Melissa Smith - President and Chief Executive Officer Steven Elder - Senior Vice President and Chief Financial Officer Michael Thomas - Vice President, Investors Relations and Treasurer.

Phil Stiller – Citigroup Bob Napoli - William Blair Sanjay Sakhrani – KBW Ramsey El-Assal - Jefferies & Co Tim Willi - Wells Fargo Tien-tsin Huang – JPMorgan Tom McCrohan – Janney David Togut – Evercore Partners.

Good morning. My name is Holly and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX Incorporated first quarter 2014 financial results conference call. (Operator Instructions) I would now like to turn the conference over to Micky Thomas, Vice President of Investor Relations and Treasurer.

Please go ahead, Mr. Thomas..

Thank you, Operator. Good morning. With me today is Melissa Smith, our President and CEO; and our CFO, Steve Elder. The press release we issued earlier this morning is posted in the Investor Relations section of our website at wexinc.com. A copy of the release has also been included in an 8-K we submitted to the SEC.

As a reminder, we will be discussing a non-GAAP metric, specifically, adjusted net income, during our call. Adjusted net income for this year’s first quarter excludes unrealized gains on fuel price derivatives, amortization of acquired intangible assets, the adjustments attributed to non-controlling interests, and the tax impact of these items.

In addition, beginning this quarter, adjusted net income excludes the expense of stock-based compensation. Please see Exhibit 1 that’s included in the press release for an explanation and reconciliation of adjusted net income to GAAP net income.

Also, please note that for comparative purposes, adjusted net income for prior periods also reflects the inclusion of stock-based compensation. I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed on our press release; and the risk factors identified in our Annual Report on Form 10-K filed with the SEC on February 27, 2014 and subsequent filings.

While we may update forward-looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. With that, I'll turn the call over to Melissa Smith..

Good morning everyone, and thanks for joining us. Earlier today WEX reported strong results for the first quarter of 2014 as both revenue and adjusted net income came in at the high end of our expectations, with revenue increasing 10% over the prior year to $182.1 million and adjusted net income per share increasing 4% to $1.6 per diluted share.

Revenue growth during the quarter was organic and in line with our long term growth targets, while adjusted net income was adversely impacted by credit losses and a significant investment to further globalize our business, most notably through the acquisition of Esso’s European fleet card operations.

Today I’m pleased to report that we are making progress on our strategic and financial objectives. Specifically, we are focused on increasing the growth of our business, enhancing scale and globalizing by making targeted international investments to expand our footprint.

As we entered 2014, we saw continued momentum as we gained traction with our first strategic objective to accelerate growth. Our results in our domestic fleet business benefited from improving trends in fleet volumes and fee income, coupled with benefits associated with new portfolios coming online.

Our virtual cards continued to penetrate the travel market, with higher global spend volumes contributing to our first quarter growth despite the headwinds we had called out last quarter on net interchange rates. Let me spend a few minutes on our fleet payment segments.

We achieved strong revenue growth at 7% year-over-year, driven by increased volumes, which include vehicles beginning to come online through new customer wins over the past 12 plus months, such as CITGO and USDA, as well as efforts to increase fees on domestic fleet customers.

Additionally, we are continuing to see the benefits of our acquisition of Fleet One. As we come together as one team, we’ve had several new customer signings highlighting the attractiveness of these transactions in the enrichment our offering.

Most recently, Sinclair Oil extended their existing fleet private label relationship with us to include an over the ropes program. And we signed Chesapeake Energy which is a large mixed fleet. In addition to our domestic wins, we continued to make headway on our globalization efforts.

As you know in November of 2013, we announced our intention to acquire ExxonMobil's European commercial card portfolio. Exxon will be a key strategic addition that we anticipate will build out our fleet presence in Europe, a critical element to our international strategy. Let me take a few moments to provide an update on our progress.

As a reminder, the transaction consists of three phases; first, the completion of the employee information and consultation processes and merger clearance approval; second, Operation readiness which consist of setting up key systems and infrastructure for the closing of the transaction; and third, the conversion of ExxonMobil portfolio to WEX’s system.

Taking these one at a time, we continued to make considerable progress as planned on the employee and regulatory front. The European Commission has given merger clearance approval for the transactions and the information and consultation process with country employee councils is continuing to go well.

The second phase focuses on our operational readiness to take ownership of the business. Our team has been focused on developing and executing against the detailed project plan, which includes building out our systems and infrastructures to support this program.

Today we’ve successfully established our European presence and the team continues to undertake and achieve important milestones in the rollout program. Specifically, we have renegotiated with key strategic vendors free the ability to process on their systems and have hired a significant number of local resources in Europe.

We’ve moved into our new headquarters building in the UK and we are in the process of securing physical space in a number of other countries. We’re on track to establish complete and fully functioning European operations on our timeline. The third phase marks the conversion of the ExxonMobil portfolio to WEX systems.

We being in our technology build for this phase in the first quarter, and expect the conversion to our systems to begin in 2015 and to be completed in 2016 which is also in line with our original expectations. Overall we are very pleased for the progress of the transaction and the strength of the team working on this effort.

As we’ve noted previously, the first half of 2014 will be comprised to preparing for the conversion and finalization of the transaction. Many of the more tangible milestones are expected to occur in the second half of the year, such as completing the works council consultation process and Exxon signing.

As a reminder, a majority of the spending associated with this transaction is expected to take place in the second half of the year as WEX Europe services will continue to build towards taking ownership of the portfolio.

Separately, we are also pleased to announce that we are expanding our efforts more broadly into Europe, Asia and Canada through partner relationships.

In April, we signed an agreement with ExxonMobil to manage the customer service collections and transaction processing of their commercial fuel cards to a select number of countries in Asia PAC, including Singapore, Hong Kong and Taiwan. This new business agreement builds upon our existing relationships with ExxonMobil in the US, Canada and Europe.

We’re also expanding our international footprint and product suite in the Asia pacific regions. This new agreement is a nice addition to our long term growth strategy and we are delighted to be working with ExxonMobil on this new business.

In addition to this agreement, we also signed a contract with another private label customer to develop a prepaid fleet card in select international countries. This is a new product offering for WEX. So we do not expect any material revenue from this relationship in the short term.

Lastly, we are seeing some momentum in Canada as Imperial Oil has recently outsourced its sales and marketing function to WEX. Turning to other regions, Latin America had tremendous growth with revenues increasing substantially year over year.

This growth was a direct result of our ongoing investments specifically through UNIK and its recent acquisition of FastCred. Our (inaudible) running business also continues to be a steady and solid performer. We’re very pleased with their performance to date globally. And we are encouraged by the progress we continue to make with our key investments.

Turning to our virtual business, we continued to see stronger momentum both domestically and internationally. Our other payment solution segment, which largely consists of our virtual business, specifically WEX travel solutions grew spend volumes 39% year-over-year.

This segment continues to benefit from recent customer wins such as Wotif, Globalia and a major European OTA customer that are now all producing meaningful contributions.

We believe our efforts to expand our virtual card business globally in compatible markets, including these important wins will continue to contribute appreciable purchase volumes in 2014. We continued to see nice momentum domestically as well, as our US based travel customers saw considerable growth of approximately 27%.

We are maintaining our strategic investments to build our operational capabilities in additional targeted countries.

Specifically, we are expanding our issuing and settlement capabilities internationally, which will allow us to reduce our cross border fees, giving us the benefit of both a compelling economic advantage as well as increased precision around authorization controls and currency reconciliations.

Specifically, we are focused on expanding our issuing and settlement presence in the countries that address both our customer needs and market demands. Europe and Asia are key targets initially, we are currently targeting Mexico and Brazil. We are settling transactions in 15 currencies and look forward to further expanding these capabilities.

Looking ahead, our strategic priorities remain consistent; positioning the company to accelerate growth organically and through M&A, driving scale across the organization and focusing on further globalizing our business by making targeted investments and driving scale across the organization.

This includes investments to enhance our infrastructure to support global growth as well as investments associated with the Esso transaction. While we continue to make strategic investments aligned with these objectives, we continue to analyze potential M&A opportunities.

As a reminder, we remained a disciplined strategic acquisition program focused on attractive businesses that can do one of two things; either create or enhance scale in our existing business and or add product differentiation and functionality that improves our offering.

We are interested in transactions that provide high risk adjusted returns and meet our specific investment criteria. While we may make smaller acquisitions in emerging markets or buy technology needed to accelerate products, we’ll mainly be focused on larger businesses in the fleet space as there are more sizeable opportunities in this market.

Our investment scope includes acquisition opportunities that provide supplemental products to improve our offerings, such as data analytics. We’re also working to identify travel expansion opportunities. While M&A activity is always subject to uncertainty, we believe our pipeline offers a number of interesting opportunities.

In summary, we are pleased with the financial and operating performance achieved during the first quarter. We’re progressing toward our long term growth targets of annualized revenue growth of 10% to 15% and earnings growth of 15% to 20%.

As a reminder, these are the goals that I’ve asked the entire WEX team to deliver in the parameter within which we focus on [training] and defining our growth initiatives over the near and long term. We start 2014 with continued momentum and marked progress against our strategic investments.

2014 should be a year of noteworthy execution and enhancement to our business as we work towards the completion of the Esso transaction, continued steady growth of our fleet business and the ongoing evolution and expansion of our virtual products. And now, I'll turn the call over to Steve to discuss our financials and guidance.

Steve?.

Thank you, Melissa. For the first quarter of 2014, we reported total revenue of $182.1 million, an increase of $16.7 million from the prior year period and above the high-end of our guidance range of $168 million to $175 million. This performance was driven primarily by accelerated fleet volumes, higher late fees and increased virtual card spend.

Net income attributed to common shareholders on a GAAP basis for the first quarter was $36.5 million or $0.93 per diluted share. Our non-GAAP adjusted net income increased to $41.6 million or $1.06 per diluted share. This compares to our guidance of $1.00 to $1.07 per diluted share and a $1.02 per diluted share in Q1 last year.

I would ask that for comparative purposes, the expense of stock-based compensation was excluded from the prior period as well as the current period and therefore is different from what was reported last year.

Taking a look at some key performance metrics for the quarter, consolidated payment processing transactions increased 7% quarter-over-quarter, which was in line with our expectations. We continued to see solid execution from our sales force bringing in new accounts, as well as a small contribution from FastCred in Brazil.

The consolidated net payment processing rate for Q1 was 1.36%, which was a 2 basis point decrease as compared to Q1 2013 and a 4 basis point decrease versus the fourth quarter of 2013. These rate decreases are a result of specific long term contract renewals as well as the sequential increase in fuel prices.

Finance fee revenue in the Fleet segment increased $4.1 million compared to Q1 last year. This increase was driven by higher minimum late fees charged to our fleet customers and increases in factoring revenue at Fleet One.

In the Other Payment segment, revenue for the first quarter increased 19% or $7.3 million year-over-year to $46.6 million, primarily as a result of higher virtual card volume. Spend volume increased 39% over last year to $3.7 billion for the quarter, driven by increased volume on our travel products.

The net interchange rate for our virtual card in Q1 was 82 basis points, down 14 basis points year-over-year and sequentially versus Q4. This decrease compared to the prior year was due to a couple of factors.

As we discussed last quarter, we received an elevated level of customer specific incentives in 2013, which is not repeating this year, and increased last year’s rates by approximately 8 basis points.

This was also the final quarter we felt the impact of the MasterCard litigation settlement which is now over and reduced the rate approximately 6 basis points in the first quarter. Moving down to the income statement; for the first quarter, total operating expenses on a GAAP basis were $121 million, a $16 million increase versus last year.

Salary and other personnel costs for Q1 were $43.9 million compared with $40.1 million in Q1 last year. The increase was predominantly due to increases in headcount and related benefits.

Total headcount is up 7% over last year, with most of the new hires in New Zealand and the UK related to the work necessary for the Esso portfolio and in Brazil, related to the FastCred acquisition. We continued to tightly control headcount throughout the company.

Service fees were up $2.5 million from the prior year at $26.3 million, primarily driven by higher virtual card volumes. During the first quarter, credit loss expense totaled $9.1 million. This compares to $3.8 million in Q1 last year. In the Fleet segment, Q1 credit losses were 14 basis points of spend versus 7 basis points last year.

This is well above our guidance range of 7 to 11 basis points for the quarter and the primary reason that earnings for the quarter did not reflect the strong revenues we reported. There are two main contributors to the performance in Q1.

First, last year we tested less restricted credit standards to the approval of certain new customer applications based on the success we were having in controlling overall loss rates.

It became clear, based on the Q1 delinquency rates, that this is not a good additional risk to take and we have therefore returned to our prior, stricter credit standards. Additionally, we experienced an increase in the number of accounts that were in early stage delinquency.

Because it was generally limited to low-risk accounts and early stage delinquencies, we do not expect there to be a significant impact on the remainder of the year Moving on, our operating interest expense was $1.3 million in Q1, which was essentially flat compared to last year as we continued to benefit from low interest rates.

During the first quarter, we recognized a $1 million non-operating gain on foreign currency transactions, compared to a $232,000 loss in the prior year. As a reminder, this gain relates mainly to cash and net receivable balances we hold in foreign currencies in order to settle virtual current transactions.

Beginning in Q2, we are hedging the majority of this FX exposure. The effective tax rate on a GAAP basis for Q1 was 36.8%, compared to 39.4% in the fourth quarter of 2013. Our adjusted net income tax rate this quarter was 36.2%, compared to 36.4% for Q1 a year ago. For the full year, we expect our adjusted net income tax rate to be between 36% and 37%.

Turning to fuel derivatives program, for the first quarter of 2014, we recognized a realized cash loss of $1 million before taxes on these instruments and an unrealized gain of $2.8 million. We concluded the quarter with a net derivative liability of $4.5 million.

For the second quarter of 2014, we’ve locked in at a price range of $3.36 to $3.42 per gallon. For the remainder of the year, the average price locked in is also $3.36 to $3.42 per gallon. Moving over to the balance sheet, we ended the quarter with $355 million of cash, down from $361 million at the end of the fourth quarter of 2013.

In terms of capital expenditures, CapEx for the first quarter was $11.4 million. We expect our CapEx for the full year to be in the range of $45 million to $50 million. We’ve increased the range for the year based on some of the new customer wins [signed] during the first quarter.

Our financing debt balance decreased $3.8 million in Q1, reflecting a quarterly payment required by our term note. We ended the quarter with a total balance of $681 million on our revolving line of credit term loan and notes. As of March 31, our leverage ratio was 2x our 12-month trailing EBITDA compared to 2.2x at the end of Q1 last year.

During the first quarter, we purchased approximately 180,000 shares of our common stock at a total cost of $17 million. This purchase was consistent with our policy of offsetting dilution stock-based compensation.

Regarding our capital allocation strategy, our primary objectives remain to accelerate growth organically and through M&A to further globalize our business and to drive scale across the organization.

We are focused on M&A and organic investments to increase our global presence and develop our foothold in new verticals that drive scale across our organization. In the first quarter of 2014, we sustained our momentum from 2013 by pursuing growth opportunities while effectively managing our established businesses.

This approach allowed us to deliver strong financial results while making progress against our long term growth strategy. We continue to proactively cultivate our business to better position ourselves to leverage opportunities across all of the growth opportunities emerging in our space.

Now for our guidance for the second quarter of 2014 and the full year, which reflects our views as of today and are made on a non-GAAP basis. For the second quarter of 2014, we expect to report revenue in the range of $190 million to $197 million and adjusted net income in the range of $47 million to $50 million or a $1.20 to $1.27 per diluted share.

These figures assume normal seasonality trends in the virtual card and prepaid businesses. Our second quarter guidance assumes that fleet card loss will be between 9 and 14 basis points and that domestic fuel prices will be $3.71 per gallon.

For the full year of 2014, we expect revenue in the range of $767 million to $787 million, and adjusted net income in the range of $185 million to $193 million or $4.75 to $4.95 per diluted share.

Our guidance continues to assume that we will move existing customer volumes over to our new issuing and settling capabilities and a growing number of foreign currencies. This will reduce our net interchange rate since the US tends to have higher interchange rates. And it will reduce our cross border fee revenue and related service fee expense.

Our guidance includes an income statement impact of $10 million to $13 million or about $0.26 to $0.33 per share after tax related to our planned acquisition of ExxonMobil’s European commercial fuel card program.

Our full year guidance also assumes that fleet credit loss will be between 10 and 15 basis points, and assumes that domestic fuel prices will be $3.57 per gallon. Fuel price assumptions for the U.S. are based on the applicable NYMEX Futures price.

As we have addressed in the past, in light of the success to date of our international expansion efforts, the proportion of our business sensitive to changes in foreign exchange rates has grown. Our guidance also assumes that exchange rates will remain in the reins of the current flat rate.

Additionally, we will continue to exclude stock comp expense from our adjusted net income guidance in order to make this measure more comparable with our peers. Our guidance does not reflect the impact of any further stock repurchases other than the activities and has occurred to date in 2014. And now, we'll be happy to take your questions.

Holly, please proceed with the Q&A session..

(Operator Instructions) Your first question comes from the line of Phil Stiller of Citi..

Hi guys, thanks for taking my question. I guess I wanted to focus on the transaction growth in both segments, starting with fleet. You obviously saw a nice acceleration sequentially.

Was there anything unusual from either business day or weather impact in the first quarter? And then maybe you could talk about when CITGO and USDA if they fully ramped during the first quarter or if we should see something incrementally for the rest of the year..

Phil, I’ll start and then Melissa can chime in a little bit. So in terms of like the sequential comparison on the growth rate, if you recall the fourth quarter last year had the government shutdown included in it, which didn’t have a major impact on us.

But it was a bit of a headwind, and this was also the first quarter that CITGO came on, not fully ramped for the full quarter, but a decent amount of volume that came through. So there was a little bit of noise in there I guess I’d call it for the first quarter, all to our benefit and all good.

But those two things added a little bit more than 1% to our transaction volume when you look at the growth rate sequentially. .

Yeah. I would just add that the USDA also came on. And it’s smaller and you can see more of an impact of that later in the year. But we were starting to see the benefit of some of those larger portfolio wins that we had during the latter part of last year. .

Okay, great. So it sounds like you guys are comfortable sustaining this type of transaction growth through the course of the year. .

Yeah. When we thought about revenue guidance, we were looking at really across the business where we’re seeing accelerated growth trends. And to the extent that we’re seeing portfolio conversions where customers are coming on live, we want to make sure that that’s getting reflected in our future guidance. .

Okay, and then similarly on the virtual card business, the growth accelerated sequentially. I know you guys have been in the process of ramping international wins that you’ve had.

Is the first quarter fully reflective of all the wins that you’ve had or any updated thoughts on the purchase volume growth guidance for the year?.

It significantly reflects the wins that we’ve had, that we’ve announced and obviously we’re continuing to add business to the portfolio. And I think probably what made the first quarter look so strong is the compounded fact we saw a significant growth in our domestic purchase volume.

And then on top of that we had the accelerated growth on the international side where you started to see the benefit of some of those signings we had last year. .

I think you said previously that you had expected kind of low 20% growth.

Is that still the expectation built into guidance or is that now higher?.

It’s still the expectation built into the guidance for the full year. .

Okay, great. And then last one, I guess you iterated the Esso expenses for the year.

Can you quantify how much was spent in the first quarter and how we should expect their progression for the course of the year?.

Yeah. The expenses are very clearly back end loaded. If you think about it as we continue to hire people, we continue to open offices. Eventually upon conversion, whether that’s this year or next year, they’ll come with a number of new employees and all kinds of processing costs associated with the transaction.

So they’ll continue to build through the year, and they’re building pretty rapidly. We spent nearly as much in the first quarter this year as we spent all of last year on this particular project. So half a million dollars in the quarter, and again that’ll continue to build as we go through the year. .

And your next question will come from the line of Bob Napoli with William Blair..

Thank you and good morning. A question I guess just on you’ve signed a lot of new customers and you’ll start ramping up some CapEx, Imperial Oil, Esso and new markets, this private label customer for prepaid. Is that another -- I was wondering maybe you give a little more color Chesapeake Energy, Sinclair on the CapEx.

Which of these new customers are most significant and this private label customer? Is that a big oil in Europe or what is that? For the prepaid..

I think that that relationship is a good example of us just putting a couple of our core values, partnership and innovation. It’s bringing us a new product into a new market with a partner that is new as well.

So it’s a combination of all of those things and it’s a startup which is part of why when talking about expectations, we don’t expect to see material revenue from that this year. We looked across all of these things, Chesapeake coming on, Sinclair Oil. Some of those are customers that will ramp fairly rapidly.

Others on our portfolio conversion will take a period of time. And then something like this new private label relationship that we have, that’s going to be in a building phase initially and then we’ll have to build revenue organically. We’re excited about the offerings.

We think it is unique within that market and it also expands our international footprint. But we’re not considering that to be material. And when you try to tie that into CapEx, some of these larger portfolio convergence lead to initial upfront investments, which is what we’ve seen historically over time.

And so when we make investment we’ll do the conversion and then we see the benefit of revenue. But there are our processes that we go through. So we kind of put all of those different things we’re putting together in our guidance expectations..

That private label, is that a fuel card and is that with a major oil company, a startup program or is it not fuel?.

It is fuel. It is a prepaid fuel card and it is with a company that has significant presence in that region..

Okay. So that’s a second potential major customer in Europe. The Esso expansion into why those three markets and when does that kick off and that has a potential to grow into -- and I’m not sure. I’m not that familiar with Exxon and Esso and their presence in Asia.

But is that -- why those markets and does it have the opportunity to grow and become full outsourced program and when is the kick off?.

Those markets, those are the markets that they’re in and so we’re assisting with the business that they already have set up. In terms of how it works, we will pick up the transaction processing as well as the other things that they’ve outsourced to us in their particular markets.

I’d say it’s just a great extension of the relationship that we started in the United States, moved into Canada then we went into Europe and now moving into the Asia PAC region..

Okay, and then this last question on credit win. Can you give a little more color on where you extend it? I would imagine small businesses in the U.S, is where that would extend. You loosened credit criteria.

What kind of effect will that have in retightening on your volumes and how confident are you that this is a brief bubble in credit losses?.

So you’re right, Bob. It was in the U.S. It was essentially small businesses. And depending on the sales channel that we see the customer come in through, we see different credit behaviors historically.

So we took one small channel and just basically ran a test internally to say, can we approve some more applications, get some more volume in without taking on much risk. After call it six months or so, it was pretty clear that we were taking on more risk than we wanted. We went back to our older standards.

You’re talking about approving a couple, 300, 400 applications per month. So, maybe a couple of thousand cards per month. So it’s really not a major – it hasn’t been a major benefit over the last six months and I don’t really expect that you’re going to see much of an impact going forward.

At the same time, in the quarter we also did see an uptick in our early stage delinquencies which was also a contributing factor to this. There’s no particular geography that it related to. There’s no particular industry. It was pretty well broad based.

So far what we’ve seen in April and obviously we’re the last day but so we haven’t seen all the activity come in yet, but the trends we’ve seen around payments have been improving. It gives us some optimism to look forward on the rest of the year. I’d also say that those trends aren’t always necessarily reflective of what happens. So we’re optimistic.

We haven’t built a significant increase into our card loss guidance. It’s a small uptick plus the impact of what we got from Q1..

Your next question will come from the line of Sanjay Sakhrani, KBW..

I just had a couple of questions. First, when I look at that net payment processing rate, it came down pretty decently and I assume it’s because of mix. I’m just trying to think about how we should consider the trajectory going forward. Similarly with the interchange rate, I know you had some onetime impacts.

you talked about mix, Steve, but as far as the trajectory going forward, would it be around the 88 basis points or something higher? Thanks. .

So starting with the fleet side, we came down depending on your comparison point, 4 basis points to 2 versus last year. Sequentially we did see a change in fuel prices that went higher and as you guys know with our fee structure, that has an inverse impact on our interchange rate there. So that certainly played a part in it. And the rest is mix.

We talked about we renewed some big customer contracts in there during the quarter and that had a small impact on the rate as well. If you flip over to the virtual side, it was down pretty significantly.

And for reasons that we’ve been talking about for the better part of six and nine months now, the MasterCard litigation settlement that was 6 or 7 basis points, the elevated customer incentives, customer specific incentives that we got last year, that was about 8 basis points.

We are also moving volume from U.S issuing with the cross border fee and being used internationally to a local issuance strategy and that’s having a mix impact on the rate. .

I guess just following up on that, with the proposed interchange changes that might occur in Europe, how do you guys respond to that in terms of your strategy?.

First of all it’s not finalized yet and it’s going to take some time even if it does become final, so will not impact us. So we’re at this point making sure that we’re involved in the process. But if you fast forward and say it does ultimately get adopted, it would again take some time to roll through our portfolio.

It would affect some of the decisions where we decide where we want to be issuing in terms of local issuance. It may make sense to do it through others in relationship. And then ultimately looking at the overall fee structure which is what you’ve seen in markets where interchange when it changes. You see more of a fee structure effect to a customer.

And so I’d say it’s the moment we’re participating in a process we’re assessing it and there’s a lot of time between now and when it actually would have a financial impact on us and others..

Got it. Just in terms of those rates that we were talking about, Steve, just looking ahead, should we expect them to stabilize around here? I think your fuel price assumption is up a little bit more from the first quarter.

So does that mean there’s a little bit of a downward bias in the payment processing rate?.

Yeah, that’s right. I would say that we’re not predicting any major contract impact for the rate. So mix changes a little bit every month, every day and the fuel price impact will matter as well..

Okay, and the same thing with the interchange rate.

I mean it will probably be stabilized here given that it’s changed a bit?.

It will stabilize where it is. I guess the caveat I’d say is that the litigation settlement that impacted us by the 6 or 7 basis points is over now. So beginning basically I think it was March 31 or April 1 the rate will go back up..

And you said that was 6 basis points?.

Yeah, between 6 and 7 because it was only on domestic volume so it depended on our mix of domestic versus international volume. .

Got it. Okay and then I just want to make sure I understood the hedging implication going forward, as far as like movements in currencies because you’re hedging.

I mean does that basically lock you in for the remainder of this year, or are you still exposed to movements in currency?.

No, I’d say we’re still exposed. So we’ve got -- because we’re settling now in 15 currencies with our virtual card product, we basically have to carry cash balances to settle in each of those currencies as well as have a net receivable exposure typically with our customers. Order magnitude you’re talking somewhere in the range of $100 million U.S.

equivalent overall between the cash and the receivables. So we’ve basically just started entering into a series of forward contracts. So this quarter we had about a million dollar gain from FX. But it can swing pretty dramatically month to month and we’re just trying to take that volatility out.

So we’re just going enter into a series of contracts, first day of each quarter, we’ll lock in the rates. It’ll expire monthly, so there’ll be a monthly cash settlement and that’ll offset the income statement impacts that we’re seeing. You shouldn’t see any kind of balance sheet impacts. We’re not planning on carrying anything over quarter ends..

Okay great. Final question just on -- I wanted a clarification on the Esso, the new deal you guys announced.

As far as the cost to roll out this new initiative, is there a significant cost outlay ahead of actually recognizing those revenues? And when will that occur if they are?.

I’d say Sanjay, it’s a pretty typical pattern as most of us kind of say. Any one of these major private label relationships comes with its own level of customization and features and functionality that they want. So we’re going to be in the process of building that out. So there is an impact mostly to our capital side.

There is some small expense in Pac but it’s usually not really incremental. It’s usually just kind of absorbed by the business. We’ll start seeing the revenue and the prophets from the contract. Again it’s going to be pretty modest but towards the end of this year or next year. .

And we’re talking about this most recent one in Singapore Hong Kong..

Yes. I mean I can give you the same commentary for the European one it’s on a bigger scale. But it’s essentially the same commentary. .

And the next question comes from the line of Ramsey El-Assal, Jefferies & Co.

Okay how would you describe the kind of competitive dynamic in the sales process with virtual cards and global markets.

Is there a general sort of bidding process, are there a lot of players competing? I mean do you bump into the same folks frequently and this is primarily again on the stuff that you’re getting outside the U.S.?.

Yeah I would say it depends on the market. One of the things, when we look at what markets we’re willing to enter. We look at what is our existing customer need within that market place, what’s the competitive environment like what’s the regulatory environment like. And so those were things that were thought of.

But before we decided where to answer, and so some market it’s highly competitive. And we would be competing against people like you would see here in the United States, American Express, Chase. In some markets, there would be local players they’re competing with. So it really depends.

In most cases, they’re competitive wins where we’re going against other people. Now always, but I would say in most cases, that’s true..

Okay. On sort of a global M&A environment, are you bumping into … now that you’re sort of focused more globally than perhaps you were in the past. Are you bumping into your competitors? I guess specifically sort of fleet core more when you’re kind of kicking the tires on deals.

And I guess a follow up there, is there a risk that you kind of, you guys all go after the same assets or is it more like there’s just plenty of room out there and plenty of assets to go around?.

I think it’s in the fleet space in particular that’s typically the same cast of people that are involved in looking at transactions. So I think that they are going to be in a competitive environment in most cases, not all cases.

But if they and a lot of them when you get beyond fleet in some of these either ancillary markets or other industries that we are in, it becomes less so.

So it’s one of the things that we are thoughtful of if we are going through a process, making sure again that it’s hitting both our strategic and our financial criteria, particularly if you are in a competitive environment..

Okay. And I think I may know the answer to this, but just wanted to triple check. Is there – In your virtual card business now that you have some European providers there, is there any – I’m sure it’s not meaningful, but any material revenue exposure in Russia in terms of just travel related stuff that you are doing in that part of the world. .

Certainly nothing material in Russia on the virtual side..

All right. That’s what I thought. Thanks a lot guys..

And your next question comes from the line at Tim Willi with Wells Fargo..

I just had one question about product in the US. You mentioned I think a part of your M&A comments things around data etc., would be of interest to you.

Could you talk a little bit about the impact of product and additional revenue sources from your customers in the context of the 10% to 15% revenue growth you articulated as the framework for the company? Just get a gauge on how you think about that and its impact over time..

Yeah. I think of it in terms of organic growth and inorganic growth, but in terms of product in our first round data analytics. We’ve actually had great growth in our WEXSMART products offering. It’s still relatively small scale, but it’s been consistently a pretty big grower.

And one of the things that if you look at combined with the conversations that we have with the fleet around the data analytics we are already providing, it’s something that’s particularly with a larger fleet it’s an important part of the package that we are offering now and there’s an elevated level of interest of getting even more information.

And I would say more information that’s very pinpointed so they can then go assess their behavior. So when you think about data analytics we think about, it’s something that we’ve been doing for a long time. It’s something that we want to continue to invest in and making sure that we are being innovative in that space.

Telematics is a mechanism in order to capture more data. We are doing that now through a bunch of different partnerships, but we would think about data analytics and how to look at that holistically going forward. We are thinking both of those elements.

With just telematics explain what it ultimately -- the information we’re capturing back to the fleet and how do you think of each of those from a monetization standpoint. and so I wouldn’t say that there’s like a definitive number that’s included in that, in like growth goals.

But it’s certainly a factor that’s in our thoughts of how we are going to continue to grow the company..

Okay. I appreciate that.

The other thing I had just maybe going back to the Esso card and the net take rate, Steve I apologize, but in terms of profitability relative to the lower net take rate, is there any offset? Optically where should we think about that in the expenses? I just want to make sure we have the model sort of looking correct relative to changes around the service fee etc., that helps mitigates some of the discount rate compression that you talked about..

Yeah. Probably six months ago now we renegotiated with two of our major providers around the product and we have seen some benefits from those new contracts that we put in place. It’s also caused us to reexamine exactly which line items revenue streams and expense streams are hit.

So a minor part of the reason for the reduction of the interchange is just geography. We are just moving things around a little bit, but we saw the reductions in rates coming and we took some action around our cost structure is really what it comes down to. .

So we don’t have yet the, I guess the P&L for that division until the Q comes out, but would we see any kind of real step down in the profit margin of the other payments business that will be attributable to the net interchange reduction or is a lot of that essentially going to absorb the vendor renegotiations etc.?.

I think you’d see some impact. I still would go back to this as an extraordinary profitable business. It’s still well in to the 20% plus net income kind of profitability. You also get some benefit going forward with that MasterCard litigation settlement, that 6 basis points that will come back and help as well. .

And our next question comes from a line of Tien-tsin Huang with JPMorgan.

Just a couple of clarifications on the credit losses, I think Steve said it was broad based. Does that include that one in the longer haul stuff? Just wanted to clarify. .

Steven Elder:.

:.

Interesting. Okay, good. With Exxon Mobile the extension here, I think Sanjay asked it, but just how did that deal come about? Was it sourced after the European deal was done? And it looks like it’s just a few regions or countries within Asian PAC? Why those countries and the last things are the rumble here.

It seems like it’s a little bit more BPO work than usual. Is that right? I’m just curious about it in the margins implications. .

So a few things, I would say most of these contracts are things we’ve been talking about for a long time. So this has been a discussion we’ve had for quite a while. And I think in terms of timing Europe has been the first priority in order to get that one off the end. And so that’s why this is following.

In terms of the markets, the markets that they are in, we asked about the type of relationship here. We end up doing a whole host of services depending on what’s needed from basic just transaction processing and then we’ll add on to their offshore fully managed.

And so this is somewhere in between and it’s something that we’ve done in other markets before. It just may stand out a little bit because we’re being probably more descriptive than we are at times, about what we are doing for the customer. .

Okay. But it seems like there’s more to do here both from a scope of service as well as from a country standpoint.

Is that reasonable, do you think?.

The countries that we mentioned are the countries that we intend to roll out with them. And in terms of scope of services I would say that, again it’s in between. It’s just a transaction processing relationship which is what we would be doing as an example for BP within Australia and New Zealand and something that we fully manage.

So I would say it’s kind of in between those two. We are doing more than just transaction processing there up towards and some other things to us, but it’s not fully managed, fully funded. .

Okay, good. Last one for me.

A lot of good wins here in Q1as you talked about, but any comment -- where are you taking this share from? Any common theme there?.

The portfolio wins that we’ve had are really, I would say across the board from most of every competitor we could lift. On the global side and some of those wins that we are having, the excellent relationship is not a takeaway from somebody else. Those are things that were being done in-house on the virtual card side.

Often they are being converted from another portfolio but I wouldn’t say that there’s a trend in any one that you would take from and say specifically we are winning from here. It’s a rich winning across the board. .

And our next question will come from the line of Tom McCrohan with Janney..

Hi, everyone. Just three questions, the first just on the provision for the quarter.

Were there any net recoveries this quarter?.

Yeah. There were, Tom. They’ll be in the Q that should come out in the next day or so. I can’t remember the number off the top of my head but it was in the millions of dollars. Pretty normal the level of recoveries I guess I’d call it. .

Pretty normal, okay.

Is there any update you can provide on healthcare and the initiatives going on there?.

On the healthcare side, we are continuing to get traction in our virtual card payments, albeit forward than what we had originally anticipated, but consistent with what we had anticipated this year. And I think in part we’ve been pretty focused on these areas that we’ve talked about. So we’re seeing growth.

We’re seeing ramp and we still put that in the category of we’re looking at that in the longer term progression or working with a number of potential numbers in the healthcare industry to make sure that we’re creating solutions that we think are unique for their complex needs.

They’re facing rising costs and they’re looking for solutions that are increasing their level of efficiency. So we think that this is actually an area for us, but something again very long term in nature as we said earlier in the year..

And just trying to get a sense for the level and trajectory of investment spending the last couple of years. It all made sense to globalize OTA and to now make some investments as you expand into the European marketplace.

Should we expect the level of investment spending after the Esso acquisition, the extent of operations, do what you need to get that converted at out year 2015, ’16 the level of investment spending is going to trend or will it stay at the same level? Just trying to get a sense on how that’s going to trend over the next couple of years..

I guess Sam I’d say it’s going to depend -- it’d be very dependent on the opportunities we have in front of us and the contracts we’re able to sign and win. If we’re unable to do that then I think you’ll see investment spending drop off pretty significantly.

I would hope and assume that we’re going to be able to continue signing additional contracts with folks to provide newer services, even this prepay contract that we mentioned today and all those kinds of things. If we see the opportunity I think we will continue to take advantage.

If that means we need to make some upfront investments for a long term relationship with the customer, then I think we’ve shown and we will continue to do that..

And the other thing I’d add to that is the relationship that we’re putting together with Esso in Europe is a little unique. So in terms of size of investments, I would agree with everything Steve said that we’re -- we tend to look at things in terms of ROI and what’s the return on the investment that we’re going to get.

And so as long as we get an appropriate risk adjusted return, we’re not afraid to make any investments.

The relationship that we have with Esso in that investment is a little bit different in the respect that it’s a little bit like doing a transaction, but you get cost associated with it that you’re going to be accounting for differently than you would with a traditional acquisition..

Yeah, it makes sense and thank you Melissa for that color. Can I just end it with this question, Melissa, just long term growth targets. So tying into how you’re thinking about the investment spending to achieve your long term targets.

Can you achieve those targets just with the spending that you’ve done the last couple of years or does it assume Melissa, like some incremental spending? And if so, how should we be thinking about that? Thanks. .

Sure. I would say that our presumption is that targets include both organic and inorganic growth. So there would be capital that is contemplated in terms of pinning those growth rates.

And then I’d say in addition to that again if you take out the Esso European portfolio and the size of that transaction, we do consider ourselves to continue to invest in new products, invest in innovation. And so those are areas that we see our historical run rate that I would expect that you’d see continue.

And now we think of what we’re doing with Esso and European is an unusual type of transaction. .

Your next question will come from the line of David Togut with Evercore..

In your prepared remarks, you highlighted Mexico and Brazil as two countries targeted for expansion and you touched on the FastCred acquisition.

Could you give a little more context for your goals in Mexico and Brazil? In particular I’m thinking about Brazil which is a huge market for payments and where there are a couple of entrenched competitors already. .

Yeah. Within Brazil actually the FastCred transaction we liked it, albeit incredibly small in the grand scheme of things, but it locked us into about 5% of the road market just by that one transaction. So it was a nice contributor in terms of fairly minimal investment and getting something back out of that.

And in terms of the broader market in Brazil, we are continuing to work on getting our virtual card more broadly accepted there, meaning the ability to settle in local currencies which has been more working through the technology there.

We’ve gone through the regulatory approvals and all the appropriate approvals from MasterCard to now it’s just getting the technology in place. So we did see that as a growth market for us and it’s a market that we’re spending time in.

we’ve had success so far with the majority interest that we have within the company UNIK that we did a couple of years ago and that’s continuing to grow nicely. So it’s definitely we’re in the market. When I talked about Mexico, it was again the extension of our virtual card settlement capabilities within that marketplace.

And so that’s popping up as a market, not only just because of the pure size of it in the travel market, but also because of the interest with their existing customers of having us have that capability in that market. So hit on a couple of criteria, which is why we prioritize that..

Do you intend in Brazil to expand into a broader array of products like for example food cards or toll cards? I know that a number of companies like Fleet and Edenred are doing a lot of work in that area now..

Yeah. Our primary focus has been to take the product sense that we have and make sure that they’re optimized to the local region. And so that’s our primary. I think this would be more on fleet side what we’re doing on employee which at this point has more to do with payroll cards.

There’s a little bit of food card business there, but I’d say pretty small and as well as what we’re doing in the travel, the virtual card side. And so that’s been our primary focus, but as we learn more in each of those markets we make customizations that fit the market need..

And this does conclude the question-and-answer portion of today’s call. I’d like to turn the conference call over to Mickey Thomas for closing remarks..

That closes the call. I just want to thank everybody for their time and attention. Have a nice day. Thank you..

Once again we’d like to thank you for your participation on today’s conference call. You may now disconnect..