Good morning. My name is Lance, and I will your conference operator today. At this time, I would like to welcome everyone to the WEX Second Quarter 2019 Earnings Call. [Operator Instructions] Thank you. Mr. Steve Elder, Senior Vice President of Global Investor Relations, you may begin your conference..

Thank you, operator, and good morning, everyone. With me today is Melissa Smith, our President and CEO and our CFO, Roberto Simon. The press release we issued earlier this morning and a slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our website at wexinc.com.

A copy of the release and the slide deck have also been included in the 8-Ks we submitted to the SEC. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income attributable to shareholders, which we refer to as adjusted net income, or ANI, and adjusted operating income margin during our call.

Adjustments for this year’s second quarter to arrive at these metrics include unrealized losses on financial instruments, net foreign currency re-measurement gains and losses, acquisition-related intangible amortization, other acquisition and divestiture-related items, stock-based compensation, other costs, debt restructuring and debt issuance cost amortization, ANI adjustments attributable to non-controlling interests and certain tax-related items as applicable.

The company provides revenue guidance on a GAAP basis and earnings guidance on a non-GAAP basis as we are unable to predict certain elements that are included in reported GAAP results.

Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income to GAAP net income attributable to shareholders and Slide 18 of the deck for a reconciliation of GAAP operating income margin to adjusted operating income margin.

I would also like to remind you that we’ll 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 in our press release and the risk factors identified in our Annual Report on Form 10-K filed with the SEC on March 18, 2019 and subsequent SEC 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..

growth, leading through superior technology, execution and continued emphasis on our culture. You’ll note double-digit growth across each of our segment volume metrics, which is illustrative of the business ramp we’re continuing to generate.

In addition, we are in various stages of integration with Noventis, Discovery Benefits and EG’s Go Fuel Card European card portfolio. We remain steadfast in maintaining our momentum as we integrate these important acquisitions throughout the remainder of 2019 and beyond.

After a tremendous amount of work, I am pleased to announce that the conversion of the Chevron portfolio is now complete and fully ramped. This follows the successful conversion of the Shell portfolio in the first quarter. Both portfolios were converted as planned, exceeding the objectives we set at the beginning of 2019.

We have a proven track record of growing partner portfolios, and looking forward, we have a great deal of opportunity to continue this trend. We continue to differentiate WEX as an employer through our culture commitment to invest in talent.

We held our fourth annual Leadership Summit this past quarter, with a focus on leadership training and development. Events like this are increasingly important as we strive to retain and attract top talent, and the summit provides a forum for our top global management to connect, ideate, collaborate and grow the business.

Slide 5 highlights some of our significant new business wins and contract renewals in each of our segments. In Fleet Solutions, we generated revenue growth of 11%, driven by transaction volume and higher late fees, partially offset by lower fuel prices. Approximately half of this growth is a result of the Shell and Chevron portfolios.

Both of these portfolios will start contributing their full expected conversion volumes in Q3. We’re now through the implementation process, and we look forward to seeing margins improve through the rest of 2019. Earlier this year, we completed the acquisition of the European fuel card business from EG Group.

The Go Fuel Card brand has approximately 200,000 cards in circulation in the Netherlands, France, Belgium and Luxembourg. This acquisition will strengthen our existing presence in the European market.

Turning to our new wins during the quarter, we signed Brock Group and Paschall Truck Lines to new contracts and continuing our strong track record of renewals with Quanta Services, Rollins, Ferguson Enterprises and our private label partner, Phillips 66.

Shifting gears, Travel and Corporate Solutions performed very well once again during the second quarter with strong revenue growth of 21% year-over-year. We saw robust growth in the segment, including international markets and corporate payment as well as contributions from the Noventis acquisition. Purchase volume growth this quarter was 13%.

Travel volumes were generally in line with our expectations, with some impact from unfavorable FX rates. The North American Corporate Payments volume grew by an impressive 51%. This relates largely to our AP offering and the emerging interest in this market segment.

WEX continues to lead in the marketplace and is well positioned to benefit from sustained growth in Corporate Payments as the migration away from paper checks as a form of payment continues. I’m very pleased with the progress we’ve made diversifying our business with our different channels and partners, serving numerous sectors and industries.

During the second quarter, we signed new customers, including a large U.S. healthcare chain and a Chinese online travel agency. In addition, we renewed our agreement with Getaroom.com, Regions Financial and a large European OTA. Lastly, our Health and Employee Benefit Solutions segment also generated very strong top line growth of 55% year-over-year.

On a standalone basis, our U.S. Healthcare business saw revenue growth of 72% year-over-year and an 18% organic growth rate. The primary driver of our growth beyond the contributions of Discovery Benefits was the 17% increase year-over-year in the average number of SaaS accounts.

Also contributing to the quarterly growth were the addition and renewal of partners, including Medical Mutual and Surency. WEX’s U.S. Health division continues to capitalize on the momentum of the healthcare savings account market with growth of accounts and assets.

We now have more than 5.5 million HSA accounts on the WEX Health Cloud, which is more than any other platform in the country. We have benefited from a strong enrollment season and also in the performance of Discovery Benefits, which is trending up 23% of revenue.

In addition, the integration of Discovery Benefits is progressing well, and we remain confident that we’ll achieve our previously mentioned $15 million synergy goal on schedule. Staying on Slide 5, our industry leading products and technology continue to fuel our robust growth engines.

Within Fleet, this includes the smooth and complete integration of the Shell and Chevron portfolios onto our proprietary platform. In addition, we’re continuously enhancing and expanding our offerings and developing new products and capabilities.

An example of this is expanding the coverage of our mobile payment app, DriverDash, to more than 25,000 fuel locations, including ExxonMobil and Shell. Our ClearView data analytics platform now has more than 8,000 users, including a rollout to ExxonMobil’s fleet in Q2.

These are great examples of how WEX keeps the customer at the center and improves our offerings to meet the customers’ self-service needs.

From an internal perspective, we are making investments in digital marketing optimization, which will allow us to broaden our digital marketing channels and provide us more dynamic ways to reach customers, including text, e-mail and online.

In tandem with our investment, we’re seeing a significant increase in the percentage of new applications that we have now fully on-boarded digitally. Internationally, we have implemented the portfolio of Z Energy based in New Zealand, so we are now live in – with Chevron in Hong Kong.

In the Travel and Corporate Payments segment, we optimize the user interface for mobile and are now able to manage customer credit lines on various schemes, platforms and legal entities. We’re issuing Visa-branded commercial virtual cards in the U.S. and UK in U.S. dollars, pounds and euros with more currencies in the pipeline.

By offering a global payment solution with Visa, we’re providing our customers with even more choices and the ability to streamline and simplify transactions across the globe, boosting options for global merchant acceptance.

In addition, we’ve also made great strides in migrating transaction volume onto our internal processing platform and have now increased our run rate volume to more than $2.8 billion annually. Our U.S. Health business continues to be the industry leader in innovation.

The June 2019 product release includes updates and enhancements that help improve the consumer experience, including CDH mobile app quick receipt upload and a new COBRA member portal open enrollment tool, as well as business intelligence enhancements to the administrator dashboard.

In summary, I’m once again very pleased with our performance in the second quarter of 2019 as we build a stronger foundation for accelerating growth and profitability throughout this year and beyond.

We’re capitalizing on the extraordinary growth and progress we’ve made in 2018 to deliver sustained growth in each of our core verticals while continuing to successfully integrate our recent strategic acquisitions.

Our enhanced growth engine built through our strategic investments over the past few years will carry our momentum forward through the remainder of this year and beyond. I’ll turn the call over to Roberto now.

Roberto?.

First, the acquisition of Noventis. Second, our renegotiation of one of the OTA contracts that resulted in a move of revenue from Other to Payment Processing. This move can be no impact on the economics. Third, the strong performance in the U.S.

Corporate Payments business driven by growth in the partner channel, this also increased sales and marketing expense as part of the revenue recognition standard changes. And lastly, domestic and international spend mix within the Travel business.

Moving on to Slide 11, for Health and Employee Benefit Solutions, revenue for the quarter was up an impressive 55% compared to last year. Within the U.S. Health business, which includes the legacy business plus Discovery Benefits, revenue grew 72%.

Breaking this down organic growth was a substantial 18% and the acquisition of Discovery Benefits added $25 million in revenue. The average number of SaaS accounts was up 17% relative to 2018, reflecting our robust enrollment season. We had a good start to the year. And as we progress, we expect the Health sales performance to continue throughout 2019.

In the long term, we believe the fundamentals are in place for a continuous mid- to high-teens growth trajectory. From an integration point of view, in 2019, we expect to deliver $5 million in run rate synergies from the Discovery Benefits acquisition and another $10 million by the end of 2020. Changing gears to expenses on Slide #12.

For the quarter, total cost of service expense was $160.8 million, up from $135.1 million in Q2 last year. In total, SG&A depreciation and amortization expenses were $186.3 million, which is up $51 million versus 2018.

Breaking down the line items within these categories, processing cost increased $22 million, primarily due to the DBI and Noventis acquisitions as well as service operations cost to handle the increased volumes. Service fees were essentially flat compared to prior year.

This was mainly due to higher costs in the Health and Employee Benefit Solutions segment and offset by moving volume to internal transaction platform in the Travel and Corporate Payments segment. Credit loss on a consolidated basis was $14.8 million. Q2 last year was $13.6 million.

In the Fleet segment, credit loss was 13.9 basis points of spend volume, which is slightly higher than the 11.2 basis points for the same period last year. Operating interest expense was $10.7 million. This is in line with expectations and was up $1.2 million compared to 2018 due primarily to higher interest rates and volume growth.

G&A expenses increased $28.7 million versus the prior year quarter. The biggest increases come from stock compensation primarily due to the performance of the company, the Noventis and the Discovery Benefits acquisitions, debt-related costs and M&A fees.

Lastly, the sales and marketing line increased $15.1 million, driven by partner rebates, the recent acquisitions and the Shell and Chevron costs. Now for taxes on Slide #13, on a GAAP basis, the effective tax rate was 28% compared to 24.2% for the second quarter of 2018.

On an ANI basis, the tax rate was 25.2% for the quarter and 25.1% for Q2 last year. Looking now to the balance sheet on Slide #14, we ended the quarter with $768 million in cash, up from $541 million as compared to the cash position at the end of Q4 2018. On the corporate cash side, the balance was $357 million.

This increase in the cash balance was used to fund the Go Fuel cash transaction on July 1. There were no borrowings under the company revolving credit agreement at the end of Q2. Between access to corporate cash and the available revolver, we have immediate access to more than $1 billion in capital.

During the quarter, we increased Term B borrowings by $150 million and improved the flexibility of the credit agreement while also extending the maturity date from 2023 to 2026. We had an outstanding cash flow generation for the quarter and reduced the financing debt balance by nearly $50 million.

At quarter end, we had a total balance of $2.8 billion on the revolving line of credit, term loans and note. The leverage ratio, as defined in the credit agreement, stands at approximately 3.8x, up from 3.1x at year-end. As expected, the increase in leverage ratio from Q4 of last year reflects the acquisitions we completed during Q1 this year.

We continue to expect to deliver 0.5 turn to 0.75 turn per year. Finally, as of today, we have approximately 65% of the financing debt essentially at fixed rate. This largely mitigates the exposure to LIBOR rates. To close out the call, let’s move on to guidance on Slide #15. The first quarter of the year set a solid foundation.

The second quarter marked the successful completion of the Shell and Chevron conversions as well as continued integration of the DBI and Noventis.

Moving forward, we expect progressively better results in the second half of the year, driven by organic growth, the contributions from the Shell and Chevron portfolios and the recent acquisitions, which now include the Go Fuel Card transaction.

We also expect the macro environment to be weaker with lower fuel prices and unfavorable exchange rates when compared to last guidance. The impact of these macro factors is approximately $0.15 of ANI EPS and the updated full year guidance reflect these changes.

For the full year, we expect revenues to be in the range of $1.72 billion to $1.75 billion and adjusted net income in the range of $399 million to $410 million. On an EPS basis, we expect ANI to be in the range of $9.10 to $9.35 per diluted share.

For the third quarter, we expect to report revenue in the range of $455 million to $465 million and adjusted net income in the range of $110 million to $115 million. On an EPS basis, we expect adjusted net income to be between $2.52 and $2.62 per diluted share. Now let me walk you through a few more assumptions.

Exchange rates are based as of the end of June 2019. Domestic fuel prices will average $2.72 per gallon in the third quarter and in the full year. The assumption for the U.S. fuel prices is based on the NYMEX future price from last week. The fleet credit loss will be between 13 and 18 basis points for the third quarter and for the full year.

The adjusted net income tax rate is expected to be between 24.5% and 25.5%, both for the third quarter and the full year. And finally, we are assuming there are approximately 43.8 million shares outstanding. To conclude, we are proud of the performance year-to-date and the projected guidance for the remainder of the year.

And with that, operator, please open the line for questions..

[Operator Instructions] Your first question comes from the line of Ramsey El-Assal from Barclays. Your line is now open..

I wanted to ask you to give us a little more color on the outperformance on Corporate Payments’ volume growth.

Can you parse that out for us in terms of underlying industry verticals or products or any of the incremental drivers there would be helpful?.

Sure and good morning. A couple things I’d say on that front. One of the things that we’ve talked about over the last few calls is the diversification that we’ve seen in that part of the business, since now it’s gotten into the point where about 40% of the revenue is coming outside of Travel.

And as a result, you’re seeing really good lift in some of these new products that we’re in. So we saw – we talked about having 59% revenue up in U.S. Corporate Payments. We also performed really well in Travel in Europe. We’re up 35% on a same basis, meaning excluding the impact of FX.

And so if you kind of look across the portfolio, we’re seeing benefit in each of the regions. Now Travel is still the majority of the revenue.

And so when we look at the volumes that are coming through, really saw incremental improvement in some of the parts of the business that are outside of Travel, but we came in line with what we expected in Travel volumes as well..

And remind us again of the delta between volume growth and revenue growth in the broader segment. Remind us again about the drivers of why volume comes in lower than revenues in terms of the growth rate..

Hi good morning. This is Roberto. So as I said here in the call today, the factor – we have now Noventis, which obviously comes with a much higher interchange rate.

The other thing we did also is on the interchange rate, by moving from Other revenue into Payment Processing, we renegotiated a contract with one of the big OTAs, which obviously have no change in the overall economics but has a move between revenue lines, also improved the net interchange rate. And then as Melissa said, the U.S.

Corporate Payments business, which has a much higher interchange rate, so revenue was up 59% and volume was up 51%. So also that has contributed. And finally, the mix on the Travel business that Melissa also mentioned between domestic and international has also driven higher growth on the revenue side..

Got it. So it’s really – it’s mix-related.

It’s not price-related or anything?.

Correct. Correct. Yes. Thank you..

I get it. Yes. Exactly. Let me sneak one last one and then I’ll hop in the queue. Just some color on your same-store sales verticals and fleet, and I’ll hop back in the queue here..

Sure. Same-store sales were down slightly sequentially. So if you look both sequentially and year-over-year, which is one of the trends that we’re paying attention to, we’ve seen over the last several years it being either slightly positive or slightly negative. And then Q2 is slightly negative..

Thank you. So much..

Your next question comes from the line of Sanjay Sakhrani from KBW..

Roberto, I wanted to just go a little bit more into the guidance. You mentioned the $0.15 macro impact. But maybe you could just go through some of the other various impacts that are affecting the range, like M&A and FX, and how significantly different they are versus the initial plan.

And then, I guess, also when I think about the revenue, the revenue guidance for the year went up, but the EPS guidance on the top end went down. So I just want to make sure I understood why that was happening..

Of course. So let me start with revenue and then we can jump into EPS. So when we guided in Q1, at the midpoint, I will talk for you. So revenue was at $1.73 billion and we increased it $5 million to $1.735 billion. The reason for this increase, there are a couple of them. So number one, obviously, we closed on the EG Go Fuel Card transaction in July 1.

This will give us a boost in revenue on the second half. We also have better performance on the U.S. Corporate Payments partner channel, which, if you remember, when we changed the rev rec last year, obviously, you get more revenue but you record the expense on the sales and marketing line.

And finally, we had in this quarter a particularly higher diesel spreads. So these, put altogether, boost our revenue from previous guidance. On the flip side, we have headwinds both on PPG.

We reduced PPG on a full year basis, $0.06, which more or less drive 14 – $15 million in revenue, combined with the FX rates that have deteriorated in the past quarter. So all in all, as I said to you, revenue at the midpoint is up $5 million.

Moving to EPS obviously the difference between the revenue outperformance versus the macroeconomic headwinds, as I said on the call, the macro headwinds $0.15 of EPS negative. And at midpoint, we are going from $9.30 to $9.225. So really, we are covering half of the macroeconomic deterioration.

And we feel good so far in the year, and we have out there big goals for the full year. So let’s don’t forget that if I look on a full year basis and we exclude the macroeconomic factors, I mean, we are expecting to grow ANI EPS on the 17%, 18%, which I think is a very solid number for the full year..

Okay. And then, Melissa, I know this is a great year. There’s a lot of things building up, including Chevron and Shell and all these deals that you’ve done.

But is it fair to assume, like, a lot of the investments have been made now? And what’s in front of us are the benefits associated with all of these initiatives? And I mean, I think, that speaks just for itself in terms of the acceleration, but maybe how should we dimensionalize it?.

Yes. It’s something that we’ve been talking about for the last 2 quarters because we want to make sure it’s clear that we invested, particularly with Shell and Chevron, we made investments in advance of the conversion, which is something that we normally do with our private label portfolio.

It’s just that the size of those 2 portfolios stacked one on top of each other made it much more obvious. And so the first quarter, you saw the drag on earnings and the impact of that as we were going through the initial portfolio conversion. Second quarter, you’re starting to see the lift as a result of Shell having been ramped through the quarter.

And now Chevron will start to be fully ramped through the third quarter. And so, each quarter, you’re seeing sequential improvement in what we’re giving out in the guidance, and a lot of that is driven based on those two portfolios.

And so, as we continue to see the revenue benefit of that, plus the implementation of some of the contracts that we’ve added in the mix, we’ve talked about that we’re in implementation mode. That’s part of what you’re seeing come through in the future revenue guidance and then the earnings lift in Q3 and Q4..

And I’m sorry, just one clarification there.

In terms of a full run rate for Chevron and Shell, that will be within this year in the second half?.

Yes..

Revenue wise?.

Yes. Yes. Now, we have a history of growing portfolios, and so our expectation is that, that baseline, we’re going to continue to grow from there. But yes, you will see the conversion benefit coming through in second half of the year..

And Sanjay, if you remember, last quarter also, we said that. So, we were expecting very little revenue in Q1, more revenue in Q2 and fully ramped for the second half of the year. So that’s the expectation..

Okay great. Good to hear things are running as planned. Thank you..

Your next question comes from the line of Darrin Peller from Wolfe Research. Your line is now open sir..

Alright. Thanks, guys. We saw the finance fee growth and fuel step up a bit after the increase in late fee range in, I think, first quarter.

Are there any other just talk about pricing more broadly, if you don’t mind are there any other levers you can expect from pricing standpoint over the next several months or quarters? How is the environment feeling around your ability to take price in certain scenarios?.

One of the things that’s impacting that, if you look at it again sequentially, is some of the portfolios that we’re bringing on, we have a discussion with the oil partner on how they want that to be presented to the marketplace and what type of fees they want to associate with that as part of the initial on-boarding.

And so, you’re seeing a mix effect as some of the choices that they have made rolling through our numbers in Q1, Q2, Q3. And again, you’ll start to see that normalize as you get later in the year. And so that’s one piece of what you’re seeing. The second just kind of relates to your second question around fees.

If you go across our portfolio, we have made choices around fees around implementing fees that people can largely avoid. And you saw the biggest benefit of that happen a couple of years ago.

It’s a place that we just continue to look at across the business to make sure that what we’re doing is in line with market and if there’s the value proposition that’s happening with our customers. So, we’ve made tweaks along the way to those fees, and I think that’s just a steady-state for us as opposed to thinking this is one big macro change..

Okay. Alright. Let me just follow up. I mean, I know the EG Group, we saw that you that went in Europe. You I think it is referenced here before also by Roberto. But it’s 200,000 cards.

Can you just try to help us size it in terms of either transaction or revenue opportunity? And then where are you guys also in Europe? I think you had won a large OTA in Europe recently.

Where are you in the run rate for that?.

So yes. So, we did talk about winning Etraveli in Europe, and we are in ramp process with them, which started in the beginning of the year. So, think of that as ramping. And related to your second question, EG feels we haven’t disclosed the revenue we associated with that.

Roberto did talk about adding it into the guidance numbers, so it’s part of why we’re seeing a revenue lift in this year. And we’re, I’d call that, early stages for that customer. We know that it operates on a spread model. Think of that like the rest of the business that we have in the European Fleet marketplace.

And so similar type of pricing model, similar type of business as an extension of acceptance and as a partner that we’re really pleased to be working with, it’s someone that we think we’ll do more of outside of Europe and other parts of the world as well..

Okay. Thanks, guys..

Your next question comes from the line of Jim Schneider from Goldman Sachs. Your line is now open sir..

Good morning. Thanks for taking my question. I was wondering if you could maybe just kind of give us a little bit of color about the on-boarding and ramping of the Shell and Chevron contracts in Q2 relative to what you had planned.

And then I guess as you head into the back half of the year, at what point do you expect those to be accretive to your overall corporate margins?.

So, I’ll start and then as Roberto is eager, I can tell, too. So Shell, we actually had fully converted by the end of the first quarter. So, you saw that at full ramp in Q2.

Chevron, we were converting throughout the course of the second quarter, with the last of that happening towards the end of the second quarter, very much according to what we had laid out early in the year of our plan and our expectations associated with this contract, so conversion timing, very much on plan.

And what we have seen come through from a revenue perspective, and Roberto talking about it being a little ahead of what we expected in the second quarter, that’s relating to us getting background around what’s the portfolio performance going to look like.

As we have more time with that, then we will get more predictable in what the behavior looks like. But it did a little better than we expected in second quarter..

And what I would like to you if you think on a, for the second half of the year on a or on a run rate basis, we have talked a couple of times about the number of gallons that these 2 portfolios were going to bring into WEX and converted those gallons at the current fuel prices.

We are talking between $60 million and $70 million in revenue on a run-rate basis. Obviously, as Melissa said before, expect and note that in the future, we grow those portfolios. But if you take this $60 million to $70 million, will give you an idea on the second half of the year, what to expect on a revenue side..

That’s helpful.

And maybe as a follow-up, in terms of the margin front, I apologize if I missed it, but in Q2, what was the operating margin drag from acquisitions in the quarter? And how much of that do you expect to be re-mediated by the synergies you expect through the end of the year, say, exiting Q4?.

So, there is a lot of moving pieces on the operating margins, and particularly, we did now on the M&A transactions. What I can tell you is that I’m following on what Melissa said before related to the investments we have done in the first half of the year.

On a full year basis, 2019, we expect, excluding the macroeconomic factors, to improve operating income margins at WEX level, inclusive of the acquisitions. Some of them, obviously, when you buy a company like DBI that has lower margins, it could impact the overall, but we are expecting to improve those margins significantly.

Now when you break the pieces into the first half and the second half, as Melissa said, we have now all the investments on Shell and Chevron. The acquisitions, obviously, as they ramp up in revenue will improve margins on the second half of the year. And also, particularly in 2019, we were aggressive on the first half of the year on the legacy U.S.

Health business in terms of investment, and we are going to be capitalizing on the operating margins on the second half. If you saw Q1 on the Health side, revenue was up 15%. And on the second half on the second quarter, 18% and we expect that to continue as we move into the second half of the year..

Great. Thank you..

Your next question comes from the line of Ryan Cary from Bank of America/Merrill Lynch. Your line is now open..

Growth in Travel and Corporate Solutions, it seems like the growth ex-Noventis decelerated a little from the first quarter and is below the full year range of kind of double-digit organic growth.

So, thinking about the full year, could we see kind of organic growth accelerate? And is double-digit organic growth still the right way to kind of think about it?.

This is Roberto. If you remember, when we guided early in the year on the Corporate Payments side, we guided on the 10% to 15% organic. And obviously, those numbers always exclude FX fluctuation, which, in this quarter, were almost 2% on the total revenue. We grew double-digit exactly, to be precise.

If you take out Noventis and you take out also the FX impact, we grew 10% in the quarter. So, we were on the low end of the range, but on a full year basis, we still expect to be within the 10% to 15% growth rate for the full year in this segment, from an organic point of view. Obviously, we expect now the Noventis to add on that as well..

Got it. Okay. And I was hoping you could provide some more color on the Brazil business for employee services and just kind of how we trended throughout the quarter. I believe we lapped the accounting changes in Brazil in the third quarter, so I’m assuming that in itself should help ease some of the headwinds.

But could we also see some benefits from our recovery in the underlying business as well?.

Yes. So, this is to put Brazilian perspective, it’s less than 1% of our total revenue. It’s less than 5% of that segment. So, it’s a relatively small part of the business. And a lot of the focus we had initially and it continues to be is around making sure we’re shoring up the control environment and with a keen eye to that.

Now at the same time, we’ve been looking at the business itself. We have changed out the management team. You’re going to see an announcement later today about the new MD that we’re putting in place that business.

And we’re starting to see the benefit of the changes we’ve been making to the business model, as well as the idea that you’re going to lap some of the changes that we started making at the end of last year.

So, we do think you’ll see sequential improvement from Q2 to Q3 around that part of the business, but it is a really small part of the overall company..

Got it. Thanks for taking my questions..

Your next question comes from the line of Peter Christiansen from Citi. Your line is now open sir..

Good morning. Thanks for taking my question. Nice execution. Melissa, I was wondering if you could speak to there’s been some notable signs of stress, particularly in the OTR trucking segment. Shippers have been under a lot of pressure this year.

I’m wondering if you’ve seen any or you’re watching closely any issues as it relates to just the growth there, but also perhaps credit issues. And it would be helpful perhaps if you can remind us what is WEX’s overall exposure now to the OTR segment..

Sure. So that’s part of the business, and so one of the things we were looking at, again, a little bit more detailed this week, was same-store sales and any trends specifically within that part of the business. And it’s pretty consistent with the rest of the marketplace, so it’s slightly down year-over-year.

And at the same time, there has been more pressure around we have a small part of that business where we’re factoring our customers and that has had seen some pressure. So, there has been rate impacts within that part of the marketplace. The loads are less. But we really haven’t seen any change in credit profile in our populations.

And just kind of keep in mind, that part of the business is paying quickly. On average, it’s got a shorter payment term, more likely to have a deposit associated with the account. And so, we don’t tend to have long credit lines for those customers. They tend to be really quick payment terms.

And so, there’s no real change or impact that I would call out second quarter versus what we’ve seen in the past..

Thank you. Helpful..

The next question comes from the line of Mr. Bob Napoli from William Blair. Your line is now open sir..

Thank you and great quarter. Good numbers. So much going on, and you guys are executing. Just on the Healthcare business, the Discovery Benefits acquisition.

That HSA business, is there an opportunity to significantly increase the interest income, that half of the HSA balances? I mean are you holding those on balance sheet? Or are you who are partnering with?.

We don’t hold them on our balance sheet. We do have partners and they kind of think all across the board and think about that business in totality. We work with a number a number of different banks.

And to the extent we’re working with the banking partners, they’re going to hold those deposits and they’re going to get the benefit of the interest rate changes. And what we’re providing is technology for them.

In places where we have the relationship or directly or we’re working with a partner who is interested in us in helping direct that, then we direct that into some partner relationships. And so, we are seeing a little bit of a lift in that revenue stream.

It’s really small when you’re thinking of the size of the segment and then the size of that revenue to that segment, it’s immaterial to the company. But we are seeing a little bit of lift associated with that.

And as we see growth in our business that is outside of our relationships where there are FIs, then we do think you will continue to see some benefit of that..

And the Travel and Corporate Solutions segment, how much of that revenue is the old, say, old Travel business, if you would, the legacy Travel business versus the Corporate Payments business? And that growth rate of 50% over 50% is what percentage of revenue? And that excludes the Travel portion, correct?.

It does. So, if you think about the segment and start to break it down, about 60% of the segment is Travel. About 40% relates outside of Travel. The Corporate Payments piece that we were talking about is the AP products that have are selling into the marketplace, either through our partner channels or directly. It’s grown the over 50%.

And so, to kind of if you take that business and split it into pieces, you’ve got Travel. You’ve got Corporate Payments related to APs. You’ve got bill pay, which, think of that as the Noventis acquisition and their relationships with FIs, which are out marketing our technology on our behalf and on their behalf on a white label basis.

So, all of those are different channels and the aggregate up to the total part of that business..

Now the AP piece, how big is the AP piece? And it’s growing to the – I mean, it’s such a huge market..

AP, when you think about it, again, directly into our partner channels, it’s about 15% of the segment. When you start to aggregate it and then add on FIs and then bill pay, that’s when you get up to the 40%..

Okay. And last question real, quick. On Go Fuel, the EG fuel, the purchase price for that was looked like about 10x revenue. Is that right? Is that I mean it looks like a pretty high purchase price. Is that business growing really fast? And maybe I’m off on the purchase price..

We haven’t disclosed the price. We have not disclosed the numbers, Bob. What I can tell you is that we pay as when we go through potential acquisitions, we always look at the market. And what we can tell you is we pay a multiple either on revenue or on EBITDA that was in line with the market.

And obviously, with expectations that we are going to be growing that business once it’s in our hands..

And that’s about $25 million revenue?.

Yes. I would put it in a context though in the aspect of the growth profile of it is it was a piece of EG. And part of what was appealing to us is that it was an asset that we felt once we carve it out, then we’d have an ability to do more with it.

And they would say the same thing, that they think that it was something they just didn’t have time or wasn’t their focus. So, adding onto our existing business, adding it onto the network we have, we believe that we have more opportunity to grow than what they’ve seen historically..

Thanks. Congratulations on the strong results..

Thank you..

Thanks..

Presenters, I’ll turn the call over back over to you..

Yes. Thank you. That’s all the time we have for questions today. But we thank everyone for joining us today, and we’ll look forward to talking with you again next quarter..

This concludes today’s conference call. You may now disconnect. Thank you for your participation..