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WEX Inc. (NYSE:WEX)
Q4 2019 Earnings Call
May 2, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, my name is Marsha, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX IQ 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press *1 on your telephone keypad. If you would like to withdraw your question, press the # key. Thank you. I would like to turn the call over to Mr. Steve Elder, Senior Vice President of Investor Relations.

Steve Elder -- Senior Vice President, Global Investor Relations

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 the 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 an 8-K 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 adjusted net income or ANI and adjusted operating income margin during our call. Adjustments for this year's first quarter to arrive at these metrics include unrealized losses on financial instruments, net foreign currency remeasurement losses, acquisition-related intangible amortization, other acquisition and divestiture-related items, stock-based compensation, restructuring and other costs, debt restructuring and debt issuance cost amortization, ANI adjustments attributable to non-controlling interest, 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 GAPP net income attributable to shareholders to GAAP net income attributable to shareholders. In slide 19 of the deck for a reconciliation of GAPP operating income margin to adjusted operating income margin.

I would also like to remind you that we will discuss forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed 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 obligation to do so. You should not place undue reliance on these forward-looking statements all of which we speak only as of today.

With that, I'll turn the call over to Melissa Smith.

Melissa Smith -- President and Chief Executive Officer

Good afternoon everyone, and thank you for joining us today. WEX had a great start to the year on the heels of a record 2018. We delivered another quarter with strong execution and exceeded our revenue and earnings targets. More importantly, our Q1 results set the foundation for our growth over the remainder of this year. We [inaudible] progressively, representing the impact of the design portfolio wins and recent acquisitions. I'm very proud of the team for executing on our long term strategies while also delivering in the short term on their large portfolio conversions. As expected 2019 is shaping up to be a milestone year that will set the foundation for our next chapter of growth. Our objective this year is to capitalize on the extraordinary growth and progress we made in 2018 by delivering continued organic growth across our core verticals, while successfully implementing Shell and Chevron in integrating our recent acquisitions.

Given the timing associated with these large portfolio conversions and integration plans, we expect to see our growth and profitability ramp as we progress through the year. Turning now to our first quarter performance. Revenue grew 8% compared to last year's first quarter reaching $381.9 million driven by double-digit growth in travel and corporate solutions and health and employee benefit solutions. We have a number of moving parts this quarter including additional revenue from acquisition, which was offset by lower fuel prices and unfavorable FX rates. The combination of these three factors resulted in a 2% increase to our reported revenue growth rate. GAPP net income attributable to shareholders was $0.37 per diluted share and adjusted then income was $1.72 per diluted share. Turning to slide four.

We continue to deliver against our strategic pillars: growth, leading through superior technology, execution, and culture, and carried the momentum we saw last year in the first quarter. At the same time, we've been highly focused at meeting our short term objective including implementing our contract wins, as well as continuing to add new business. The solid volume gains in the quarter were partially offset by lower fuel prices and unfavorable foreign exchange rates, which reduced revenue by 2%. Slide five highlights some of our new business wins in contract renewals in each of our segments in the first quarter. In fleet solutions, we generated revenue growth of 1% driven by higher volume growth and increased late fees partially offset by lower fuel prices and fewer business days.

The successful and timely conversion of both Shell and Chevron remain our primary short term focus. I'm happy to report that both conversions are on schedule. After a tremendous amount of work on both sides, the conversion of the Shell portfolio is now complete. We converted all of the accounts and discontinued the old program as of April 1st. The volume we are currently seeing from this portfolio is in line with our initial projections, which we expect to ramp as we progress through the year. As part of the normal conversion process, we've had costs in advance of revenue and we expect the margins to improve in the second half of the year.

The conversion of the Chevron portfolio is also progressing well. More than 50% of the accounts have now been converted to our platform and we expect the remaining accounts to be fully transitioned by the end of the second quarter. As two of the largest oil company portfolios in North America, we expect Chevron and Shell will contribute meaningfully to the growth and profitability of our fleet business in years to come. We announced in March the plan to purchase the European fuel card business from EG Fleet. The Go Fuel Card brand has approximately 200,000 cards in circulation in the Netherlands, France, Belgium, and Luxembourg. We expect this transaction to strengthen our presence in the European market and we're excited to work with EG Group in other regions.

We expect to close the transaction this quarter subject to customary closing conditions including the approvals of the various work councils. Pivoting to new winds, during the quarter we signed EMKAY, a top-ten North American leasing company, as well as Evans Network of Companies, and a large number of smaller wins. On the contract renewal front, I'm pleased to announce the resigning of contracts with the State of Maine and Davy Tree. In addition, we celebrated our 25th anniversary with Wheels, one of the largest leasing companies in the country. Shifting gears travel and corporate solutions performed extremely well during the first quarter with strong revenue growth of 22% year over year. Growth was driven by robust performance in the international markets and corporate payments, as well as contributions from the Noventis acquisition.

Purchase volume growth this quarter was 6%. Travel specific volumes were a little softer than we expected, in part due to unfavorable FX rates. The North American corporate payment volume grew an impressive 48%. WEX continues to win in the market place and remains well positioned to benefit from the significant growth in the industry. During the quarter we signed on new travel partners including Mondee, one of the largest airline aggregators in the world, and Time Design a premier hotel and travel aggregator and our first customer base in Japan. In addition, we extended our agreement with Divy, who is an innovator in the corporate payment space and serves small and medium-sized businesses. We're also seeing great results from our network partners, including American Express as they use WEX's technology platform to issue virtual cards. While still relatively small today, we see the potential for significant growth with this strategic partner over time.

We're making great progress in furthering diversifying our business with our different channels and partners in a continuation with the significant progress we've made in 2018. This will continue to be a point of focus for us this year.

Lastly, our health and employee solutions segment had strong topline growth of 19% year over year. On a stand-alone basis, the U.S. healthcare business generated revenue growth of 31%, primarily driven by an increased number of staff accounts in the acquisition of Discovery Benefits. The quarter's growth was driven by the additional and renewal of numerous partners, including BE Solutions, Hauser Corp Solutions, Mass Mutual, and Phillips Research Network Inc. Complementing this solid organic growth was the contribution from Discovery Benefits, which also had a strong enrollment season. The integration of Discovery Benefits is progressing well and we're on track to achieve our previously mentioned $50 synergy goal. Our best in class technologies led to another very successful open enrollment season.

We continue to capitalize on the growth in the market with more than 5.5 million HSA accounts on the platform, which is more comps than any other platform in the country. Finally, the SPARK brand will debut at WEX SPARK Health 2019, the annual conference that gathers WEX health partners and industry leaders. The conference will provide concurrent sessions addressing top of mind topics for partners. There will be over 600 people in attendance with invaluable networking time with partner peers, industry experts, and WEX health senior leaders.

Staying on slide five, our growth engine continues to be fueled by our market-leading products and technology. Within fleet, this includes the successful transition of the Shell portfolio onto our proprietary platform. In addition, we continue to improve our existing offerings and develop new products and capabilities for expanding customer base including introducing ClearView Snap to a number of additional small fleets during the quarter. We have now over 6,000 customers receiving our proprietary analytics from ClearView, a substantial growth in adoption and incremental revenue stream.

Our Smarthub mobile app had over 45% year over year increase in utilization. This is a great example of keeping the customers at the center and meeting their self-service needs. Our acquisition engine in the small fleet area continues to drive business for WEX and our partners. We have achieved significant advancements in data-driven optimization including new targeting models and utilization of artificial intelligence tools to optimize our digital acquisition activities. This continuous investment in marketing and product technologies is [inaudible] why our partners choose WEX and stay with us.

In the travel and corporate payment segment, we released a new user interface in March for both direct and partner portfolios, modernizing the experience for these clients and bringing full control over the mobile roadmap in house. In addition to the new UI, we're also making progress integrating the Noventis products to begin leveraging their payment network and delivery capabilities to the corporate payment business. We're also making progress in migrating transaction processing volume onto our internal platform. We're still in the early stages but we've now moved run rate volume of more than $2.5 billion annually. Our U.S. health business remains the industry leader in innovation.

The March 2019 product release includes updates that reflect health's continued focus on providing the leading consumer experience for healthcare accounts while driving efficiency in administration. Key features address consumers' financial goals regarding their health savings account, new advanced consumer analytics for administrators and employees, and a new provider payment capability that allows consumers to pay providers in the method that providers prefer. Finally, we're also in the early stages of product integration with Discovery Benefits.

Turning to slide six, at our investor day last November there was a high level of interest about WEX's success in the large and growing payments market. Given our recent acquisitions and product ads, I'd like to take a deeper dive into our corporate payments business and talk about why we're winning in this growing and competitive market. At the core of our offering, WEX's solutions are focused on optimizing payment workloads for both buyers and suppliers in different verticals. In all three channels, there's a common pain point WEX solves for our customers. By utilizing our services, businesses are able to help minimize the operational burden associated with check processing and payment reconciliation, address increasing security and fraud concerns with dated in house legacy systems and optimize cash flow with credit solutions.

It's the value WEX creates for our consumers and customers that allows us to retain and win customers. For example, WEX processes approximately $60 billion in volume for all of our channels. We bring to market scale and credibility for [inaudible] businesses. We also are known in the market for providing optionality for our B to B customers by investing in both products and global acceptance. This allows our customers to create global programs that are more efficient, fewer payment gaps for their customers. And because our products and services are built on modern architecture this means we can offer flexible integration for technology partners, which allows them to create more and better experiences for their end users. All that coupled with global reach and WEX's fleet payment expertise is why we win in the mark.

In summary, I'm once again very pleased with our performance in the first quarter of 2019 as we set the foundation for improving growth and profitability through this year and beyond. We will capitalize on the extraordinary growth and progress we made in 2018 to deliver continued organic growth in each of our core verticals while successfully implementing the Shell and Chevron portfolio conversion and integrating our recent strategic acquisitions. We've carefully built our growth engine through our strategic investments over the past three years and look forward to carrying our momentum forward throughout the remainder of the year. Roberto...

Roberto Simon -- Chief Financial Officer

Good morning everyone and thank you, Melissa. As you heard our financial results exceeded the targets for the first quarter. The performance was driven by double-digit, topline growth from both the travel and corporate solutions and the health and employee benefit solution segments. We saw particular strength in two areas. The non-travel corporate payments and the U.S. health business. Both of them had significant growth versus prior year and so far projections for the quarter. Additionally, the Noventis and Discovery Benefits acquisitions were in line with expectations. From an earnings point of view, we continue to benefit from revenue growth, which was offset this quarter by the Shell and Chevron implementation cost, lower fuel prices than Q1 2018, and a negative impact from FX rates.

Now, let's take a look at the results on slide number eight. Total revenue for the first quarter was $381.9 million, an 8% increase over the prior year period. GAPP net income attributable to share holds was $16.1million. Non-GAPP adjusted net income was $74.8 million or $1.71 per diluted share. Slide number nine shows the overall revenue performance broken down by segments. Travel and corporate solutions led the growth once again by posting a 22% increase in revenue. It was followed by the health and employee benefits solutions segment, which had 19% revenue growth. Now let's look to segment results. Starting with the fleet segment on slide number 10. The fleet solution segment achieved $232.8 million in revenue an increase of 1% when compared to the prior year quarter.

Payment processing revenue was flat, and finance fee revenue was up 5%. Finance fee revenue was 44 basis points of spent volume of the year compared to 41 basis points. Increasing basis points was due to a mix of new business wins and small rate increases. Looking at the fleet revenue in detail, the North American fleet business grew 4%. This group includes the legacy WEX fleet, the Over-The-Road, and the [inaudible] businesses.

Lower fuel prices in the quarter reduced the revenue growth rate by 2 percentage points versus the prior year. The international fleet business had several [inaudible] with increases in Asia and offset in Brazil and Europe. The average domestic fuel price in Q1 was $2.67 versus $2 in Q1, 2018. Fuel prices went higher than guidance, which benefited revenue by $2 million; however, compared to 2018 we had a $4.5 million negative impact revenue from lower fuel prices. Similar to last quarter, we continue to see positive trends including solid organic transaction growth of 5.1%, lower attrition rate, and positive same small sales.

Finally, in the segment, we continue to make very good progress with the Shell and Chevron implementations. As of today, we are on track with both portfolios to be fully converted by the end of fiscal this year. Turning to our travel and corporate solutions segments on slide number 11. Total revenue for the quarter increased 22% to $81.6 million. Due primarily to the U.S. corporate payments business, lower skim fees, which have now contributed revenue, and benefits from the Noventis acquisition, which are approximately $8 million in revenue. We continue to see solid growth internationally.

In Australia, Asia-Pac, Europe, and Brazil. In North America, the corporate payment business posted very strong growth of 59%. Purchase volume issued by WEX reached $8.4 billion, which equates to a 6% growth versus last year. As we progress into 2019, we expect volume growth to accelerate thanks to the ramp up of new business recently signed. As mentioned in the last call in March, we expect full year organic volumes to grow double digits.

To conclude this segment the net interchange rate was 71 basis points, which went up 15 basis points from Q1 last year. Increasing the rate is due to a combination of factors. Number one, the acquisition of Noventis. Number two, a renegotiation of one [inaudible] that resulted in a move of revenue from other to payment processing. This move had no impact on the economics. Number three, the strong performance in the U.S. corporate payment business driven by growth in department channels, which also increased sales and marketing expense as part of the revenue recognition standard. And lastly, domestic and international expense mix.

Moving onto slide number 12. For the health and employee benefits solution segment, revenue for the quarter was up 19% compared to last year. Turning first to the U.S. health business, which includes the legacy business plus Discovery Benefits revenue grew 31%. Approximately half of this growth came from the acquisition of Discovery Benefits, which held at $8 million revenue and the other half was organic growth. The average number of SaaS accounts was up 18% relative to 2018 reflecting a robust enrollment season.

We had a very good start to the year and as we progress we expect the outsized performance to continue throughout 2019. In the long term, we believe that the fundamentals are in place for a continued mid-to-high teens growth trajectory. From an integration point of view, we expect to deliver $5 million in synergies from the Discovery Benefits acquisition in 2019 and another $10 million by the end of 202. Finally in the segment, as we expected conditions in Brazil remain challenging. We are taking steps to stabilize the business.

Let's move onto expenses on slide number 13. For the quarter total cost of service, expense was $153.2 million, up from $128.6 million in Q1 last year. In total SG and A depreciation and amortization expenses were $159.7 million, which is up $18.1 million versus 2018. Breaking down the line items within these categories processing costs increased $18 million primarily due to the ramping up for Shell and Chevron and expenses related to the newly acquired companies. Service fees went up $1.9 million compared to the prior year mainly due to higher costs in the health and employee benefits solutions segment.

Credit loss on that consolidated data was $17.8 million. Q1 last year was $14.2 million. In the fleet segment credit loss was $15.7 basis points of spent volume, which is within our guided range of 13 to 18 basis points and slightly higher than the 12.5 basis points for the same period last year. Also, we took a $12.6 million reserve in the quarter outside of the fleet credit loss for our corporate payments customer. Operating interest expense was $9.6 million. This is in line with expectations and went up $1.1 million compared to 2018 due primarily to higher interest rates and volume growth. G and A expenses increased $9 million versus the prior-year quarter. The biggest increase comes from the two acquisitions we completed. Lastly, the sales and marketing line increased $7.6 million driven by the acquisition of Discovery Benefits, Shell, and Chevron and partner rebates.

Now for taxes on slide number 14. On a GAPP basis, the effective tax rate was 26.4% compared to 25.2% for the first quarter of 2018. On an ANI basis, the tax rate was 25.4% for the quarter and 26.9% for Q1 last year. The declining [inaudible] in this quarter is due to the mix of U.S. and foreign earnings. Looking now to the balance sheet on slide number 15. We ended the quarter with $387 million in cash down from $541 million as compared to the cash position at the end of Q4 2018.

On the corporate cash side, the balance was $96 million. In general, we announce that we increase our borrowing capacity and improved [inaudible] in order to fund the Discovery Benefits and Noventis acquisitions. Because of this WEX had about $547 million of available borrowing capacity, which gives us access to more than $625 million in capital. At quarter end we had a total balance of $2.9 billion on the revolving line of credit, term loans, and notes. The leverage ratio of the [inaudible] stands at approximately 4.0 times up from 3.1 times at year end. As expected, the increase in leverage reflects the acquisitions we completed in the quarter.

We continue to expect to [inaudible]. During March we executed on another $450 million in interest rate hedges locking in [inaudible] at approximately 240 basis points. We have a $6 million unrealized gain on the interest rate hedges we placed on the debt. As of today, we have approximately 65% of the financing debt essentially at fixed rates, which mitigates the exposure to rising rival rates.

To close out the call, let's move onto guidance on slide number 16. The first quarter set a solid foundation for the year as we anticipated last quarter, we continue to expect progressively better results through the year driven by organic growth, the recent acquisitions, and the Shell and Chevron portfolios. The updated full-year guidance has been increased to reflect higher fuel prices projected by the market. For the full year, we expect revenue to be in the range of $1.705 billion to $1,745 billion and adjusted net income in the range of $399 million to $416 million. On an EPS basis, we expect ANI to be in the range of $9.10 and $9.50 per diluted share. For the second quarter, we expect to report revenue in the range of $438 million to $443 million and adjusted net income in the range of $97 million to $100 million. On an EPS basis, we expect adjusted net income to be between $2.22 and $2.28 per diluted share.

Now, let me walk you through a few more assumptions. Exchange rates are based as of the end of March 2019. Domestic fuel prices we landed at $2.85 per gallon in the second quarter and $2.78 for the full year. The assumption for the U.S. fuel prices is based on the [inaudible] future price from this week. The fleet credit loss will be between 11 and 16 basis points for the second quarter and 13 to 18 for the full year. The adjusted income tax rate is expected to be between 24.5% and 26% both for the second quarter and the full year. And finally, we are assuming that approximately 43.8 million shares outstanding. To conclude we are proud of the performance to date and the projected guidance for the remainder of the year. And with that, we are opening the lines for questions.

Questions and Answers:

Operator

Our first question comes from the line of Sanjay Sakhrani with KBW.

Sanjay Sakhrani -- KBW -- analyst

Hi. Good morning and congratulations on the momentum you have. I guess I appreciate the call around Chevron and Shell. I'm just curious if we have some kind of run rate as to how much volume or I'm sorry, gallons of gas came in this quarter and how it might sequence through the year. I know you guys had given us a number of approximately what the two might mean. But maybe if there was a little bit of color on the sequencing that'd be great.

Melissa Smith -- President and Chief Executive Officer

Sure, I'll start and Roberto may want to add onto this. But I'm going to reiterate a couple of things I said to give you some data points. The Shell portfolio was ramping up, was not a significant amount of volume in Q1, but was ramping up toward the end of the first quarter with the total cut over happened April 1st. and what that means is that we then shut off their old card program. And so, that's where you start to see much more conversion activity. And the reason why we say that it's going to continue to ramp through the latter part of the year are two reasons. Some of the fees relate to their activity. So, it takes some time for that activity to occur. And as a result, they're going to get a little bit of staging when the revenue comes. And then we've added sales and marketing resources.

So, those sales and marketing will contribute to continued growth in the portfolio from the baseline that we brought in. so, you see kind of a step-up that will happen in the second quarter and then it will continue to grow from there. Chevron we've gone through the portfolio conversions, which we've talked about 50% of the account being converted now, but they're coming over in traunches. And the last traunch completes just before the second end of the quarter. So, that will also continue to ramp every more rapidly in that case because of how the portfolio is moving over to us. And again, we've got sales and marketing resources that are dedicated to continue to grow the business. So, both of them are going to add sequentially into what we're seeing in volume trend. I don't know if [inaudible] Roberto.

Roberto Simon -- Chief Financial Officer

Sanjay, what I also said if you remember, we have disclosed a couple of times the expected number of gallons overall for those two portfolios. And you know if you take the revenue of the two of them combined in a full year there should be between 60 and 70 million. And you consider what Melissa just said that we should be fully ramped by the end of the second quarter. [Inaudible] on the second half of the year. And as Melissa said, the ramp ups should be starting by each of the months on the first half. So, you know directionally the second half what to expect from a revenue point of view and on the Q1. And then obviously Q2 we should be seeing the ramping up of the volume and the revenue.

Sanjay Sakhrani -- KBW -- analyst

Okay. Thank you. Perfect. Second question, on the net interchange rate in travel and corporate solutions. That was up 15 basis points. And I think you guys had talked about it being up 10 for the year. Should we assume the 15 is a more sustainable rate going forward now. And then secondly, just on the slowdown in volumes understanding you expect it to ramp up because of some wins. What specifically drove the slow down this specific quarter?

Roberto Simon -- Chief Financial Officer

So, I will start with net interchange. You are completely right. So, the quarter was 15 basis points, and I gave all the reasons why. What I would say to you is that most probably we're going to be between the 10 and 15 basis points. There's a lot of moving pieces as you know because there's the Noventis acquisition. [Inaudible]. We have the interchange and the expenses for the rebate goes on the expense line as G and A but I would say to you that you can model between 10 and 15 basis points as we move to the full year. It should be a pretty stable number going forward unless there is a big swing on the revenue side between the parts that I mentioned to you.

Melissa Smith -- President and Chief Executive Officer

Then on the corporate payments just in terms of volume, there was a negative 2% around FX. And about another negative 2% because of fewer business days this year compared to last year, which affected both our fleet volume and our corporate payments volume. Those are the bigger things and then on top of that I talked about the fact that we saw a little bit of softness in the travel spend volume, which if you look at the trends we're seeing coming through in April we're seeing a step up in what's happened from spend volumes between the first quarter and even the month of April.

Sanjay Sakhrani -- KBW -- analyst

That's probably Easter.

Roberto Simon -- Chief Financial Officer

Yeah and Sanjay I also will add remember last year the first quarter was very, very strong. We had a growth of 20% and then obviously the [inaudible] between what Melissa said and the fact that last year the first quarter was really very, very strong is having a big impression on the first quarter. But we should be seeing, very quickly, a ramping up volume in the coming quarters.

Sanjay Sakhrani -- KBW -- analyst

I'm sorry. Just one last one. On the FX impacts, how is it progressing to what you had in your guidance? Should we expect it's more of a headwind, less of headwind, or in line?

Roberto Simon -- Chief Financial Officer

It should be, last year [inaudible] was positive and second half was negative. This year should be the opposite. It's probably that this quarter is the one obviously the rate to stay is where they are today. They should stay we progressing to Q2, Q3, and Q4 really talking a million, a million and a half per quarter. So, the big impact was in Q1 this year obviously at the rates of today, and the guidance includes that.

Sanjay Sakhrani -- KBW -- analyst

Thank you.

Operator

Our next question comes from the line of Darrin Peller with Wolfe Research.

Darrin Peller -- Wolfe Research-- analyst

All right hey guys. Thank you. Could we just start off if you could continue touching on the mi --to high single digit transaction growth rate you're seeing in fuel And Melissa, just talked through -- I know when we've talked before there's been a lot of technology investments that have been resonating and just what is the sustainability to that whether it's 5% or even 7% to 8%. And then, what was the actual revenue impact from the last fueling days in either of the segments or both if you can.

Melissa Smith -- President and Chief Executive Officer

Okay, so I'll start on your sustainability question. All the way through to how we approve an account and how we get an account set up. There's been a lot of automation in all those pieces. And so, we think we'll get continued benefit of that over the next few years. And as well as the investment we're making. You know we're particularly excited about what we're doing in data analytics and were particularly with what we're doing with mobile capability with our Driver Dash product as we continue to expand that. And both of those things we think that we geared toward smaller businesses as well as larger businesses. And obviously this year we only have the added benefit of bringing in these two large portfolios. So, we feel good about the momentum we have in the space and we continue to bring in new wins that make us feel like we are going to be able to grow that part of our business for many years to come. And you asked about the difference between business days and the impact --

Darrin Peller -- Wolfe Research-- analyst

I was just trying to figure out the revenue impact specifically for both the fuel and the corporate and travel segments.

Melissa Smith -- President and Chief Executive Officer

It would be about equivalent. So, I said 2% to spend volume and it's about 2% --

Darrin Peller -- Wolfe Research-- analyst

So, similar to revenue. Okay. Thanks. Let me just quickly follow up on that. Look, I mean, there was very strong growth in the healthcare segment. I assume strong enrollment season helped. What was the impact from Brazil -- Brazil healthcare? If you could just comment on what's going on there as well in terms of whether that business should be rebooted or any additional reads.

Melissa Smith -- President and Chief Executive Officer

Yeah so, if you look at the segment itself we talked about 19% growth and when you look at the healthcare business specifically it's 31% and so you can infer from that what's happened. Brazil is negative. And we said that going into the year that we expected that the first half of this year that we would have some headwinds. As you remember we readjusted the way that we were going into the marketplace kind of mid last year and we're seeing volume coming through with the product. It's really just a matter of repositioning the product to annualize. And as we continue to work through that part of the business it has performed pretty close to what we expected within the course of this quarter even though it's down from the prior year. And we're going to continue to work on a couple of things in that front. We're going to continue to work on remediating the control environment, which we talked about last quarter. And also keep in perspective that it's less than 2% of our revenue.

Darrin Peller -- Wolfe Research-- analyst

Okay. That's great. Thanks, guys.

Operator

Our next question comes from the line of Ramsey El-Assal with Barclays.

Ramsey El-Assal -- Barclays -- Analyst

Hi. Thanks for taking my question. I wanted to ask about the small acquisition you did in Europe. And I know that used to be a bit of a theme in terms of some potential opportunity there for outsourcing. Can you sort of help us understand how this deal fits into that broader narrative? Have you seen any incremental developments in that market to think that that sort of broader opportunity might be opening? Any color there would be appreciated.

Melissa Smith -- President and Chief Executive Officer

Sure. So, we announced the EG Fleet acquisition of their Go Fill Card program. We haven't closed it yet. So, that's really dependent on going through the work council process and we expect that to close in the second quarter. Again, just to add that narrative. But the business itself part of why we like this asset in particular. We like the idea of expanding the network in the region and they have a captive card base but also a network that allows us to extend the offerings that we have throughout Europe and they also have network in areas that we wanted to expand and so there was a good geographic alignment from the [inaudible] that they have and the covers that we wanted to have in that marketplace. And so, we think of this as an ability to continue to expand our presence in Europe, to continue to build off the base that we have in that marketplace. With it relates to private level offerings.

The platform that we developed a number of years ago is a platform we've been going into the market and selling private label offerings and we've had really good success in Asia particularly in selling that platform. In Europe, it has been a slower part of the new business ramp. And I wouldn't say that adding this portfolio is going to make a difference in the private label offerings. We think it will make a difference in our direct offering that we have in the marketplace.

Ramsey El-Assal -- Barclays -- Analyst

I wanted to ask about your longer term capital deployment plans. And you're doing quite a few tuck-in acquisitions at a relatively steady pace. How should we think about your views on leverage over time? Or should we think about you guys are running at higher normalized leverage levels over a longer period of time and just continuing to fill in gaps? Or is there a trajectory here where you've reached a point where you feel like you've filled in some gaps and the leverage level might come in a little bit.

Roberto Simon -- Chief Financial Officer

Let me start by reminding you at the investor day and we have been clear with our policy is to be between 2.5 and 3.5 times on leverage ratio. And when we closed 2018 we closed at 3.1 times. But we also have said that for the right transactions we will go up in leverage. Going back to three years ago and when we did the EFS transaction we did the same. The company went up in leverage. We went a bit more than four times. When we closed EFS we went to 4.7 times. From there we have been spending two and a half years reducing leverage up to the 3.1 we closed at the end of '18. And in that period we also did the transaction of AOC and we did the Chevron portfolio acquisition. So, I would say to you that our policy doesn't change 2.5 to 3.5. For the right transactions, we will go up in leverage and going forward all of our focus is going to deliver as much focus as we can to get back to the ratios that I just mentioned. Finally, what I would say to you as well is we expect to be levered half a term to three-quarters of a term per year and this is consistent with the last two and a half years through the year's acquisition.

Ramsey El-Assal -- Barclays -- Analyst

Great. Thanks so much.

Operator

Our next question comes from the line of Oscar Turner with SunTrust.

Oscar Turner -- SunTrust -- Analyst

Hey guys good morning. First question is on the travel and corporate solution segment. Can you talk about drivers of that 48% growth in North America corporate payments? Are there any verticals, channels, or partners worth calling out?

Melissa Smith -- President and Chief Executive Officer

The growth actually has been primarily drive by our AP product in that corporate payment segment. And we have a group of sales people that have done a fantastic job out in the market place selling and as we've added those accounts we've seen a really nice ramp in that business. It's part of why we've been excited about what we can do in that space and part of what led us to the acquisition of Noventis. We just believe that this is a space that's right for growth. And you're starting to see more movement where people are interested in it and making that outsource move now.

Oscar Turner -- SunTrust -- Analyst

That makes sense. Second question is on healthcare and Discovery Benefits, which closed recently. How does this deal enhance your value proposition in the HSA marketplace? And then can you give any color on the tone of customer conversations since you closed the deal? Just given the potential for channel conflict there.

Melissa Smith -- President and Chief Executive Officer

I'm going to start with your latter part, because it's something that we think a lot about if you look across our business. We go to market in multichannel across the board. And so, we've done that in Fleet for many, many years quite successfully in corporate payments so you can see that we're doing business with American Express and a lot of FIs, but at the same time, we have a direct product offering. So, this is part of who we are as a company and we think that that really starts with a foundation of having ground rules of how you operate. And it works to do this in really big markets. And so, that's been the narrative we've had in the space and I think that when it comes right down to it people just want to make that you're following what you say you're going to do. And so there's going to be a period of time that we make sure that we continue to demonstrate that this is a core capability of ours.

And in terms of DBI itself, the idea that they have a transit product, which is an interesting product. The idea that you can just extend the offering so that you can have full services is interesting to some in this marketplace. So, when we think about the options out there we like this position of having that as an option and also working with partners, which they bring something unique. Sometimes that's the user interface that they've created. Something that's something else that they've created that's unique to their brand and they're offer will be differentiated in the marketplace as well.

Oscar Turner -- SunTrust -- Analyst

Okay, thank you.

Operator

Our next question comes from the line of Bob Napoli of William Blair.

Bob Napoli -- William Blair -- Analyst

Thank you and good morning. Follow up on the corporate payments business. What is the revenue for the North American corporate payments business today? I wanted just to dig into that a little bit more. The non-travel portion. Hello?

Melissa Smith -- President and Chief Executive Officer

You didn't lose us. I'm just looking it up. We don't report it so I'm just looking to make sure I give you the right number here.

Bob Napoli -- William Blair -- Analyst

As you're looking for that I wanted to understand --

Melissa Smith -- President and Chief Executive Officer

It's about 20% of the segment.

Bob Napoli -- William Blair -- Analyst

Okay. Segment, 20% of the segment. And how much of the growth is Noventis? How much is Noventis adding and the AP capability that you've built? Is that primarily from EFS which you've built upon? Or is Noventis bringing that to you? So, you're combing the AP with the payment side. It's obviously a very large market. Just trying to understand. And then you're focused on mid-market companies in that space.

Melissa Smith -- President and Chief Executive Officer

Let me parse through into your impressions because I think you had a bunch in there. Noventis itself which we'd like to -- Noventis itself is a delivery mechanism. So, what it allows us to do is optimize how the payment is made and so it allows us to operate more efficiently if you're deploying a large amount of payments. And so, we like that in the context of as we continue to scale the business and have a variety of different offerings. Having that sit in the background and optimize how payments are made is something that was interesting to us. That was one of your questions.

The second one is the size that we're going after. So, yes that's true where we go after directly. It's part of why we like going into the marketplace through partner channels. It's just the reach that you get. So, some of the partners that we're doing business with are interested in small businesses and what they had done with us is we create the payment mechanism that sits in the background to whatever product offering that they have and so that combined offering can create something unique for them in the market space and it gives us greater reach into the market. So, I wouldn't limit, when you think about our ability to penetrate the marketplace, we won't be going -- at least anytime soon -- after that small, small marketplace on our own. But through partner channels, we think that that is a good mechanism to approach the market.

Bob Napoli -- William Blair -- Analyst

The AP piece. Is that through the partners?

Melissa Smith -- President and Chief Executive Officer

It's both. So, we have an AP product that we had kind of patented within WEX. We expanded that in two ways. We added on the acquisition of AOC. That gave us broader capability in that space and then when we also did the EFS acquisition; they had some capability in that space as well. And so, what we've done is merged all of those components together and really modernized the technology. So that it is a series of micro-services that are all talking to each other. And then we can expose that through APIs to partners. So, it's really a combination of a bunch of different technical moves that we've made over the years -- the last two years really primarily -- that have created this product set. And then on top of that this in house processor that we're moving volume over creates more scale capability for us as we continue to scale up the marketplace.

It also is just a solution that enabled us more control over the entire servicing experience for our global accounts, too. And so, we like that from many different fronts from scale building all the way up to our capabilities. So, there's been a number of different things that have changed over the last few years.

Bob Napoli -- William Blair -- Analyst

Last question, thank you. That's a very large market and I would imagine it's mostly white space. Is that a business that can grow 30%, 40% for years to come organically?

Melissa Smith -- President and Chief Executive Officer

You're right it's white space. It's been a space that I think people have been circling around for quite a long time. But you're actually starting to see movement where people are making the switch and going to technology providers. And so, we think the timing is right. In terms of the growth profiling. It's a huge market. So, I think that's possible that we haven't -- we gave out our long term growth targets we were probably a little bit more conservative in that part of the marketplace with what that looked like because it's still unknown.

Roberto Simon -- Chief Financial Officer

Bob, just to clarify for you the revenue. So, you ask about Noventis and as I said during the call update $82 million in the segment. Approximately $8 million are Noventis and then approximately 20% of the $81 million, $82 million relates to the corporate payment business. Just to clarify your question.

Bob Napoli -- William Blair -- Analyst

Thank you very much. Really appreciate it.

Operator

Our next question comes from the line of David Koning with Baird.

David Koning -- Robert W. Baird -- Analyst

Hey guys. Thanks for taking my call. I was just wondering, first of all, on the fleet business transactions grew 5% and I think they had been growing 7%. I think is that explainable to the days that you called out. And then I guess the second question around that, why didn't that pick up as some of the Shell and Chevron came out? I maybe would've thought it would've been a little faster.

Melissa Smith -- President and Chief Executive Officer

The first answer is yes. The 2% impact has an impact on the volume and there is a direct correlation between those two things. Your second question, there really was moderate volume in Q1 related to Shell and Chevron. Because the -- we had issued cards out there but people have to actually go through the process of going through the conversion and de-activating their old card. And that created a surge within our call center within the first quarter to really go through that process of getting people through, what's the new card program like, and activating them. And so, is similar to any of these conversions. There's just a lot of work that goes into the process. And that work happened in the first quarter and we're really starting to see the benefit of it happening more now.

David Koning -- Robert W. Baird -- Analyst

Okay. That's great. And then I guess my one follow up question. Just to understand the health business and the dynamics there. The 35% or so revenue growth. It seemed half year over year on accounts and half on yield. And I'm wondering where does Discovery, does Discovery help revenue more on the account side, or the yield side, or was it part of both? How do we disaggregate all three of those dynamics?

Melissa Smith -- President and Chief Executive Officer

So, we said that about half was related to Discovery and half was related to organic in terms of the total revenue number for the U.S. healthcare business.

David Koning -- Robert W. Baird -- Analyst

But I guess my question -- The grown in accounts was pretty similar to what it's been. To me, it looked like maybe Discovery comes on without --

Melissa Smith -- President and Chief Executive Officer

I'm sorry. The Discovery was a partner and so the volume was already included in the volume statistics. So, the revenue model changed. But if you look at the volume statistics, they were already being captured largely within the volume that we were already reporting.

David Koning -- Robert W. Baird -- Analyst

Totally makes sense. Thanks for taking my question.

Melissa Smith -- President and Chief Executive Officer

Thank you.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 61 minutes

Call participants:

Steve Elder -- Senior Vice President, Global Investor Relations

Melissa Smith -- President and Chief Executive Officer

Roberto Simon -- Chief Financial Officer

David Koning -- Robert W. Baird -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

Sanjay Sakhrani -- KBW -- analyst

Ramsey El-Assal -- Barclays -- Analyst

Bob Napoli -- William Blair -- Analyst

Oscar Turner -- SunTrust -- Analyst

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