Q3 2019 Earnings Call
Greetings and welcome to the Fleetcor technologies third quarter 20, <unk> earnings Conference call.
A reminder, this call is being recorded.
I would like to turn to compress over to our host Mr., Jim Eggo Sadder head of Investor Relations for Fitcorp technologist. Thank you Sir you may begin.
Good afternoon, everyone and thank you for joining us today for third quarter 219 earnings call.
With me today around Clark, our chairman and CEO , Eric Dey, our CFO .
Following comments from both Rotten Eric the operator went out your opportunity to get into the Q4 Q1 <unk> session.
Only then that the Q open for questions.
Please note our earnings release ends up on that can be found under the Investor Relations section of our website at <unk> Dot com.
Throughout this call, we will be presenting non-GAAP financial information, including adjusted revenues adjusted net income and adjusted net income per diluted share.
This information is not calculated in accordance with GAAP and may be calculated differently than non-GAAP information and other companies.
Reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today's press release in on our website as previously described.
We also providing updated 2019 guidance, how about the GAAP and non-GAAP basis with reconciliations.
Now before we get our formal remarks, I need to remind everyone that part of our discussion today will include forward looking statements.
That's include forward looking statements about our guidance and outlook, new products and fee initiatives and expectations regarding business developments and acquisitions.
They are not guarantees of future performance and therefore, you should not put undue reliance upon them.
These results are subject to numerous risks and uncertainties, which could cause actual results to differ materially from what we expect.
Some of those risks I mentioned in today's press release on form 8-K, and on our annual report Form 10-K filed with the Securities and Exchange Commission.
Documents are available on our website and at Www Dot FCC that golf.
With that out of the way I would like to turn the call over to rock Clark, our chairman and CEO Rob.
Okay, Yeah, Jim Thanks, and good afternoon, everyone and thanks for joining our third quarter earnings call.
Upfront here I'll plan to cover three subjects first I'll provide my perspective on our Q3 results.
And outlook for Q4.
Second I'll share our continued progress on our beyond initiative and lastly, I'll update you on on the acquisition front.
Okay. So onto Q3, we reported Q3 revenue of 681 million up 10% and Threed scanning cash E. P. S up 16% on a constant macro a in constant scope basis, or what we call like for like basis.
A revenue was up 11% in Kashi P.S. up approximately 17% so right in line with our targets.
Overall organic revenue growth I was 11% in Q3 with fuel card organic revenue growth, finishing at a 10% in the quarter.
Our global fuel card revenue.
Represented about 42% of our overall consolidated Q3 revenue.
Our three non fuel lines of business performed quite well with lodging and toll revenue both up.
17%.
And corporate pay revenue up 24%.
The volume growth are quite strong at all three nonfuel lines of business enlarging our SMB room nights were up 10% in toll our active tags up 8%.
Corporate pay our virtual card spend up 14%.
So healthy volume growth in each business.
Our trends in the quarter I also quite good our new sales or new bookings.
Up 14% versus the prior year and once again, we signed up over 30000, new business accounts to our various programs that represents over 100 million of new annualized recurring revenue so a real demand for Iraq our offerings.
Same store sales a rebounded quite nicely I ended the plus column plus 1% a inside of that number various puts and takes our trucking business quite soft really everywhere here out here in the U.S. a in the UK.
Okay, and even in Brazil that was offset by strength in our Mexico, and Russia fuel card business.
And but then our corporate payments business.
Our client or business retention continued quite steady at 92%. So obviously pleased with that.
Our balance sheet.
Very good place a leverage finished below two times.
And we now have approximately 1.3 billion available on our revolver, so well position to allocate capital to buy backs and or acquisitions and given the some recent weakness with tech Ipos, maybe valuations will come down so.
In summary, our Q3, another clean a solid quarter organic revenue growth, 11% profit growth, 16% strong volume growth in our three non fuel businesses continued positive sales retention and same store sales drop.
Since.
And lastly, Q3 profits, finishing at the top of our guidance range.
Okay, Yeah, let me make a turn it to our outlook for Q4.
We're confirming overall organic revenue growth guidance of 9% to 11% for Q4 with fuel card organic revenue growth in the seven.
To 9% range, that's on a tougher comps.
We are raising full year 2019, Kashi P.S. guidance to 11 73 at the midpoint.
That reflects our five cent Q3 beat the guidance.
Just as a reminder, our initial 2019 full year guidance from February was 11 55.
The assumptions within our updated rest of your guidance versus last time, we spoke.
Slightly less favorable macro primarily.
Due to FX weakness in Brazil, but that'll be offset by higher acquisition contribution the t. idea, which closed on October onest.
Okay, Let me transition to an update of our beyond strategy initiatives.
Just as a reminder are beyond strategy idea is really a twofold first to offer our existing clients the opportunity to spend more with us.
By expanding the network in which they can make purchases.
And then second to attract.
New customers and or new customer segments to which our expanded network appeals.
So for example, offering urban or city drivers in Brazil are the option of using our RF I'd parking and fueling sites in the city.
So, let's let's start off with beyond fuel here in the U.S.
Another good quarter, we activated approximately 1500, new beyond fuel clients in Q3.
That's out of roughly 100000 existing U.S. fuel card clients that were targeting these companion car clients those the purchase both fuel and Nonfuel spend about.
50% more and generate 25% more revenue per account then pure U.S. fuel clients.
In addition, I, 20% of all new Q3 fuel card sales I'm in the U.S. or two beyond the fuel or two for clients you know those choosing the option to purchase.
Non fuel items in addition to fuel.
Moving on to beyond toll in Brazil.
Q3 continued a further adoption of our 5 million existing toll users there the fuel transactions grew nicely up 60% in Q3 versus the prior year, the Mcdonald's transactions Crazy reached 400.
60000.
In the quarter up sequentially from Q2, and we estimate on track now to reach 3 million next year in and 2020 , but maybe more importantly is the impact of beyond toll.
And attracting these new urban or city users. So the new urban sticker users added in Q3 was 58000, that's up from 3500 in Q1 and 18000 in Q2, so the idea of attracting some of the.
Potential 20 million.
Brazil City drivers to our beyond toll offering is starting to materialize.
Okay, and our corporate payments business historically, we've relied on the virtual card as our primary go to market offering, but now with the recent invoice pay acquisition.
We plan to broaden our go to market approach with that was for offerings. So one will be plastics offering.
Simple peak our programs as a as an initial entree.
End of the accounts payable space to virtual cards for clients, who want to digitize some.
But not all of their payables.
Third full ATP for clients, who want to transform their entire.
80 process and make 100% of their payables electronic and then lastly, our cross border payments for clients, who have some international payments, who want a simple and integrated way.
To make those payments from the same user interface in Q3 about 14% of our overall payables revenue. Excluding cross border was from full 80, so up from a fraction earlier in the year. So we expect this for prong.
Payables product line to dramatically strengthened our market position as we move into 2020.
So.
To us the beyond strategy initiative is now working.
On both fronts, it's increasing the spend in revenue that we get from existing fuel toll and virtual car clients and maybe more importantly, the beyond offer is attracting.
New types, new kinds of clients to our programs.
Again, as I said, 20% of all new U.S. fuel card client sold in Q3.
With the beyond offer and 20% of all new Brazil.
Tag users in Q3, two the beyond toll offer so.
Starting to become material.
Okay.
Last stop is acquisitions.
We're delighted to announce.
The acquisition of travel Alliance in early October .
This is one of the deals we mentioned on our last call that was close in and we're out we're pleased with completed that deal.
T a broadens our existing lodging business into the airlines segments cruise distressed passengers.
Even the airline personnel.
And because its global it as international hotel coverage and feed on the street capabilities.
This reflects our strategy of entering you know adjacent lodging segment. So in this case airlines, but theres, others like corporate apartments or corporate meetings.
They could expand the Tam of our hotel.
Line of business, we paid about 120 million for T.A.
Annualized revenue approximately 50 million with 20% EBIT da margins looking for T., a two to be accretive in 2020 in terms of pipeline still quite active currently we're working four or five tuck in opportunities in our.
Fuel.
Lodging and corporate pay spaces, and as I as I mentioned earlier.
Plenty of liquidity to pursue them.
So in closing we had a very good Q3 double digit revenue and profit growth and continued good trends.
Q4 outlook is maintained despite the less favorable FX in Brazil.
Our beyond that strategy gaining more traction.
We're capturing additional spend from existing clients and again extending.
The Tam and the new prospect base for our services, we continue to close.
Tuck in deals and have additional opportunities in the works so with that let me turn the call back over to Eric to provide some additional details on the quarter Eric.
Thank you Ron.
For the third quarter of 2019, we reported revenue of 681 million up 10% compared to 619.6 million in the third quarter of 2018.
GAAP net income increased 43% to 225.8 million from 157.7 million.
GAAP net income per diluted share increased 46% $2.49 from $1.71 cents in the third quarter of 2018.
As a reminder included in the third quarter of 2018 results.
The 23 million true up charge to income taxes related to the transition tax liability originally recorded at the end of 2017 in connection with U.S. tax reform.
Which reduced the GAAP net income and GAAP net income per diluted share in the quarter.
non-GAAP financial metrics, there will be discussing our adjusted net income and adjusted net income per diluted share.
For which the reconciliation to GAAP numbers is provided in exhibit one of our press release.
Adjusted net income for the third quarter of 2019 increased 14% to 280.6 million compared to 246.6 million in the same period last year.
Adjusted net income per diluted share increased 16%.
$3.10 compared with $2.68, an adjusted net income per diluted share in the third quarter of 2018.
Third quarter results reflect the negative year over year impact from the macroeconomic environment.
Approximately 7 million in revenue.
The macro impact was primarily due to lower foreign exchange rates when compared with the third quarter of 2018.
Which we believe negatively impacted revenue by approximately 7 million.
Due primarily to unfavorable foreign exchange rates in Brazil in the UK.
Fuel prices were also slightly worse year over year in the third quarter.
And although we cannot precisely calculate the impact of these changes we believe it negatively impacted revenue by approximately 3 million in the quarter.
This negative impact was partially offset by a 3 million favorable impact in fuel spreads.
Organic revenue growth after adjusting out the impact of the macroeconomic environment and the Chevron de conversion was approximately 11% for the third quarter of 2019.
And all major product categories performed well during the quarter.
Organic growth in our fuel card business was 10%, excluding the de conversion of the Chevron portfolio.
Driven by solid growth in most of our fuel card businesses.
And our beyond fuel initiative contributed about one to two points of growth during third quarter.
The corporate payments category continues to perform well and was up 24% organically during the quarter.
The growth in corporate payments was driven by both our cross border business, which grew in excess of 30% again in the quarter and our comdata corporate payments business, which grew in the upper teens.
Both our toll business and our logic business were up 17% organically.
So all in all another very good quarter for non fuel businesses, resulting in very strong organic growth performance in the quarter.
Same store sales also improved sequentially from a decrease of approximately 1% in.
In the second quarter, two an increase of approximately 1% in the third quarter.
You are a lot of puts and takes between our businesses around the world, but generally our Mexico in Russia fuel card businesses and our corporate payments businesses were strong in the quarter.
That was partially offset by our trucking business in the U.S. in the UK in Brazil that were a bit softer in the quarter.
Now moving down the income statement.
Total operating expenses were up 4% for the third quarter of 2019, the 351.9 million compared with 338.5 million in the third quarter of 2018.
The increase was primarily due to acquisitions and normal growth in our operations.
As a percentage of total revenues operating expenses were approximately 51.7% compared to 54.6% in the third quarter of 2018.
Included in operating expenses, our credit losses, a 15 million for the third quarter or five basis points.
First of 17 million or six basis points in the third quarter of 2018.
As expected we've begun to see the reduction in losses as a result of some new.
Okay and processes, we put in place earlier this year.
And we continue to expect more improvement as it fuel stations implement the card terminals through 2020.
Depreciation and amortization expense was flat at 67.3 million in the third quarter of 2019 compared to 67.3 million in the third quarter of 2018.
Interest expense increased 1% to 36.5 million compared to 36.1 million in the third quarter of 2018.
The increase in interest expense was due primarily to the impact of acquisitions closed in 2019, and higher LIBOR rates compared with last year.
Our effective tax rate for the third quarter of 2019 was 22.9% compared to 33.6% for the third quarter of 2018.
The 2018 third quarter tax rate included a 23 million true up of our provisional transition tax liability liability originally recorded at the end of 2017 in connection with U.S. tax reform.
If we exclude the impact of the transitional tax adjustment the tax rate for the third quarter of 2018 would have been 23.4%.
Now turning to the balance sheet.
We ended the quarter.
1.470 billion in total cash.
Approximately 412 million is restricted and consist primarily of customer deposits.
As of September Thirtyth 2019, we had about 3.5 billion outstanding on our term loans and revolver.
At approximately 1.285 billion of Undrawn availability.
We also had 992 million burden our securitization facility at the ended the quarter.
In the third quarter of 2019, we repurchased approximately 184000 shares of our stock for 55 million.
And we have 489 million remaining under our current authorization.
The board has authorized an additional 1 billion increase in the share buyback authorization and we now have nearly 1.5 billion in total capacity.
As of September Thirtyth 2019, our leverage ratio was 1.98 times EBITDA as calculated under our credit agreement.
Which is well below our covenant level of four times EBITDA.
Given our leverage ratio in current liquidity, we believe we have ample dry powder to pursue both our M&A objectives and share buybacks.
We intend to use our future excess cash flow to temporarily pay down the balance on a revolving credit facility and securitization facility.
Maintain liquidity for acquisitions and other corporate purposes.
And as a reminder, though our first use of liquidity will continue to be M&A.
Finally, we spent approximately 16.7 million on capex during the third quarter of 2019.
Now onto the update for 2019.
First we are raising our adjusted net income per diluted share guidance by five cents to $11 in 73 cents at the midpoint to reflect our third quarter results compared to our expectations.
As always we expect a few moving parts in our balance of the your guidance.
For the balance of the year, we expect the macro impact to be approximately 10 million worse than our prior guidance due primarily to lower fuel prices and unfavorable foreign exchange rates.
However, the impact of the travel Alliance acquisition will offset the impact of the unfavorable macro.
So taking in total these puts and takes net zero in terms of financial impact for the fourth quarter.
Please refer to our third quarter earnings call supplement for additional information regarding our guidance.
So what that out or the way our guidance is as follows.
Total revenues to be between 2.640 billion and 2.660 billion.
GAAP net income to be between 880 million and 900 million.
GAAP net income per diluted share to be between $9, an 80 cents and $9 a 90 cents.
Adjusted net income to be between 1.050 billion and 1.070 billion.
And adjusted net income per diluted share to be between $11.68 and $11.78.
And some of the assumptions we have made in preparing the guidance includes the following.
Weighted fuel prices equal to $2.73 per gallon average in the U.S. for the fourth quarter.
Market spreads well below the fourth quarter of 2018 average.
Foreign exchange rates equal to the month of September 2019 average.
Interest expense of 150 to 155 million for the full year.
Approximately 90.3 million fully diluted shares outstanding for 2019.
Adjusted tax rate of approximately 23% for the full year.
And no impact related to acquisitions or material new partnership agreements not already disclosed.
And with that said operator, we'll open it up for questions.
Thank you.
Well now begin the question and answer session. The joined a question Q You Me Press Star then one on your telephone keypad.
You will hear a tone and all this in your request.
If you're using his speakerphone, please pick up your handset before pressing any Keith.
To withdraw your question. Please press Star then too.
We kindly ask that you limit your question to one and one follow up.
Well the pause for a moment as call lets join the queue.
Our first question is from Sanjay Sakhrani with KBW. Please go ahead.
Thanks, and good results Ron Thanks for the comments on the M&A pipeline I'm just curious if there any larger size deals that you're interested in the market in the pipeline and then specifically the travel lines could you maybe just walk through the synergy pieces there.
What's larger Sanjay to you.
Not not.
Not a bolt on more transformative.
Yes, so I would say on the list in front of me we have two out of the part of the five things we're working on where the number would start with a with a b for the affiliate.
So I don't know if you call those large but there are more than takeaways.
And when we think about the probability of that type of deal happening sooner than later I mean is it the valuations are still quite high.
Yes. The valuations are I think we set a million times for us it's really the conviction around the Ford.
Numbers and so in those cases, we are we are working to see if we can get the conviction that forward numbers, where we can make return. So I'd say those deals that are bigger our earlier than some of the other things were looking at.
Okay, Great and then as far as the travel line.
Certain synergies that you might be able to extract could you just maybe talk through sort of timeframe and the thesis there and then just a quick question on gift the the week I know, it's a smaller part of the total but the weakness there in terms of revenues could you just talk about what's driving that thanks.
Yeah, Let me start was with T.K. So at the headline level I'd say that are early view is we'll double the profits of that business and 2020, and the I'd say that too.
He synergies our first the hotel.
That's right. So we share I think about 8000 hotels that we have in common and we have much larger volumes and a lot of those hotels and so we have better rates. So we'll we'll pick up.
Arbitrage basically on our rate versus T., a phase and then second I'd say the whole back office.
Right, we got a logic business, it's got a decent.
Back office around finance, HR, and I T and so.
We've got a bunch of synergies plan on the back office. So those those those two things will drive the doubling of profits next year.
Great.
And the way.
Yes.
Yes, yes. This is really just timing as you know the one of our lease favorite things about that business is.
You know the seasonality and the Bumpiness of orders you know that number pretty large clients and they make orders of significant size. So sometimes those orders come in in a quarter or get pushed a and so in this case fundamentally we're moving forward into Q4 some of the revenue we expected in Q3.
Thank you.
Our next question is from Traver Williams <unk> with Jefferies. Please go ahead.
Hey, Thanks, Good afternoon, one for me on the on fuel Ron appreciate the color on the Q3 uptake and I'll just ask most my questions on front. So first do you mind reminding us what percentage of 100000 U.S. fuel customers that you guys have marketed the program too and then.
Second was just curious more on the trends that you've seen from the Q1 in Q2 cohorts I know you guys. It said in the past you've seen an average initial uplift and spend around 40%.
I was just hoping you could give us some color around how that growth has trended in the quarters at fall. So thanks.
Good good question so of the 100000.
To credit worthy targets I think we're in the about two thirds call. It 65000 that we marketed to.
Kind of year to date, so we keep adding 10 or 20000 every quarter to target I think corrupt oh and attach rate in the six or 7000.
Clients now.
To the the the book in total is spending about 50% more that 7000 out of the hundred that that are.
Going beyond fuel and buying nonfuel spend about 50% more with us which turns into about 25% more revenue, but the hope the idea that were working now is whether the non fuel spend could be dramatically higher multiples or five or 10 times.
What the fuel spend is enough and really we limited it artificially going in by creating credit lines and credit limits proportionate to fuel rather than credit limits proportional to.
The clients ability to repay.
So we're actually in tests now with a with a subset of those 7000 accounts, increasing the credit line and seeing if we can expand the non fuel spend by again multiples of or five or 10 times. So the early view that as positive, but I'd say that could drive the 2020 success.
Really as much as that continues attach rate.
Great. Thanks very much.
Our next question is from Bob Napoli with William Blair. Please go ahead.
Thank you.
Nice quarter.
Well done the corporate payments business. Ron is you had a 30% revenue growth and your revenue per transaction was up quite a bit I think you're you lap the invoice pay acquisition first quarter is but what is the outlook for that what do you expect for that business I generally.
We think of the accounts payable piece to be a big market, but lower revenue per transaction. Your revenue per transaction was up 20% year over year. So just some thoughts on on that business on.
Maybe the mix of revenues cross border versus virtual card and.
The long term growth in house, a p. fits into that.
Yeah, Yeah, Bob I mean, as you know it's a it's a great line of business with a with a huge tam that invoice pay deal I believe that closed April 1st So we're not close yet to the lapping that and frankly I'm all the components all the all the offerings there.
Invoice pay with full ATP, our core virtual card business, our plastics business had particularly our cross border all of them are growing really well year to date 2019, I think again our plan.
For that business, although not basis that is to try to guide that stuff still into the mid teens, which again for us is really a function of like I say, all the time sales investments.
Relative to the base it was the base keeps getting bigger which it does.
You know we have the modulator buyer, our sales investment to keep that base growing 15%. So we kind of design or engineer our way to that if we thought we could invest a bit more and not have you know too. Many new people are too many new marketing programs, we might try to step it up some but.
We want to maintain quality right in terms of the Onboarding and the client service. So we're trying to say do it in a controlled way, but effectively grow the business in a controlled way.
One of the risk because a lot of investment going into that market and a lot of innovation, where where do you have.
Where where are you most are paying attention to the competitive front and where it where it could affect your business and.
Yeah, I think I've said this before we love the the breath now above our game you know there are people.
Right now at it Nichey right. There are some there's some pure play P. players is obviously some pure plastics players.
You know there's banks that are sub contracting you know virtual card processing. So the first thing I'd say as I liked the fact that we've got a broader solution set that most of the others that playing the game and then second I'd say it over and over again, it's a distribution game right. These are relatively new.
Services and work and require you know education and communication and so having a you know the salesforce that can go out and you know communicate in brief prospective accounts I think is still our main advantage and then third is.
Because we got out earlier than other people our merchant network.
And the quality of the data and the ability to fulfill payments a you know with a high degree of accuracy is is a huge part of the game. So those advantages I think you know bode well, it's not that they are on other people chasing but we really like how were you know we're set up.
Great. Thank you appreciate it.
Our next question is from Ryan carry with Bank of America. Please go ahead.
Hi, guys. Thanks for taking my question.
WEX call it a weaker demand environment in the quarter, particularly in the fleet business or while I know you call that some headwinds and U.S. trucking doesn't sound like the headwinds you're seeing are quite as meaningful. So first are you modeling any slowdown in demand in the fuel business as compared to your prior expectations and second is there anything you can provide on demand trends quarter to date.
Yeah, Hey, it's Ron So so you got it right I'd say in terms of our same store base. I think you know globally, we reported a plus one back into the plus call him and I did call out trucking saw a here the UK in Brazil I'd say.
Other than that the trends look relatively consistent for us a year to date through the first three quarters.
I think year to date, we had I can't remember zero, a minus want an a plus one so kind of flat on same store through the first three quarters I think last year, we did a bit better we were plus one or two but no I wouldn't say you know per your WEX, Tom at that we're seeing other than the trucking costs.
All out anything different than what we've seen.
Got it and then moving to the toll side, it's interesting to hear how beyond toll has driven the acceleration in new urban sticker users how is that growth impacted merchant and balance is there anything stopping you from meaningfully expanding the acceptance footprint and what does it take for the merchant themselves to kind of introduce.
The payment capability of of accepting a one of the total tax.
Yeah, I mean, frankly, you know I.
I think were a bit blown away by the pace I don't know if you picked up to the numbers for my opening remarks, but we you know we turned and basically went after these urban users who are not you know obviously heavy toll users right, but there are there are huge group into go from focusing on why.
On channel we started in the gas station channel trying to add these people out at 3500 step that up to 18000 am I saw the number for Q3 that we've gotten a 58000 and there are looking again, another 50000 quarter. This quarter I mean, the the distribution channels, we've opened up my.
More of our traditional store retail digital channels to now at a target. These urban people. So that's what's causing you know significant step up.
You're right. It's it is a chicken on an AG the bigger the network that we can offer urban people the more attractive our offer is right. If we had twice as many fueling station twice as many parking twice as many fast food that would be even more appealing, but I think we've obviously got enough. It's what the data tells me too attractive.
And so we're going to chicken and egg it we're going to we're going to keep trying to add urban users to generate revenue, we're going to keep expanding oh, each one of those three networks, which we have over the last couple of years and so I think again as you look into the mid term and that network gets more built out you know our returns will get better right we'll be space.
And less money or building out the network and obviously more money hopefully churn on the crank in terms of of gadgets and stuff I'd say the fueling our challenge is higher than the then the parking or the fast food.
The nature of having multiple lanes the vehicles moving in the way the equipment and stuff you know sets up as it is a bit more complex Nat gas station environment. So, it's not particularly difficult at stationary like the fast food, where the thing come through one line one lane the whole way so talk.
Current fuel and easier and now parking and fast food and clearly as I've said before they're additional I'm merchants in every one of those areas now interested in joining the program. So once we showed you know people are coming to shell than the other you know fuel guys want to be and once we've shown in mcdonalds.
His work and the other fast to people want to come and once we sign up the next biggest.
Parking operator, then we get calls for the next set of parking operators. Once we got the first rental car company and in line now the other rental car companies are calling so once you prove out that your client base.
We'll go to those merchants you attract yet you know more merchants. So it's a it's really I keep telling you got its a great model. The question is really just the pace at which we can do it.
Got it thank you for taking my question.
Our next question is from Ashish Sabadra with Deutsche Bank. Please go ahead.
Hi, Thanks, Congrats congrats on such a solid quarter.
A particularly if I'm going to execute the gift card growth was even stronger.
Just my question on the corporate even side. So I was wondering if you could share what the bookings growth was there and then thanks, Laura plus depending on that the how big the fully ideas I was just wondering if you could share some what's driving the growth in foot like how you're going to market in the phillippi solution spirit.
How what kind of traction you're seeing on cross sell as well as new wins and how you're using the daytona existing relationship the sudden wouldn't do that customer base. Thanks.
Yes, Ashish, it's Rob where you're looking for the sales and corporate days that was that what your question first looking yeah bookings going within corporate bioscience bookings growth instructing guys have that sorry.
Well, we're just taking a peak for [noise].
[noise] right into that offline I was just more interested in and Oh, you're driving you will see is and what learnings you've had that how we can see that this potential seen process acts and going forward.
Yeah, I mean, the the marketing I'd say is evolving right. So we had a number of separate pieces as I mentioned earlier, the core comdata business Ashish, we own five years ago push basically plastics peak cards and virtual card.
And obviously invoice Bad then 10 15 years building itself up as a full KP provider and obviously, Cambridge, we bought whatever two years ago has been up a cross border.
Specialist and so I'd say the main change we're going through is trying to integrate that package and that marketing message. So that we can take the power of having lots of ways to help a company a corporation make payments and make them aware of all the different programs that we've got they.
Want to start Super simple, we can compete with peak our guys. They want to a you know get rid of their paper, we can give them the virtual guar they want to transform so I'd say that the integration and the consolidation is the is the biggest change with that said, we still have field specialists.
Behind each one of those products. So we have people that are obviously super train and virtual card Super drain and full HP and Super drain in cross border and so what we're trying to figure out is that.
The account manager lead if you will in the marketing leads that provides the consolidated set of solutions and then still have specialists that can go deep in terms of presenting you know our particular solution. So that's what's going on now we're trying to make make a turner from effectively pedaling.
One program one service at a time too you know marketing something more comprehensive.
And I think when we do that if we do that the returns will be way better and bigger because you can generate more interest from a prospect right offering a broader set of solutions warm.
Yeah, I know that's helpful and maybe just Oh preliminary look at next year going into 2020, there's there's kind of slow actually didn't 9% to 11% organic growth sustainable just given that you'd be hitting some difficult comps going into next year and the same thing on fuel cards any thoughts.
How we think of articulate the.
Yes, I'd say, it's still early days for US for 2020 were in fact that had a couple a bunch of reviews today and yesterday. So I'd say, we're you know in the middle Ashish of our 2020 planning I guess, what I would say is that we go into this every year with the same aspirate.
Asian, which is to build plans across these businesses.
To get hit the goals that we set out what's your kind agenda in 13, and then use in our free cash flow and capital to produce profits to the 15%, 20% range and so what I tell you is that Eric and I are coming in trying to build plans. They can trade offs. The again hopefully stay on that same track.
It would be I think premature.
You know because we don't have to stop consolidated to really give you any other guidance I mean, obviously, there will be back and nine correct I agree Ashish. So I mean, we are we're kind of right in the middle of the process and we'll have obviously a lot more.
More to say, we get to that Q4 earnings call, but remember Ashish, which you know well the the beautiful thing.
About this business is the recurring model and so if you have a good 19 that helps you already have a good 20.
So just to re park that in your guys mine that the modeling that we do is based off of exit rates and if you look at our four quarters stacked up you'll see sequential acceleration obviously in revenues right in our business. So obviously, assuming our trends like.
Retention, which we quoted stay in line that that obviously crates built in growth as we roll into next year.
Yeah, that's great congrats once again on solid quarter. Thanks.
Thanks My friend.
Our next question is from John Davis with Raymond James. Please go ahead.
Hey, good afternoon, guys I just wanted to follow up a little bit on the same store sales commentary Ron I think you called out U.S. trucking softness.
Sounds like the good Guy this quarter was corporate payments any insights to macro trends just from that business and what you're seeing the businesses macro slightly better getting slightly worse any insights there would be helpful.
Yeah, I think the magic in the end, the and the payables or or corporate payments business is in the model again, it's not so much at the clients are.
Healthier or nothin and fuel cards. If you went into a client, let's say that had a thousand invoices and we went in and pay 20% of and we pay 200 of them.
First of all their number of invoices and expenses tend to grow every year and then second our share you have a 20% can grow so effectively the model. If you will is built to grow too.
Step up if you will quarter over quarter year over year. So so I'd say that's the difference if you will between the fuel card business, where they've got to go from 10 drivers you know to 11 their revenues have to go up after the size going to spend more you know on on drivers and stuff and so I think the model just lens.
Itself, if you will.
To a bit better same store sales and as the mix that business is growing a bit faster so as that becomes a bigger part of our mix. It obviously helps our overall you know consolidated same store number.
But again I think we feel comfortable were happy with plus one it's pretty balanced other than the than the trucking.
Call out and per earlier, we don't really see anything you know even through October here that fits that's any different than what we've experienced kind of year to date.
Okay and then just as that's helpful. Just a quick follow up.
On M&A landscape and specifically tire around corporate payments appreciate your comments about valuations, we'll see what the impact is there first thing that came to mind for me as maybe some of these high flying.
To be payments companies, maybe you're having a little bit reality check with what's going on the public markets. So are there any specific capabilities or geographies that you view as attractive or kind of topped the list as you look at M&A opportunities in corporate payments.
Yeah, I mean again the good news is when we kind of have a lot again of the of the products. So we now have a full late the even though there are other people to do that we have virtual card processing, even though there's a few people that do that we have a merchant networks. So we have a lot of the capabilities I'd say, we're always on the look out for either.
There are complimentary market segments or verticals. So for example, we've got a pretty big position in construction I think it's a quarter or a third of our core of our corporate payments business. So if there were another company that had you know a third and media or a third of the saying health gathered all thanks for health care.
Third and something else third in property management, some other kind of complimentary vertical we like that or be someone that has some different kind of selling capacity you know us found some way to craft digital selling for example, our as figure it out some kind of a new partner channel those would be I think.
The couple of things that we would look for again this the Corey fee businesses. Most attracted here I had all good all USA, because where the world slowest and getting off the paper as you know still kind of half paper. The rest of the plant. It seems to have done a a better job than us so I'd say that for now.
Now most of our focus is still on targets in that corporate pay segment that are that are U.S. based.
Okay, all right great. Thanks, guys.
Our next question is from Andrew Jeffrey with Suntrust. Please go ahead.
Hi, Thanks, that's any different on for Andrew just thinking about the macro impact on fuel and it does the headline warfarin pricing or is it miles driven what metrics should we be watching there.
After that Jay one more time is the headwind officially headwind coming more from pricing or from miles driven.
And I guess from from pricing I think its softness in the it just in the in the channel of tracking right that the loads. The the capacity the drivers just just what they're delivering and then second is what you're saying it's vehicle or fuel efficiency. So those would be the a couple of things, creating the the slowdown.
Okay, and then do you anticipate it's getting to a point in where it's going to start hitting on like a loss rates will go up and start hitting segment profitability.
[noise] loss rates in one in the trucking business yes.
Yeah, our loss rates are in that business or low single digit and I'd say at least half of whatever we lose there is a credit is us exiting you know some more challenge kind of trucking companies for credit. So I don't think so I mean, you know even though the thing has slow.
Load, it's clearly a necessary you know us way of up delivering and so I think it maybe it could continue to slow in the if you know the vehicle efficiencies probably at a point or two drag is your role fall, but no I don't we don't see anything on the numbers that suggest a spike in the and attrition.
Jenny also to add onto that from a loss perspective, I mean, we have lots of tools that we've implemented over the last couple of years that helps us to kind of managed credit losses and managed to credit worthiness of of the accounts and we tend to manage our losses through lots of different things, including payment terms. So think of Craig I think of account.
That would be probably less credit worthy would have more frequent payment terms and less days to pay because we what we want to manage the amount of our credit exposure through that so we're constantly looking at an evolving.
The way, we build those type of accounts.
Great. Thank you so much.
Our next question comes from Ramsey El Assal with Barclays. Please go ahead.
Hey, guys have gone its damian on for Ramsey I am just hoping to take a step back here on the on the B to B business, obviously visa mastercard or intensifying their focus on b to b payments on just want to get your take on how that changes the dynamic in your business, presumably better it's sort of a rising tide lifts all ships, but then maybe.
Then you could break out the growth rates of the various products or channels within corporate payments. You know for example, I'm assuming the partner channel is probably growing a little bit faster than that and the the direct given the fast growth of some of the a baby automation startups, but I just want to get your take on those couple of things.
Yeah, Dan M&A, it's Ron So I would say, yes, so the first point to have visa and Mastercard.
The big fans of this you know corporate payments or B to B space is great I mean, I think it helps.
Both PR in marketing and awareness and stuff. So I think it certainly softens the beaches as as we go out and there's obviously both super helpful to us both in research and and they're working on some products in some ways to hopefully make us more effective and so I'd say that that's all good.
In terms of the components, yes, I'd say that the reason that channel thing can grow faster as there's two things going on one is the channel partners that we already have a poor and more money in so take avid who's a better client of ours for a while you know, they're continuing to ramp up sales and marketing spending so they grow.
So and then B, we add new channel partners and so in the direct business, we but we mostly just do the second thing right. We add new clients that we don't have but in the channel business. For example, we brought on build dot com as a partner and they're they're beginning to ramp up so we.
It's it's a two for power of they invest more in grow and then we find new partners in the channel space.
Yeah, that's great and then just separately here on the lodging business.
You guys rolled out the new the new network of hotels for the quote unquote grey collar workers, maybe you could just give an update on that and maybe if it helps revenue per Tran and then I'll just slip into sort of perennial question on gifts if theres any update on a strategic alternatives there.
Yeah, that's an interesting one I think it's Ben.
Less impactful with the existing base than we thought so we when we first launched it I think we got to.
Two or 3%.
Lifted room nights as clients saw hey, there's a bunch more places I can go what I think it is is you know existing people kind of go existing accounts go to where they went there are harder to to the switch or change where they're going I think where maybe it's helping more is on the selling side attracting new ERP.
People and having you know a larger hotel coverage and network to attract people. So they feel like if they joined the program you know they got plenty of coverage. So we thought initially it was going out more with the base, but I think the answer is it's probably going to help more with ER with new accounts.
Our next question is from David Togut with Evercore. Please go ahead.
Oh, Thank you and good evening I apologize if if you called this out earlier, but did you give the growth rate on the Mastercard fuel card in the quarter.
I don't know did when there are I don't think we did David I think we've we've given just the totaling about all of it right in front of me there, but we could we can circle back to the weather.
Okay.
As a follow up where do you stand in terms of building out the cross border corporate pay capability connecting domestic corporate pay through the end voice pay acquisition.
To Cambridge that seems to be where a lot of the world of payments is focused and you've got some unique assets there.
Yeah, we again as I mentioned earlier work, we're doing that stitching, David now right, because it's funny that invoiced fey and even build dot com both fully be guys had reached out to Cambridge, even before we had done the Cambridge transaction trying to have capability for the whatever.
Over the four or 5% of cross border payments at those client bases have.
So they are already trying to integrate it even before we did so I'd say, it's still early days were trying to figure out how to speak to both clients. We have that are only on one of those products or prospects. It may be interested across all three or four of those products and yet keep some special.
As Asia, you know people that really know that particular area well. So I'd say, it's a it's a work in process, but I think it's a huge advantage for us right to have all the different ways to be able to how you know when ATP department versus going in with just one but I'd say think think next year will probably be enough in a better place.
To articulate our we're going to do it.
Got it just a quick final one for me any update on the growth at all star in the UK and and are you completely done with the shift to a chip cards there.
Yeah, we're done with the shifted the chip cards, I'd say that we're still pushing the beyond view like of all the markets. We're in a fuel cards I'd say the UK is the the most mature right we have the highest.
Market share as a company not only with all star, but the other product lines. We have there. So I think for that saying to continue to be a decent you know grower in the mid term we've got to get the beyond fuel odd numbers up so bad thing is improving I'd say not not going as well yet as the.
You asked as some subtleties, there, but I'd say, that's still our best idea for leveraging its a very big client base that we've got in the UK, so getting them to spend more with us seems like the easiest way to step up growth there.
Understood. Thank you very much but.
So to talk to you.
This concludes the question and answer session and today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.