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FleetCor Technologies Inc (NYSE:FLT)
Q3 2019 Earnings Call
Nov 6, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Fleetcor Technologies Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would like to turn the conference over to our host, Mr. Jim Eglseder, Head of Investor Relations for Fleetcor Technologies. Thank you, sir. You may begin.

James Eglseder -- Head, Investor Relations

Good afternoon, everyone, and thank you for joining us today for our third quarter 2019 earnings call. With me today are Ron Clarke, our Chairman and CEO and Eric Dey, our CFO. Following comments from both Ron and Eric. The operator will announce your opportunity to get into the queue for Q&A session. It is only then that the queue will open for questions. Please note, our earnings release and supplement can be found under the Investor Relations section of our website at fleetcor.com. Throughout this call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income and adjusted net income per diluted share. This information is not calculated in accordance with GAAP and may be calculated differently than non-GAAP information at other companies.

Reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today's press release and on our website as previously described. We also are providing updated 2019 guidance under the GAAP and non-GAAP basis with reconciliations. Now, before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. This includes forward-looking statements about our guidance and outlook, new products and fee initiatives and expectations regarding business developments and acquisitions. They are not guarantees of future performance and, therefore, you should not put undue reliance upon them.

These results are subject to numerous risks and uncertainties which could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today's press release on Form 8-K and on our Annual Report Form 10-K filed with the Securities and Exchange Commission. These documents are available on our website and at www.sec.gov.

With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Okay, Jim, thanks. Good afternoon, everyone, and thanks for joining our third quarter earnings call. Upfront here I'll plan to cover three subjects. First, I'll provide my perspective on our Q3 results and outlook for Q4. Second, I'll share our continued progress on our beyond initiative, and lastly, I'll update you on the acquisition front.

Okay, so on to Q3. We reported Q3 revenue of $681 million, up 10% and $3.10 in cash EPS up 16%, on a constant macro and constant scope basis or what we call like-for-like basis, revenue was up 11% and cash EPS, up approximately 17%. So right in-line with our targets. Overall organic revenue growth was 11% in Q3 with fuel card organic revenue growth finishing at 10% in the quarter. Our global fuel card revenue represented about 42% of our overall consolidated Q3 revenue. Our three non-fuel lines of business performed quite well with lodging and toll revenue both up 17% and corporate pay revenue up 24%. The volume growth, quite strong in all three non-fuel lines of business. In lodging, our SMB room nights, were up 10%, in total our active tags up 8%, and corporate pay, our virtual card spend up 14%.

So healthy volume growth in each business. Our trends in the quarter also quite good. Our new sales or new bookings up 14% versus the prior year. And once again, we signed up over 30,000 new business accounts to our various programs, that represents over $100 million of new annualized recurring revenue. So real demand for our offerings. On same-store sales, rebounded quite nicely into the plus column, plus 1%. Inside of that number, various puts and takes. Our trucking business quite soft, really everywhere, here in the US, in the UK, and even in Brazil. That was offset by strength in our Mexico and Russia fuel card business and within our corporate payments business.

Our client or business retention continued quite steady at 92%, so obviously pleased with that. Our balance sheet, in a very good place leverage finished below two times, and we now have approximately $1.3 billion available on our revolver. So well positioned to allocate capital to buybacks and/or acquisitions and given the some recent weakness with tech IPOs, maybe valuations will come down.

So in summary, Q3, another clean solid quarter. Organic revenue growth 11%, profit growth 16%. Strong volume growth in our three non-fuel businesses, continued positive sales retention and same-store sales trends. And lastly, Q3 profits finishing at the top of our guidance range. Okay. Let me make a turn to our outlook for Q4. We're confirming overall organic revenue growth guidance of 9% to 11% for Q4, with fuel card organic revenue growth in the 7% to 9% range that's on tougher comps. We're raising full-year 2019 cash EPS guidance to $11.73 at the midpoint, that reflects our $0.05 Q3 beat to guidance. Just as a reminder, our initial 2019 full-year guidance from February was $11.55.

The assumptions within our updated rest of year guidance versus last time we spoke, slightly less favorable macro primarily due to FX weakness in Brazil, but that will be offset by higher acquisition contribution, the TA deal which closed October 1. Okay. Let me transition to an update of our beyond strategy initiatives. Just as a reminder, our beyond strategy idea is really twofold. First, to offer our existing clients the opportunity to spend more with us by expanding the network in which they can make purchases. And then second, to attract new customers, and/or new customer segments to which our expanded network appeals.

So for example, offering urban or city drivers in Brazil, the option of using our RFID parking and fueling sites in the city. So let's start off with beyond fuel, here in the US. Another good quarter. We activated approximately 1,500 new beyond fuel clients in Q3. That's out of roughly 100,000 existing US fuel card clients that we're targeting. These companion card clients, those that purchase both fuel and non-fuel, spend about 50% more and generate 25% more revenue per account than pure US fuel clients. In addition, 20% of all new Q3 fuel card sales in the US were to beyond fuel or two for clients. Those choosing the option to purchase non-fuel items in addition to fuel.

Moving on to beyond toll in Brazil. ***Part 2***

Q3 continued further adoption of our $5 million existing toll users there. The Fuel transactions grew nicely, up 60% in Q3 versus the prior year. The McDonald's transactions crazy, reached $460,000 in the quarter, up sequentially from Q2, and we estimate on track now to reach $3 million, next year, in 2020. But maybe, more importantly, is the impact of beyond toll in attracting these new urban or city users. So the new urban sticker users, added in Q3 was 58,000, that's up from 3,500 in Q1 and 18,000 in Q2.

So the idea of attracting some of the potential $20 million Brazil city drivers to our beyond toll offering is starting to materialize. Okay. In our corporate payments business, historically, we've relied on the virtual card as our primary, go-to-market offering. But now, with the recent invoice pay acquisition, we plan to broaden our go-to-market approach, with four offerings. So one will be plastics offering simple peak card programs as an initial entree into the Accounts Payable space. Two, virtual cards for clients who want to digitize some but not all of their payables. Third, full AP for clients who want to transform their entire AP process and make a 100% of their payables electronic. And then, lastly, cross-border payments for clients who have some international payments who want a simple and integrated way to make those payments from the same user interface.

In Q3, about 14% of our overall payables revenue excluding cross border was from full AP, so up from a fraction earlier in the year. So we expect this four-prong payables product line to dramatically strengthen our market position as we move into 2020. So, to us, the beyond strategy initiative is now working, on both fronts. It's increasing the spend in revenue that we get from existing fuel toll and virtual card clients, and maybe, more importantly, the beyond offer is attracting new types, new kinds of clients to our programs.

Again, as I said, 20% of all new US fuel card clients sold in Q3 with the beyond offer and 20% of all new Brazil tag users in Q3 to the beyond toll offer so starting to become material.

Okay. Last up is acquisitions. We're delighted to announce the acquisition of Travelliance, in early October. This was one of the deals we mentioned on our last call that was close in, and we're pleased to have completed that deal. TA broadens our existing lodging business into the airline segment, cruise, distressed passengers, even airline personnel and because it's global, it has international hotel coverage and feet on the street capabilities. This reflects our strategy of entering adjacent lodging segments so in this case airlines. But there is others like Corporate apartments or corporate meetings, that could expand the TAM of our hotel line of business.

We paid about $120 million for TA. Annualized revenue, approximately $50 million with 20% EBITDA margins. Looking for TA to be accretive in 2020. In terms of pipeline, still quite active. Currently, we're working four or five tuck-in opportunities in our fuel lodging and corporate pay spaces. And as I mentioned earlier, plenty of liquidity to pursue them. So in closing, we had a very good Q3 double-digit revenue and profit growth and continued good trends. Q4 outlook is maintained despite the less favorable FX in Brazil. Our beyond strategy gaining more traction. We're capturing additional spend from existing clients, and again, extending the TAM and the new prospects base for our services. We continue to close tuck-in deals and have additional opportunities in the works.

So with that, now, let me turn the call back over to Eric to provide some additional details on the quarter. Eric?

Eric Dey -- Chief Financial Officer & Corporate Secretary

Thank you, Ron. For the third quarter of 2019, we reported revenue of $681 million, up 10% compared to $619.6 million in the third quarter of 2018. GAAP net income increased 43% to $225.8 million from $157.7 million, and GAAP net income per diluted share increased 46% to $2.49 from $1.71 in the third quarter of 2018.

As a reminder, included in the third quarter of 2018 results, was a $23 million true-up charge to income taxes related to the transition tax liability originally recorded at the end of 2017 in connection with US tax reform which reduced the GAAP net income and GAAP net income per diluted share in the quarter. Non-GAAP financial metrics that we'll be discussing are adjusted net income and adjusted net income per diluted share, for which the reconciliation to GAAP numbers is provided in Exhibit One of our press release. Adjusted net income for the third quarter of 2019 increased 14% to $280.6 million compared to $246.6 million in the same period last year.

And adjusted net income per diluted share increased 16% to $3.10 compared with $2.68 in adjusted net income per diluted share in the third quarter of 2018. Third quarter results reflect a negative year-over-year impact from the macroeconomic environment of approximately $7 million in revenue. The macro impact was primarily due to lower foreign exchange rates when compared with the third quarter of 2018, which we believe negatively impacted revenue by approximately $7 million, due primarily to unfavorable foreign exchange rates in Brazil and the UK.

Fuel prices were also slightly worse year-over-year in the third quarter. And although, we cannot precisely calculate the impact of these changes, we believe it negatively impacted revenue by approximately $3 million in the quarter. This negative impact was partially offset by $3 million favorable impact in fuel spreads. Organic revenue growth after adjusting out the impact of the macroeconomic environment and the Chevron deconversion was approximately 11% for the third quarter of 2019. And all major product categories performed well during the quarter. Organic growth in our fuel card business was 10% excluding the deconversion of the Chevron portfolio driven by solid growth in most of our fuel card businesses.

And our beyond fuel initiatives contributed about one to two points of growth during the third quarter. The Corporate Payments category continues to perform well and was up 24% organically during the quarter. The growth in Corporate Payments was driven by both our cross-border business, which grew in excess of 30% again in the quarter, and our Comdata Corporate Payments business, which grew in the upper teens. Both our toll business and our lodging business were up 17%, organically.

So all in all, another very good quarter for our nonfuel businesses, resulting in very strong organic growth performance in the quarter. Same-store-sales also improved sequentially from a decrease of approximately 1% in the second quarter, to an increase of approximately 1% in the third quarter. There are a lot of puts and takes between our businesses around the world, but generally, our Mexico and Russia Fuel card businesses, and our corporate payments businesses were strong in the quarter. That was partially offset by our trucking business in the US, in the UK and Brazil, that were a bit soft in the quarter. Now moving down the income statement. Total operating expenses were up 4% for the third ***Part 3***

quarter of 2019, the $351.9 million compared with $338.5 million in the third quarter of 2018. The increase was primarily due to acquisitions and normal growth in our operations. As a percentage of total revenues, operating expenses were approximately 51.7% compared to 54.6% in the third quarter of 2018. Including in operating expenses are credit losses of $15 million for the third quarter, or five basis points versus $17 million or six basis points in the third quarter of 2018. As expected, we've begun to see the reduction in losses as a result of some new AI tools and processes we put in place earlier this year.

And we continue to expect more improvement as the fuel stations implement EMV card terminals through 2020. Depreciation and amortization expense was flat at $67.3 million in the third quarter of 2019, compared to $67.3 million in the third quarter of 2018. Interest expense increased 1% to $36.5 million compared to $36.1 million in the third quarter of 2018. The increase in interest expense was due primarily to the impact of acquisitions closed in 2019 and higher LIBOR rates compared with last year.

Our effective tax rate for the third quarter of 2019 was 22.9% compared to 33.6% for the third quarter of 2018. The 2018 third quarter tax rate included a $23 million true-up of our provisional transition tax liability originally recorded at the end of 2017 in connection with US tax reform. If we exclude the impact of the transitional tax adjustment, the tax rate for the third quarter of 2018 would have been 23.4%. Now turning to the balance sheet. We ended the quarter with $1,470 million in total cash. Approximately $412 million is restricted and consists primarily of customer deposits.

As of September 30, 2019 we had about $3.5 billion outstanding on our term loans and revolver. And approximately $1,285 million of undrawn availability . We also had $992 million borrowed in our securitization facility at the end of the quarter. In the third quarter of 2019, we repurchased approximately 184,000 shares of our stock for $55 million and we have $489 million remaining under our current authorization. The Board has authorized an additional $1 billion increase in the share buyback authorization, and we now have nearly $1.5 billion in total capacity.

As of September 30, 2019, our leverage ratio was 1.98 times EBITDA as calculated under our credit agreement. Which is well below our covenant level of 4 times EBITDA. Given our leverage ratio and current liquidity, we believe we have ample dry powder to pursue both our M&A objectives and share buybacks. We intend to use our future excess cash flow to temporarily pay down the balance on our revolving credit facility and securitization facility and maintain liquidity for acquisitions and other corporate purposes. And as a reminder though our first use of liquidity will continue to be M&A.

Finally, we spent approximately $16.7 million on capex during the third quarter of 2019. Now, onto the update for 2019. First, we are raising our adjusted net income per diluted share guidance by $0.05 to $11.73 at the midpoint to reflect our third quarter results compared to our expectations. As always, we expect a few moving parts in our balance of the year guidance. For the balance of the year, we expect the macro impact to be approximately $10 million worse than our prior guidance due primarily to lower fuel prices and unfavorable foreign exchange rates. However, the impact of the Travelliance acquisition will offset the impact of the unfavorable macro. So taken in total, these puts and takes net to zero in terms of financial impact for the fourth quarter. Please refer to our third quarter earnings call supplement for additional information regarding our guidance. So with that out of the way, our guidance is as follows. Total revenues to be between $2,640 million and $2,660 million.

GAAP net income to be between $880 million and $900 million. GAAP net income per diluted share to be between $9.80 and $9.90. Adjusted net income to be between $1,050 million and $1,070 million, and adjusted net income per diluted share to be between $11.68 and $11.78. And some of the assumptions we have made in preparing the guidance includes the following; weighted fuel prices equal to $2.73 per gallon average in the US for the fourth quarter. Market spreads, well below the fourth quarter of 2018 average, foreign exchange rates equal to the month of September 2019 average, interest expense of $150 million to $155 million for the full-year.

Approximately, $90.3 million fully diluted shares outstanding for 2019. Adjusted tax rate of approximately 23% for the full-year. And no impact related to acquisitions or material new partnership agreements not already disclosed.

And with that said, operator, we'll open it up for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

Our first question is from Sanjay Sakhrani with KBW. Please go ahead.

Sanjay Sakhrani -- KBW -- Analyst

Thanks and good results. Ron, thanks for the comments on the M&A pipeline. I'm just curious if there are any larger size deals that you're interested in the market in the pipeline and then specifically the travel lines. Could you maybe just walk through the synergy thesis there?

Ronald Clarke -- Chairman, President & Chief Executive Officer

What's larger, Sanjay, to you?

Sanjay Sakhrani -- KBW -- Analyst

Not a bolt-on, more transformative.

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yes. So I would say at the -- the list in front of me. We have two out of the -- out of the five things we're working on where the number would start with a B for the billion. So I don't know if you call those large, but they are more than tuck-ins.

Sanjay Sakhrani -- KBW -- Analyst

And when we think about the probability of that type of deal happening sooner than later. I mean is it the valuations that's still quite high.

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, the valuations are I think we said a million times for us it's really the conviction around the forward numbers. And so in those cases, we are, we are working to see if we can get the conviction that forward numbers where we can make return. So I'd say those deals that are bigger are earlier than some of the other things we're looking at.

Sanjay Sakhrani -- KBW -- Analyst

Okay, great. And then as far as the travel lines sort of synergies that you might be able to extract, could you just maybe talk through sort of time frame and the thesis there. And then, just a quick question on gift. Then, I know it's a smaller part of the total. But the weakness there in terms of revenues. Could you just talk about what's driving that? Thanks.

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, let me start with with TA so at the headline level, I'd say that our early view is we'll double the profits of that business in 2020 and I'd say the two key synergies are first the hotel arbitrage. So we share I think about 8,000 hotels that we have in common. And we have much larger volumes in a lot of those hotels and so we have better rates. So we'll pick up arbitrage basically on our rate versus TAs. And then second, I'd say the whole back office, like we've got a lodging business that's got a decent back office around, finance, HR, and IT, and so we've got a bunch of synergies planned on the back office. So those -- those two things will drive the doubling of profits next year.

Sanjay Sakhrani -- KBW -- Analyst

Great. And the...

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, yes, this is really ***Part 4***

just timing as you know the -- one of our least favorite things about that business is, you know the seasonality and the bumpiness of orders you know it's a number of pretty large clients and they make orders of significant size. So sometimes those orders come in in a quarter or get pushed and so in this case, fundamentally, we're moving forward into Q4. Some of the revenue we expected in Q3.

Sanjay Sakhrani -- KBW -- Analyst

Thank you.

Operator

Our next question is from Trevor Williams with Jefferies. Please go ahead.

Trevor Williams -- Jefferies -- Analyst

Hey, thanks, good afternoon. One from me on beyond fuel. Ron, appreciate the color on the Q3 uptake and I'll just ask all of my questions upfront. So first, do you mind reminding us what percentage of the 100,000 US fuel customers that you guys have marketed the program to, and then second, I was just curious, more on the trends that you've seen from the Q1 and Q2 cohorts. I know you guys have said in the past, you've seen an average initial uplift in spend around 40%, but was just hoping you could give us some color around how that growth has trended in the quarters that follow. So thanks.

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, good -- both good questions. So of the 100,000 kind of credit-worthy targets. I think we're in about two-thirds call it 65,000 that we've marketed to kind of year-to-date. So we keep adding 10,000 or 20,000 every quarter to target. I think we're up to I want to attach rate in the 6,000 clients or 7000 clients now. Two, the book in total is spending about 50% more, that 7,000 out of the 100 that are going beyond fuel and buying non-fuel spend about 50% more with us which turns into about 25% more revenue. But the hope, the idea that we're working now is whether the non-fuel spend could be dramatically higher, multiples of five times or 10 times. What the fuel spend is, and really, we limited it artificially going in by creating credit lines and credit limits proportionate to fuel rather than credit limits proportional to the client's ability to repay.

So we are actually in test now with the with a subset of those 7,000 accounts. The increase in the credit line and seeing if we can expand the non-fuel spend by again multiples of five times or 10 times. So, the early view of that is positive, but I'd say that could drive the 2020 success really as much as the continued attach rate.

Trevor Williams -- Jefferies -- Analyst

Great, thanks very much.

Operator

Our next question is from Bob Napoli with William Blair. Please go ahead.

Robert Napoli -- William Blair -- Analyst

Thank you. Nice quarter. Well done, the corporate payments business, Ron, is you had 30% revenue growth and your revenue per transaction was up quite a bit. I I think you lapped the invoice pay acquisition, first quarter. That is -- but what is the outlook for that, what do you expect for that business? I generally think of the accounts payable piece to be a big market, but lower revenue per transaction, your revenue per transaction was up 20% year-over-year. So, just some thoughts on -- on that business, on maybe the mix of revenues cross-border versus virtual card and the long-term growth and how AP fits into that?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, Bob, I mean, as you know, it's -- it's a great line of business with a huge TAM, that invoice pay deal I believe closed April 1 so we're not close yet to the lapping that, and frankly all the components, all the offerings there, invoice pay with full AP, our core virtual car business, our plastics business, and particularly, our cross-border, all of them are growing really well, year-to-date 2019. I think again our plan for that business, although not baked, is to try to guide that stuff still into the mid-teens, which again for us is really a function of, like I say all the time, sales investment relative to the base.

So if the base keeps getting bigger, which it does, we have to modulate up our sales investment to keep that base growing 15%. So we kind of design or engineer our way. If we thought we could invest a bit more and not have too many new people or too many new marketing programs, we might try to step it up some, but we want to maintain quality right in terms of the on-boarding and the client service so we're trying to, say, do it in a controlled way but effectively grow the business in a controlled way.

Robert Napoli -- William Blair -- Analyst

Where are the risk, there is a lot of investment going into that market and a lot of innovation, where do you have -- where are you most paying attention to the competitive front and where it'll affect your business?

Ronald Clarke -- Chairman, President & Chief Executive Officer

And yeah, I think, I've said this before, we love the breath now of our game. There are people quite mad at niche [Phonetic] right. There are some -- there are some pure full AP players, there is obviously some pure plastics players, there's banks, they're subcontracting virtual card processing. So the first thing I'd say is I like the fact that we've got a broader solution set than most of the others that play in the game.

And then, second, I say it over and over again. It's a distribution game. Right. These are relatively new services and require education and communication and so, having the salesforce that can go out and communicate and brief perspective accounts, I think is still our main advantage. And then third is, because we get out earlier than other people, our merchant network, and the quality of the data and the ability to fulfill payments with a high degree of accuracy is a huge part of the game. So those advantages, I think bode well. It's not that there aren't other people chasing, but we really like how we're -- we're set up.

Robert Napoli -- William Blair -- Analyst

Thank you. Appreciate it.

Operator

Our next question is from Ryan Cary with Bank of America. Please go ahead.

Ryan Cary -- Bank of America Merrill Lynch -- Analyst

Hi, guys. Thanks for taking my question. We heard WEX call it a weaker demand environment in the quarter, particularly in the fleet business. And while I know you called out some headwinds in US trucking. It doesn't sound like the headwinds that you're seeing are quite as meaningful. So first, are you modeling any slowdown in demand in the Fuel business as compared to your prior expectations. And second, is there anything you could provide on demand trends quarter-to-date?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, Ryan. Hey. It's Ron. So -- so, you got it right. I'd say in terms of our same-store base, I think, globally, we reported a plus one back into the plus column and I did call out trucking soft here in the UK and Brazil. I'd say other than that, the trends look relatively consistent for us, year-to-date, through the first three quarters. I think year-to-date, we had a -- I can't remember, zero, a minus one, and a plus one, so kind of flat on same-store through the first three quarters. I think last year we did a bit better, we were plus one or two, but no, I wouldn't say, per your WEX comment, that we're seeing other than the trucking call out anything different than what we've seen.

Ryan Cary -- Bank of America Merrill Lynch -- Analyst

Got it. And then just moving to the Toll side interesting to hear how beyond toll has driven the acceleration in new urban sticker users. How has that growth impacted merchant and balance. Is there anything stopping you from meaningfully expanding the acceptance footprint and what does it take for the merchant themselves to kind of introduce the payment capability of accepting one of the toll tags?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, I mean, frankly, you know, I think we're a bit blown away by the pace, I don't know if you picked up the numbers for my opening remarks, but we turn and basically went after these urban users who were not obviously heavy toll users. Right. But there are -- there a huge group and to go from focusing on one channel, we started in the gas station channel trying to add these people, added 3,500, step that up to 18,000, when I saw the number for Q3 that we've gotten to 58,000, and they're out looking again another 50,000 a quarter, this quarter. I mean, the the distribution channels, we've opened up more of our traditional store retail digital channels to now target these urban people.

So that's what's causing a significant step up. You're right, it is a chicken and an egg. The bigger the network that we can offer to people, the more attractive our offer is, right. If we had fueling station, twice as many parking, twice as many fast food, that would be even more appealing. But I think we've obviously got enough is what the data tells me to attract people. And so we're going to chicken and egg it. We're going to keep trying to add urban users to generate revenue. We're going to keep expanding ***Part 5***

each one of those three networks, which we have over the last couple of years. And so I think again as you look into the mid-term and that network, it's more build out. Our returns will get better, right. We'll be spending less money building out the network, and obviously more money hopefully churn on the crank. In terms of digits and stuff, I'd say the fueling challenge is higher than the parking, or the fast food. The nature of having multiple lanes and the vehicles moving, and the way the equipment and staff sets up is -- is a bit more complex than that gas station environment. So it's not particularly difficult at stationary like the fast food where the thing comes through one line -- one lane the whole way. So tougher in fuel, and easier in parking and fast food. And clearly, as I've said before, there are additional merchants in every one of those areas now interested in joining the program.

So once we showed people come of the Shell, then the other fuel guys want to be in, and once we've shown the McDonald's is working, the other fast food people want to come in. Once we sign up the next biggest parking operator, then we get calls for the next set of parking operators. Once we get the first rental tower company in, in line, now, the other rental car companies are calling, so once you prove out that your client base will go to those merchants, you attract yet more merchants. So it's really, I keep telling you guys, it's a great model. The question is really just the pace at which we can do it.

Ryan Cary -- Bank of America Merrill Lynch -- Analyst

Got it. Thank you for taking my question.

Operator

Our next question is from Ashish Sabadra with Deutsche Bank. Please go ahead.

Ashish Sabadra -- Deutsche Bank -- Analyst

Thanks, congrats. Congrats on such a solid quarter, particularly for the next queued gift card. The growth was even stronger. Just my question on the corporate payments side. So I was wondering if you could share what the bookings growth was there, and then, thanks for classifying out that the -- how big the full AP is, I was just wondering if you could share some -- what's driving the growth and like how you're going to market in the full AP solution space? How -- what kind of traction you're seeing on cross-sell as well as new wins and how you're using the data on existing relationship to sell more into that customer base? Thanks.

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yes. Ashish, it's Ron. Were you looking for the sales in corporate pay. Is that what your question -- first question was?

Ashish Sabadra -- Deutsche Bank -- Analyst

Yeah. We're looking -- yeah. Looking at growth in corporate pay, our sales bookings growth in corporate pay?

Ronald Clarke -- Chairman, President & Chief Executive Officer

You guys have that. I'm finding --

Eric Dey -- Chief Financial Officer & Corporate Secretary

Ron was just taking a peak for it.

Ashish Sabadra -- Deutsche Bank -- Analyst

Or I can get that offline. I was just more interested in how you're driving new sales and what learnings you've had and how we can see that potential sale process accelerate going forward?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, I mean the marketing, I'd say is evolving. Right. So we had a number of separate pieces as I mentioned earlier, the core Comdata business, Ashish, we owned five years ago, pushed basically plastics, P-cards and virtual cards, and obviously, invoice pay had then 10 years, 15 years building itself up as a full AP provider. And obviously, Cambridge we bought, whatever, two years ago, has been up a cross-border specialist and so I'd say that the main change we're going through is trying to integrate that package and that marketing message, so that we can take the power of having lots of ways to help a company, a corporation, make payments and make them aware of all the different programs that we've got. They want to start, super-simple. We can compete with P-card guys, they want to get rid of their paper, we can give them a virtual card, they want to transform.

So I'd say that the integration and the consolidation is the biggest change. With that said, we still have field specialists behind each one of those products. So we have people that are obviously super trained in virtual card, super trained in full AP and super trained in cross-border. And so what we're trying to figure out is the the account manager lead if you will, and the marketing lead that provides the consolidated set of solutions and then still have specialist that can go deep in terms of presenting our particular solution. So that's what's going on now. We're trying to make a turn from effectively pedaling one program. One service at a time to marketing something more comprehensive. And I think when we do that, if we do that, the returns will be way better and bigger because you can generate more interest from a prospect. Right. Offering a broader set of solutions from.

Ashish Sabadra -- Deutsche Bank -- Analyst

Yeah, no, that's helpful. And maybe, just a preliminary look at next year going into 2020. Is this kind of accelerated 9% to 11% organic growth sustainable just given that you will be hearing some difficult comps going into next year and the same thing on fuel cards, any thoughts how we think about the growth there?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, I'd say, it's still early days for us for 2020. We're in fact that -- had a couple of budget reviews today and yesterday. So I'd say we're in the middle, Ashish, of our 2020 planning. I guess what I would say is that we go into this every year, with the same aspiration which is to build plans across these businesses that can hit the goals that we set out, which are kind of 10% and 13%, and then, use in our free cash flow and capital to boost profits to the 15% to 20% range and so what I'd tell you is that Eric and I are coming in, trying to build plans that can trade off, that can hopefully stay on that same track, but it would be I think premature because we don't have the stuff consolidated to really give you any other guidance. I mean obviously Eric will be back in [Indecipherable] that's correct?

Eric Dey -- Chief Financial Officer & Corporate Secretary

Yeah, I agree, Ashish. So I mean we're kind of right in the middle of the process and we'll have obviously a lot more to say, we get to the Q4 earnings call. But remember, Ashish, which you know well. The beautiful thing about this business is the recurring model and so if you have a good '19 it helps you already have a good '20. So just to repark that in your guys mind that the modeling that we do is based on exit rates. And if you look at our four-quarter stack up, you'll see sequential acceleration obviously in revenues right in our business. So, obviously assuming our trends like our retention, which we quoted, stay in-line that obviously creates built-in growth as we roll into next year.

Ashish Sabadra -- Deutsche Bank -- Analyst

Yeah, that's great. Congrats once again on a solid quarter. Thanks.

Eric Dey -- Chief Financial Officer & Corporate Secretary

Thanks, my friend.

Operator

Our next question is from John Davis with Raymond James. Please go ahead.

John Davis -- Raymond James -- Analyst

Hey, good afternoon, guys. I just wanted to follow up a little bit on the same-store-sales commentary. Ron, I think you called out US trucking softness. It sounds like the good guy this quarter was corporate payments. Any insights to macro trends, just from that business and what you're seeing the businesses macro slightly better, getting slightly worse, any insights there would be helpful.

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, I think the magic in the payables or Corporate Payments business is in the model again. It's not so much if the clients are healthier or not. Then in fuel cards if you went into a client, let's say, that had a 1,000 invoices and we went in and paid 20% of them, we paid 200 of them.

First of all, there, number of invoices and expenses tend to grow every year. And then second, our share, the 20% can grow. So effectively the model if you will, is built to -- to grow, to step-up, if you will, quarter-over-quarter, year-over-year. So I'd say that's the difference, if you will, between the fuel card business where they've got to go from 10 drivers, you know, to 11. Their revenues have to go up, they have to decide, they're going to spend more on drivers and stuff. And so I think the model just lends itself, if you will, to a bit better same-store sales and as the mix, that business has grown a bit faster. So as that becomes a bigger part of our mix, it obviously helps our overall consolidated same-store number.

But again, I think we feel comfortable. We're happy with plus one, it's pretty balanced. Other than the trucking call out, and for earlier, we don't really see anything even through October here that's any different than what we've experienced kind of year-to-date.

John Davis -- Raymond James -- Analyst

Okay and then just -- that's helpful. Just as a quick follow-up on the M&A landscape, and specifically around corporate payments. Appreciate your comments about valuations. We'll see what the impact is there. First thing that came to mind for me, was maybe somebody's high flying, B2B payments companies maybe are having a little bit of reality check with what's going on in the public markets. So is there any specific capabilities or geographies that you view as attractive or kind of top of the list as you look at M&A opportunities in corporate payments?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, I mean, again, the good news is we kind of have a lot again of the products that we now have, a full AP even though there are other people to do ***Part 6***

that, we have virtual card processing, even though there's a few people that they do that. We have a merchant network. So we have a lot of the capabilities. I'd say we're always on the look out for either complementary market segments or verticals. So for example, we've got a pretty big position in construction I think it's a quarter or a third of our -- of our corporate payments business. So if there were another company that had, you know, a third in media or a third, let's say, in healthcare, but no thanks for healthcare. Third in something else, third in property management, some other kind of complementary vertical we'd like that or B, some of it has some different kind of sell-in capacity.

You know, who's found some way to crack digital selling for example or figured out some kind of a new partner channel. Those would be, I think the couple of things that we would look for. Again this, the core AP business is most attractive here in all -- in all USA, because we're the world's slowest in getting off the paper, as you know, still going to have paper. The rest of the plan, it seems to have done a better job than us. So I'd say that for now, most of our focus is still on targets in that corporate pay segment that are US-based.

John Davis -- Raymond James -- Analyst

Okay, all right. Great. Thanks, guys.

Operator

Our next question is from Andrew Jeffrey with SunTrust. Please go ahead.

Jennifer Dugan -- SunTrust -- Analyst

Hi, thanks. It's Jenny Dugan on for Andrew. Just thinking about the macro impact on fuel is it -- is the headwind more from pricing or is it miles driven. What metrics should we be watching there?

Ronald Clarke -- Chairman, President & Chief Executive Officer

I have to add, Jenny, one more time, is the headwind...

Jennifer Dugan -- SunTrust -- Analyst

Is the headwind coming more from pricing or from miles driver?

Ronald Clarke -- Chairman, President & Chief Executive Officer

I don't think it's from pricing. I think it's softness in the -- it's just in the channel of trucking right at the loads. The capacity of the drivers, just what they're delivering. And then second is what you're saying it's vehicle or fuel efficiency. Those would be the couple of things creating the slowdown.

Jennifer Dugan -- SunTrust -- Analyst

Okay. And then do you anticipate us getting to a point soon where it's going to start hitting on like loss rates will go up and start hitting segment profitability?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Our loss rates, in what, in the trucking business?

Jennifer Dugan -- SunTrust -- Analyst

Yes.

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah. Our loss rates are -- in that business are low single-digit. And I'd say at least half of whatever we lose there is Credit, is us exiting some more challenge kind of trucking companies for credit. So I don't think so. I mean, even though the thing has slowed. It's clearly a necessary US way of delivering. And so I think it -- may be you could continue to slow in the vehicle efficiencies, probably a point or two drag, as you roll forward. But no, we don't see anything in the numbers that suggest a spike in attrition.

Eric Dey -- Chief Financial Officer & Corporate Secretary

Yeah, hey, Jenny. Also to add on to that, from a loss perspective, I mean, we have lots of tools that we've implemented over the last couple of years that helps us to kind of manage credit losses and manage the credit worthiness of the accounts and we tend to manage our losses through lots of different things, including payment terms. So think of -- think of account that would be probably less creditworthy would have more frequent payment terms and less days to pay because we want to manage the amount of our credit exposure through that.

So, we're constantly looking at and evolving the way we build those type of accounts.

Jennifer Dugan -- SunTrust -- Analyst

Great, thank you so much.

Operator

Our next question comes from Ramsey El Assal with Barclays. Please go ahead.

Unidentified Participant

Hey, guys. How's it going? It's Damian on for Ramsey. I'm just hoping to take a step back here on the B2B business obviously Visa, Mastercard are intensifying their focus on B2B payments. Just want to get your take on how that changes the dynamic in your business. Presumably better, it's sort of a rising tide lifts all ships, but then it maybe-- then you could break out the growth rates of the various products or channels within corporate payments. For example, I'm assuming the partner channel is probably growing a little bit faster than the direct given the fast growth of some of the -- the AP automation start-ups. But I just wanted get your take on this couple of things.

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, Damian. Hey, it's Ron. So I would say to answer [Phonetic] the first point to have Visa and Mastercard, the big fans of this Corporate Payments or B2B space is great. I mean I think it helps both PR and marketing, and awareness and stuff. So I think it certainly softens the beaches as we go out and there is obviously both super helpful to us both in research and they are working on some products and some ways that hopefully make us more effective and so I'd say that that's all good.

In terms of the components, yes, I'd say that the reason the channel think and grow faster is there's two things going on. One is the channel partners that we already have are pouring more money in. So take Avid, who's a been a client of ours for a while, they're continuing to ramp up sales and marketing spending so they grow, and then B, we add new channel partners and so in the direct business we mostly just do the second thing, right, we add new clients that we don't have. But in the channel business, for example, we brought on Bill.com as a partner and they're beginning to ramp up. So we, it's a two-fer power they invest more and grow and then we find new partners in the channel space.

Unidentified Participant

Yeah, that's great. And then, just separately here on the Lodging business. You guys rolled out the new, the new network of hotels for the quote-unquote gray collar workers. Maybe you can [Phonetic], you could just give an update on that and maybe if it helps revenue per tran, and then I'll just slip in the sort of perennial question on gift if there is any update on strategic alternatives there?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, that's an interesting one. I think it's been less impactful with the existing base than we thought. So we -- when we first launched and I think we got a 2% or 3% lift in room nights as clients saw, hey, hey, there's a bunch more places I can go. What I think it is is existing people kind of go, existing accounts go to where they went. They are harder to switch or change, where they're going. I think where maybe it's helping more is on the selling side, attracting new people and having a larger hotel coverage and network to attract people, so they feel like if they join the program, they get plenty of coverage.

So we thought initially was going to help more with the base. But I think the answer is it's probably going to help more with with new accounts.

Operator

Our next question is from David Togut with Evercore. Please go ahead.

David Togut -- Evercore ISI -- Analyst

Thank you and good evening. I apologize if -- if you called this out earlier, but did you give the growth rate on the MasterCard fuel card in the quarter?

Eric Dey -- Chief Financial Officer & Corporate Secretary

I don't know, did we or...

Ronald Clarke -- Chairman, President & Chief Executive Officer

I don't think we did, David. I think we've given just the toll on, but I have it right in front of me that -- but we can circle back to you [Indecipherable].

David Togut -- Evercore ISI -- Analyst

Okay. As a follow-up. Where do you guys stand in terms of building out the cross-border corporate pay capability connecting domestic corporate pay, through the Nvoicepay acquisition to Cambridge, that seems to be where a lot of the world of payments is focused and you've got some unique assets there?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, we, again as I mentioned earlier, we're doing that stitching, David, now right. Because it's funny that Nvoicepay and even bill.com, both full AP guys had reached out to Cambridge even before we had done the Cambridge transaction, trying to have capability for the whatever the 4% or 5% of cross-border payments that those client bases have so they were already trying to integrate it even before we did.

So I'd say it's still early days. We're trying to figure out how to speak to both clients that we have that are only on one of those products or prospects that may be interested across all three or four of those products and yet keep some specialization, people that really know the particular area well, so I'd say it's a work in process. But I think it's a huge advantage for us right, to have all the different ways to be able to help in AP department versus going in with just one. But I'd say think next year, we'll probably be in a better place to articulate how we're going to do it.

David Togut -- Evercore ISI -- Analyst

Got it. Just a quick final one for me, any update on the growth at Allstar in the UK and are you completely done with the shift to chip cards, there?

Ronald Clarke -- Chairman, President & Chief Executive Officer

Yeah, We're done with the the chip -- the chip cards, I'd say that we're still pushing the beyond fuel-like, of all the markets we're in, fuel card, I'd say, the UK is the most mature. Right. We have the highest market share as a company, not only with Allstar, but the other product lines we have there. So I think for that thing to continue to be a decent grower in the mid-term, we've got to get the beyond fuel numbers up so that thing is improving ***Part 7***

I'd say not going as well yet as the US, there's some subtleties there. But I'd say that's still our best idea for leveraging and it's a very big client base that we've got in the UK. So, getting them to spend more with us seems like the easiest way to step up growth there.

David Togut -- Evercore ISI -- Analyst

Understood. Thank you very much.

Ronald Clarke -- Chairman, President & Chief Executive Officer

Good to talk to you.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

James Eglseder -- Head, Investor Relations

Ronald Clarke -- Chairman, President & Chief Executive Officer

Eric Dey -- Chief Financial Officer & Corporate Secretary

Sanjay Sakhrani -- KBW -- Analyst

Trevor Williams -- Jefferies -- Analyst

Robert Napoli -- William Blair -- Analyst

Ryan Cary -- Bank of America Merrill Lynch -- Analyst

Ashish Sabadra -- Deutsche Bank -- Analyst

John Davis -- Raymond James -- Analyst

Jennifer Dugan -- SunTrust -- Analyst

Unidentified Participant

David Togut -- Evercore ISI -- Analyst

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