FleetCor Technologies' CEO Discusses Acquisition Of Fuel Card Company In Russia Conference Call (Transcript)

FleetCor Technologies, Inc. (FLT)

Acquisition of Fuel Card Company in Russia Conference Call

July 11, 2012 16:30 ET

Executives

Ron Clarke – Chairman and Chief Executive Officer

Eric Dey – Chief Financial Officer

Analysts

Tien-Tsin Huang – JPMorgan

Tim Willi – Wells Fargo

Adam Carron – Barclays Capital

Phil Stiller – Citigroup

Roman Leal – Goldman Sachs

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the FleetCor Technologies Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions)

I would now like to turn the conference over to Eric Dey, Chief Financial Officer. Please go ahead.

Eric Dey

Good afternoon, everyone and thank you for joining us today. By now, everyone should have access to our press releases announcing that we have successfully completed the previously announced acquisition of CTF Technologies, the leading fuel payment platform provider in Brazil and that we have acquired a leading Russian fuel card company. These press releases can also be found at www.fleetcor.com under the Investor Relations section.

Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statement regarding the transaction between FleetCor and CTF Technologies and the Russian fuel card company. Our remarks may include discussion on future financial and operating results, benefits of the transaction, and other statements about management’s future expectations, beliefs, plans or prospects. 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 our press release and our 8-K filed with the Securities and Exchange Commission.

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 be about the acquisition. We will be hosting an earnings call in early August to discuss the second 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

Thanks, Eric. And as always, thanks to everyone for joining the call today. The purpose of this call is to update you on the status of a couple of recent FleetCor acquisitions. So, first off, we want to confirm today that we have officially closed our CTF acquisition in Brazil effective July 3. And just as a reminder, CTF is a pretty meaningful fuel payments company in Brazil. It serves long-haul fleets more than local predominantly fee-based. Its great relationships with Brazil two largest fuel retailers, Petrobras and Ipiranga and its settlements are handled by Brazil Bank leaving CTF out of the receivable financing and credit extension business, which we like.

Again, our primary motivation for acquiring CTF was to get positioned in Brazil, a large under-penetrated and obviously attractive fuel card market. So, today we’d like to reconfirm our expected second half accretion from CTF, which we estimate at $0.04 to $0.05 at cash EPS. This is the same range we communicated back in May when we signed the definitive doc.

So, let me move on now to our next transaction, which is our second major fuel card acquisition in Russia, which we closed on June 15. This Russian fuel card company is a technology leader in fuel card system and it serves both major oil clients like Rosneft and Gazprom along with hundreds of independent card issuer. It’s basically a partner’s business and that it supplies card technology to card issuers meaning it does not issue cards directly to end customers.

This company’s technology is the de facto standard in Russian fuel card systems. It uses an old-fashioned software license model that we hope to transform into an online SaaS model over time and it’s pretty sizable. Approximately, 30% of all commercial fuel purchased in Russia run through this company’s technology and about 80% of all fuel purchased on a fuel card runs through this company’s technology. So, 30% of all commercial fuel and 80% of all fuel card purchase fuel run through this company’s systems.

So, our motivation here is once again is the market and strengthening our position in attractive economies. Russia has annual commercial fuel purchases of approximately 30 billion liters, about 15% of the US with only one-third on fuel cards today, meaning the other two-thirds are still on cash and voucher. So, obviously, lots of runway for further penetration. We expect this new Russia deal will deliver approximately $0.02 of incremental cash EPS in the second half of this year. So, along with CTF, we are estimating a total of $0.06 to $0.07 of combined incremental cash EPS in the second half.

So, in conclusion, we are delighted to announce the closing of CTF and the closing of our second Russian fuel card company. As we have said repeatedly, we are interested in gaining positions in attractive fuel card markets, specifically those that are large, under-penetrated, growing, and are balance sheet light. So, both Brazil and Russia fit this profile and we have acquired attractive assets in both places on which to bill. So, obviously, we are pleased with that.

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