FleetCor Technologies' Management Presents at Barclays Emerging Payments Conference (Transcript)

Mar.20.13 | About: FleetCor Technologies, (FLT)

FleetCor Technologies, Inc. (NYSE:FLT)

Barclays Emerging Payments Conference Call

March 20, 2013 2:50 pm ET


Eric Dey - Chief Financial Officer


Darrin Peller - Barclays Capital

Darrin Peller - Barclays Capital

We would like to invite FleetCor up to the stage. Eric, anyway. So we have from FleetCor, Eric Dey, Chief Financial Officer. We are happy to have you with us again. We are going to start off by asking a couple of questions to the audience again.

Number one, do you currently own shares of FleetCor stock? Number one, yes, overweighed. Number two, yes, equally. Number three, yes, underweighed. Or four, no.

All right, and next question is what is your general bias towards FleetCor stock right now? Positive, negative or neutral?

Okay, well, great. With that, Eric, thank you again. We will turn it over to you.

Eric Dey

Thank you, again. Well, price is right going on here, again. Okay, for those of you who don’t know me, my name is Eric Dey. I am Chief Financial Officer for FleetCor technologies. Our company has been public since December of 2010. We went out at $23 a share back in December '10 and we are currently trading in the $69 kind of range. So our stock has effectively tripled over that period of time. So we will get into that a little bit as we go along.

So for those of you who don’t know the FleetCor story, I mean effectively we are a special purpose business charge card and we primarily commercial fuel card processing to the space of about 90% of our revenue is driven by the processing of commercial fuel cards around the world. The other 10% or so of our revenue is driven by our other products. We also manage a hotel card product in the United States called CLC. We have a food card and voucher product that we have in Mexico and we have a small telematics business that we have in Mexico. So again those products round out the other 10%, of our business.

Our value proposition to our customers is primarily around control and savings. So our products effectively help to reduce commercial fuel spend, hotels spend and other product spend around the world. We offer our products to effectively every different kind of customer around the world. So, primarily businesses and government entities, of all shapes and sizes around the world. We also market our products and manage card portfolios on behalf of major oil companies and fuel marketers that also have fuel card programs around the world.

So as an example in the United States, if you have got a Chevron commercial card or a BP commercial card, Arco or Citco, just to name a few, that’s effectively FleetCor. More recently we also added Euroshell to our portfolio of private label customers as well.

We have operations today in 23 different countries around the world. We have 17 offices. However, we are primarily in five countries. We are in the United States, obviously. We are in the U.K. We are in the Czech Republic. We are in Russia. I can count to six. We are in Brazil and we are in Mexico, today primarily.

In 2012, over 40% of our revenue was generated outside the United States but in 2013 that number is probably be closer to 50%. So we are very, very diversified, certainly from a from a geography standpoint. Our company has seen a tremendous amount of growth over the last 10 years. Our revenue has grown at a compounded annual growth rate of 29% since 2003, and our adjusted net income or our free cash flow has grown at a compounded annual growth rate of 41% over that same period of time. So again, we have a tremendous track record of growth.

And even if you look at our growth over shorter period of time, our company has effectively doubled over the last three years. Even in a more shorter period of time, in 2012, our revenue was up 36%, our cash net income was up 41% and again our stock prices up 76% last year, again that leaded the payment processing sector. So very good year for the company effectively in 2012.

As this graph indicates, again we have a tremendous track record of growth. I have already gone over some of these numbers but again you can see that our company has grown, again, a compounded annual growth rate revenue of 29% and adjusted net income or free cash flow 41% over that period of time. So again significant performance on the company's part.

We have a great business model. It's transaction based. 90% or so of our revenue recurs every year before we sell a new account. Effectively our transactions, again, are mostly recurring and are effectively routine purchases for our customers. So again we have a high degree of confidence in developing our business model every year, again, because 90% or so of our transactions recur.

We are very diversified from a revenue perspective. Again in 2012, 43% of our revenue was generated outside of the United States. About half of our revenue comes from our customers and about half of our revenue comes from our merchant relationships. We also have very low customer concentration. We have over 600,000 customer relationships around the world today, none of which represent effectively any significant percentage of our business. So again we have a terrific business model.

We have high operating leverage. We have low variable costs. About 70% of our cost they are fixed. We have low CapEx requirements. In 2012, we spent approximately $20 million on capital expenditures. So again very, very ratable predictable business model. One that is effectively easy to plan.

We are also extremely profitable, as you have seen the last couple pages. Our EBITDA margins are over 50%. Matter-of-fact, last year, we had EBITDA margins of 53%. So again, just a great business model.

We operate in a very, very large market that is significantly underpenetrated. Our business, effectively, has lots of room to grow. We believe that the world's commercial fuel market represents about 226 billion gallons, of which we process about 6.8 billion gallons. So we have about a 3% market share around the world. Our objective is to grab a piece of every single fuel transaction in the world today. So we have lots of room to grow.

We are effectively in only five the top 20 fuel markets today. If you get into the next few pages, we will get in to talk about what our strategy is then over the last five or 10 years and what our strategy is going to be going forward and how we are going to grow the next, double the company yet again.

So what is our growth strategy. Again, if you look at our business moreover the last two or three years, what we have done. We have doubled the size of the business. You can see our revenue since 2009 has grown from $381 million to $708 million but more importantly, our free cash flow or adjusted net income has grown from $100 million effectively in 2009 to over $250 million in 2012.

So how we do it. We did this by effectively utilizing our three-pronged growth strategy. We build the businesses that we own by investing in sales and marketing, kind of doing it the old-fashioned way, growing them organically. We also buy businesses. We buy businesses that in attractive geographies and businesses that effectively are undermanaged but have business models that we actually like. Finally, we partner with big major oil companies. Again just to name a couple of the names, Chevron, BP, Arco, Citco in the United States and more recently, Euroshell on the European side.

So how do we do it. Again, from a build perspective, we build the businesses we own by investing in sales and marketing. In 2012 we invested approximately $46 million in sales and marketing to grow the business the old fashion way. As a matter-of-fact, in the fourth quarter of last year, we disclosed on our earnings call that almost every one of our businesses except one, grew double-digit around the world organically. So we are in a very, very good place.

We market our products through multiple sales channels. We effectively use every means imaginable to sell our product. We use direct sales forces. We use telemarketing. We use direct mail. We use the web. We use third-party partners. It is kind of interesting if you look at our business now compared to three or four years ago. 65% or so of our sales are generated today using sales methods that didn’t exist in our business just three years ago. We effectively had just a direct sales force at that period of time.

We also grow our revenue through new product features, you know, on functionalities such extended network cards, telematics, price protection. We have added other products that we call FleetWide and FleetSource, which has helped us to not only grow our volumes but to grow revenue per transaction as well. We continued to penetrate our target markets even further. Again, we add new customers through investment in sales and marketing.

We also buy and improve the businesses that we acquire. Again, since 2003, we have acquired over 50 different businesses around the world. More recently we have acquired four pretty sizable businesses. On the middle of 2011 we acquired a company called (inaudible) which is a Mexican prepaid fuel card and food voucher company. We also acquired AllStar, which was a leading U.K. fuel card provider. In 2012 we completed two other pretty significant fleet card acquisitions. We bought another fuel card company in Russia called NKT in the middle of 2012. We also bought the leading card fraud prevention company in Brazil called CTF technologies.

As you can see, our focus over the last couple years has been on more of the emerging markets, or the brick countries. We like the emerging markets because those markets are significantly underpenetrated. So there is lots of room for those businesses to grow and we will get into that a little bit more specifically when we buy a business and our objective is to double the profitability of that business in the first year to after we own those businesses.

Again, were able to do that because we gain economies of scale. We obviously have a significant operation around the world. So we are able to leverage rest of our businesses and help to improve the performance of those businesses. We also leverage state-of-the-art processing systems. We have developed a new international fleet processing system that we call GFN around the world and so we are marketing that product to some of our major partner relationships around the world. We are converting some of our existing businesses of that platform as well. Quite frankly, we have run them the FleetCor way. Again effectively what that gets us is a doubling of the profitability of those businesses particularly the first couple of years after we own them.

Finally, we partner with major oil companies and petroleum marketers around the world. Again, the services that we offer to those customers include our industry-leading platform that we call GFN. It was a platform that was developed specifically to meet the needs of the fleet operator. It can handle multicurrency, multilingual and can accommodate many of the complex VAT tax reporting issues that are around the world today. We also offer other programs to our partners such as revenue management and full program outsourcing. So we have a full suite of products, again, all the way down to just providing a processing solution for our partners all the way to a full turnkey solution.

Recently we have won a couple of pretty significant contracts. Euroshell, which is the world's largest commercial oil companies, has operations in 35 different countries around the world. We are currently in the processing of rolling out our GFN platform. We just rolled out our first, converted the first market in Asia, back in December. So we are on our way with that as well.

Again, our growth strategy going forward effectively is to do more of the same. We are going to continue to grow our business by build, buy and partner. Our objective is to continue to do it the old-fashioned way. Invest in sales and marketing, grow the business organically. We are going to continue to buy acquisition and we are going to continue to partner with big major oil companies. In 2013, our goal is to spend about $50 million, again in sales and marketing. Our target, from an organic growth standpoint, is to grow this business around 10% on the top, which translates to something in the 15% to 20% range in organic growth on the bottom line.

We are also going to invest in more M&A. Our target is to spend about $300 million in M&A each year over the next three years. So think about it as a $1 billion dollar M&A target over that period of time. Our objective is to continue to secure new partner outsourcing opportunities. So effectively we have double the size of this business over the last three years and we think we can double this business again over the next three years. Again, by using a three-pronged growth strategy.

So not only does our business have a great business model but we also have a great financial model as well. We have gone over a lot of these statistics already, but again we have got a tremendous track record of performance. Again growing revenue at 29% at a compounded annual growth rate level over last 10 years, 41% in cash net income. We got a great and stable and predictable business model with lots recurring revenue. Again, about 90% of our revenue recurs every year before we sell a single new account.

We also have low fuel price sensitivity. So only about 20% of our revenue is directly impacted by the movement in the retail price of fuel. So, low commodity sensitivity. We also have minimal credit risk. In 2012, we ended the year with about 13 basis points in bad debt, which is down pretty dramatically from the prior year which ran just around 20 basis points.

We also have strong operating leverage. In 2012 we had 53% EBITDA margins. Again we have a very, highly leverageable cost structure with about 70% or so of our cost being fixed. What that means is most of our organic growth can fall straight to the bottom line which should help to improve the company's margins. Some are already high enough.

We also generate a lot of free cash flow. In 2012, the company generated approximately $250 million of free cash flow. We have lots of liquidity today to help fund the company's growth strategy in the future. We have about $1 billion dollars available in cash and our available debt facilities today. We have low operating leverage, 1.5 times EBITDA looking forward. We use limited amount of CapEx. Again last year, we spent about $20 million in CapEx. So again very, very strong balance sheet and we really well positioned to execute on our growth strategies going forward.

Our revenue growth has been driven by both again on the organic side driven by both increases in volume and increases in revenue per transaction. You can see, if you look at our business over last the last seven or eight years, we have grown our transactions at a compounded annual growth rate of 13% over that period of time. That was generated through some combination of, again, growing our businesses organically and by doing mergers and acquisition work. So over that period of time, about half of our growth has come from acquisition and about half of our growth has been acquired over that period of time.

Similarly, you can see our revenue per transaction has grown at a compounded annual growth rate of 8% over that period of time. Again, that’s come from a couple of different sources. Simplistically it is just mix. Again, we invest in sales and marketing. When we invest in sales and marketing, guess where we are investing our dollars. It's in the higher margins sort of products. So look at all of our transactions. On a tail, we processed about 3 million transactions last year.

We have transactions that we earn revenue as low as $0.20 to $0.30 a transaction and as high as $10 a transaction. You can see with the average being about $2.33. So again were we are investing in those products that have a higher than the average revenue per transaction. So simplistically when we add new volume, we are adding revenue per transaction.

We also upsell other products and services to our existing customer base as well. Particularly those customers that are lower on the average revenue per tran scale. We have added products like our MasterCard products. We sold that to some of our partner businesses and we have we have offered other extended network cards, like our FleetWide and our FleetSource sort of products. We also improved the performance of the businesses that we acquired over that period of time. Again our objective is to double the profitability of those businesses, really in the first year or two after we acquire the businesses.

We are also very well diversified from a revenue mix standpoint. Again, in 2012, 43% of our revenue was generated outside of the United States, 57% in the United States. So that mix is continuing to shift as we continue to do M&A activity around the world. So I would expect that number in 2013 to be closer to a 50-50.

We are also very well diversified from a revenue source standpoint. So, over half of our revenue comes from our merchant and network relationships and the other half of our revenue or so comes from our customers and partners. So again very well diversified, geographically, very well diversified from a business model perspective. We have about 25 different products around the world. Each one of those products has its own unique business model.

We also have, as I mentioned earlier, limited exposure to the movement in the retail price of fuel. Again, about half of our revenue comes from our merchant and our network relationships. Some of our revenue types would include revenue models are based on a percentage of the transaction volume. We have some of our revenue is fixed fee based revenue and some of our revenue comes from our spread based models. For those of you who do not know spread is the difference between the wholesale cost of fuel and the retail cost of fuel. Within those models, again, only about 20% or so of our revenue is directly impacted by the movement in the retail price of fuel.

We also get approximately 50% or so of our revenue from our customer and partner relationships. The number revenue sources there are varied. We get revenue from managing various programs for our partners around the world. So we have program fees. We have other miscellaneous fees, which would include transaction fees, late fees, interest, report fees, just to name a few. But those models effectively have no direct impact or very limited impact to the movement in the retail price of fuel. So again very diversified model.

We also have strong operating leverage with low credit risk. As you can see from a cost base standpoint, again as I mentioned earlier, about 70% or so of our cost are fixed, which results in a highly leverageable cost structure. So we are able to add organic growth that falls primarily to the bottom line. Our bad debt, as a percentage of billed revenue, has been dropping over time and you can see it stabilized kind of in the low teens basis. So averaged around 13 basis points last year. That’s versus 21 basis points a year ago.

That decrease in bad debt has come from a couple of things. One, obviously it's through performance. We have implemented new policies and procedures that has helped to reduce the amount of bad debt. But it has also been reduced through some of the acquisitions we acquired. Because we are buying businesses in the emerging markets that are primarily prepaid in nature and because they are prepaid, it obviously comes with little to no bad debt. So some of it is just simplistically mix.

I also mentioned, we have strong EBITDA margins. You can see in 2012 we ended the year at about 53% EBITDA margin and generated $373 million of EBITDA. So you can see we are able to achieve those results by obviously continuing to grow our business the old fashion way, increasing revenue per tran. We have lots of operating leverage. So we are able to increase our EBITDA margins by just from an economies of scale standpoint. Low amount of variable costs and we have low incremental CapEx. So, again, great, great business model.

Finally, we generated significant amount of free cash flow every year. You can see in 2012 we generated over $250 million of free cash flow. We are going to use that money to continue investing in the company's growth strategy, investing in the business growing it the old fashion way, helping to acquire businesses around the world that have attractive business models and are in under penetrated geographies, continuing to invest in new product innovation such as our extended network cards, such as our heavy truck card that we are rolling out in 2013. That should help to, again, continued to grow our business organically in the United States and help to increase revenue per tran yet again. We are going to enter new markets. As a last use of our cash we are going to continue to pay down debt, certainly on a short-term basis

So with that said, Darrin.

Question-and-Answer Session

Darrin Peller - Barclays Capital

Sure. All right, just I will start it off. So when we think about your goal of doubling earnings over the next three years. How would you (inaudible) that out in terms of what portion of that would come from organic growth through cross-selling and driving further efficiencies through recent acquisitions versus new acquisitions that you may look to acquire over the next few years suing the $1 billion or so in liquidity?

Eric Dey

It really is about 50-50. Again, if you think about some of the guidance we have given. We said we are going to grow our business about 10% organically, certainly in 2013, and we believe certainly into the future. That 10% organic growth turns into a much higher percentage when you get to the bottom line because of the fixed cost nature of our business. So 10% is going to turn into 15% or 20%. So think of that as, lets call it 50% over the next three years.

I also said, we are going to invest about $1 billion in M&A over that same period of time. Typically we pay about eight to 10 times TTM EBITDA for something that we buy. So I am thinking, that’s a $1 billion, I am going to buy another, call it $100 million dollars of EBITDA. We significantly improve the performance of those businesses that we buy.

Again, our objective is to effectively double the profitability of those businesses in the first couple of years. Guess what, that’s another $100 million. So that gets you in to the double range. Then, in addition to that, we are going to continue, hopefully, to sign big new partnership arrangements around the world, which really represents a tremendous amount opportunity for the company because those markets are effectively untapped.

Every major oil company in the United States outsources to a company like ours today. But around the world, effectively none of the major oil companies outsource today. They are all doing it in-house and we believe that down the road, those companies are going to go the way of the U.S. and start outsourcing.

Darrin Peller - Barclays Capital

That’s great, and then just if I can ask a quick follow-up, just in terms of thinking about the opportunity for new acquisitions. One of the ways that FleetCor has shown such strong growth over the last number quarters is by the acquisitions that you brought on and driving the profitability. Could you help us understand how fragmented this market really is? You only have about 3% global share and seem to be the largest player doing this. What really is the opportunity? What areas are you looking at? How could we expect that to shape up over the next few years or so?

Eric Dey

The world's a big place. We are in five of the top 20 fuel markets around the world today. Our objective is to get into every single one of those markets. We may get into those markets in different ways. Some of them we made buy our way in through M&A. Some of those markets we may get in through by partnering with major oil companies. Some of those markets we may get into by forming a joint venture with a third party as well.

But our objective is to be everywhere. So the opportunity is just enormous. Again, we are just scratching the surface on the partner side. We got a very robust business development team. We have people that are focused on chasing down new M&A deals. We have got people that are focused on new partner arrangements around the world. Quite frankly we have got also people focused on developing new add-on products. Products that are complementary to our existing customer base.

Darrin Peller - Barclays Capital

The stats on your acquisitions are pretty sterling. Could you go over the details on CF as an example? Your large one last year. What were the economics? What was that company doing? How much (inaudible) you need to have? How much CapEx are you going to do there? How do you double the profit?

Eric Dey

Well in that business, that is a little bit of a different technology business. They have an RF-based or ring technology in that country. So it’s a fraud prevention sort of business. So it is what it is. That company has partnered with two of the biggest oil companies, Ipiranga and Petrobras in Brazil. So effectively we have installed a unit on every pump.

Then we have gone out and said, like the predecessor to us and then they install a unit effectively on the vehicles and they primarily market their product to the big over-the-road vehicles because they consume a lot of gas. Depth of fuel in Brazil is high.

So effectively the way it works, a customer pull ups to a pump, take the pump, you put it into the gas tank. When those two units connect, it sends a signal to the authorization center and effectively based on the parameters that the fleet operator has given us, we will then turn on the pump. Fleet operator might say, we are going to allow that vehicle to buy 50 gallons of gas. So the authorization center says turn on the pump. We turn on the pump and if he pumps 50 gallons of gas, we turn the pump off. So again it is a very unique technology.

Darrin Peller - Barclays Capital

So how are going to double that?

Eric Dey

So effectively doubling the profitability of that that business within tailgaters, there is cost play there. We believe we are going to streamline the business and run it better. We also believe there is a number revenue opportunities there. The company has recently signed a couple of big contracts with a couple of big mining companies in Brazil. So they want to use that same technology installed on the big giant construction vehicles.

Mining it is huge in Brazil. So that’s a new kind of avenue for that product there. We are also going to move for implementing a card product in Brazil that we will market primarily downmarket to the small to midsize customers primarily on a prepaid basis. So we have lots of different ideas in that market.

Darrin Peller - Barclays Capital

Okay, following up, (inaudible).

Unidentified Analyst

57% of your revenues is U.S. based. How does that break down as your core fleet card, the MasterCard card, and the hotel opportunity, what's the approximate breakdown. What's the growth rate staying on the core U.S. fleet card?

Eric Dey

We don’t disclose the actual revenue numbers for each of our products in the United States but I can say the United States is really broken down in to three segments. It is the way I look at it internally. We have a direct market product, which is effectively our Fuelman product and our MasterCard product. We have a big partner business in the United States which would again would entail our relationships with BP, Chevron, Citco, to name a few and including are CFN and our Mannatec products. Then we have got a hotel card product in the United States. It is clearly the largest two products, our direct product and our partner business in the United States followed by CLC certainly from a directional standpoint. Our U.S. business grew organically 14% in 2012.

Unidentified Analyst

And just as a follow-up on the direct market Fuelman business. What is the key driver of growth? Is it the GDP? How do you think about what is the growth rate there?

Eric Dey

Well, again, we look at the direct market as a whole. Certainly we have growth of all of our businesses because we invest in sales and marketing. We do it the old-fashioned way. The majority of the growth in our direct market has come from our new universal product, which is our MasterCard control card. So that’s what is driving the growth in our direct business as a whole.

Unidentified Analyst

And just as a last follow-up on that. How correlated is the GDP growth and how much more of a bonus can you get from new products and implement new products coming in?

Eric Dey

Well, same store sales in the United States has been relatively flat over the last few years. I mean there is some correlation to GDP. So if the economy took off over the next few years you would see, or hope to see, some growth in each of the businesses on a same-store basis over that period of time. Sorry, what was the second part of your question, again?

Unidentified Analyst

How much more do you get products?

Eric Dey

Yes, we are always looking for new products and services to market to our customer base. One of the product that we are rolling out next year as an example, is a new heavy truck card. We spent a lot of time researching over-the-road segment last year and we found that first and foremost we have got a great truck stop network that we have developed over the last 20 years that we have been just marketing to our Fuelman network. But we really haven’t marketed that product specifically to an over-the-road segment. So this year, we are developing a heavy truck card that we are going to specifically market to that over-the-road segment.

Unidentified Analyst

I just had one last question. I think we are going to have to, we are almost out of time, but real quickly, as you alluded to before, on the ability that you did actually show some very incredible results over the past few quarters and the stocks have been showing the performance as a result of that have been related to the synergies you have been able to get at these yields. Can you give us a sense of a more typical example? Because the one you just provided was a little bit more unique of how you were able to really manage that process of getting that margin away of accretion and synergy out of these deals. What is it that you are buying that you are able to really change? Then what is left of the deals in the past, lets call it, year, maybe even two years. I know there has been a couple of larger ones. What's the waiting on these some of these big synergies that really could come?

Eric Dey


Unidentified Analyst

Can you give us a sense of what is it you are doing and then how much is really left?

Eric Dey

I will just answer the first part of your question. Most of the businesses we buy are undermanaged. Now let me give you perfect example. I know that some of you probably heard the story but it is pretty relevant to all the businesses that we buy. We were buying a business in Mexico a few years ago. It is a food card. It is a fuel and food business that has cards and vouchers. So we were buying the business from the owner. We went in and we were like, well lets look at the economics of the business. What's your average interchange? What's your cost structure look like? What's your margin look like?

So as an example, he told me, he has an average, and these are just made up numbers, but 3% average interchange, his cost structure runs around 2%. So we have got around a 33% margin. Well, we said, well that’s great but again, so you have four really kinds of businesses that you have in Mexico.

You have got food card and food vouchers and fuel card and fuel vouchers. So what's that same profitability dynamic in each one of those boxes? Well, the first thing he does, he looks back and he has got a puzzled look on his face. I don’t know. We don’t look at the business that way. Huh, well that’s three, two, one.

Well, the first thing that we try to do is obviously figure out the profitability of what we consider to be the four businesses that he generates. Lo and behold, as we had expected, he loses money on approximately 20% of his customers.

What do you think we do when we buy the business. Well, he is losing money on most of the voucher business because it effectively is a very cost intensive business. So the first thing we do is try to convert all vouchers to cards and those people that we can't convert, we are obviously going to re-price. We are not in the business of losing money.

The second thing we did is go an look at the network relationships. So what kind of interchange, what kind of discount you get from the fuel merchants? We get a look back and well I develop this relationship, call it 20 years ago, we have exclusively vouchers and we have 0.5% sort of discount. So 0.5%. Wow.

Well, what's your discount rate today? Because about 50% of your volumes is on cards. What do your mean? 0.5%. What's the market. Well, the average interchange in the market., guess what, in Mexico runs whatever it runs. Call it a couple of percent. So he is significantly below market. So what do you think we did. Well, we went in and renegotiated all the merchant settlement rates.

So again we didn’t have to do. Its like a low hanging fruit in a lot of these businesses because they are undermanaged. So the first thing we do is we go in and we look at that. Then we develop an investment thesis. So before we actually close on a business, we are well on our way to figuring out ways to more than double the profitability of the business. By the way, since we converted all those vouchers to card, we have eliminated almost 50% of the people in the business as well. So we gain significant economies of scale.

And regarding the second part of your question regarding some of the other businesses that we acquired, we acquired this business called AllStar in December 2011. We had to obtain OFT clearance before we can start managing the business our way. That clearance was obtained in the middle of last year. Then in the second half of last year we actually had to convert from their legacy system onto a new system. So we really have been spending that period of time doing that. So the real improvement in that business we should start seeing in 2013, and particularly as we exit 2013 in to '14.

Similarly with the other couple of businesses that we acquired, NKT and CTF, we should start seeing some improvement there as well. So we are in the early innings of seeing some of the gains there.

Unidentified Analyst

Thanks very much.

Eric Dey

Yes, thanks.

Darrin Peller - Barclays Capital

Lets wrap it up with three questions on FleetCor, if you could pick up your handheld devices. Number one, what do you view as the strongest near-term growth driver for FleetCor? Number one, new product initiatives in North America, number two, additional profits and synergies from recent acquisitions, number three, new partnership agreements and then number four, new acquisitions. Additional profits and synergies.

All right, number two, what do you view as the most likely potential near-term catalyst for shares? An announcement of an acquisition, number two is an announcement of material new partnership agreements, number three is announcement of share repurchase program and then four is first quarter '13 earnings release?

Okay, and then last question. What do you perceive to be the most significant near-term risk or challenge for FleetCor? Number one is competition, number two is integration risk, number three is macroeconomic and then lastly, industry regulation. Macro.

Okay. Well, Eric, again, thank you very much for being with us.

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