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Executives

Eric R. Dey – Chief Financial Officer

Analysts

Julio Quinteros – Goldman Sachs & Co.

FleetCor Technologies, Inc. (FLT) Goldman Sachs Technology & Internet Conference Call February 13, 2013 6:20 PM ET

Julio Quinteros – Goldman Sachs & Co.

We’re kind of keep pushing along here on the, what we kind of call the transaction process side of coverage group. Now we’ve had a pretty good day to day with Visa and Green Dot, Global Payment, MoneyGram and with you guys. And I think as guys notably pointed out on your conference call, the best performance stock for the trailing 12 months in process and…

Eric R. Dey

I’ll remind everybody…

Julio Quinteros – Goldman Sachs & Co.

That was nice. So, with I guess obviously want to thank you for joining us Eric Dey, CFO of FleetCor Technologies. Maybe just by way of background, quickly just give you a couple of thoughts on what FleetCor is, what you guys do and kind of the state that you plan?

Eric R. Dey

Okay. I’ll try to be as brief as I can. For those of you, who don’t know the FleetCor story, I mean effectively we are the leading global provider of fuel cards and workforce payment products to businesses. And our products are primarily designed to help businesses to better control employee spending and provide merchants kind of with a loyal customer base.

Approximately 90% of our revenue today is generated from the management of our various card portfolios and products around the world and we get 10% or so of our revenue from our other products. And our other products would include things like our corporate lodging card in the United States, our telematics product that we have in Europe, and our food voucher and our food card products that we manage in Mexico.

We have operations in about 20 countries today but we’re primarily in six countries. We’re in the United States. We’re in the U.K. We’re in the Czech Republic, Russia, Brazil, and Mexico. And for those of you who don’t know the FleetCor story, I mean we’ve experienced a tremendous amount of growth over the last seven or eight years. We’ve grown our revenue at a compounded annual growth rate of approximately 29% over that period of time.

And we’ve grown our adjusted net income, or we refer to internally as our cash net income at just over 40% over effectively that same period of time. And about half of the growth has come from organic means, and the other half of the growth has come from acquisition. So, we’ve been able to accomplish this growth by primarily using our three-pronged growth strategy.

You’re going to hear us say a lot that we build, we buy and new partner. We build the businesses that we own today by investing in sales and marketing, and growing them in the old fashion way, by growing them organically. In 2012, we spent about $46 million or so in sales and marketing to help us grow our business as kind of organically the way we do. We also buy attractive assets that we believe are under-managed, particularly in emerging market geographies.

So we like to buy under-managed businesses and places that we think we then have a lot of opportunity to grow, and we partnered with big major oil companies. So, today, we have partnership relationships in the United States with companies like Chevron, BP, Arco, Citgo, just to name a few. And more recently we’ve got into a partnership arrangement with Euroshell and we’re in the integration phase associated with that as well.

We’ve a very attractive business model today. About 55% or so of our revenue comes from our partner, merchant relationships, and about 45% or so comes from our customer relationships. Similarly, we’re becoming a very international company, and we’re getting close to a 50-50 split between revenue generated from our U.S. operations and revenue generated from our international operations as well.

And we have great EBITDA margins of 50%, over 50% EBITDA margins today and growing. We’ve got a high fixed cost structure. About 70%, 75% of our cost structure is fixed today. So the majority of our organic revenue effectively falls straight to the bottom line. So and on a go forward basis, you can see our margin effectively continue to kind of bump up a little bit.

Our growth strategy going forward as much the same as it’s been in the past. Again, as we’re going to continue to use this three-pronged growth strategy to continue to grow our business, so we’re going to build, we buy and we partner. We have guided people to think of our business as about a 10% organic growth business. And again, we’re confident in that that level because we’ve been doing this game a long time. We know what kind of productivity levels we get from our investments in sales and marketing, so we’re kind of confident in that level of organic growth.

And we’re going to continue to buy businesses that we like it of attractive business models in attractive geographies. Our objective internally is not to grow this business kind of 10% like a lot of other companies do, but our objective is to double the size of this business, again over the next three years. I mean, we’ve doubled our business over the last three years. And we think that there is a, we have a lots of opportunities effectively to do it again and then again after that.

And before I turn it back over to Julio, let me just give you a couple of highlights from 2012. Obviously for those of you who know the FleetCor store, we had a very, very good year in 2012. Revenue was up 36%, our cash net income, our adjusted net income was up kind of 41% over that period of time. We saw a tremendous amount of organic growth. Our U.S. business grew organically in the fourth quarter by 18% and 14%, overall for the year.

We continue to execute on our acquisition strategy. We completed two pretty sizable deals in 2012: one in Brazil, kind of one in Russia. We went live with our first Shell market on our GSM platform in Asia. So we’re starting to see some progress on the international, on the integration front as well. We expanded our term loan. And today, we have about $1 billion of liquidity to continue to pursue our acquisition strategy.

We completed a couple of secondaries in the year, and we’ve offered about $20 million more shares to the market. So we’re continuing to see our liquidity enhance. And more importantly, as Julio mentioned, we kind of led the payment processing category with a 76% growth in our stock price, during the year. So all in all, I think we had a pretty successful year. I think we’re hopefully off to a pretty good start in 2013.

Julio Quinteros – Goldman Sachs & Co.

That’s great. That’s very helpful to just kind of geared within the same page in terms of where you guys have kind of come from in 2012. And so obviously with the 2013 outlook already out and you guys taking through the kind of puts and takes as we think about the business going forward. Maybe let’s just kind of stick on that same thought around the opportunity in the U.S. first and what some of those growth drivers could really look like in those core markets? And then may switch over to some of international segment, just start with the U.S…

Eric R. Dey

Sure, I mean, again we had a very good year growing our business organically in the U.S. And again, our stated target for 2013. Again as to think of our overall business as another kind of 10% organic growth year, and then the United States just kind of much the same that’s going to be driven by continued growth in our MasterCard product, which we called out this year. It’s going to be continued success with our extended network card products in our partner businesses. And we’re going to continue to see our check-in direct product expand in our CLC business. So all in all, we’re pretty bullish on 2013.

Julio Quinteros – Goldman Sachs & Co.

Okay. And maybe just taking a lit bit deeper on the North America side, a part of the way that in terms of how we look at them all. So in the outside you have kind of the transaction growth from the segment. You have the volumes as well. So revenue per transaction metrics, we think about them.

Obviously a nice acceleration in transaction growth as we went through of course of the year finishing this last quarter actually around 5% from low digits over the previous couple of quarters. What drove that acceleration as you kind of think about that? And then when you think about the revenue per transaction trends, what could actually continue to add to your growth profile…

Eric R. Dey

Yeah, we had one of those quarters where it was just literally every business just kind of performed well. So there really wasn’t one thing that I can point to you that was extraordinary that kind of helped us during the quarter. So again, it was MasterCard product growing 48%. Our CLC business grew 20% during the quarter. It was our extended network products continue to perform well. And here in the U.S., we’ve got a little bit of help from the environment, spreads were a little bit favorable during the quarter, which added about $1 million to our revenue.

And then going forward, I think that again we’ve guided people to think about our business as a 10% grower. And that’s some combination of growing transactions and growing revenue per tran. So we’re kind of targeting to grow transactions in the 2% to 3% range and to grow revenue per transaction in the 7% to 8% range. And a revenue per tran effectively is grows by a couple of things.

One, it simplistically mixed because we tend to do invest our sales and marketing dollars in acquiring more full service type customers, which add more revenue per transaction versus the average. And we also are going to have a continued success marketing our extended network card products. We’re introducing a new heavy card product in the United States that we’re going to gear toward the small and mid-sized trucking sector. And I think CLC is going to continue to kind of perform well with its check-in direct kind of driving the growth in that product as well. So more in the same.

Julio Quinteros – Goldman Sachs & Co.

Any kind of the competitive front that could kind of derail the outlook as you guys think about earlier, just on a macro thing. As you think about, where you guys, what you guys went through and saw in 2012 looking forward? May be a little bit on the competitive side or even potentially macro versus the…

Eric R. Dey

We don’t see anything changing really on the competitive landscape. Obviously, we do business on a lot of different geographies, but I think it’s kind of more of the same competitively. On the macro side, the environment can help or hurt our business. We have kind of three big macroeconomic factors that are out of our control, right. We don’t control fuel prices, so those can go up and down. Fuel price spreads can kind of go up and down as well, we don’t control those, and foreign exchange rates can impact our business. All of those in 2012 as an example were probably directionally favorable. So those things probably added close to kind of $10 million in revenue to our business in 2012. And from a guidance standpoint, we’re assuming those things are going to be relatively neutral in 2013.

Julio Quinteros – Goldman Sachs & Co.

Okay. On the competitive side, you had a U.S. Bank make small acquisition in the space to the banks where you at all as the potential greater competitor in the space?

Eric R. Dey

No, we don’t believe so.

Julio Quinteros – Goldman Sachs & Co.

Okay. All right may be I switch gears over to the international side that pushed, you talked about at lease this last year it was Russia, Brazil but also included Mexico and then I think in 2011 as well the UK…

Eric R. Dey

Yeah.

Julio Quinteros – Goldman Sachs & Co.

Growth to the model, I think one of things that definitely have been underestimated by us. And so as you think about the relative size of each of those markets, may be if you can kind of think about some individually like Mexico, Russia, Brazil that’s kind of the first. How big can those markets get for you guys? How do you think about sort of the addressable opportunity inside of each one of those countries?

Eric R. Dey

I mean, if you think about each of those markets, I mean those markets are all large.

Julio Quinteros – Goldman Sachs & Co.

Yeah

Eric R. Dey

We’ve got each of the opportunities; the opportunity set is going to vary. When we buy these businesses, our objective is to double the profitability of those businesses in the first couple years after we own them. In addition to that you mentioned the size of the markets, but the reason we like the emerging markets is because those markets are so under penetrated from a card accepted standpoint. So not only can we improve the performance of those businesses initially by just running them kind of better or the FleetCor way, but those businesses have a lot of runway to, have a lot of room to grow, because card penetration there is so well. I think we’re bullish on all of the acquisitions.

Julio Quinteros – Goldman Sachs & Co.

So you get obviously the benefits of the leverage of the scale as we get these segments and transaction volumes come around in the course. May be on the operating side, when you guys do come into these countries and a part of this question, I think kind of to help sort of compare a little bit to what you guys are doing in the fiscal year versus the competitor who has gone off, who’re tying to make acquisition. But the strategy seem to do a little bit different in terms of what you do. So may be address your own issues like when you guys going there and double the profits, what is that you’re doing that allows you do that? Is it shutting down all platforms sort of (inaudible) that are effective? How you guys kind of address that? And what you kind of repurchase the FleetCor …

Eric R. Dey

A lots of a little bit of everything. I mean I think first we’ve done over 50 acquisitions in the last kind of eight or nine years. So I think it goes without saying, we’re actually getting pretty good at it. We kind of know every deal we look at, we know what to go in and look for when we go into the deals. We know that there is two or three or four levers that we can pull or push to effectively increase the performance of the business.

So we’re getting good at it. And we will go in and obviously cost synergies is an obvious opportunity and we can certainly get cost synergies in new markets, but we get even larger cost synergies when we buy a business in a market that we already have a presence in because we do have a consolidation opportunity. We do go in and look at the assets we’re acquiring.

And we go in and we look at the account distribution to see as an example, if there is any accounts that we are losing money on and inevitably there is, accounts that that they are losing money on. And we’re not in a business of losing money on anything. So effectively we will go in and we’ll right size those contracts as we see necessary. And we’ll take a look at the merchant agreements and again make sure that we’ve got at least kind of market agreements with the merchants and the customers. So there is kind of lots of, lots of low hanging fruit when we go into most of these deals.

Julio Quinteros – Goldman Sachs & Co.

And as everything reported on to single platform, or do you keep the square platforms running whatever happens to be kind of local in country. How do you get the leverage on that side?

Eric R. Dey

You know the answer to that is it varies. We obviously one of the levers, very important levers we look at is the IT system and the IT system needs to be designed in a way where its very flexible, where we can kind of run the business the FleetCor way and it can accommodate a lot of the strategies we want to implement. And if we find that there is a particular business that is inflexible maybe because its old mainframe system that was designed 20 years ago. We will go to replacing that system with our state-of-the-art GFN system, which is what we’ve done in the AllStar deal.

Julio Quinteros – Goldman Sachs & Co.

Right.

Eric R. Dey

We found that that was an outdated system. And so we spent the second half of 2012 implementing our GFN system that actually went live in January of this year.

Julio Quinteros – Goldman Sachs & Co.

So it’s the backbone but it’s unnecessarily something that you do…

Eric R. Dey

Yeah it can be a priority but it can also be something we want to deal with that at a later day.

Julio Quinteros – Goldman Sachs & Co.

Okay. Maybe on the, I can touch a little bit on the U.K. situation there and I think following the acquisition also in the U.K., you also talk a little bit about the legacy business in the last quarter in terms of how that actually pick back up maybe just a little bit on that front as long in terms of what would be the big turn around of you legacy U.K. businesses?

Eric R. Dey

I think Ron actually mentioned something in his part of the earnings call script last week. But effectively, he said that all of our businesses with the exception of one grew organically at least 14% in the fourth quarter of last year. But what was particularly good was that our U.K. business actually turned around in the quarter. And those businesses are attractively a spread-based business in the U.K., and the last couple of years, spreads have effectively been depressed, which has limited our ability to market the product there as more of a discount product, which is what it is. Those spreads actually expanded in the fourth quarter of this year, so we’re able to reintroduce some more of a discounted product and now we see that was perceived very well in the market, there which helped to spread the growth that we saw in the U.K.

Julio Quinteros – Goldman Sachs & Co.

One of the things that you can again just coming back to some of the metrics in the model, and I think that was probably the biggest surprise was, how much the revenue per transaction between the America and the international segment really just feels like? You’re only about $0.30 of difference now when you think about North America relative to international now. On the call you’ve kind of highlighted some of the new markets that have done, that it helped to kind of drive those transaction metrics. But is there something beyond that, you talked about mix and some of those issues. So we should be thinking about that should go away or is this really a sustainable rate to certain think about on balance…

Eric R. Dey

You’re really kind of at the new run rate, now. I mean effectively what’s driven up revenue per transaction in the international segment and the second half of the year is mostly mix. I mean we acquired the CTF business in Brazil and we acquired the NKT business in Russia, both of those businesses have higher revenue per transaction products.

As an example, gallons associated with it. Because of that we are going to get more revenue per transaction, they also sell some products in Brazil., and those products can be higher revenue per transaction. Similarly in Russia, although we do get a little bit of service there, they are a product, they have a product sales model, because they have a more of a historical sort of a software model there. So, they sell software, they sell cards and they sell those sort of things, and because of that its higher revenue per transaction related to what they are selling.

Julio Quinteros – Goldman Sachs & Co.

Maybe you just kind of keep going through some of the thoughts around the macro having little impact on our business. You guys talked a little bit on market spreads; fuel prices foreign exchange rates and the economy in general. Those are all the things that you guys certainly highlight as the things that could have an impact on your business. Is there anything in there that as you guys look forward that could still be a surprise? And what would be the thing that could certainly impact you the most? I guess as we think about it maybe fuel prices, and just sort of help us think about what the risk that you’re going to have as it relates to fuel prices?

Eric R. Dey

Well, obviously, we’ve got, we always call out the macroeconomic environment that something that can help ahead of us and there always three big kind of macroeconomic factors that we identify; fuel prices, fuel price spread and FX rates. Obviously, we’ve got some of our businesses that like higher fuel prices, because they are more interchanged type business models. We have some business that actually like more volatility, because they are more spread-based business models. And then, obviously, foreign exchange rates can have an impact for obvious reasons. So I don’t think fuel prices in and of itself, going up or down is a big concern for us because we’ve almost got a natural hedge in play. Fuel price is going up. I got some businesses like that. I got some business that don’t, and fuel prices drop. Again, I got some businesses like that and obviously some don’t there as well.

Julio Quinteros – Goldman Sachs & Co.

Yeah. I mean it seems like this factor (inaudible) working, definitely coupled from some of the volatility, I think we used to see with the fuel price as well. So maybe just kind of going back to the track record of M&A and what you guys have done in terms of closing accretive M&A transactions, when you guys kind of extend out from here, are there any geographies, any sort of particular offers that you guys are going to thinking about there could be sort of priorities for you at this point?

Eric R. Dey

We’ve increased the size of our business development department, kind of over the last year. We’ve got people that are dedicated to identifying new acquisition opportunities, both in the United States and around the world. We’ve got M&A, our business development people that are focused on partnership transactions, and we got business development people that are focused on new products. And again, I think our business development pipeline is as robust as it has even been. But I would say, I think we are opportunistic acquires of businesses, and we are not, although we are very interested in the emerging markets, I think we are looking at a lot of other locations as well. So I think we’re excluding anywhere.

Julio Quinteros – Goldman Sachs & Co.

Okay. On the partnership side, and you talked too much about this. Yeah, but just taking about opportunities for some of the major oils both in the U.S. and internationally, I know that the contract decision-making cycles can be really lumpy and some of these can get very extended. Where are we in terms of expectations for something near-term versus longer-term (inaudible) opportunity side?

Eric R. Dey

We’ve had conversations, kind of about of our partner businesses before, in the past. There’s a lot of activity going on right now from an RFP standpoint. Some of those, obviously, we don’t control the decision making process with the major oil companies, but if all goes as expected, there is a couple of decisions are supposed to be made this year. So, hopefully, we can come out in the positive end of that but when and if something happens, we’ll announce something.

Julio Quinteros – Goldman Sachs & Co.

And the impact of that could have to the models as you think about how that close through. What are the things you sort of thinking about it in terms of revenue per transaction metrics, or yield metrics?

Eric R. Dey

Well, I think we’ll identify that as it comes. It depends on the kind of transaction that is. I mean it can arrange from a processing agreement all the way to a full service; transaction and there is a pretty big, pretty wide spectrum in there in terms of what the revenue per transaction contribution might be.

Julio Quinteros – Goldman Sachs & Co.

So, theoretically, there was just pure processing that could be some revenue per transaction drive?

Eric R. Dey

It’s going to be a lot lower revenue per transaction. If it’s a full service transaction, obviously, has a more of a positive impact.

Julio Quinteros – Goldman Sachs & Co.

Right, right. Okay. May be just on the, last one for me and we’ll opened it up a little bit. Thinking about technology at the pawns and some of the stuff that the people worry about, whether it’s the advent of mobile or EMB and kind of how your infrastructure is kind of debt for that. Will you just sort of touch on the some of the technology issues or initiatives that (inaudible).

Eric R. Dey

For us, it really is not about the technology it’s about the transaction. We want to capture all the information around a transaction because that’s where the value is. We’re not as concerned with somebody takes a phone and has a barcode on the phone and swipes that as means of originating the transaction versus it’s a card technology versus something else. It’s about transaction level itself. It’ inevitable that the transaction is, that the origination of the transaction is going to migrate over time and there is going to be other means to do. You’re seeing it today, a lot of people are using iPhones and the like with barcodes on, to originate transactions. And again, for us, it’s not about that. It’s about capturing the transaction itself. We want to control the transaction we want to provide information to the fleet operator, so they can better manage their spend and better manage their fleet. And as long as we can capture that information, we can still provide that level of service to our customers.

Julio Quinteros – Goldman Sachs & Co.

And I guess just on that Bain, I mean does the DMV in the United States, is that something that you guys have to gear up for, or just give us an update…

Eric R. Dey

It really doesn’t impact our business much. Sure, not in the near-term.

Julio Quinteros – Goldman Sachs & Co.

Okay great. But why don’t we open it up and see if anybody has any quick ones in the audience here.

Question-and-Answer Session

Unidentified Analyst

I just want to clarify on the fuel, do you actually think that have it all to be able to spread through our absolute fuel levels?

Eric R. Dey

We do not. Today, only about 20% of our revenue is directly impacted by the movement in the retail price of fuel. And because we have two different businesses, we got a spread-based business in the U.S. and we also have some business that are sensitive in the movement in the retail price of fuel. Those two business tend to act as a natural hedge because they move in opposite directions. So we don’t really think that’s a necessary for our business today.

Unidentified Analyst

You’ve got some non-fleet assets, right? You’ve got the Mexican food voucher business, and you got CLC, which I don’t think is necessarily a bad thing, but I would just love to hear your thoughts on those non-fleet related businesses? And if the expectation as you would go more down that path or just how do you think about those in the strategic vision of the front?

Eric R. Dey

Okay, first both of those businesses have, we like businesses that have attractive business models. And we like businesses that are complementary to the business that we have today. So our hotel card product is effectively a blue collar hotel network, that is geared toward blue collar workers that drive around the country and happen to spend nights in hotels. Guess what, it’s very complementary to our fuel card product, which is geared toward blue collar workers that drive around the country.

Our fuel card and food voucher product in Mexico is also a product that is sold to businesses and it’s got the same kind of high-margin profile that our existing business does, so really two businesses that we’re very, very bullish on. And I would say that that going forward from a product perspective, again, I think what we’re very interested in products that are complementary to our existing customer base and it have similar margin dynamics that our existing products have today.

Unidentified Analyst

But that includes adjacent markets (inaudible)…

Eric R. Dey

Well, you know, I mean I might, I don’t know if we’d exclude a whole lot, but again if it’s products that that again and we thought the margin profile were similar to our existing businesses and that we could market to the same sort of customers that we have. It’s certainly something we would look at. I’m not saying we would go down the road, but we would look at it.

Unidentified Analyst

Can you talk a little bit about just the size of the opportunity in Brazil over the next couple of years and the competitive landscape there?

Eric R. Dey

First, from a competition perspective, I mean there is certainly two or three other competitors in the market that do things similar to us. We kind of have a unique product in Brazil that really isn’t anybody that that offers a same product we do. We have more of an RF-based technology there. We have a product that helps to manage the theft of fuel, effectively in Brazil. So, I don’t believe there is another company there that actually does exactly what we do. But we are very interested in implementing some sort of a card product there as well, and there are a couple of other competitors in Brazil today that actually do that.

And from a market size perspective, I mean the market is an enormous. Brazil is certainly one of the top five fuel markets in the world and again from a card penetration standpoint is very low penetrated. So again lots of opportunity their GDP is growing at, has historically grown at a pretty healthy rate as well. So, lots of opportunity.

Unidentified Analyst

Was there legislation enacted there that would accelerate the growth or

Eric R. Dey

Are you taking about something that we had talked about a year - last year?

Unidentified Analyst

I think so where you have for - heavy-trucks have to start recording their transaction

Eric R. Dey

We were talking about Mexico and a year or so ago I am not sure, exactly when the government did this but they effectively enacted some legislation where the only way a company could detect fuel purchases for tax purposes was if they purchase the fuel using some sort of a card. So they want to get away from using vouchers is effectively which is difficult to control in that industry and getting away from cash as well.

Unidentified Analyst

Hey, Eric it seems like that the growth contribution on the top line from these new businesses are going to be pretty nice help us understand that the margin profile of these businesses it seems like you do a good job at executing on cost synergies taking cost out. When you acquire these companies, you are looking specifically for assets that perhaps have margins that are below the accessed investments where you think you can take up and over the near term or you looking for those that are accretive instantly from the margin side.

Eric R. Dey

Well, I mean I think first and foremost we look at assets that are complementary to the ones that we own today. And we look for assets where we think we can significantly improve the performance of those assets whether that is when you refer to as underperforming assets and we can improve the performance of that business or that we’re buying an assets that has just huge growth potential so were interested in both its just coincidentally I think most of the businesses we acquire, when we acquire, I am happen to have a little bit lower margin profiles on our existing business does, so I just as a little bit of bonus to us, because there is some low hanging fruit. And inevitably again we increase some margin profile of almost everything that we buy.

Unidentified Analyst

How are you developing the business development pipeline? So how do you identify the assets, how do you get to know them and build that relationship and push those M&A opportunity forward?

Eric R. Dey

Again, we’ve got a pretty robust business development department and again we’ve got people that are focused on chasing M&A deals around the world, we got people focused on partner deals and we got people focused on kind of other products. We also supplement the business development department by hiring advisors, in certain parts of the world, like if we don’t have a lot of expertise in (inaudible) any geography Brazil as an example we may hire somebody to advise us and identify potential acquisition targets, we’ll then I guess for lack of a better term romance, those targets until we can strike some sort of a deal and in some cases it can take, that romancing can take a couple of years, or may never develop and anything.

Unidentified Analyst

Are you finding a still primarily a one on one conversion or given your success with these international acquisitions are you finding there is competitors who were also romancing them and…

Eric R. Dey

It’s a little of both, obviously from time-to-time you are going to run into an acquisition target that’s ran a process. As an example Allstar was a process, but I would say most of our acquisitions are sole sourced, so we go and we do all the leg work we identify the acquisition we do the romancing, and eventually we can get a term sheet signed and then complete diligence and move to close. From time to time then we are going to run into a competitive situation now as well, but I think most of them are kind of sole-sourced.

Unidentified Analyst

One last one for me because you’re way too cool, common and collect, right now...

Eric R. Dey

Sorry (inaudible)

Unidentified Analyst

Well, I mean obviously you spend a little bit (inaudible), Brazil, Russia and Mexico, these are huge markets a lot of things, I guess you get to encounter along the way. When you worry about the state of the integration of some of these businesses like where were those challenges really be for you guys?

Eric R. Dey

You know, I don’t know if there is anything. From a business standpoint, we’re still well diversified. I mean we’ve got, I don’t know what the exact number is, but probably 25 different businesses and products that we manage around the world. So, there really isn’t one particular business or product, if it went sideways on is that that could dramatically hurt our business, which obviously we like a lot.

If I had anything that kind of kept me up a little bit at night, again it’s more of the macro because I can’t control it. If fuel prices has dropped to $1 that would impact some of our businesses in a negative way, if the U.S dollar started to strengthening against every currency around the world that could impact some of our business as well. And it’s just a stuff that I can’t deal with or I can’t, we don’t manage the environment in each one of the country that the economy went sideways in a couple of our, in our bigger geographies that would have a negative impact in our business. But again, those are things that are out of my control and I think those are the things that I would lose the most sleep over generally speaking.

Unidentified Analyst

Great, all right, sorry one more. In the past, are there any markets where there was significant downward pricing pressure on average transaction where margin pressure (inaudible)

Eric R. Dey

Again most of our business models are such where we get, we earn revenue both from the merchants and we earn money from the customers. So, again, we get different business models all over the world. And we are diversified to a point where I think and again there’s no one product or no one business that can dramatically hurt our business.

But to answer your question, it has happened from time to time particularly on the merchant side where merchant may want to come in and kind of renegotiate their settlement rate. And it can be something that’s a little out of control, particularly if it’s in a geography where there is limited merchant acceptance, meaning there is limited other places to go.

Unidentified Analyst

Do you have any trap cash issues, I mean, for every $100 of accounting cash flow you generate. How much of that’s actually in U.S dollars at the end of the day, if you need to bring it back and do something with it?

Eric R. Dey

Well, we have permanently reinvested overseas. So, we don’t bring any of our foreign cash back to the United States. So effectively we keep that cash and we pull that cash and we use that first to use to acquire new businesses internationally. Obviously, it’s a way more effective obviously from a tax standpoint to do at that way.

Unidentified Analyst

(Inaudible)

Eric R. Dey

And the U.S tax rate. So effectively, our overall tax rate runs around 30%. And if I moved all the money back to the United States, I mean, my effective tax rate would go to the U.S. tax rate.

Unidentified Analyst

Okay.

Julio Quinteros – Goldman Sachs & Co.

Any last ones? Okay, great, thank you so much.

Eric R. Dey

Thank you.

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