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WEX, Inc. (NYSE:WEX)
Q2 2019 Earnings Call
Aug. 1, 2019, 9:00 a.m. EDT

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Lance and I will be your conference operator today. At this time, I would like to welcome everyone to the WEX Second Quarter 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. And if you would like to queue for questions during that time, simply press star then the number one on your telephone keypad. Thank you. Mr. Steve Elder, Senior Vice President of Global Investor Relations, you may begin your conference.

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 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 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 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 remeasurement 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 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 GAAP net income attributable to shareholders and slide 18 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 obligations 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 morning, everyone, and thank you for joining us today. I'm pleased to announce another quarter of strong execution and robust growth across all of our segments. We expect 2019 will be another significant milestone year as we capitalize on the extraordinary progress we've made in recent years and build on our strong foundation for sustainable growth. Our recent strategic acquisitions, significant new wins in the conversion of both the Shell and Chevron portfolios position us well to accelerate our growth and profitability throughout the remainder of the year and beyond.

Turning to our second-quarter performance, revenue grew 19% compared to last year's second quarter reaching $441.8 million driven by double-digit growth in all of our segments. As expected, we have a number of moving parts that impacted our overall results this quarter, including approximately 10% revenue growth from acquisitions partially offset by negative 2% from macro impacts of fuel prices and foreign exchange rates. The combination of these factors resulted in an 8% increase to our reported revenue growth rate. The remaining 11% of our growth in the quarter came through our existing partners and customers, the addition of new customer and partner contracts, and very high retention rates. GAAP net income attributed to shareholders was $0.32 per diluted share and adjusted net income was $2.28 per diluted share, which is up 10% over the prior year. This was a sequential improvement from Q1 and illustrates the benefit we're getting from the ramp of the Shell and Chevron portfolios where we added costs in preparation for customer conversion.

Turning to slide four. Our business is driven by our team's successful execution of our strategic pillars: 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 ramps we're continuing to generate. In addition, we're 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'm 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, achieving 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 opportunities to continue this trend.

We continue to differentiate WEX as an employer through our culture and 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 five highlights some of our significant new business wins in 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 are 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 2,000 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 [inaudible] [00:08:05], Rowlands, 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 a strong revenue growth of 21% year over year. We saw robust growth in this segment including international markets and corporate payments, 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 check as a form of payment continues. I'm very pleased with the progress we've made with 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've renewed our agreement with getaroom.com, Regents Financial, and a large European OTA. Lastly, our health and employee benefits solution segment also generated very strong topline growth of 55% year over year. On a stand-alone 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 the 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% in revenue. In addition, the integration of Discovery Benefits is progressing well, and we remain confident that we will achieve our previously mentioned $15 million synergy goal on schedule.

Staying on slide five, our industry-leading products and technology continue to fuel our robust growth engine. 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 in developing new products and capabilities. An example of this is expanding the coverage of our mobile payment app, Driver Dash, to more than 25,000 fuel locations, including ExxonMobile and Shell. Our Clear View Data analytics platform now has more than 8,000 users including a roll out to ExxonMobile's fleet in Q2. These are great examples of how WEX keeps the customers at the center and improves our offerings to meet the customers' self-service needs.

From an internal perspective, we're 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, email, and online. In tandem with our investment, we're seeing a significant increase in the percentage of new applications that we've now fully on-boarded digitally.

Internationally, we've implemented the portfolio of Z Energy based in New Zealand, and we're now live with Chevron in Hong Kong. In the travel and corporate payments segment, we optimized 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 U.K. 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 uploads, and a new Cobra member portal open enrollment tool, as well as business intelligent enhancements to the administrator dashboard.

In summary, I'm once again very pleased with our performance in the second quarter 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 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 from 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.

Roberto Simon -- Chief Financial Officer

Good morning, everyone. As you have heard from Melissa, the financial results in the quarter were extremely positive and as expected. On a sequential basis, we more than doubled the revenue growth rate with excellent execution on the Shell and Chevron portfolio conversions, as well as continued progress on the integration of the recent acquisitions, DBI and Noventis. The performance was driven by double-digit top-line growth from each of the segments with notable strengths in several areas. The Shell and Chevron portfolios industry segment, the U.S. corporate payment business, and the U.S. health business. Each of them had significant growth versus prior year and surpassed projections for this quarter. Additionally, the Noventis and Discovery Benefits acquisitions continue to meet expectations. From an earnings point of view, we continue to benefit from vertical growth, which was upset by the continued ramp-up costs for Shell and Chevron, lower fuel prices than Q2 2018, and negative impact from FX rates.

Now, let's take a look at results on slide number seven. Total revenue for the second quarter was $441.8 million, a 19% increase over the prior year. GAAP net income attributable to shareholders was $13.8 million. Non-GAAP adjusted net income was $99.6 million, or $2.28 per diluted share.

Slide eight shows the overall revenue performance broken down by segments. As I just mentioned, total revenue growth was over 19%. Breaking it down health and employee benefit solutions led the growth with 55%. Travel and corporate solutions posted a 21% increase. And finally, the fleet segment had a strong 11% growth rate.

Now, let's move on to segment results starting with fleet on slide number nine. The fleet solutions segment achieved $267.3 million in revenue, an increase of 11% when compared to the prior-year quarter. Payment processing revenue was up 7%, and finance fee revenue was up 38%. As we expected the net late-fee rate was 54 basis points of [inaudible] this quarter from 30 to 38 basis points from Q2 2018. The increasing basis points were due to the Shell and Chevron portfolio conversions and mix of new business wins and small rate increases. We project the rate to grow for the second half of the year. The net payment processing rate was up five basis points from Q2 2018 due to higher diesel fuel FX in the U.S., which we do not expect to continue and lower fuel prices. This was offset by the implementation of Shell and Chevron.

Looking at the fleet revenue in details, the highlights for the quarter include 18% growth in the legacy WEX fleet business, fueled by Shell and Chevron, 11% growth in the Over-The-Road business, driven by customer wins and very strong growth in the Asia-Pac region. Lower fuel prices and FX rates reduced the revenue growth by almost two percentage points versus the prior year. The average domestic fuel pricing in Q2 was $2.91 versus $3.02 in Q2 2018. Similar to last quarter we continued to see positive trends including solid organic transaction growth of 10% of low attrition rates. Finally, in this segment, as Melissa noted, the Shell and Chevron implementations are fully completed, and we have already started to see the benefits of higher revenue growth. Looking forward, we expect this trend to continue in the third and fourth quarters.

Turning to travel and corporate payments segment on slide number 10. Total revenue for the quarter increased 21% to $91.4 million due primarily to the U.S. corporate payment business, lower skim fees which have now contributed revenue, and benefits from the Noventis acquisition, which are approximately $9.5 million in revenue. We continued to see solid growth internationally in Asia-Pac, Europe, and Latin America. In North America, the corporate payment business posted excellent revenue growth of 59%. Purchase volume issued by WEX reached $10 billion. This equates to a 13% growth versus prior year. As expected, volume growth rates have more than doubled from Q1 2019 thanks to the ramp-up of new businesses [inaudible]. Looking forward, we continue to expect full-year volume to accelerate and grow double-digit.

To conclude this segment the net interchange rate was 77 basis points, which was up 20 basis points from Q2 last year. Similar to prior quarter, the increasing net rate is due to a combination of factors. First, the acquisition of Noventis. Second, our renegotiation of one of the OPA contracts that resulted in a move of revenue from other to payment processing. This move had no impact on the economics. Third, the strong performance in the U.S. corporate payments business driven by growth in department channels, which also increased sales and marketing expenses as part of the revenue recognition standard changes. And lastly, domestic and international expense mix within the travel business

Moving onto slide 11. For health and employee benefits 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 in revenue. The average number of SaaS accounts was up 17% relative to 2018 reflecting a robust enrollment season. We had a 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, 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 number 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 and 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 costs increased $22 million primarily due to the DBI and Noventis acquisitions, as well as service operations costs 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 benefits solutions segment and upset by moving volumes of the internal transaction platform in the travel and corporate payment segments. 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 spent 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 expectation and was at $1.2 million compared to 2018 due primarily to higher interest rates and volume growth. G and 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 and 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 number 13. On a GAAP basis, the effective tax rate was 28% compared to 24.2% for the second quarter 2018. On an ANI basis, the tax rate was 25.3% for the quarter and 25.1% for Q2 last year.

Looking now to the balance sheet on slide number 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 card transaction on July 1st. 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 notes. The leverage ratio of the [inaudible] credit agreement stands at approximately 3.8 times up from 3.1 times 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 1/2 a turn to 3/4 of a turn per year. Finally, as of today, we have approximately 65% of the financing debt essentially at fixed rates. This largely mitigates the exposure to rival rates.

To close out the call, let's move on to guidance on slide number 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 macroenvironment to be weaker with lower fuel prices and unfavorable exchange rates when compared to last guidance. The impact of these micro factors is approximately $0.15 of ANI EPS and the updated full-year guidance reflects these changes.

For the full year, we expect revenue to be in the range of $1.72 to $1.75 billion, an adjusted income in the range of $399 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 to $465 million and adjusted net income in the range of $110 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 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 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 operator, please open the line for questions.

Questions and Answers:

Operator

At this time, I would like to remind everyone in order to ask a question, you may press star then the number one on your telephone keypad. Again, that's star then the number one on your telephone keypad. We'll pause for just a moment to compile the question and answer roster.

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

Ramsey El-Assal -- Barclays -- Analyst

Hi guys and thanks for taking my question. I wanted to ask you to give us a little more color on the performance of corporate payments volume growth. Can you parse that out for us in terms of underlying industry verticals, or products, or any other incremental drivers there would be helpful?

Melissa Smith -- President and Chief Executive Officer

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. So, it's now gotten to 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 were up 35% on a same basis, meaning excluding the impact of FX. And so, if you 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 looked 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 volume, as well.

Ramsey El-Assal -- Barclays -- Analyst

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

Roberto Simon -- Chief Financial Officer

Hi, good morning. This is Roberto. So, as I said during the call today the fact that we have now Noventis, which obviously comes with much higher interchange rate. The other thing we did also is on the interchange rate by moving from other revenue into payment processing. We negotiated a contract with one of the big OTAs, which obviously had 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 payment business, which has a much higher interchange rate. So, revenue was up 59%, and volume was up 51%. So, also that piece contributed. Finally, the mix on the travel business that Melissa also mentioned between domestic and international has also driven higher growth on the revenue side.

Ramsey El-Assal -- Barclays -- Analyst

I see so truly it's mix related. It's not price related.

Roberto Simon -- Chief Financial Officer

Correct.

Ramsey El-Assal -- Barclays -- Analyst

I get it. Let me sneak one last one in then I'll hop in the queue. Just some color on your same-store sales verticals en suite. Then I'll hop back in the queue. Thanks.

Melissa Smith -- President and Chief Executive Officer

Same-store sales were down slightly sequentially, 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 slightly positive or slightly negative and then Q2 is slightly negative.

Ramsey El-Assal -- Barclays -- Analyst

Thanks so much.

Operator

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

Sanjay Sakhrani -- KBW -- analyst

Thanks. Good morning. 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 MNA and FX and how significantly different they are versus the initial plan. And then I guess also when I think about the revenues, the revenue guidance for the year went up but the EPS guidance on the top end went down. So, I just wanted to make sure I understood why that was happening.

Roberto Simon -- Chief Financial Officer

Of course. Good morning. 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 increase 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 of July 1st. This will give us a boost of revenue in the second half. We also have better performance on the U.S. corporate payment partner channel. Which, if you remember, when we changed the [inaudible] 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, particularly higher diesel expenses. So, this put all together 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 drives $14 or $15 million in revenue combined with the FX rate 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 of performance versus the macroeconomic headwinds. As I said on the call, the macro headwinds are $0.15 of EPS negative and at midpoint, we are going from $930 to $9.225. So, really, we are covering half of the macroeconomic deterioration and you know, we feel good so far in the year. And you know, we have 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, we are expecting to grow ANI EPS 17%, 18%, which I think is a very solid number for the full year.

Sanjay Sakhrani -- KBW -- analyst

Okay. thank you. 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 think that speaks just for itself in terms of the acceleration but maybe how should we dimensionalize it?

Melissa Smith -- President and Chief Executive Officer

It's something that we've been talking about for the last two quarters. We wanted to make sure it's clear. We invested, particularly with Shell and Chevron, we made investments in advance of the conversion, which is something that normally do with a private label portfolio. It's just that the size of those two portfolios stacked one on top of the other made it much more obviously. So, in the first quarter you saw that drag on earnings, 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. 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 were in implementation mode. That's part of what you're seeing come through in the future revenue guidance and then the earnings life in Q3 and Q4.

Sanjay Sakhrani -- KBW -- analyst

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? Revenue wise?

Melissa Smith -- President and Chief Executive Officer

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

Roberto Simon -- Chief Financial Officer

Sanjay, do 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.

Sanjay Sakhrani -- KBW -- analyst

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

Operator

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

Darrin Peller -- Wolfe Research -- Analyst

All right. Thanks, guys. You know, we saw the finance v. growth in fuel step up a bit after the increased 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 a pricing standpoint over the next several months or quarters? How's the environment feeling around your ability to take price in certain scenarios?

Melissa Smith -- President and Chief Executive Officer

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 [inaudible] partner on how they want that to be presented in the marketplace and what type of fees they want associated with that as part of the initial onboarding. And so, you're seeing a mix effect of some of the choices that they've made rolling through our number Q1, Q2, Q3. And again, you'll start to see that normalize as you get later in the year. So, that's one piece of what you're seeing. The second, just kind of related to your second 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 happened a couple of years ago. It's a place that we just continued to look at across the business to make sure that what we're doing is in line with market. And there's a 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.

Darrin Peller -- Wolfe Research -- Analyst

Let me just follow up. I know the EG group. We saw that went in Europe. I think, you just referenced before also, 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?

Melissa Smith -- President and Chief Executive Officer

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 about that as ramping. And related to your second question, EG fuels. We haven't disclosed the revenue 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 where it's called laterally stages for that customer. We know that it operates on a spread model. Think of it like the rest of the business that we have in the European fleet marketplace. So, similar type of pricing model. Similar type of business is an extension of acceptance. And it's 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.

Darrin Peller -- Wolfe Research -- Analyst

Okay. Thanks, guys.

Operator

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

Jim Schneider -- Goldman Sachs-- Analyst

Good morning. Thanks for taking my question. I was wondering if you can maybe give us a little bit of color about the onboarding 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 accreditive to your overall corporate margins?

Melissa Smith -- President and Chief Executive Officer

I'' start and then I see Roberto's eager, I can tell, to add on to that. shell we actually had fully converted by the end of the first quarter. So, you thought that at full ramp in Q2. Chevron we were converting throughout the course of the second quarter with the last of that happening toward the end of the second quarter very much according to what we had laid out early in the year of our plan and our expectation associated with this contract. So, conversion timing very much on plan and what we've 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 gonna look like. As we have more time with that then we'll get more predictable with what the behavior looks like. But it did a little better than what we expected in the second quarter.

Roberto Simon -- Chief Financial Officer

And what I will add to you, if you think on the second half of the year on a run-rate basis, we have talked a couple of times about the number of gallons that these two portfolios were going to bring in to WEX and converted those gallons at the current fuel prices. We are talking between $60 and $70 million in revenue on a run-rate basis. Obviously, as Melissa said before, expecting now that in the future we could hold those portfolios. But if you take this $60 and $70 million will give you an idea on the second half of the year what to expect on a revenue side.

Jim Schneider -- Goldman Sachs-- Analyst

Thanks that's helpful. And then maybe as a followup. 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 remediated by the synergies you expect through the end of the year, say, exiting Q4?

Roberto Simon -- Chief Financial Officer

There's a lot of moving pieces on the operating margins. In particular with the M and A transaction. What I can tell you is that I'm following on Melissa said before. Not 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 run [inaudible] 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. healthcare 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 quarter, 18%. And we expect that to continue as we move into the second half of the year.

Jim Schneider -- Goldman Sachs-- Analyst

Great, thank you.

Operator

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

Ryan Cary -- Bank of America -- Analyst

... growth in travel and corporate solutions. It seems like growth FX Noventis decelerated a little from the first quarter and was below the full-year range of double-digit organic growth. So, thinking about the full year, could we see organic growth accelerate and is double-digit organic growth still the right way to think about it?

Roberto Simon -- Chief Financial Officer

Hi, this is Roberto. If you remember when we guided earlier in the year on the corporate payment side, we guided on 10% to 15% organic. And obviously those numbers always exclude FX fluctuation, which in this quarter were almost 2% on top of 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 Noventis to add on that as well.

Ryan Cary -- Bank of America -- Analyst

Got it. And I was hoping you could provide some more color on the Brazil business for employee services. 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 benefit from a recovery in the underlying business as well?

Melissa Smith -- President and Chief Executive Officer

Just to put Brazil in 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 continues to be -- is around making sure we're shoring up the control environment. There's been a keen eye to that. Now at the same time, we've been looking at the business itself. We've changed out the management team. You're going to see an announcement late today about the new MD that we're putting in place in 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 gonna 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.

Ryan Cary -- Bank of America -- Analyst

Got it. Thanks for answering my question.

Operator

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

Peter Christiansen -- Citi -- Analyst

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 if you're watching closely, any issues as it relates to the growth there but also perhaps credit issues. And it would be helpful perhaps if you could remind us what is WEX's overall exposure now to the OTR segment. Thank you.

Melissa Smith -- President and Chief Executive Officer

Sure. that part of the business so one of the things that 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 for our customers. That has seen some pressure as there's been rate impacts within that part of the marketplace. The loads are less. But we really hadn't seen any change in credit profile in our population. And just kind of keep in mind that part of the business is paying quickly an average that's got a shorter payment term, more likely to have a deposit associated with an account. And so, we don't tend to have long credit lines for those customers. There's going 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.

Peter Christiansen -- Citi -- Analyst

Thank you. Helpful.

Operator

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

Bob Napoli -- William Blair -- Analyst

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 HAS business. Is there an opportunity to significantly increase the interest income off of the HAS balances? Are you holding those on balance sheet? Who are you partnering with?

Melissa Smith -- President and Chief Executive Officer

We don't hold them on our balance sheet. We do have partners. If you go across the board and think about that business in totality. We work with a number of different banks. And to the extent we were working with the banking partners, they are gonna hold those deposits and they're gonna get the benefit of the interest rate changes. And what we're providing is technology for them. In places where we are -- we have the relationship more directly or we're working with a partner who is interested in us helping direct that then we direct that into partner relationships. And so, we are seeing a little bit of a lift in that revenue stream. It's really small when you think of the size of that 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 with FIs, then we do think you'll continue to see some benefit of that.

Bob Napoli -- William Blair -- Analyst

Thank you. and the travel and corporate solutions segment. How much of that revenue is the old travel business, if you would? The legacy travel business versus the corporate payments business. And that growth rate of over 50%, what percentage of revenue. and that excludes the travel portion, correct?

Melissa Smith -- President and Chief Executive Officer

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 we are selling into the marketplace either through our partner channels or directly. That's grown over 50%. You take that business and split into pieces. You've got travel. You've got corporate payments related to APS. You've got bill pay, which think of that as Noventis acquisition. And we have 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 aggregate up to the total part of that business.

Bob Napoli -- William Blair -- Analyst

Now, the AP piece. How big is the AP piece and that's growing because that's such a huge market?

Melissa Smith -- President and Chief Executive Officer

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

Bob Napoli -- William Blair -- Analyst

Last question real quick. On Go Fuel, the EG fueling, the purchase price for that looked about 10 times revenue. Is that right? I mean, that looks like a pretty high purchase price. Is that business growing really fast and maybe I'm off on the purchase price.

Melissa Smith -- President and Chief Executive Officer

We haven't disclosed the purchase price.

Roberto Simon -- Chief Financial Officer

We have not disclosed the number, Bob. What I can tell you is that we pay. When we go through potential acquisitions, we always look at the market. And all we can tell you is that we pay a multiple either on revenue or on a [inaudible] that was in line with the market. And obviously with expectations that we're going to be growing that business once it's in our hands.

Bob Napoli -- William Blair -- Analyst

That's about a $25 million revenue.

Melissa Smith -- President and Chief Executive Officer

I would put it in the context though in the aspect of growth profile is that it was a piece of EG. And part of what was appealing to us is that it was an asset that we felt if we carve it out that we had an ability to do more with. And they would say the same thing. That they think that it was something that they didn't have time and it wasn't their focus. So, adding on to our existing business, adding it on to the network that we already have. We believe that we have more opportunity to grow than what they've seen historically.

Bob Napoli -- William Blair -- Analyst

Thanks. Congratulations on the strong results.

Operator

Presenters, I turn the call back over to you.

Steve Elder -- Senior Vice President, Global Investor Relations

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.

...

Operator

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

Duration: 59 minutes

Call participants:

Melissa Smith -- President and Chief Executive Officer

Steve Elder -- Senior Vice President, Global Investor Relations

Roberto Simon -- Chief Financial Officer

Ramsey El-Assal -- Barclays -- Analyst

Sanjay Sakhrani -- KBW -- analyst

Darrin Peller -- Wolfe Research -- Analyst

Jim Schneider -- Goldman Sachs-- Analyst

Ryan Cary -- Bank of America -- Analyst

Peter Christiansen -- Citi -- Analyst

Bob Napoli -- William Blair -- Analyst

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