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Executives

Eric R. Dey – Chief Financial Officer

Ronald F. Clarke – Chairman and Chief Executive Officer

Analysts

Phil Stiller – Citigroup

Adam Carron – Barclays Capital

David Togut – Evercore Partners

Glenn Fodor – Autonomous Research

FleetCor Technologies, Inc. (FLT) Q1 2013 Earnings Call May 2, 2013 5:00 PM ET

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to FleetCor Technologies Incorporated First Quarter Conference Call.

At this time I’d like to turn the conference over to Eric Dey, Chief Financial Officer. Please go ahead.

Eric R. Dey

Good afternoon everyone and thank you for joining us today. By now everyone should have access to our first quarter 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, adjusted net income and EBITDA. 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 previously described. Also, we are providing 2013 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 2013 guidance, new product and key initiatives and potential business development and acquisitions.

They are not guarantees of future performance and therefore, you should not put 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 press release and Form 8-K filed with the Securities and Exchange Commission; others are discussed in our annual report on Form 10-K. These documents are available on our website as previously described and at www.sec.gov.

With that out of the way, I’d like to turn the call over to Ron Clarke, our Chairman and CEO.

Ronald F. Clarke

Okay Eric, thanks. Hi to everyone and thanks for joining today. In my opening here, I'm going to comment on just a couple of things, first Q1 and our 2013 guidance and then second speak a bit about our recently completed deals along with our pipeline.

So over to Q1, you may have seen our press release from just a bit earlier in which we reported very, very good results, we reported 50% profit growth on $0.90 in cash EPS and 32% revenue growth on a $194 million in revenue, so 32 on top and 50 on the bottom. These numbers we did get some lift from market spreads probably on the range of $3 million to $4 million versus last year. But actually probably only half of that against kind of our normal historical levels.

In terms of the rest of the environment, I’d say the macro economy, fuel prices and FX were really generally neutral in terms of our impact on our numbers. In terms of the various areas of the company, every line of business was up with the exception of check. Our U.S. business is grew 21% all organic mostly on the strength of our extended network card and our CLT business posted a 25% revenue gain for the quarter.

Internationally, our U.K., Russia and Mexico businesses all grew double digit. And of course, we got additional lift from our newest Russia and Brazil deals, which is a remainder we did not own in Q1 last year. So, really very, very solid performance. Our sales performance, sales being new clients, brand new clients that we add and on board in the quarter was really good.

In the U.S. across all channels, sales were up 36% versus the prior year and Russia up 50% and even our Mexico in Brazil sales were well above our internal plan. So obviously both well and new clients are liking our products.

But let me now comment just a bit on our newest assets, our four newest assets, our newest businesses. Those are the [Effect] valley in Mexico, AllStar in the U.K., NKT in Russia and CTF in Brazil. So at the combo these four newest assets at Q1 pro forma revenue growth that exceeded 35% for the quarter, so the four of them collectively grew over 35% for the quarter. And we believe based on what we are working on, it could be literally continued upside throughout this year and in the next, so honestly, really strong new asset performance.

Let me now transition over to thoughts on full-year guidance. We’re raising full-year cash EPS guidance at the midpoint $0.10, so now to $3.75, that based on our Q1 beat against guidance and the two new Australia and New Zealand deals. We are also raising full-year revenue guidance at the midpoint $15 million, so to $815. And I would say our confidence in these revised guidance numbers this high assuming that the key environmental factors stay in place.

As always, we would also mention that we could have further upside of the number that would be related to any of these late innings business development deals that we are working on. Let me now shift gears and talk just a bit about our most recently completed acquisition, so three of them. Telenav, which is a mobile tracking company, The GE Fleetcor business in Australia and CardLink, which is our most recent fuel card deal in New Zealand.

So first on Telenav; Telenav is the mobile tracking company that serves businesses. We’re commercial accounts basically the same customers that Fleetcor serves. And the Telenav service tracks driver location and also provides related set of tools and an enhancing productivity. But our reason for the acquisition is simple. We want mobile capabilities that help us extend our current programs.

So, beyond plastic and paper we want to bring mobile features to our fleet operator and drivers and we’re working now on a Fleetcor specific application that we would offer back to our existing 500,000 clients, so, very, very exciting development for the company.

Now, let me comment on our GE fleet cards in our Australia in CardLink acquisitions down under. So, what’s interesting is both of these transactions provide us with a universal multi-branded network and those kind of networks are difficult to establish and when you get universal networks, you can create pretty good products. So we expect to be offering market-leading products in both geographies. We think this tremendous opportunity to grow both of these businesses as both were dramatically underinvested in terms of sales and marketing. There’s obvious synergy between the two businesses beyond than being in decent proximity. GE’s business actually uses CardLink’s technology today and we decided to install one management team that will run both markets or both businesses for us, so some clear expense synergies.

As usual, we’ve identified a number of ways to increase profits in those business with ideas to obviously increase revenue longer-term.

And finally, we think there is some additional opportunity, (inaudible) under specifically with the major oils. A number of the major oils in the regions are evaluating new ways, new options for running the Fuel Card programs and now that we’ll have operational presence there, we maybe a viable alternative for them, so some opportunity there. So lastly, beyond these three completed 2013 acquisitions, we are continuing to work on new things, new partner and new acquisition opportunities, some of those are actually nearing to vision time. So we will revert if appropriate with any news on that front.

So in closing, honestly, we’re pleased with the Q1 results and our start to the year. We’re please that our newest assets that we’ve acquired are growing fast, 35% for the quarter. I would say we’re confident about the revised guidance that we provided. We’re excited about these three newest deals that we just completed. And we’re optimistic about our prospects to keep developing new partner relationships and wining new acquisitions.

So with that let me turn the call back over to Eric to provide some additional details on Q1 and on our 2013 guidance. Eric?

Eric R. Dey

Thanks, Ron. For the first quarter of 2013, we reported revenue of $193.7 million, an increase of 32% from the first quarter of 2012.

Revenue from our North American segment increased 21% to $100.6 million from $82.8 million in the first quarter of 2012. Revenue from our international segment increased 47% in $93.1 million from $63.4 million in the first quarter of 2012. For the first quarter of 2013, GAAP net income increased 54% to $64.7 million or $0.77 per diluted share from $42.1 million or $0.49 per diluted share in the first quarter of 2012.

The other financial metrics that we routinely use to measure our business our adjusted revenues and adjusted net income, which we sometimes also refer to as cash net income. Adjusted revenues equal our GAAP revenue less merchant commission. We use adjusted revenues as a basis to evaluate the company’s revenue, net of the commissions that are paid to merchants to participate in certain card programs.

For reconciliations of adjusted revenues and adjusted net income to our GAAP numbers are provided in Exhibit 1 of our press release. Adjusted revenues in the first quarter of 2013 increased 32% to $179.8 million compared to $135.8 million in the first quarter of 2012. Adjusted net income for the first quarter of 2013 increased 48% to $75.2 million or $0.90 per diluted share compared to $50.8 million or $0.60 per diluted share in the first quarter of 2012.

For the first quarter of 2013, transaction volume increased 3.1% to $74.2 million transaction compared to $72 million transactions in the first quarter of 2012. North American segment transactions grew 4.1% and were all from organic growth. While transactions volumes in our international segment grew 2% and were positively impacted by acquisitions closed in 2012. Adjusted revenue per transaction for the first quarter of 2013 increased 28% to $2.42 from $1.89 in the first quarter of 2012. Adjusted revenue per transaction can vary based on geography, the relevant merchant and customer relationship, the payment product utilized and the types of products or services purchased. A mix of which will be influenced by our acquisitions, organic growth in the business and fluctuations in the macroeconomic environment. When we talk about the macroeconomic environment, we are referring to the impact of market spread margin, few prices, foreign exchange rate and the economy in general can have on our business.

During the first quarter, the decrease in the wholesale cost of fuel resulted in higher fuel spread margin, and although we cannot precisely calculate the impact, this increase has on revenue, we believe it positively impacted our revenues by approximately $3 million. The majority of which was in the North American segment. Changes in foreign exchange rates were mix and overall had a slightly unfavorable impact on our business during the quarter. And finally, changes in fuel prices were mostly neutral in the U.S. and Europe and we believe had a minimal impact on revenue. Adjusted revenue per transaction for the first quarter was up in both the North American and international segment. Revenue per transaction was up 16.9% in North America due primarily to the positive mix impact of finding out customers, which is higher revenue per transaction products than the average. Favorable spread margin and organic revenue growth in most other lines of business.

In the international segment, revenue per transaction increased 43.9%, which is due primarily to organic revenue growth in most lines of business and acquisitions posed in 2012, which has products that have higher overall revenue per transaction versus our line average.

Now, let’s shift over and discuss some other drivers of our first quarter performance, first our North American segment. Most of our lines of business perform well, resulting in a 21.5% organic revenue growth rate in the quarter versus prior year. Included in the North American segment revenue was a favorable impact from market spread margin, as I mentioned earlier. Some of the other positive drivers of North American revenue during the quarter were similar to last year, and included the continued exceptional performance of our direct market MasterCard product, which had revenue growth of 47% year-over-year.

The CLC Group provider of lodging management program continue to perform well and had another solid quarter with 26% revenue growth, over the first quarter of last year. This revenue growth was driven primarily by increases in room nights and check-in direct product. Results for international business were positively impacted by two acquisitions closed in 2012: CTF in Brazil and MKT in Russia. In addition, our independent fuel card provider base in Russia, PPR, continued to grow with revenues up double-digit over last year, measured in local currency.

Our U.K. business performed well during the quarter with revenue growing organically by approximately 22% in local currency, driven primarily by the performance of our Allstar business, which was acquired in December of 2011.

Allstar, the Mexican prepaid fuel and food business continues to perform well with revenues also up double-digits in local currency. The macro economic environment was generally neutral in the International segment during the first quarter and although we cannot precisely calculate the impact of changes in fuel spread and fuel price, we believe they had minimal impact on revenues.

And finally, the two recently announced acquisitions in Australia and New Zealand will have a positive impact on our International segment revenue and profit for the balance of the year.

To remind everyone in late March, we announced that we acquired Fleet Card, which is a business that includes certain fuel tied assets from GE Capital Australia’s custom fleet leasing business. Fleet Card is a multi branded fuel card’s product with acceptance in over 6000 fuel outlets and over 7000 automotive service and repair center across Australia.

Through this transaction, we acquired the Fleet Card product, brand, acceptance network contracts, supplier contracts and approximately one third of the GE customer relationship with regards to fuel cards.

Also on April 30, we announced that we have acquired CardLink, fuel card issuing and payment processing company based in Auckland, New Zealand. CardLink provides a market leading proprietary fuel card program with virtual universal acceptance at retail fueling stations across New Zealand.

The company market its fuel card directly to mostly small to mid size businesses and provides processing and outsourcing services to all companies and other partners. And moving down the income statement.

Total operating expenses for the first quarter were $99.4 million compared to $81.7 million in the first quarter of 2012, an increase of 22%. Included in operating expenses are merchant commission, processing expenses, bad debt, selling and general administrative expenses, and depreciation and amortization expense. The increase in operating expenses was primarily due to the additional expenses related to acquisition closed in June and July of 2012.

As a percentage of total revenues, operating expenses decreased to 51.3% of revenue compared to 55.9% in the first quarter of 2012. Credit loses were 9 basis points for the quarter compared to 13 basis points in the first quarter of 2012. The improvement in credit losses was primarily due to improved performance in many business lines and the impact of acquisitions closed in 2012 which at product with historically lower bad debt as a percentage of billed revenue.

Depreciation and amortization increased 24.8% to $14.6 million in the first quarter of 2013 from $11.7 million in the first quarter of 2012. The increase was primarily due to the impact of amortization of intangible asset or they did two acquisitions in 2012. Our effective tax decreased to 28.6% compared to 30.2% for the first quarter of 2012. The decrease in the first quarter of 2013 tax rate was due primarily to the reversal of $1.9 million of tax booked in the fourth quarter of 21012, related to the controls foreign corporation look through exclusion expiring for FleetCor on December 1, 2012.

The exclusion was retroactively extended in January 2013. However, on December 31, 2012 the retroactive extension had not been passed, so we had the book taxes as of December 31, 2012 based on the law in effect at that time before the extension was passed. Since the extension was passed in 2013 we reversed these additional taxes in the first quarter of 2013, which resulted in a lower overall tax. Taxes for the remainder of the year should return to historic normal level.

Now turning to the balance sheet. We ended the quarter with approximately $274 million of total cash $49 million of which is restricted and are primarily customer deposit. The company also has a $500 million accounts receivables securitization faculty. At the end of the quarter, we had approximately $385 million borrowed against the facility.

On February 4, we amended and extended our facility termination date until February 4, 2014. The renewal included a reduction in the facility’s interest rate from [CP] for 75 basis points to [CP] plus 67.5 basis points and also included our reduction in our unused line fee.

The current purchase limit remains at $500 million. We also had $518 million outstanding on our term loan and $75 million drawn in our revolver. On March 20, we amended our term loan facility to extend the term back to a five-year term and modified certain provisions of the agreement. The facility was expected to terminate in June 2016 and we’ve extended to March 2018. We have over $900 million in liquidity to continue our global business development effort and for general working capital purposes today. As of March 31, our leverage ratio was 1.36 times EBITDA compared to 1.57 times at the end of the first quarter 2012. Our leverage ratio remains well below our covenant level of 3.25 times EBITDA. We intend to use our free cash flow to temporarily pay down the balance on the revolving credit facility and securitization and mainly maintain liquidity for acquisition and other corporate purposes. Finally, we are not a capital intensive business as we spent approximately $4.8 million on CapEx during the first quarter of 2013.

Now on to our outlook for 2013. Given our favorable results in the first quarter of the year as well as our recently announced acquisition of fuel card companies in Australia and New Zealand, we are updating our guidance for the remainder of 2013. We now expect revenue to be between $810 million and $820 million, up from our previous guidance range of $790 million to $810 million; adjusted net income to be between $310 million and $320 million, up from our previous guidance range of $300 million and $310 million; and adjusted net income per diluted share to be between $3.70 and $3.80 up from our previous guidance range of $3.61 to $3.69. As a result, our guidance at the adjusted net income per share midpoint of the range of $3.75 represents a 25% growth rate over 2012.

Our guidance assumptions for the remainder of 2013 are as follows. We expect our two recent acquisitions in Australia and New Zealand to be accretive to adjusted net income by approximately $0.04 per diluted share over the remainder of the year. Fuel prices and FX rate at current levels, market spread equals to the historical average, fully diluted shares outstanding of approximately 84.2 million shares, our full year tax rate of approximately 30.6%, and as always, no impact related to acquisitions or material new partnership agreement that we have not already disclosed.

And with that said, operator, we’ll open it up for questions.

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Our first question is from the line of Phil Stiller with Citi. Please go ahead.

Phil Stiller – Citigroup

Hi, guys. Congratulations on the good results.

Unidentified Company Representative

Hey, Phil

Phil Stiller – Citigroup

I wanted to ask about the U.S. segment, to begin with higher acceleration and growth rate sequentially, you talked about CLC and the MasterCard product [opportunity]. Just want to get a sense of the higher transaction growth rate than what you saw for most of 2012? How much of the recent growth acceleration do you think is sustainable as we look towards the back half of the year?

Eric R. Dey

Hey, Phil, this is Eric, I mean it’s, if you look at our business in North America we have three primary business; we’ve got a direct business, a partner business and our hotel, lodging business. All three of the businesses continue to grow at better than historical levels, and growth rates primarily driven again by our MasterCard product which is up kind of 48% year-over-year and our hotel card product was again up kind of over 20% again. So I think that we are very, very bullish on the continued performance of those products. We need they will continue to perform well over the balance of the year. So we kind of see how it goes.

Ronald F. Clarke

Yes. It is Ron. I would add a couple of things. One I think the growth was a bit easier in the quarter that the spreads were not great in Q1 of the prior year. So I think that gave us a few points in this quarter. So I will probably guide you to 15% kind of range for the balance of the year.

Phil Stiller – Citigroup

Okay, it’s helpful. And for CLC in particular what has been driving that growth it has been up for last couple of quarters?

Unidentified Company Representative

It’s really a lot of things, I mean the small account product I think we have mentioned to you guys continues to and I mean that thing is up, way up and I think you know the rate on that is four or 5X our large accounts, so revenue rose obviously faster than transaction. We got help conveyed from the disaster from the fourth quarter last year.

Unidentified Company Representative

Yeah that was Hurricane Sandy, so we have even a emergency product at CLC and we continue to get some revenue out of that. So I think I added about a million of dollars of revenue in the first quarter. We have added more hotels, I would say literally every part on that business is working. The large accounts that we have there is healthy, they are growing a bit, the small account is doing great, I would say all pieces of that business do working.

Phil Stiller – Citigroup

Okay. Great and last question for me the international margins spiked up a bit here in the first quarter and we are almost equal to your North America margins despite some of the amortization cost you guys have there, I mean how much of that is reflection of where you are in terms of the synergies that you’re trying abstract from this recent acquisition?

Unidentified Company Representative

Well, Phil, there are a couple of things kind of drive in the revenue per transaction, I mean, one of the acquisitions themselves meaning CTF and NKT have both higher revenue per transaction products. So the mixed impact of those two acquisitions drove up the average. And in addition to that, if you look at that organic growth in the rest of the international segment, I think we were probably up around 20% organically as well and again driven primarily by our performance in the U.K., performance in our legacy, Russian business, PPR, and both effective online and in CTF also continue to perform kind of very well, so little bit everyday.

Phil Stiller – Citigroup

Okay, great. Thanks, guys.

Operator

Our next question is from the line of Tien-Tsin Huang, with JPMorgan. Please go ahead

Tien-Tsin Huang – JPMorgan

Hey. Thanks. Good quarter. Again, I want to ask about Australia, just turn another is obviously there as well and Ron, you mentioned there is some oil business to be won there, what’s the competitive sort of environment like there and do you have what you need to be competitive in your mine?

Unidentified Company Representative

Yeah, it’s mostly relative proprietary, out intention is to take on set of players you see in Europe, BP is there, Shell is there, Exxon is mobile brand is in the New Zealand (inaudible) and virtually all of those with the exception I think of mobile, our proprietary and so just like continental USA looking at different ways to basically take your programs forward. So for us having this GFN system which we can obviously use there and now having the people on the ground, right, they can talk in the same times as those clients we think will be helpful to our prospects there

Tien-Tsin Huang – JPMorgan

Got it. May be would it still be underlying market growth in Australia, I mean do you need to win some of the business to sort of justify the acquisitions? Or is there enough business development that you can do without securing some of the bear stuff?

Unidentified Company Representative

Yeah, I would say, no. I would say they are like all, we would rise these being played as somewhat undermanaged, so we think there is like always lots of opportunity initially and then same to U.S., there’s a big opportunity in the SME segment there. It’s on other kinds of programs not on fuel card programs. So I think three things, the standard to fix the business, its grow to smallest segment with the universal card and then the upside would be some of these partners.

Tien-Tsin Huang – JPMorgan

Okay. You said you talked about the four assets gone 35, that’s pretty impressive. Obviously, is there a way to sort of just for us to better understand, is that equal across the four, there is some other way of outperforming the others, I’m just curious if you are to force rank them, how that would work?

Unidentified Company Representative

Yeah, that’s a good question. And I think that the page in front of me and what I would add I guess to the earlier commentary is everyone of those four, the lowest one will grew over 20%.

Tien-Tsin Huang – JPMorgan

Okay.

Unidentified Company Representative

Remember to make sure you guys are clear, when we get new assets TMI is zero, our game plan over 12 to 24 months has obviously moved the numbers in the business, so I don’t want to imply that two years and today these four companies are going to growing organically 35%. What I am trying to highlight is we are good at acquiring businesses, and we think running them better and so we want to get an actual data point of things that have been acquired in the last year, year and a half to make it to clear to people that even in recent times, we’re able to do that.

Tien-Tsin Huang – JPMorgan

That’s great. Last two quick housekeeping questions and then I’ll jump off. I guess international transaction growth in light of some of that commentary there I thought it would have been a little bit higher or was there was some attrition underneath the base that was maybe for us. And the second one is got to ask the question about so given the magic card growth with the litigation impact would be with the attempt that pull back around the settlement? Thanks.

Eric R. Dey

Tien-Tsin, this is Eric. I’ll answer the second question first. The MasterCard settlement, we’ve estimated the impact of that to be around $2 million over the 10 month period of time. So that will be spread out over six months in 2013 and a little bit in 2014. So from our perspective, it’s fairly immaterial. Moving over to your first question regarding the international transaction growth, obviously, we’ve got a lot of different businesses across Europe, some of those businesses are performing kind of better than others, some of the businesses are still being impacted by the economy. As an example, our Czech Republic business is still nose down from a business perspective, so it’s still being pretty much impacted by the economy. On our U.K business, I would say the transaction volumes are a little bit down there as well. And then all of the kind of the emerging market businesses, the transaction volumes are mostly kind of when you net it all together that kind of the 2% transaction growth that you see here.

Tien-Tsin Huang – JPMorgan

Okay, great thanks.

Operator

Our next question is from the line of Julio Quinteros with Goldman Sachs. Please go ahead.

Unidentified Analyst

Hey, guys. It’s from (inaudible), a few follow-ups to questions that are previously asked. First in North America, can you actually help us talk maybe what percentage of the North America revenue comes from CLC today. It feels like that’s obviously a big consider to not only the growth but the revenue per transaction there.

Eric R. Dey

Hey, Roman, this is Eric. Unfortunately we don’t disclose the revenue of individual business lines, because we have quite a few of them around the world. I’d say of the three big businesses we have in United States, meaning the direct business, the partner business and the CLC business; that business would be the smaller of the three. Just you have to sum up kind of size prospective but again we don’t specifically disclose revenue.

Unidentified Analyst

Okay. And then maybe the second half of that is how would you describe the, how you share the revenue per transaction in CLC versus the other two major channels there?

Eric R. Dey

If we had a look at CLC, it’s going to have higher venue per tran than all of the other businesses just because of the nature of what the product is. So, of the three businesses in the U.S. again, that would be the highest revenue per tran business probably followed by the direct business and then the partner business.

Unidentified Analyst

Got it. That’s actually helpful. And in international, I guess we are always trying to reset the bar there. Can you figure out what’s the normal level of revenue per transaction there? Maybe there is two new acquisitions that seem to have really moved the needle for you this quarter. How much of the average international revenue per transaction, all those two acquisitions?

Eric R. Dey

There is two businesses, there are CTF business in Brazil is kind of higher, I’d say it’s not dramatically higher than where the average ended up for the quarter. Our NKT business historically the different kind of business, because historically it was a business that earned revenue based on the sale of cards and the sale of software. So, the transaction count there is a little bit lower and is a little bit more kind of lumpy, but it is kind of higher than the average and it's based on just happens to be gets purchased in the quarter.

Unidentified Analyst

Got it.

Unidentified Company Representative

But it also little bit higher than the average.

Unidentified Analyst

Okay. And last one just to a follow-up to Tingent’s question, in UK you said major transections growth was a little soft there or modest, but Allstar revenue growth was pretty strong so was there something like pricing or anything else out there.

Ronald F. Clarke

Yes, it's Ron. We introduced some price on some segments of the market analysis and we also managed to a pretty bumpy conversion in the first quarter, so both of those things moved volume down a bit, and I think our questions is it temporary or is it longer term, but I’d say that business still performed well, so it's not – you don't see them in the Q1 numbers, but we did bump through some conversion issues were the count, which wasn’t great and we like always are testing pricing in some areas.

Unidentified Analyst

Got it. Thank you.

Operator

Our next question is from the line of Darrin Peller with Barclays Capital. Please go ahead.

Adam Carron – Barclays Capital

Hi guys this is actually Adam Carron filling in for Darrin. Just a quick question in North America to start, you mentioned that sales during the quarter were up somewhere around 36% or so in the U.S. specifically, I mean when we think about the sales, I know you guys have traditionally said it's being about 50-50 between the exceeded network card versus the traditional card, I mean is that kind of the mix that you saw during the quarter as well.

Ronald F. Clarke

Hi Adam, it's Ron. I mean the main reasons the U.S. sales are up or we’re were spending more, like we said the two investing growth, we had a higher spend in the quarter and b, we are getting more productivity some of the new channels like our telesales group is aging, so their producing more programs for the same dollars. So the first thing I would say is that thing is not really, because of investment and productivity. I’d say again we don’t disclose that’s not far off, we still know some fair amount of our proprietary products. So I think 50/50 is a fair estimate.

Adam Carron – Barclays Capital

That’s helpful. And then, secondly you mentioned that you could see some upside to the 35% growth from these core acquisitions you started in the first quarter and maybe you could provide a little bit more clarity in terms of what types of synergies you could recognize to help get you there and I think one of the things may be from own start given the back that you did have to wait for clearance for start kind of recognizing a lot of the synergies, may be we could also get a better understanding in terms of where you are at in terms of what inning you are at, recognize in the synergies mature as acquisition?

Unidentified Company Representative

Yes, what I’d like to make clear is, there is a big difference between point-to-point or grow over business sequential, so when I comment about, hey these four deals have more dues, so those four deals have revenue of x in Q1. What I am trying to convey is that Q2, Q3, Q4 and next year, we believe the revenue, the absolute revenue in each of those businesses will keep arising. Again be careful on the grow over because we have moved those upper lot, since we’ve own them and so we are going to lap a place there where we are not going to have that kind of growth in those four new assets. So want to make that point first, but I’d say that the answer is on every one of these new deals we do kind of the quick fix work as we develop the thesis and put that in the first six to 12 months. And now the stuff that will be added that were kind of new products or new channel ideas, so as I mentioned we’ve got a new universal product in Mexico. And we’ve introduced telesales there that they never had before. I think we built that up a lot. And also we had zero people in telesales. We built that team to, I think, 20 to 25 people now over the last six months. We’ve got some new partner conversations going on in one of the businesses. So I’d say that in every situation that were things happening that we believe can cause the revenue and each of those businesses to increase on a sequential basis. But again, not 35% because we’ll have some of the early improvements as we get into the later half of the year.

Adam Carron – Barclays Capital

Got it, very helpful. Great quarter guys.

Operator

Thank you. (Operator Instructions) Our next question is from the line of David Togut with Evercore Partners. Please go ahead.

David Togut – Evercore Partners

Thank you. Good afternoon, Ron and Eric.

Unidentified Company Representative

Hey, David.

David Togut – Evercore Partners

Just starting off, what was the organic international transaction growth in the quarter?

Unidentified Company Representative

No, the organic go through the transactions internationally. The revenue grew organically just over 20%, but I don’t have the exact number for the transactions in front of me, David.

David Togut – Evercore Partners

Got you. Can you ballpark for us, maybe give us a range of what the revenue per trans growth was organically international?

Unidentified Company Representative

Again it would be probably in lined with the amount of the revenue organic growth, so there were two things that happened internationally during the quarter. One is obviously we bought two acquisitions that have higher than the average revenue per transaction, so there is a favorable mix impact associated with adding those two businesses in and then the remainder was driven by a 20% kind of organic growth in the international segment. So it’s around 20% is that – would be the answer from an organic perspective.

David Togut – Evercore Partners

Got it. And then on the direct MasterCard another high 40-s revenue growth quarter for you. What types of growth rates are sustainable for this product over the next 12 to 24 months?

Ronald F. Clarke

David its Ron, I think again the answer is just literally a function of what we want to spend for the reason again that product is rolling, if those rates is a relationship between the sales, like the amount of new sales we’re selling. Your earlier question to size of the base, and because we’ve increased our sales investment and from my comments on sales we’re producing more total sales as long as we continue to increase investment relative to that base. We think it is a 30%, 40% growth for a while, there is no limit on the market again and the interest in the product it’s really just a marketing and reach in investment question from our perspective.

David Togut – Evercore Partners

Thank you that helped. You’re referencing your comments Ron partnerships you are working on acquisitions; do these give more towards mature market or emerging markets?

Ronald F. Clarke

Emerging.

David Togut – Evercore Partners

Got it right, well thanks so much, appreciate it.

Ronald F. Clarke

Thanks David.

Operator

Our next question is from the line of Glenn Fodor with Autonomous. Please go ahead.

Glenn Fodor – Autonomous Research

Hi, Good evening, thanks for taking my question, just going back to what is your first point about the sales performance the U.S. was 36%, and Russia was up 50%, just part that, but what is this metric is this expected revenues over the next two year from clients you won this quarter, what exactly is that?

Unidentified Company Representative

That is a good question, so basically we want a metric alongside of revenue that we call sales in the company in the methodology to calculation is if you sign up let’s say Lorenz Plumbing on January 1. We basically look at that account over a month and decide okay what’s Lorenz Plumbing going to produce in the 12 month period for January 1 to December 31 and it will long 13 weeks later, we adjusted if it’s running higher or lower. So we basically create pretty accurate estimates of every new account what is going to produce on the 12 month basis. So, it’s proactive really for annual revenue of the account.

Glenn Fodor – Autonomous Research

So, that’s helpful, thank you and then. So, we in these metrics of 36 and 50 just for frame of reference, what were those for the similar calculation what you would have posted in the fourth quarter, I don’t know if you disclosed it. But do you have that?

Unidentified Company Representative

Yeah, I unfortunately don’t have it but I would say that we grew sales clearly double-digit last year and again it’s really a function of investment the reason I want to call it out is I want to again make this point about the maturity or lack of our business and our products and make the point that when you sell a bunch and you sell more than you did before obviously there is an interest in your product line and so we thought disclosing this would be again, just another indicator the people listening that, we have a product line that people want and it’s being reflected in the amount of new business that’s been added. And as you guys model things, that obviously rolls into revenue right the more we sell, obviously that will move forward revenue rates, so that was the message.

Glenn Fodor – Autonomous Research

That’s great color, so thank you for that. Just expansion of David’s question, I mean I know you don’t have in front of you the organic transaction growth. But this 2% for the quarter, I mean, how does that fuel to you versus just without putting it down to exact numbers. How does that fuel versus where it has been again ex-acquisitions for the last couple of years. And then how do you expect this, excluding acquisitions how should we expect it to trend for the rest of the year, is this 2% about where it should be again ex-acquisitions for the rest of 2013?

Ronald F. Clarke

Yeah, it does not sound try, I mean the problem that they feel to be relevant. Again, the metrics we look at are the growth rate again in the businesses that we are trying to grow. And as I repeatedly say, we are growing those much, much faster. And so the problem with the average is that are quoted is, it’s not how we run the company or look at the company. And so what I would say again is of the products in the businesses that we’re investing in, they are all growing double-digit. And we track revenue, we’re trying to focus on organic revenue growth.

So I would say that the only way we could get out that is if we were to unbundle for you all of various product lines and show you that the ones that have hired revenue for tran and that we’re interested in, and we’re spending behind and growing much, much faster than the couple of percent. And again that’s what’s driving, it’s not pricing, it’s what’s driving again the revenue growth being much higher than the tran growth, it’s the businesses that are more attractive growing at much, much faster rate.

Glenn Fodor – Autonomous Research

Okay. Thanks, Ron. I appreciate it.

Operator

Thank you. There are no further questions at this time. Ladies and gentlemen, this concludes FleetCor Technologies Incorporated first quarter 2013 earnings conference call. Thank you for your participation. You may now disconnect.

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