Q1 2020 Earnings Call
Asia Pacific travel business with hardest hit first in mid February.
Followed by declines in European travel volume, which accelerated through March into April.
Our north American volumes follow the same path for the past two months and our similarly challenged.
We do not know as a consequence to the cobot 19, pandemics when purchase volumes will rebound, but we remain well positioned to recapture volume market recovery begins.
Our corporate payments spend volumes declined 5% in April reflecting a drop in business spending.
On the other hand are you a health business remains strong in his is expected to continue to perform well through the rest of the year.
While elective healthcare spending has slowed demand for our healthcare products remains strong and our pipeline continues to be solid.
In particular, we're seeing increased demand for October products.
In each area the business, we're working to ensure that we effectively managed for this period and are well positioned to quickly ramp up against once the Pandemics subsides.
Page seven illustrates some of our recent wins and renewals.
I'll touch quickly on the net an optimal acquisition.
When we began discussions last fall the strategic rationale for entity entering into this transaction was very strong.
However, we've concluded that depend on that in the conditions are rising in connection with it have had and continued to have a material adverse effect on the businesses of Ethernet and optimal.
It was a lot of hard work to get the deal find in this is obviously not the situation that any of US wanted are expected to be in back in January.
This is not a decision we have taken lightly.
Wexs never walked away from assigned deal.
But we have been analyzing the situation closely with a lot of work done by specialist advisors to reach this conclusion.
Because of this material adverse effects, we have advised Ethernet and awful that WEX is not required to close the transaction pursuant to the terms of the purchase agreements.
Finally, just a few words in conclusion before I turn the call over to Roberta.
As we look ahead, we remain committed to ensuring the resilience of our business in strengthening our balance sheet in liquidity position.
These priorities keep us focused on weathering the storm without sacrificing our long term growth potential.
I'm proud of the work we have done throughout the organization to adapt our business in order to better support our customers as they navigate these same challenging times with us.
I want to thank the entire WEX team for continuing to do what they do best.
Spring and best in class technology and solutions to the market first.
Providing unparalleled service.
And anticipating the emerging needs of our customers and partners.
The products, we offer are an integral to our customer operations and we expect the volumes will return as the economy improves.
While it's difficult to gauge the magnitude in the duration of cobot 19, pandemics the resilience in diversification of the WEX portfolio.
Coupled with market leading positions in each of our segments and our strong balance sheet positions as well to navigate through these challenging time.
With that I'll turn it over to Roberta.
Thank you Melissa and good morning, everyone.
While we continue to maneuver a difficult environment in the first quarter, we delivered solid results by continuing to execute on the strategic pillars I'm building up on 2019 Tailwinds.
Revenue grew 13%.
About 8% came from acquisitions.
5% from organic growth.
The net impact from fuel prices on the fixed rate was negligible.
No.
Take a look at the results on slide number nine.
For the first quarter total revenue was four comedy from 31.7 million, a 13% increase year over year.
GAAP net income attributable to shareholders was a loss of 16.3 million.
Non-GAAP adjusted net income was 79.7 million or $1.81 cents critical load the chair.
Slide seven shows the overall revenue performance by segment.
Breaking down the revenue growth health on employee benefits solutions grew 45%.
The flip segment crept, a 7% growth rates.
And finally trumbo incorporate solutions, both circa 3% increase.
Moving to segment results, starting with fleet on slide number 11.
Fleet solutions.
Chief who parameters from 49.8 million in revenue.
7% growth versus prior year.
Driven by an increase in payment processing revenue of 6%.
Finally fee revenue of 21%.
Segment results were boosted by new customer wins on renewals.
Fleet volumes remained largely on track through mid to late February.
Which following the impact of Gobi 19 started to accelerate.
Shipping activity slowdown followed by this figure for Monovisc in all of the company's where do we kind of operations.
Despite these headwinds payment processing drums auctions went up 5% when compared to that but our year to year.
We've not a fair Mehdi complete up 5%.
Over the road up 3%.
We also cut some benefits from the Goldfields got acquisition, which was completed in July 2019.
The net payment processing rate was up 80 basis points from Q1, 2000, and Nitin 235 basis points.
The year over year increase was due primarily to the acquisition just mentioned I'm positive spreads in Europe.
It was offset by your other minor changes.
The net late fee rate increased this quarter to 56 basis points in comparison to the 44 basis points in Q1 2019.
The increase was due to the addition of the show on Chevron portfolio.
The mix of new business wins.
And as more rate increases implemented a year ago.
The EBITDA for domestic fuel price in Q1, 2020 was $2 on 57 cents.
This was $2 some 67 cents in Q1 2019.
Although fuel prices in the US what was 10 cents lower than last year.
We are critical is products in Europe.
Which largely neutralized the U.S. impacts.
Turning to travel incorporate solutions on his line number 12.
Total segment revenue for the quarter increased 3% to 84.4 million.
Boosted by the us quarter prepayment business with scalp east they impact that go with night being Scott on the travel industry.
Corporate repayments grew revenue 18%.
Driven by the partner channel customers.
Compared to last year travel revenue was down 8%.
Purchase volume issued by wax was down 4% to 8 billion.
Similar to fleet volumes throughout all purchase volume remained in line with expectations through mid to late February.
Finally in this segment the net interchange rate was 87 basis points.
Which was up 16 basis points from Q1 last year.
The increase was primarily due to the growth in quarter four repayments.
On a contract change with a sizable troubled customer that was made about a year ago.
Turning onto a slide 13, the health and employee benefits solutions segment finished the quarter strong.
With revenue up an impressive 45% compared to last year.
In the us Kelk business revenue grew 48%.
As Melissa mentioned, we are the time review key partners.
Also we saw a large benefit from the Dbi acquisition completed in March 2019.
Well continue to capitalize on the momentum of the HSC markets.
Including more than 6 million HSH accounts on the WEX health cloud.
From a volume point of view healthcare spending was impacted by koby nitin restrictions in the second crop of much.
We expect to see this to see a spend and recover in the second half of the year as restrictions are lifted.
Finally in this segment the number of SaaS accounts was up 14% relative to 2000 native.
Now, let's move to expenses on his line number 40.
For the quarter total cost of service expense was our committed on 85.8 million.
From our counted them 53.2 million in Q1 last year.
Total SGN eight depreciation and amortization expenses were 171 million.
Which is up 11.3 million versus 2019.
Breaking down the line items within these categories.
Processing cost increased 13.8 million, primarily due to the acquisition completed in 2019.
Service fees decreased slightly.
Probably loss or not consolidated basis was 34 million.
Beds to 17.1 million in Q1 last year.
This amount includes approximately 9 million for via an auction off season.
In the flip segment revenue loss was 23.6 basis points of spend volume.
Compared to 15.7 basis points in Q1 2019.
As expected we continue to see some weakness in there over the road business.
Additionally, we book, our 3 million expense for the adoption of Suzo, which impacted the rate approximately three basis points.
In the travel segment currency loss was 13 million.
Which is significantly higher than any past quarters.
This reflects the state of the travel industry and includes approximately 6 million due to the adoption of seasonal.
At the end of the quarter account receivable balance declined by more than 500 million when compared to the end of prior year.
This decrease Skus continued into the second quarter.
As specifically in travel.
Our has gone down from more than 500 million, our year end to less than 40 million as of today.
Operating in that as expense was 8.4 million.
Down about 1.2 million from the prior year quarter.
This is mainly due to lower interest rates on the deposit balances.
Gionee expenses decreased 2.4 million versus the prior year quarter, mostly due to reductions in M&A.
Restructuring and other cost.
Lastly, the sales and marketing line increased 4.7 million.
Driven by partner rebate, primarily in the core prepayment business.
Let's discuss access on his line number 15.
On a GAAP basis.
The effective tax rate was 31.7% compared to 26.4% for the first quarter of 2019.
On our NII basis, the tax rate was 25.6% for the quarter.
25.4% for Q1 last year.
Changing gears now to a slide number 16.
Let's look at the metrics on our balance sheet.
Even in this environment. It is very healthy we have robust levels of liquidity.
We ended the quarter, we they commented on 61 million in cash.
Up from eight commented on 11 million compared to the cash position at the end of Q4 2019.
From a liquidity perspective, the corporate cash balance was over 500 million.
These volumes increased more than 125 million from Q4 2019.
Thanks to exceptionally strong cash flow during the quarter.
As Melissa just reinforced we cup sharpened our capital allocation priorities and implemented tighter working capital plans.
Additionally, there is 769 million of available borrowings under the company's credit agreement.
This gives us immediate access to more than 1.2 billion in capital.
We believe that we have adequate funds to meet the operating investing on financial needs in the current environment.
At the end of the first quarter, we got a total balance of 2.8 billion on the revolving line of credit.
Term loans and notes.
The leverage ratio as defined in the credit agreement stands at approximately 3.5 times.
Which is unchanged from year end.
On the financing that site, we have approximately two thirds at essentially fixed rates.
During April we extended 935 million of the interest rate swaps for another year.
This reduced the fixed rates by approximately 40 basis points.
To conclude this section.
We continue to evaluate the market to determine if there are opportunities to enhance our balance sheet, our liquidity position even more.
We are working closely with our bank group to provide us with additional flexibility in the future.
And we will provide an update on actions taken when appropriate.
To close our because while we experienced a tough macro environment in the first quarter, we were able to deliver both revenue and earnings growth.
We cannot assess the financial impact of Koby nitin due to the speed at which the situation is evolving.
However, we have provided some metrics on our April volumes on page number six of the presentation.
To show you the trends we are seen in the market right now.
At this time, we have not been opposition to provide guidance for the second quarter and we are withdrawing our previously announced guidance for full year Twentytwenty.
We will provide updated guidance figures as soon as reliable estimate can be determined.
And now we will open the line for questions.
As a reminder to ask a question you will need to press star one on your telephone keypad.
To address your question press the pound Keith please standby, while the two filed with you in Iran.
Thank you first question.
From the line.
Great. Thanks.
Your line is now open.
Good morning, and I'm glad you guys are doing well.
Melissa can you.
Operate a little bit on your decision to exercise the Mac on Sina opto your level of confidence that.
On the move and that will sustain itself and then maybe just outlined the process going forward, because I know in that an optimal or out suggesting.
Yes, they don't believe it's appropriate thanks.
Yes, sure so good morning.
Yes, and I now have a lot more to say about that I'd say is that we we.
We determined that an Emmy exists and we went through obviously a whole lot of work to get to that point. We wanted the absolutely sure of our position before we take took the steps of notification.
So we've been scrutinizing matters, very clearly clean closely with our advisors and with the board.
And.
We reached a conclusion based on our.
Contracts in place and.
In terms of next steps, we provided notification on to see seller onto the nation that we're fulfilling our obligations.
And and as it typically go through like a litigation process, how long does that process take.
Our obligation right now its nature that we were providing notification around the Amy.
And so we fulfilled our part of that obligation and in terms of next steps I think that that is yet to play out and I don't really want to talk about hypotheticals right now.
Okay great.
I've got a follow up question on travel incorporated Robert on maybe.
You can help us think about the go forward here.
And I know you guys aren't providing guidance, but when I think about that net interest rate.
Actually went up nicely or has held in quite strong and then we think about a mix you mentioned 50 50 travel corporate in the first quarter, but when we think about the.
Update you provided on that slide stake.
Should we a portion of those growth rates to the previous.
Percentage contribution from each of those could you just help us think about what the trend would be if you looked at it based on the April trends. Thanks.
Good morning, I think you ask the several questions in one.
Let me give you a bit of the breakdown on the first on the volume for the quarter.
And then we can go through the interchange rate on encore fully answered everything that do you wanted to do that so in the quarter the portfolio payments.
Business was over $2 billion spent so on the total.
The total volume for the quarter was a billion. So we are talking around.
Approximately 25% of the volume.
Finally, he grew double digits, while the travel volume was down.
We cannot predict what is going to happen in a in the future Thats why we through our guidance, but and we want to not to provide our Melissa mentioned that we wanted to provide visibility in through the last six weeks.
You know of it.
On the year just to give you some color on what are the things are trending on the much insight Sanjay if you recall last year.
We make an amendment to one of the deal Da's contract and this is why the rate has been increasing since our Q1 2019, and obviously as we move into Q1.
If the mix between travel on core body payments is changing into the quarter prepayments side, obviously the rate of at all is going to also increase.
But again going forward, what do we cannot believe nor will the rate is going to be.
Okay. Thank you.
Andrew next question comes from the line.
Ramsey El Assal from Barclays. Your line is now in Spain.
Hi, Good morning. This is Dan on for Mt. Thanks for taking my question I am.
I wanted to ask maybe about the end market and that we solution segment. Maybe you can just breakdown by vertical I know you called out construction being the only vertical that was positive in the quarter, but can you just discussed any of the other end markets are for your customers not Rixubis solutions segment, and just kind of what you're seeing there.
Yes sure.
It is on the we saw a lot of.
Disparity based on geographic regions and I'm talking specifically right now about our North American fleet volume.
So when we saw.
Changes happened, where volume was starting to.
Move down the east and West Coast, which we shutdown sooner.
Had a deeper impact than the Midwest in the Gulf, which were.
Less rent I know all being impacted but.
East West coast being much more heavily impacted with that.
Gulf Coast Midwest Lesser so that was also as he got into geographies, Washington in New York for harder hit, Texas in Georgia were less though.
And when you get into industries that actually it wasn't as much variation based on industry as you might it stuck with the exception that construction.
Had positive trends.
And if you combine those two things together if you look at the construction in.
Like the Gulf Coast region looked really strong.
And construction in east West Coast still looks better than other industries.
But when you started looking across the other areas the business that they were you down.
Pretty comparable.
Okay, that's helpful and I think.
Maybe related to that and also including the travel business. Some shifting now to the credit losses, obviously, a lot of the increase in the quarter related to see saw but maybe you can talk about any sort of stress that you may be seeing in your book either on the feed or on the travel side in any sort of expectation that you have for increased sacrifice credit losses.
For the rest of year.
Hi, Let me, let me give you some more color on on the adoption of season on going on there on the quarter trend on the on the credit loss. So seasonal cutter two impacts on one can we change is likely the methodology on how we calculate the regular quarterly losses.
On that the impact was almost was immaterial I would say.
Then on the other side due to the C. So on the qualitative reserve when you look on the macroeconomic indicators as I said on the call. We took an additional 9 million could any loss that was broken down between 3 million in North American fleet, and 6 million in the travel business.
I also want to shed we view correlated to that you know the movement of our accounts receivable balance so from year end. The receivable balance has gone down almost 500 million at the end of the quarter, but if we look at the end of April number is another 400 plus million down so that all.
From December 2019 to the end of April we have reviews, the accomplishable balanced almost $1 billion.
So obviously, we feel good about that on the credit loss.
From a trail off point of view, which have been able toward with our customers are managed another challenging times, especially on the travel on the travel industry. If you got to be modest specific in a in the fleet a segment.
The credit losses were adjusted slightly failure, the last year in Q1, excluding csos.
North American fleet was almost flat to Q4 19 onto Q1 night in.
And on the other side what over the road business was slightly higher continue that trend we call last year in Q3 in Q4.
Okay.
And your next question comes from the line even while.
Your line is now open.
Thank you good morning, and I Hope you guys are all second well.
Thanks for providing where you could around the United Alpha deal, but maybe just a follow up towards the sandy was sort of getting out around the.
The segments.
It seems like if you're approaching this from a material adverse side of things.
That it would seem tabs is similar impact on your legacy travel business. So I guess I was wondering if you could talk about how you're thinking about the strategy for growth in the legacy travel business and has the shifted your thinking around where you'd like to grow and diversify long term.
Yes, sure so our legacy travel business, we showed you volume trends.
The last several weeks so you get a pretty good snapshot of what's happening in terms of spend and in terms of our customer base and we continue to work with our customers when you there to support them.
And.
Make sure that we are positioned for when you see rebound in that market. We do think that that market will be slower to move back compared to if you look across wax newer financial service technology provider, we're doing business in many different verticals.
Instead, you travel compared to anything else we're doing.
Clearly in having a longer tail, we think in terms of recovery.
Doesnt change on it.
I would like if you're asking I traveled and we said the market over a long term basis, it's something that exactly yes, where we're continuing to be.
Interest in and we'll make sure that were there supporting our customers in meeting their needs as they get through this challenging times.
Okay. Thanks, and then maybe just switching gears towards the cost cutting initiatives and the Capex tail down are you guys mentioned.
If we were to take the deal off the side just put it over here and say okay. Thank you Bob the cost cutting or would you say that that is going to get you to a place where you have a significant level of extra comfort around your standalone leverage or I.
Thank you guys alluded to potentially more actions to come is that sort of you're waiting it as every step as you go can you maybe talking about you're thinking about that.
Hi, So you ask seminal fix on one so on the cost actions that we have taken Melissa cuss explain node the rationale on what we cup non.
Easily our business is expected to and you saw the numbers for April. So obviously, we are managing our money already know these challenging environment.
What I would say to you is it you know if you look at our leverage position today. So we closed the year.
19 at 3.5 times, we are unchanged.
In Q1 this year.
I think I want to make sure that you know you get one thing that is very important compared to what we were in the past.
Especially you know when we need the FX transaction on higher leverage ratio and that is that they would have more than 500 million of portfolio cash on Khan.
On the and obviously that gives us a lot of comfort on we have a solid position not from a liquidity point of view on additionally, with up to 750 million taxes on the revolver.
So when you look at delivered operational though is 3.5 times.
Different than we have the company cash on kind of over half a billion. We could use we cannot fully utilize a 125 million.
That company cash so was the our gross debt.
And to give you an idea for every 125 million of corporate cash.
It's approximately a quarter of a term loan limit at ratio.
So when you when you put in perspective, the caution, though we have them kind I mean, our limited ratio from a net basis point of view is below three times today. So we feel good where do we are and as Melissa said to the cost containment is to protect the short term, but also to make sure that when the seems come back we are ready.
To grow again on to serve our customers.
I guess add to that that would I mentioned to ever further actions. We were internationally, we were going through very methodically understanding the rule changes that are happening on a global basis and.
Being thoughtful about those changes as we were making changes within our cost structure and so that's just been a process from.
But it's not something that than we had made a decision what we're going to do and we're actually just going through methodically and making those changes.
Throughout the world.
That's very much appreciate it thanks for your color there.
Andrew next question comes from delight.
Sad and hopefully your line is now okay.
Thank you good morning, and could you talk to you guys.
Quick question on the the Mastercard deal.
That you guys did.
And I was just trying to understand.
Potential benefits why you made that change I mean mastercard.
They are rebates and incentives line is going up quite a bit and I'm wondering if you guys are benefiting from that as part of this deal. So they just generally strategically why did you ship so much more of your business towards Mastercard and what benefit you get.
So it wasn't make sure I clarify said with Mastercard, what we did extend our contract with them and.
And I'd say it takes advantage.
Size that we are relative to Mastercard you over a number of years, we've grown our business in portfolio with them and so it's just representative the physician that we're in now.
It was had a longstanding relationship with them.
We continue to have.
Also a contract in place with visa.
And so.
This may mention advantage is the idea that we're extending the relationship with Mastercard. We we've had a really good relationship for them and make sure that we continue to build upon that.
And and it was timely for that to happen then under the Sun life that we've had in evolutions that we've had in growth.
Okay.
And the Hey follow up then on just on page six.
Of the volume trends.
Yes, the looking at the a gallon volume.
Is it.
First of all are you seeing any significant differences.
Our in markets that ours.
Areas that are in the country that are starting to open up a little bit and would it be fair to assume that the transaction trends are right in line.
With those gallon volume growth trends.
So if you look at the graph on page snacks, you can see that we are having on is what appears to be a little bit of.
The increase in volume that's coming through that primarily from North American fleet business.
A little bit internationally to little bit not or is it kind of seem to have bottomed out.
I think if you were not to mention today, you're starting to see the benefit in some of the senior living on the block down, but it's it's a pretty small lift that we've seen over the last few weeks.
You can tell if you look at or data again that the the states that have been locked down had been harder hit.
There is in an argument around the back you're going to see some of that getting a little bit better anything new that and these have locked down.
Thanks, Let LNG example, yeah like New York Martin can I said before you know there they were down.
Over 30%.
Okay.
Corporate payments business declined payment volume declined 5% or as a run rate of decline, 5% rethink you're saying is just what was the shift in the trend on the corporate payments volume and are you seeing any benefits from.
Customers on the top of the following adding new customers because of.
No the need to electronified fee to be payments.
The today, we actually get it it's not really good point and we have seen an increase in implementation from our partners to where we're seeing more demand we're pushing through.
In the pipeline for our 80 products, particularly through our partners.
Nick let we also saw in April was pretty in a dramatic shift and then from a business spend perspective.
From the first quarter into what we saw in April.
So we are feeling good about the pipeline, we're feeling good about being at the prospects, we haven't what we're seeing coming through the front end the funnel.
And in.
Aware, the fact that we saw a difference in business spend at least in monthly.
Okay, and how much of a shift in business spend if you could.
In April well, let you can see that were up 18% in the first quarter and down 5% and April thanks, Thats My pretty dramatic can yeah.
Okay.
But the other thing I would say that you know when you look Jeff them up but people are month.
No you put up a last year, we implement somebody as Melissa we're saying we are doing a lot of implementation. So you could stuff you know one customer data to customers that are more volume last year and then now they are on our run rate basis. So.
It's I wouldn't call. It the you know like that and what do we went from 18 to minus five.
But obviously, we wanted to be that I'm spot a no with all the information that we have as of today.
We'll make sure you got the best feature possible.
Thank you appreciate it.
Andrew next question Com underlying.
Diving parlor.
Your line is now one thing.
All right, Hey, thanks, guys glad to hear doing okay.
You know you can give us a little bit more color on the volume trends that you're seeing and we today versus perhaps would you would see in kind of an or more clinical and normally session, but what's really discretionary versus nondiscretionary in your business and Melissa any any thoughts on the survival rate you would expect to see through through some.
Of your client base, maybe thinking about smbs versus not and the types of businesses you're servicing.
I would be helpful.
Yes, let me talk a little bit about the types of businesses that sits in each of these portfolios. So on and I think that might give a little bit of color now on the over the road marketplace, we talked about.
Being down less there is been obviously a need to make sure that products for getting moved across the country and so we continue to see some stability there even though they've been in a period of weakness in particularly in some version of Reis retail transport.
And an eminent you'd look at the North American fleet business those type of customers.
It is filled with with people that are you continuing to work and in this environment, which I have first responders.
With that.
Yes, we've got state governance, we have in their ambulance drivers and and at least officers in the Kenny hit the spectrum and you also have construction trade across many different trades lots of small businesses that fit in there and as well as.
Not really large companies that just happened have vehicles that they're moving is it bride product of their business and so we've seen.
It is down on in more than what we saw annually.
It is.
Really being driven based on industry.
Individual state rules.
In the combination of those doctors or what were seeing with volume trends if you're in the oil and gas is an example, you guys see that that volume is down in or similar retail industry that they're down.
Construction seller continued to be up and then it it really depends on the Geo.
We're seeing some of the state lift those restrictions, we think you're going to see at least a little bit of benefit of that.
But I think that you know that's for us.
Still unknown, how how much in how quickly.
This is not a and then internationally as we believe that what's happening in Europe, because Europe has been the hardest hit in remedy international part is only a little over 10% of the international part of fleet is only just a little bit over 10% of total revenue.
And that's been hardest hit.
In the fleet segment, we think because.
Sure.
Orders across our closed no across a lot of Europe has the ability to move from region to region has an even more restrictive in Europe than it has been in the United States.
Australia, less though not trails look a little bit more what we're seeing in terms in the last.
All right, but I mean in a typical recession, you would spread what type of transaction for until maybe double fleet side versus.
So these kinds of lockdown loans.
So in in the auto nine recession, we saw.
Almost like attack where people.
Stopped.
Traveling quite as much because it just didn't have as many young into deliveries to make or service calls to make.
It really is down around 10% and then.
From that 0.4 decide actually for the steady improvement because almost like a restarted the base.
Okay, all right Thats all.
Ordinary decline.
Please.
No totaling just.
Just bigger picture question is what we think about devaluation.
Longer term.
We're all trying to figure out ruffling who's coming out of the pandemic with this would changes in the model. So.
The b to B in the corporate side clearly benefited to some degree as I think businesses, realizing the more more electronic payments.
What about your what do you think about the other stuff.
So you probably have some of that element, where there's more need.
But maybe even a must meet what are your thoughts across the business on structural changes. Thanks, yeah, Yeah, I'm going to for travel aside for a minute, but if you talk about.
The rest of the verticals that we service.
Days that we had a little bit of an adjustment of how to sell into the marketplace virtually.
Really small we've seen a continuation of interest and the products and in some cases, we've got larger pipelines and we had a year ago sets. It is near the products to resonate in the marketplace that is the needs that we filled continued to be there.
And what we're leaning into our is we see changes in needs of customers like and I talked about the fact driver dashes is being much more utilized you that they have product we have in that marketplace is something we can put our weight behind.
So I don't expect to see large shifts.
In the base of what we're doing in our fleet.
Business.
To your point B to B, we're seeing actually a pickup in interest.
And when you get into our healthcare business same thing, we're seeing you would lift in demand.
Right now a lot of interest and whereas our.
Prospects and customers are employers are looking for ways that they can help support employees.
On the interest in T. lip products that we have it also cobra related products, we have the marketplace. So.
Leisure travelers and we do expect that they're going to see behavior changes in that marketplace.
Okay.
Thanks, guys.
And the next question comes from the like can't seem Wong Your line is now open.
Oh, yes, thanks, I was asking a lot of good questions asked already the.
Travel and the fleet business and maybe corporate brands as well can you help us think about incremental or decremental margins and how much of the change in revenue year flows through to the bottom line I know, there's some offsets with rebates and some other variable cost the considers though.
Anything interesting there.
So did this it's it over to let me give you some color on wood with tough you know screening in the quarter from you know that if you split the travel EMCORE prepayment business.
Well segment, who.
Our travel business, obviously the margin profile is much failure.
Done done the corporate repayment, one, especially as we are growing on the quarterly payments through that bottom of China and that's because if you recall when we adopt a couple of years ago. The new revenue recognition has done that you report all their good on revenue and net revenue and then you have a primary rebate.
Commission on the sales and marketing so if it you know if I put that to business aside.
If the business of course prepayments, especially through the button, if China continues to grow faster than the rest of that but Alan on the other pieces of the portfolio payments.
Your margin, although incrementally dollar wise is going to continue improving from a from a marketing point of view you may see a reduction however on the same time as you know we have been doing a lot of a different things to improve our cost base I.
And obviously when you look at the bus two years, even though we have been growing significantly in the corporate payments segment or business, including the button a channel the marketing of the of the overall segment has been improving.
Got you that's good to know and then on the credit losses as my follow up lowered their and was asking about comparing it to the.
Financial crisis, what's indicators should we be tracking here.
But more on the fleet side, we're whereby we might see a little bit of a step up in your reserve revisions here should know timing wise, how when we might start to see some some bankruptcies or do it with these picked up.
So let me give you some color on on on the quarter on the credit losses and then.
We can we can go from there and give you also as well what company in the 2008 2009, what is Steve always reminds me, what what's cup and not so I will start with a lot there in 2008 2009.
The pickup the could any losses in the fleet segment was in Q4 2008, what we've got 45 basis points of it clearly lawsuits, but for the full year well now, but as we went to 25 basis points.
The business is different than it was obviously years ago.
We have good own on their small fleets.
Business as you know we shall we chevron another wins, but at this time on the same time, we also incorporate that DFS from on over the road point of view. So the business is is fundamentally different.
But at least I gave you know what's happening at the time, if you look at whats out of the deferred any indicate we're stuck with three that.
I could any loss increased a bankruptcy obviously we model.
I had a James if you look at the end of the quarter on into April.
Although we talk through C. so.
Our qualitative reserve for.
3 million on the fleet site, we have not seen.
A significant deterioration on our agent.
And even another indicator is the late fees. So in the quarterly fees wet US you know we were expecting any line with the last just below.
What do we stuck in the last two quarters. So for now we have not seen any other indicate thought on and we feel that the you'll note that the position we've got at the end of the quarter Thirtys. These Hollywood.
That's great.
Thank you.
And we are running at this time.
There'll be no more questions, Andrew ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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