years kind of signing up merchant networks around the world, kind of one network at a time. We've developed a very specialized processing platform and we believe we have the state of the art system around the world. As an example that platform enabled us to win the Euroshell business which is the largest major oil company in the world. They do business in 35 different countries today. We have broad distribution capabilities. We market our products in a number of different ways. We have direct sales force on the street. We use the web. We use direct mail. We use telemarketing and we market our product via other partners as well. As a matter of fact, we had a record sales year in 2011. And we have strong relationships. I mean we built customer relationships over that same kind of 10 or 20 years period of time. We have relatively low attrition rates and we're able to grow our business efficiently by using our broad distribution network and offset the amount of attrition that we have and effectively grow our business.

So the short story is, we have a difficult business to enter regardless of scale. So Tenjin I'll turn it back over to you.

Tenjin Wong – JPMorgan

That's a good summary. So maybe just start off with your top line target of 10%. How do you sort of build up to that, obviously the easy metrics would be to look at transactions and rate per trend. Can you build us up to the 10% there?

Eric Dey

Yes, our targeting goal is to grow our businesses organically around 10% and we do that simplistically by investing in sales and marketing. In 2011 as an example, we spent about $34 million in sales and marketing around the world and we know that given the level of productivity that we get out of our sales force at that level of investment, will give us enough new sales volume to offset the amount of attrition and to grow our transaction volumes in the 3 to 4% range. At the same time, we also grew per transaction and we do that simplistically in a couple ways, one is just mix and what I mean by that is today we process about 250 million transactions and we earn revenue per transaction on a large scale from as low as about $0.10 a transaction to as high as $10 a transaction. So you can guess where we're investing our sales and marketing dollars. It's certainly not growing transactions at the lower end of the scale, so we're investing in the higher end. So effectively to the extent we're successful in growing transaction volume in the higher end of the scale, we simplistically also are growing revenue per transaction. And we're also upselling productions and services to our existing customer base. So we get more revenue out of the same transaction that we had in the past. And that's effectively we kind of do it.

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