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Tien-Tsin Huang – Senior Research Analyst JP Morgan IT Services

Steve Elder – Senior Vice President and Chief Financial Officer

Wright Express Corporation (WXS) JP Morgan Ultimate Services Investor Conference Call Transcript November 9, 2011 1:15 PM ET

Tien-Tsin Huang

Thanks everyone for joining us after lunch. My name is Tien-Tsin Huang, I cover the computer services and IT consulting group at JP Morgan. And so we had the prepaid guys in the morning we had the payroll folks after that and now we are going to shift gears and close into the merchant and the point of sale et cetera. So we are going to kick it off with Wright Express with the afternoon session here. And from Wright Express we have got Steve Elder the CFO, we’ve got Nicky Thomas as well from Investor Relations in case you haven’t met.

In terms of format Steve I think we are just going to have Steve start out with some prepared remarks sort of the state of the union, I’ll ask some questions as well then well for sure we will open it up to the audience if that’s okay.

Steve Elder

Absolutely

Tien-Tsin Huang

Let’s do it.

Steve Elder

It’s not going to be the state of the union address.

Tien-Tsin Huang

Yeah state of the union.

Steve Elder

Wright Express is well first of all pleased to be here but a unique play in the payment processing phase. So we are recognized as a leader in the fee payment processing industry in the United States. We’ve got more than 5 million vehicles that we service today in the U.S. and about little more than 6 million vehicles worldwide.

In the U.S., we are recognized for our superior products and superior service. We have the largest market share about 12% of the overall market or about a third of the penetrated marketplace. It’s a very strong profitable business model we have very predictable and recurring revenue streams as fleets of vehicles buy their fuel and it’s also a very high margin business as well, which is very nice.

Going forward, we’ve got a growth strategy that’s got many prongs to it that hopefully we will touch on a lot of them today. But we just got a quick marketplace here in the U.S. expecting to be able to grow that between 5% and 7% annually and in terms of the transaction. And then when you pull out the impacts of fuel prices out on the business 8% to 10% revenue growth annually.

The core fleet market is made up or really of service kind of vehicles well think about a pickup truck or a van kind of fleet that either is going out to provide a service or running a delivery as our primary customer.

We also operate in our other payment solution segment, which is primarily a MasterCard branded corporate card. We are an issuing bank for that product and we issue corporate purchase cards, we also have some special use products that we call are single use account product or also known as a virtual card. We are a very large player in the online travel space for hotel rooms in that market with that single use products.

Also just in terms of kind of like growth areas that single use product has been tremendous over the last several years really the 10 year growth rate and the purchase volume of more than 35%, 36%. And more recently it’s been in the 60%, 70%, 80% range this year due to a large new account that we brought on.

We are also about a year ago a little over a year ago we purchased a business in Australia, that was very similar to us in the fleet space and we are using that as kind of a jumping off point for the rest of Asia. We’ve identified a hand full of countries that we are looking at expanding into further. Nothing terribly concrete at the moment, but we’ve at least identified the areas that we want to move into.

We also more recently at the end of March purchased a very small company in Tampa, called rapid! PayCard, which is a payroll card provider. So kind of maybe (Inaudible) a little bit of what you heard this morning. But we are looking at the prepaid space and saying where can Wright Express bring it to assets and how can we add value? And what we came back to was the payroll space because of the customer base that we have installed already with our fluid space so a lot of overlap between the types of businesses that are interested in offering a payroll card to our distinct customer base that’s another area that we expect to grow in the future.

With that I will leave that as the overview and then let you go with questions.

Tien-Tsin Huang

Yeah, I think it’s a perfect overview. So maybe we just start you mentioned sort of 5% to 7% you guys have been growing transactions in the high single digits. Same-store has been running sort of in the flattish range. So my question I guess is when do some of these new wins roll off? What is the pipeline of new business coming on as well we can help think about the next several quarters as the macro plays out against some of your wins?

Steve Elder

Yeah, so I mean 5% to 7% is the target and part of that 5% to 7% does include our same-store sales if you will and we measure that in terms of the number of gallons that an existing customer purchases per business day this year compared to last year. So they have to get a customer in both periods with some volume but that change I mentioned has been running in the plus or minus zero kind of range for pretty much all of this year.

So we’ve been outperforming that a little bit. The last quarter we were 7% transaction growth in North America, in the second quarter we were 80%, part of that is we had a great portfolio win with the Conoco Phillips brands, private label win that came on earlier this year in first part of the year in January. So that’s adding a percentage point or two in terms of the overall growth. But we really had a tremendous amount of success in the large fleet segment and by large fleets you know think several hundreds 700, 800 vehicles have been and bigger.

Our sales force has done a tremendous job in keeping that pipeline full and also bringing on some of these large customers. Just in the last few years the Federal Government the State of Florida, State Missouri, FairPoint Communications, AmeriGas, Federal Gas a number of very large businesses at least in the fleet industry, that have come on in the last couple of years. It’s hard to pinpoint with the except of Conoco Phillips, but you know that obviously went in anniversary in the first quarter next year and maybe the growth rates won’t be quite as outstanding but that’s the timing on that. Well then in terms of the large fleets I think we still have, we still have a great pipeline the sales force is still bringing those customers and we feel very good about our competitive position there.

Tien-Tsin Huang

So you’ve had a lot of wins I mean it’s pretty clear you announced that you’ve been driving the growth. So is that a function of requesting more effective on the sales front whether it be products of it will be more opportunistic or is the economy starting to drive a little bit more in the way of outsourcing and switching?

Steve Elder

Especially when you are talking in the live fleet market it’s essentially a pretty penetrated industry. If you are a business with 1000 vehicles or more to say you’ve either got some alternative or you’ve got a product like ours whether it’s us or one of our competitors you’ve essentially got a product. Really the success we are seeing now kind of goes back a few years ago, we were fortunate enough to win a bid with the Federal Government the GSA, which is about 285,000 vehicles that we service today. Part of that bid was we had to build a lot of functionality to meet their needs, which also had application to just large fleets in general.

So even during those lean years and kind of ’08, ’09 we were investing in the platform and getting those products and features built out and we are seeing the benefits of that now. When we think about competing with our products in the supply to pretty much anything it’s a combination of products services and price. And we believe if you can win on two of those and have, then the third one is less meaningful. So we really compete on the product and the service that we provide. And then if we do things right our price will be a little bit higher than our competitors. In the large fleet marketplace that means that the rebate you are sharing back with some of the payment processing revenue that we earn you share back a little bit less in terms of price.

But the products you know those investments that we made that were related to that GSA bid a few years ago are really paying off. And the service I think you, if you talk to any fleet manager any professional in the industry whether it’s our customer or somebody else’s they will tell you that the responsiveness they get from Wright Express is second to none. And that’s something loud and clear both in terms of investors who have kind of cold calls, research analysts who have done it and our own internal surveys. We measure the net promoter scores of our customers and its world-class levels.

Tien-Tsin Huang

So just the pipeline then give you’ve had a lot of things going up how does it look now versus say a year ago?

Steve Elder

Looks great, it looks great.

Tien-Tsin Huang

So when you think about growth flaring in new sales I think if I can ask you now over the road you’ve got to deal with Sky Capital to go after that market, which is obviously very, very penetrated already and highly competitive. So how important is that as well as a growth vector versus some of the other things that you are focusing on in the core fleet business?

Steve Elder

Yeah, we looked at the over the road marketplace if you take a step back, we looked at it in terms of large fleets and small fleets and the demographics are that large fleet marketplace is essentially relatively fully penetrated. Like I said, if somebody wants a product they have been called on by us and our competitors and they probably got one. In the (Inaudible) marketplace it’s not the same to dynamic because a lot of penetrated space. So we step back and said what other additional products do, we need to have in our stables to offer people small businesses. So is it really a small fleet play that we should start this over the road products.

We started from scratch, like I said before when you think of the Wright Express business think of pickup trucks and vans this new business that we are starting is over the road OTR Pro is the name of the product. This is the 18 wheelers somebody is who is delivering goods from New Jersey to Chicago and back again on the road for a week at a time or a couple of weeks at a time, the services and things that they need the products, features and functionality are just different. They need to have tax reporting for their states, they need to have load matching services, payroll, cash advances, hotels and restaurants those kinds of things, because they are away. So we in conjunction with Sky Capital have developed a brand new platform to meet all those needs on the fuel purchasing side and partnered with Sky Capital on kind of all the ancillary services side.

So right now today, it’s in a start up phase really you know we are in the phase of trying to get new merchants to accept the products, sign up new customers through Sky Capital who has very good relationships in the trucking industry and a very large customer base. But we are in very, very initial stages of starting up. Hopefully, I can sit here three years from now, five years from now and say you know what this is the business that is now generating $30 million of revenue, $50 million of revenue a lot like our corporate card is today.

Tien-Tsin Huang

Well just can you give us 30 seconds on Sky Capital, what they bring to the table?

Steve Elder

Yeah, so Sky Capital has a couple of businesses in this industry. One is they own the brand name of Roady’s, as the truck stop brand name Roady’s. They don’t own the sites but they brand the name. And if anyone is a college football fan you see the Roady's Humanitarian Bowl a few years ago that was them.

Also they have a website called Internet Truck Stops, which is really a load matching service. So that driver who went from New Jersey to Chicago when he gets there and wants to go back, he goes on to that website and they find somebody who needs goods moved from Chicago back to New Jersey. So they’ve got literally 10s of 1000s of small businesses, small trucking firms that are on this service that they have a month of fee. And then they have a whole bunch of other ancillary services around those as well.

Tien-Tsin Huang

So just thinking about the risk profile of this business you grow at a minimum is the credit profile going to be that different? How aggressive are you going to underwrite some of the new business there?

Steve Elder

The credit profile in the space is different there is no questioning. And there are people in the marketplace who have kind of set that fire already for us. Essentially, in our core fleet business we are offering 30 day payment terms and that’s very valued by especially small fleets. The over the road trucks phase it’s a lot more transient and it’s a lot more restricted on our part. So it could be anywhere from a couple of days literally that they have to pay to so maybe they don’t qualify for credit at all. But it’s probably not anymore than a couple of weeks so it is little more restrictive.

Tien-Tsin Huang

So may be just staying with fleet, I want to ask about Mascot and then we will open it up. But I guess you guys what’s the right word tightening your guidance a little bit partially because of fuel prices as well as FX. So this is pretty straight forward but from an FX standpoint Australia is a big sort of focused market for you. What should we be looking for in terms of what that brings to you beyond the normal sort of secular growth there, is that a platform to enter new countries that became more and more about countries looking to outsource on the fleet side. So based on coming at it from the northeast how do you go about penetration outside the U.S?

Steve Elder

When we talk about international for us it all starts in Australia. The company bought Retail Decisions down there it’s our largest acquisition to date. It really looks a lot like what we have here in the United States. And I call this new answers of difference you know we have large fleets and small fleets; they have mostly just small fleets. We get a little bit higher payment processing rate or you can kind of think of that as an interchange from the merchants here in the U.S. they get a little bit less. They get a little bit more from the fleet provider from the fleet customer excuse me as an accounts servicing fee. We still have fees for small fleets but it’s lower it’s just structural in the marketplace. But by in large the business is very, very similar.

We are processing quick transactions we are capturing data providing excellent customer service with high retention rates and availability pretty much anywhere throughout the country. It is a jumping off point that is how we are viewing it, it’s not like we are in the Main Land in Asia but it’s certainly a lot closer than we are in Portland, Mane.

We’ve identified a handful of countries in the region that we think are more attractive than some others. And we are just starting to take that second level dive into those specific countries, which products will work? Who is already there? What’s the landscape look like right now? But we are viewing it as a jumping off point. We’ve given the Managing Director down there more responsibilities. When we bought the company he was in charge of the fuel business in Australia. Now he has got both the fuel business as well as the gift card business that we bought he is in charge of as well down there. And we’ve opened up a region to him look for opportunities within the region.

Tien-Tsin Huang

Yeah, so organic or inorganic growth, how are you going to get into some of these countries? Can you do it organically do you necessarily need to actually buy portfolios and platforms?

Steve Elders

Well look at how we got into Australia. So I’ve mentioned the acquisition in Australia the Retail Decisions we’ve also kind of coincidentally at the same time literally within a couple of weeks we started processing transactions for BP in Australia and New Zealand it is where we started. But two different ways of getting a presence in the region BP is a very large portfolio down there and we can (Inaudible) it pretty seamlessly in their minds. Very, very little disruption to anyone and that was a, it was an excellent implementation that we went through.

You can take that and apply that kind of same model to any other country or region. In my mind it’s relatively unlikely we just go and rent some office space, throw off a shingle and say Wright Express is here let’s start signing up fleets and getting merchants to accept it’s just, it’s not that easy as the whole chicken and egg process. So it’s going to be one or the other so either you are going to make an acquisition in the marketplace, depending on the market it could be big or small or you are going to strike a deal with an oil company to begin processing an existing portfolio in that region. I can’t handicap which one is going to happen and it is going to be different by region by country.

Tien-Tsin Huang

Yeah, fair enough. Let me ask about a nice card then we will open it up obviously that was huge again this quarter surprise on the upside you added $1 billion nominal volume, which I think is the biggest that we’ve seen since we’ve been following the company. So what’s driving the outside surprises is it really just the online travel vertical doing well or are you penetrating new geographies within those clients. Can you just talk about that?

Steve Elder

Yeah, so I mean that this is really one of the great stories of the business I mean when we went public five or six years ago people would ask why are you even doing this? And today we are looking at a business that’s pushing $100 million in revenue and pretty strong margins too, pretty similar to our fleet business. So what’s driving it today is our penetration to the online travel verticals.

So we’ve developed what we call our single user account product and it’s essentially a one for one relationship between a unique account number and an individual transaction and the tracking of that transaction through the whole payment process. The application for it that we have today is with hotel rooms for some of the largest online travel companies in the U.S. So we count Priceline, Orbitz, Expedia customers three out of the four largest in the U.S.

Essentially what happens is when you book a hotel room through one of those providers they will make a reservation for you at the hotel? Part of that reservation information is an account number to hold the room just like any consumer would do. When they are making that reservation they come into our system and we create in real time a unique account number related to that reservation and track data related to that reservation with that account number. So essentially it serves two purposes one is that it pays the merchant they essentially that hotel is going to get their $200 or whatever the room charge is through that MasterCard settlement process. More important part of it though is on the back end we’ve automated the reconciliation process. So that they know that it’s a $200 hotel room for me that the right amount was paid to the right hotel they didn’t end up paying for reckless charge or a room charge of some sort an ancillary charge in the room of some sort.

So all those kinds of things that they are having problems with are all automated and reconciled automatically and only the exceptions kick out it’s something that they have to look at and worry about, which took a tremendous amount of expense out of their back office. We have taken that same exact product and bringing it into different geographies. We talked last week that hopefully in the first half of next year we think we will have our first international or foreign company in the travel space using this product for similar purposes. The market outside of the U.S. is more fragmented, so I want to make that clear. But you’ve taken the same product into different geographies and at the same time taking the same product into different verticals.

So we’ve got it, today we’ve got a handful of insurance or warranty kind of companies in the automotive space. So I think of an aftermarket automotive warranty and the muffler goes in my car, they are going to tell me where to go, who is going to repair it and they are going to pay you that garage or repair shop through a MasterCard so it’s the same process. It’s a single use account number that’s associated with that claim, you pay the merchant you know you paid the right amount for the right repair it tracks through the claim system and it’s seamless to them. So we’ve, this has been one of the great areas of expansion over the last couple of years we think it’s got more legs both domestically it has to grow whereas the online travel companies grow and internationally bring that into new geographies and different verticals.

Tien-Tsin Huang

Alright, so talk about the new verticals how hard would it be to extend into some of the other markets like insurance whether or not they are dominated by the banks today is that portable in terms of what you had now or you have to fine tune the platform?

Steve Elder

It’s we have insurance companies today and customers and warranty kind of companies today of customers. And they are growing 20%, 30% a year if you look at that just that vertical. What we have is a bunch of relatively small companies that don’t have that kind of brand name recognition. It’s easy for me to stand up here and say we are in the travel vertical and we have Priceline, Orbitz, Expedia and everyone knows exactly what I’m talking about and who those people are. When I say we have ABCO and Warantech and Mercury Insurance it doesn’t have that same kind of name recognition. But the product works the exact same way we’ve actually had people from one of those companies come and present to us at our company say and say this product works, this is what it saves me and my business and this is why it’s important to me. So it does work.

Tien-Tsin Huang

Good, we are at the 15 minute mark so questions from the audience we have a mic in case if you want to ask anything, otherwise I can keep going.

Question-and-Answer Session

Unidentified Participant

Can you help me just understand how fuel influences your whole business maybe talk about or you make a percent of the transaction fee or are you setting a fixed fee for transaction and hedging fuel?

Steve Elder

A very common topic. To back up we issue credit cards to fleet vehicles to buy their fuel right and essentially 100% of the merchant contracts in the accepting locations we have, we get a percentage based fee and (Inaudible) that was about 60% of those contracts, we get a smaller percentage fee plus a fee per transaction so that’s what we call our hybrid contracts with merchants. What that does is it as fuel prices are rising it kind of gives a little bit of relief to the oil companies in terms of we are not taking quite as many penny’s of their limited margin. And when fuel prices are falling it gives us a little bit of protection on the downside as well, by kind of boosting the amounts that we were getting in terms of real dollars.

So the sensitivity to fuel prices comes up because we get those percentage based fees and as we pointed out we try and hedge some of that sensitivity through cost with collars. So the program is essentially we have a revenue exposure of X out of that 85% of that is essentially going to fall down to operating income. We have some variable costs with a cost to fund transactions we have a negative flow of about 28 and we have credit losses. So each of those two expenses are going to rise and fall along with fuel prices. Other than that there is not a lot of sensitivity to fuel prices, so you can get some sensitivity in the operating income line, that’s the part that we are trying to hedge 80% of our domestic fuel price related earnings exposure is the program.

The way we do it is we actually buy good options, which essentially sets the floor right and we sell call options, which essentially sets the ceiling price. And every month there is a cash settlement on those instruments it’s an Asian style contract, so it looks at an average price over a period of time and then there is a cash settlement at the end of each month. The accounting for it does add some complexity to our income statement there is one line on our income statement that’s called gains and losses both realized and unrealized and derivative instruments. We don’t qualify for hedge accounting on these instruments, so we have to mark them to market through our income statement not through OCI. And that’s really the Genesis of why we talk about adjusted net income if you ever see our investor presentation and even when I talk I’m always talking in terms of adjusted net income and that mark-to-market impact is what we are trying to pull out and isolate for people.

Unidentified Participant

(Inaudible).

Steve Elder

It’s a trade off it’s just like anything else you know the as fuel prices rise, so if you go back to 2008 for example when oil prices were spiking I mean yes on a nominal in terms of dollars did we get more money? Yes, but when that’s happening was it curtailed demand and that was far worse than what we gained in terms of fuel prices.

So if you know, if you have to know what’s the perfect fuel price for us it’s kind of probably a little bit lower than where we are now so that you keep that demand up, but I would also kind of add it is better for us to just kind of slowing rising so that people have a chance to adjust and get used to that price I suppose to the spikes that we have seen more recently.

Tien-Tsin Huang

I guess next year you are walking into a higher level of prices that you had yourself into. I think you just, just that alone will give you about $0.25 in earnings what you guys have quantified. But as we roll forward to ’13 obviously that’s the new base line that we are going to have to compare against. So remind us what the hedging strategy is from the timing perspective I know you talked about being optimistic. Do you see potentially changing to the extent that fuel stays relatively stable?

Steve Elder

Sorry, I probably should have mentioned as I was going through it. But essentially the program is we make one purchase each quarter on a rolling basis. So right now we had covered that 80% target domestically, we have that in place through the third quarter of next year so a year in advance. And then in the fourth quarter of next year we have two thirds of our exposure purchased and in the first quarter of 2013 we have a third 27% or about a third of what we are going to buy are repurchased.

We make one purchase each quarter covering a third of that exposure for a nine month or a three quarter period of time. And since you pointed out it’s not a set point in time, there is no on March 15 whatever year we are going to buy we do try and somewhat opportunistically time the marketplace. And we’ve even in the fourth quarter of ’08 and first quarter of ’09 we pulled out in the marketplace because we didn’t think there was any kind of risk reward for us. We are giving up if you can recall fuel prices were like $2 a gallon, we think ahead of whole lot more to drop so we didn’t really feel much risk involved. But they head a long way so they could have gone up and it proves to be the right call.

Since that point in time and really that’s the only point in time the program has been very stable. We started it probably six months after we went public in 2005 and you know with just some minor tweaks we’ve maintained the program very consistently and I would expect we would in the future.

Tien-Tsin Huang

Any other questions? I wanted to ask about Durbin to some degree just want to lower the cost of the some of the products that are out there already from a debut perspective so the merchants are just going to see presumably some of that benefit. So my question is that if we look at Wright Express’ (Inaudible) versus some of the lower products that are coming out on the debit side, do you see a scenario where some of the merchants might ask for a bigger rebates or incentives to stay involved with the network or is it small enough that it won’t have an impact?

Steve Elder

The Durbin amendment to start off has really no direct impacts. We are Durbin is debit and it’s consumer focused we are 100% commercial business to business processes and it’s all credit with some very, very small exceptions. So, really no direct impacts on our business. Anytime you are going through a negotiation with we are literally talking about the world’s largest corporation and the oil companies that we are dealing with, there is always pressure to push the rates down and there is benchmarks out there it’s not just us there is MasterCard, there is VISA there is American Express consumer commercial rates. I don’t foresee Durbin adding to that pressure. I think that’s always inherent in the negotiation process.

Tien-Tsin Huang

Any other questions? I know you guys have bought a little prepaid company you mentioned payroll. So what’s some of the distribution plan on that when do you think that could actually start moving the needle?

Steve Elder

Back in early March we’ve made the acquisition of rapid! PayCard. Again it’s a very small company the total purchase price is $18 million including an earn out. So a pretty small start. The reason we focused on payroll though is we surveyed the landscape and said where can we add value? And it came down to our customer base. So we looked at a lot of different payroll card providers and then we eventually settled on purchasing rapid! It’s a small piece, we’ve increased the sales force significantly but they started with nine employees, we’ve increased their headcount by 50% or more. But we added about five or six sales reps into them.

Those people are essentially trying to cross sell into our existing customer base. So they have their own sales force before we bought them with their own pipelines and they are going to continue along those paths. And then we are going to supplement that with some additional people to cross sell into our own customer base. Is it going to be meaningful this year certainly not, next year probably not but again it’s one of those businesses that in three to five years, ten years who knows what it is, will be one of those another $50 million, $100 million business that’s the hope.

Tien-Tsin Huang

Okay, fair enough anyone else. So I guess Quick Card reports tonight their model is quite different it’s not a universal card, it’s more a limit acceptance card. So I’m curious as you think about expanding and suiting up more growth do you see a scenario where you might extend and sort of diversify the network and go after the markets in different ways.

Steve Elder

I can’t say it’s high in our priority list would you ever say I’d never said we wouldn’t ever do anything. I think our acceptance model was really resonates with our customer base and you talk about what are the features and functionalities that people like about our product. Number one, every single time, every year, it’s the ease of acceptance they know they don’t even have to worry about where to go, they just go anywhere they want then. And they can get in and get out and get their fuel and get back on the way. Would we ever? I would never rule anything out but I think we are very happy with the model we’ve got.

Tien-Tsin Huang

Alright, so I guess last one from me just thinking about distribution going out to the end of the market you said that the (Inaudible) are obviously penetrated. Are there any new uncreative ways that you can go about and reach out to that more fragmented space, because obviously that is a lot of economics that you have there. And I would say the path is still limited in terms of its awareness. So how, what’s the plan to go after there, are you spending enough to go after that small fleet?

Steve Elder

The whole game about attracting small fleets is about finding them and signing them up cost effectively that’s the entire game we literally make our revenue a dollar at a time. In an average vehicle we will make 75 to 85 transactions in a year. Less than $100 is our gross revenue before any kind of expenses. So when you talk about a cost to acquire and getting a reasonable payback. You can’t put a person on the street to knock on the door of a three vehicle fleet and say hey you want to sign up for the Wright Express card, because you just will never get that payback. These are the businesses that will go away they will get swallowed up whatever happens to be even if they stay for 10 years you just might not get your money back based on that cost.

So you have to do it directly through phone and over the phone, we use direct mail campaigns, we use key word searches on the internet our website is set up to find the optimizing product for you. All kinds of things like that but in the end you have to close it indirectly without having a person be in the room with them. The other important pieces to go through channels indirectly and we have relationships with somewhere around 25 to 30 different oil companies and brand names that you know it’s a very important piece to get penetration, local market so that they can attract the small suites. We’ve talked about in our last call GoGas and Wawa these are not huge brand names but they are important because they are additional channel partners to get into local businesses. And none of them are ever going to be a home run but when you stack up we’ve signed several of these guys in the last year even, when you keep stacking them up you just, you keep adding to that penetration. Is there anything new and revolutionary? Not really, just blocking and tackling and doing effectively.

Tien-Tsin Huang

And have you given the rough mix of where you are going to be business from the small from the low end where that comes from between the call center and the direct mails have you broken that out if possible?

Steve Elder

I mean the direct mail is kind of a feeder of the leads that they get. We don’t do cold calling we don’t hire out to call centers to do outbound calling. I mean we tried all that stuff and we haven’t found it to if it works it gets you usually a poor credit. So never makes any sense for us is where if we ever believed at a support credit it never makes any sense for us to do that so we do all in house indirectly.

Tien-Tsin Huang

Alright, very good any one last question. One minute let’s do it.

Unidentified Participant

(Inaudible).

Tien-Tsin Huang

Yeah question was what happens at fuel crisis?

Steve Elder

The puts are actually the protection. We buy the put option and that kind of sets the floor price. So and like I said it’s a monthly cash settlement. So, if the actual wholesale price of the fuel over that, say one month period of time is below the put option, we are going to collect from our counter party. We are going to get less money in from the merchant, we are going to collect from the counter party and essentially get back to even for that price.

Tien-Tsin Huang

And to be clear your target the 8% to 10% is x fuel opposite right?

Steve Elder

Yes, absolutely and its x acquisitions till they simply occur.

Tien-Tsin Huang

Nice and truly organic. Very good, appreciate the time. Thanks for being here.

Steve Elder

Thank you.

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