Greetings, and welcome to the FLEETCOR Technologies Second Quarter 2019 Earnings Conference Call. As a reminder, this conference call is being recorded. I would like to turn the conference over to our host, Mr. Jim Eglsetter, Head of Investor Relations for FLEETCOR Technologies. Thank you.
You may begin, sir.
Good afternoon, everyone, thank you for joining us today for our Q2 2019 earnings call. With me today are Ron Clark, our Chairman and Chief Executive Officer and Eric Day, our Chief Financial Officer. Following comments from Ron and Eric, the operator will announce your opportunity to get into the queue for the Q and A session. It is only then that the queue will open for questions. Our earnings release and supplement can be found under the Investor Relations section of our website at fleetcor.com.
Throughout this conference call, we will be presenting non GAAP 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. Quantitative 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 are providing updated 2019 guidance on both a GAAP and non GAAP basis along with reconciliations. Finally, 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 development 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 ks and on our annual report on Form 10 ks filed with the Securities and Exchange Commission. These documents are available on our website and atsec.gov.
With that out of the way, I would like to turn the call over to Ron Clark, our Chairman and CEO. Ron?
Okay, Jim. Thanks. Good afternoon, everyone, and thanks for joining our Q2 earnings call. Upfront here, I'll plan to cover 4 subjects. First, I'll provide my perspective on our Q2 results.
2nd, I'll preview our outlook for the second half. 3rd, I'll report a bit on continued progress of our Beyond strategy. And lastly, I'll comment on the acquisition front. Okay. So on to Q2, we reported Q2 revenue of $647,000,000 up 11% and $2.85 in cash EPS also up 11%.
On a constant macro and constant scope basis or what we call like for like basis, revenue was up 13% and cash EPS approximately up 13%. Both revenue and cash EPS results topped our expectations, revenue coming in about $7,000,000 better than planned and cash EPS $0.06 higher than the midpoint of our guidance range. Notably, our overall organic revenue growth accelerated nicely to 13% in Q2. That marks the highest organic revenue growth quarter since we started reporting like for like revenue in 2016. So quite pleased.
Inside of that, our fuel card organic revenue growth was 9%. Our 3 non fuel lines of business, all exceptional, lodging up 13%, toll up 17%, corporate pay up 26. The volume growth in each of those 3 non fuel lines of business are quite good. In lodging, our SMB room nights were up 15%. In total, our active tags, which drive revenue up 7%.
And in corporate pay, our virtual card spend, up 20%. So very strong volume growth. Our trends in the quarter continued quite good. Our new sales or new bookings up 18% versus prior year. Our client or business retention continued steady at 92%.
Our same store sales came in at -one percent, but largely due to Excluding gift, same store would have been a push. Our balance sheet in a very good place. Q2 leverage finished about 2 times and our July term loan upsizing of $700,000,000 brings our revolver liquidity now to over $1,000,000,000 So we're well positioned to allocate capital to either acquisitions or buybacks in the second half. So in summary, Q2 probably one of the best quarters in quite some time, record organic revenue growth of 13%, very strong volume growth in our 3 nonfuel businesses, continued positive sales growth and retention trends and Q2 profits above the top of our guidance range. Okay.
Let me transition to our outlook for the second half. So today, we're confirming overall revenue growth guidance of 9% to 11% rest of the year and fuel card organic revenue growth in that same range. We're raising full year 2019 cash EPS guidance to $11.68 at the midpoint. That reflects our $0.06 Q2 beat to guidance. There are a number of assumptions or kind of moving parts rest of year.
We're expecting a bit more unfavorable macro than when we spoke last time and a slightly higher share count than when we spoke last time. But those will be offset by lower interest expense going forward and likely better acquisition contribution driven by the SOL deal going forward. So look, when you take all these items together, they effectively net to 0 in terms of rest of year impact. Also, as a reminder, our rest of year guidance anticipates pretty big increases sequentially in both revenues and profits. Okay.
Let me transition over to an update of our Beyond strategy. As a reminder, the idea, quite simple to offer our existing fuel, lodging and toll clients the opportunity to spend more with us by opening up the network or adding locations in which they can purchase things. This increases the utility of our card programs to our clients and results in incremental spend and revenues for us. So Beyond Fuel, here in the U. S, we added 2,000 new Beyond Fuel clients in Q2.
That brings our active Beyond Fuel client count to about 6,700. This set of Beyond Fuel clients contributed approximately 1% to 2% of our incremental revenue growth in the quarter, so starting to be helpful. Still lots to do. We're targeting about half of the 100,000 eligible existing fuel clients and continue to monitor credit trends quite carefully. But it seems clear to us that our fuel card clients do like the idea of making adjacent mobility and supplier purchases on a single business account with us.
Lodging, in our Beyond Lodging initiative, we added about 10,000 new hotel locations to our 15,000 proprietary network a couple of months ago. And in June, we captured about 3% of our overall room nights coming from the expanded network. So based on our forecast, we're hopeful that the expanded network could add about 2% of incremental revenue growth to our SMB lodging business by year end. In terms of Beyond Toll, our Brazil initiative, we've now nearly tripled our parking gas station and drive thru network from about 1,000 locations at the time of acquisition in 2016 to over 2,700 locations today. And the adoption in the expanded network is growing.
At McDonald's for instance, we had 65,000 transactions in March that grew to 135,000 transactions in June and we're expecting approximately 250,000 McDonald's transactions as we exit December. So a big pickup. Very importantly, sales of our new non toll or what we call urban users are also growing. We added approximately 18,000 new urban user tags in Q2. That's up significantly from 3,500 that we signed in Q1.
So the conclusion is our Beyond strategy is gaining traction, adoption is accelerating and the new revenue contribution in every business growing. Okay, last up is acquisitions. I'll touch on the 2 transactions that we recently closed, Nvoicepay and Sol, and also provide a brief update on our acquisition pipeline. So InvoicePay, we were delighted to announce that acquisition on our last earnings call. The primary rationale again for that deal, strengthen our position in full AP or integrated payables in which we help clients pay 100% of their monthly supplier invoices and that's via every payment modality card, ACH, even paper check.
So we've made good progress in the 1st 90 days that we've owned Nvoicepay. We've advanced the synergies that we outlined at close and we expect invoice pay to transition from approximately $0.03 dilutive in Q2 to accretive in Q4. Soul, we closed the Soul Payroll Card acquisition on July 1. Soul is a payroll card tuck in. It's about 1 quarter the size of our existing payroll card business, and has historically grown revenue about 30% annually.
So we like it as an add on for a couple of reasons. First, it's complementary to our existing business and that it focuses on SMB accounts and it's developed a pretty ratable partner distribution channel with payroll processors to sell more or further penetrate that SMB segment. And then second, we expect significant synergies via the combination as we consolidate our tech platform and our existing bank and network relationships. So expect Sol to be accretive in 2020. In terms of pipeline, our acquisition pipeline still active.
We've got 3 close tuck in opportunities, 1 each in our fuel, lodging and corporate pay businesses. And as I mentioned earlier, we've got plenty of liquidity to pursue them. So in closing, again, a very good Q2 with revenues and profits ahead of our expectations. Our rest of year outlook is good. We're planning sequential step ups in revenues and profits.
Our Beyond strategy is starting to take hold, client adoption accelerating and the revenue contribution becoming more meaningful. Integration of our 2 recent acquisitions also progressing nicely. We're capturing synergies and expect both of those deals to be accretive to 2020 earnings. So with that, let me turn the call back over to Eric to provide some additional details on the quarter. Eric?
Thank you, Ron, and good afternoon, everyone. For the Q2 of 2019, we reported revenue of $647,100,000 up 11% compared to $585,000,000 in the Q2 of 2018. GAAP net income increased 48 percent to $261,700,000 from $176,900,000 and GAAP net income per diluted share increased 52 percent to $2.90 from $1.91 in the Q2 of 2018. Both of these reported numbers include the impact of a tax benefit associated with the sale of our Mastercard investment, which was a benefit to GAAP net income of $65,000,000 and GAAP net income per diluted share of $0.72 per share. The sale of our investment in Mastronaut allowed the company to offset the capital loss recognized against the previously recorded capital gain from the sale of NeXTrak in the Q3 of 2017.
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 1 of our press release. Adjusted net income for the Q2 of 2019 increased 8% to $256,700,000 compared to $237,800,000 in the same period last year. And adjusted net income per diluted share increased 11% to $2.85 compared to $2.57 in adjusted net income per diluted share in the Q2 of 2018. 2nd quarter results reflect a negative year over year impact from the macroeconomic environment of approximately $10,000,000 in revenue, in line with our expectations. The negative macro impact was primarily due to lower foreign exchange rates when compared with the Q2 of 2018, which we believe negatively impacted revenue by approximately $17,000,000 due primarily to unfavorable rates in Brazil and the UK.
Fuel prices were slightly better year over year in the Q2. And although we cannot precisely calculate the impact of these changes, we believe it was a positive $1,000,000 to the quarter. And finally, fuel spreads had about a $6,000,000 favorable impact in the quarter. Organic revenue growth after adjusting out the impact of the macroeconomic environment and the Chevron deconversion was approximately 13% for the Q2 of 2019 and all major product categories performed well during the quarter. Organic growth in our fuel card business was 9%, driven by solid growth in most of our fuel card businesses.
Our Beyond Fuel initiatives contributed about 2 points of growth. The corporate payments category continues to perform well and was up 26% organically during the quarter. The growth in corporate payments was driven by both our cross border business, which grew in excess of 30% in the quarter and our virtual card business, which grew approximately 20%. Our toll business was up 17% organically, driven primarily by new toll tag sales, rate initiatives and more beyond toll revenue. Our lodging business was up 13% on a print basis and would have been up approximately 16% if you adjust out the roughly $1,000,000 in emergency related revenue from the Q2 of 2018.
So all in all, another very good quarter for our non fuel business resulting in very strong organic growth performance in the quarter. Now moving down the income statement. Total operating expenses were up 9.2% for the Q2 of 2019 to $349,800,000 compared with $320,200,000 in the Q2 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 54.1% compared to 54.7% in the Q2 of 2018.
Including in operating expenses, our credit losses of $18,000,000 for the Q2 of 2019 or 7 basis points, compared to $14,500,000 or 6 basis points in the Q2 of 2018. The higher than normal credit losses were due primarily to fraud losses in our U. S. Fuel card businesses. Fuel card fraud should improve as U.
S. Fuel stations begin transitioning to Tip and Pin technology in late 2019 2020. Depreciation and amortization expense increased 3 percent to $70,900,000 in the Q2 of 2019 from $68,600,000 in the Q2 of 2018. The increase was primarily due to acquisitions completed in 2019. Interest expense increased 19 percent to $39,500,000 compared to $33,200,000 in the Q2 of 2018.
The increase in interest expense was due primarily to the impact of additional borrowing for share buybacks throughout 2018, recent acquisitions and increases in LIBOR. Our effective tax rate for the Q2 of 2019 was a negative 1.7% compared to 23.5% for the Q2 of 2018. And if you adjust out the tax benefit related to the sale of MasterNaut, our effective tax rate would have been 23.6 percent. Now turning to the balance sheet. We ended the quarter with 1 point $49,000,000,000 in total cash, approximately $318,000,000 is restricted and consists primarily of customer deposits.
As of June 30, 2019, we had $3,614,000,000 outstanding on our term loans and revolver and approximately $478,000,000 in undrawn availability. We also had $974,000,000 borrowed in our securitization facility at the end of the quarter. Subsequent to the end of the quarter, we completed a facility and securitization facility. And we now have approximately $1,200,000,000 in availability. We plan to use these funds for acquisitions or future share repurchases of our stock.
As of June 30, 2019, our leverage ratio was 2.1 times EBITDA, which is well below our covenant level of 4 times EBITDA as calculated under our credit agreement. 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. Finally, we spent approximately $17,500,000 on CapEx during the Q2 of 2019. Now on to the update for the outlook for 2019. First, we are raising our full year revenue guidance $20,000,000 at the midpoint to reflect our 2nd quarter outperformance and the acquisition of Sol Financial, which closed in early July.
We are also raising our GAAP net income and GAAP net income per diluted share guidance to reflect our 2nd quarter beat and the impact of the master not related tax benefit in the quarter, in addition to the acquisition of Sol Financial. We are also raising our adjusted net income per diluted share guidance by $0.06 to $11.68 at the midpoint to reflect our 2nd quarter results compared to our expectations. Also, we expect a few moving parts in our balance of the year guidance. For the balance of the year, we expect a macro impact to be slightly worse than our prior guidance, due primarily to lower fuel prices and unfavorable foreign exchange rates. We also expect a slightly higher share count due primarily to an increase in our share price, which impacts the calculation of fully diluted shares.
Partially offsetting these impacts will be favorable interest expense due primarily to interest planning initiatives implemented and lower LIBOR rates and the impact of acquisitions, which will be slightly accretive over the balance of the year. So taken in total, these puts and takes net to 0 in terms of financial impact on our balance of the year guidance. Please refer to our Q2 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 2,625,000,000 dollars 2,675,000,000 net income to be between $865,000,000 895,000,000 dollars net income per diluted share to be between $9.60 $9.90 Adjusted net income to be between $1,040,000,000 $1,070,000,000 and adjusted net income per diluted share to be between $11.53 $11.83 Some of the assumptions we have made in preparing the guidance includes the following.
Weighted fuel prices equal to 2.75 dollars per gallon average in the U. S. For the balance of the year for those businesses sensitive to the movement in the retail price of fuel. Market spreads slightly below the 2018 average. Foreign exchange rates equal to the 7 day average as of July 28, 2019 interest expense of between $150,000,000 to 160,000,000 dollars Approximately 90,300,000 fully diluted shares outstanding, a tax rate of 23% to 24% and no impact related to acquisitions or material new partnership agreements not already disclosed.
And finally, for the Q3 of 2019, we are expecting adjusted net income per diluted share to be in the range of $3 to 3.10 And with that said, operator, we'll open it up for questions.
Thank you.
Our first question comes from the line of David Togut with Evercore ISI. Please proceed with your question.
Thank you. Congratulations on the acceleration in organic revenue growth.
Thanks, David.
With 13% organic revenue growth for Q2 and with your 2019 guide staying at 9% to 11%, is that just conservatism? Or are you expecting some deceleration in organic revenue growth in the back half of the year?
Dave, this is Eric. Yes, I mean, it's a couple of things. 1, obviously, we expect our business to continue to perform and actually accelerate as we get into the second half. It's more like we have tougher comps. So last year in the second half of the year, our business has accelerated as well.
So we're expecting, again, accelerated growth overall, but again, just tougher comps from an organic growth perspective.
David, it's Ron. We've also got the gift and the other, which we don't call out, looking those to be not super great in the second half. So probably still double digit for the non fuel lines in that 9 to 11 number.
Got it. And then any specific assumption on corporate payments in the back half? It seems like you're just starting to benefit from the cross border growth there up 30%.
Yes. They could probably still start with a 2% in Q3 and Q4.
Got it. And then, what was the growth rate for the Mastercard fuel card in the second quarter?
Hold on a second. We have to look that up, David. I think it was in the low 20 percentages, if I No,
it's not much higher. It is still pretty high. David, we'll get back to you.
The combo, David, we call it our local business. I'm looking at the local business was up 13 for Q2, which includes our Fuelman business with Mastercard. I don't have them split in front of me, but it's circa in that range.
Got it. Just a quick final question, the 18% growth in new sales bookings in the second quarter, Any key drivers of that acceleration from what we saw in Q1?
I mean, all I'm looking at the sales page, all were pretty good. The corporate payments again was blockbuster, was up almost 40% over prior year. And the Brazil, I think I mentioned the new sales channels there that we launched 2 or 3 years ago were just rocking again. So that's way, way up. So I'd say those are the 2 pulling the rest.
Got it. Congrats on the strong results.
Thanks, pal.
Our next question comes from the line of Tien tsin Huang with JPMorgan. Please proceed with your question.
Hey, good afternoon. So with the revenue accelerating and Ron, like you said, sort of a high since you started reporting that organic metric. I'm curious if you can attribute it to anything. It seems like you're hitting on a lot of the right areas. Is it fair to just say it's greater focus across the broader organization with new sales up, retention of organic growth accelerating?
Just what could you what would you point us to there?
Yes. I think it's a good question, Tien Tsin. I'd say a couple of things. One is its mix obviously. So having bigger businesses here that have bigger TAMs makes the non fuel lines grow.
And then second, to your point, we have had, starting with me, more focus on the knitting because we've done less big deals, right in the last 12 months to 24 months. So I think both of those things have brought more focus to the base business.
Cool. Good to know. And then on the bookings front, I know David just asked it, I'm curious how much of the bookings could we assign to your Beyond initiatives? You're at 2% now. Do you have a target for maybe exit rate?
Could that get much better?
Yes. We don't actually book keep our sales or new bookings per se into the beyond buckets yet. It's a bit of a manual kind of system. But I'd say again, the hope is for those things to step up, call it, another point over the next, call it, 2 quarters. So they're building, like I mentioned, in the Beyond Fuel, we're still chasing the first 50,000 clients here.
We're up to just under 7,000. We're going to turn our attention to the other 50 as we start to move through the second half. So stay tuned. Hopefully more, same on the Beyond toll, same on the Beyond lodging. So it's definitely picking up.
I try to give a few stats of that progress. But clearly, as those bases keep getting bigger, it will it should contribute more.
Okay. That's useful. Then last one just quickly on payroll. Going back to your roots a little bit there, Ron, just I'm curious is that a bigger focus potentially for the company? And was it really just enhancing your corporate payments outlook?
Yes, it might be. We like that space
because again, it's another employee payment product. We're not in payroll processing, I love ADP. And there's a number of kind of independent assets given all this consolidation. So obviously, I've been key to bid into that, that there may be some assets that could get loose here. But we like it.
I mean, this one we pull the trigger on. We like it because it's really 100 percent SMB, which we like, TinGen, and it's got a sales model to work with processors, payroll processors. Card business more in the SMB space than in the mid or large. So we just liked it a lot and we could afford it really because of the synergies that we could bring being in the business. So it's a nice little add on that helps us head in the direction that we like.
Okay. Thanks. Well done on the results. Appreciate it.
Our next question comes from
the line of Jim Schneider with Goldman Sachs. Please proceed with your question.
Good afternoon. Thanks for taking my question. I was wondering if you could maybe throw a little more statistical color on the progress for Beyond Fuel. I believe you said it was 2 points incremental last quarter. I think this quarter you said it was 1 to 2 points.
Can you give us any kind of sense about in terms of the acceptance of the clients that are taking you up on the offer, the uplift on spend relative to kind of the 40% metrics you provided last quarter? And just to confirm that additional point or so of acceleration, is that kind of a statement about exiting this year or more of a statement about 2020? Thanks.
Yes. Hey, Jim, this is Eric. We continue to add more customers to the base of the Beyond fuel bucket. So like as an example, remember from last call, I think we said we had about 5,000 clients that were actually in that beyond using the Beyond Fuel capability. We've accelerated the acceptance to about 7,000 clients at the end of Q2.
And again, we're still looking at accelerating the acceptance of that to about 100,000 customers eventually. So we're slowly getting to do that. So I think as we get into 20 20, you'll see that beyond fuel category accelerate by another point or so. At least that's our goal at this point.
Yes, Jim, it's Ron. Just to add to it. So when we use the term beyond fuel, I think we've mentioned before that there's some different use cases, that we kind of stick onto that umbrella. So for example, we call internally the companion card when we go back to fuel card clients we already have and try to add a card, right, that would let them buy AP. We have a different thing when we try to go to like a construction vertical and sell a 2 product, one that buys fuel and construction supplies.
And we even have a third use case when we go out to trucking clients and have the trucking company put the payroll of the driver literally on the card and then uses a debit card. So every one of those use cases creates incremental spend by the client, incremental utility for the client, obviously incremental revenue. And so the lift off amounts, the 40% I referenced in the last call, they vary, if you will, by those applications. So the companion card probably is in the 25% range, the construction card is probably 50% or 60% and the payroll card probably in that 40% range. So it varies basically by use case.
But the message I think we're trying to leave everybody with is, it's working, right? We're adding clients, we're keeping clients. Each one of the use cases is building. And so to Eric's point, there's a lot of compares to the prior period. But I think the headline is that this idea is now working and it's growing and it's actually adding like we're saying, a couple of points to growth.
And my comment was as you get into call it Q1 of next year, we should think about it going up another point.
That's great color. Thank you. And then maybe you can comment on the overall corporate payments side of things and particularly the sales activity you're seeing there? And maybe comment specifically on the kind of sales and lead generation you're seeing through say some of your partner software channels versus the InvoicePay channel itself? And maybe just kind of talk about whether you see the opportunity do you have the desire to kind of acquire additional software assets in that space?
Thanks.
Yes. I mean, I think they're all working our own direct business. We're getting much better, I think, on the marketing side. So we're teeing up more softball, more leads. So that's one of the reasons our direct business is growing.
I think our channel partners, some of the ones that you guys know that are private are really doing super. They're investing lots of money in their respective channels. So we're getting the benefit of their growth. Same thing in our FX business. We doubled down on the sales investment and went after larger accounts.
So we're seeing that now in our sales numbers that even if the account the new account count is the same, the dollars per account are way up. So I'd say that the corporate pay selling machine is working almost across the board. And in this model that we have of working with ERPs, which is part of the whole invoice pay idea, their core business, leverage the old ADP accounting stuff, car dealers and a couple of big construction packages. And so this idea of working with ERP partners in an integrated fashion to serve our joint clients is working quite well. So it's literally, Jim, across the board, the selling is working there.
Good to hear.
Thanks so much.
Our next question comes from
the line of Bob Napoli with William Blair. Please proceed with your question.
Thank you. And a follow-up on the corporate payments business, the invoice pay. Ron, I guess knowing you not that surprised that invoice pay is going to be accretive sooner than you thought at the end of the year. But it is to me, it seems like that opportunity is so large, should it be accretive by the end of the year? I mean, are the AP Automation piece, how big can that be?
And are you investing to the level that you should be to drive that business to much multiples of what it currently is?
Yes. So I would say, Bob, don't presume that the conversion from dilutive to accretive is based on clipping sales or marketing or even IT investment. It's not. We're actually spending more as we move into the second half. It's simple lay down synergies around contracts, for example, that they have and merchant, acceleration, we can take our 500,000 or 600,000 merchants and get their current penetration up.
It's easy, low hanging fruit money that we're grabbing more than it is that we're trying to govern or dial back on the investment. So that's point 1. Point 2 is, yes, really of all the areas, I mean, the TAM and trying to monetize this payable turning AP, which is again half of the business spend into something that's cardable or we can get a per trans fee if it's ACH or something. It's you know this, the opportunity is massive. So you shouldn't read any comments about accretion into us not understanding that or us not investing a lot in that.
Okay. Thank you. Then you mentioned 3 acquisitions that are, I guess, in the pipeline that are obviously not guaranteed to close, but are they I mean, on the M and A side, should we expect larger transactions? Or I mean, how are you do you have visibility or on do you expect some of those deals to close, I guess, before the end of the year or would you be buying back stock?
Again, when we try to comment on our pipeline, there's a number of dimensions, right? There's the size of the deal, there's the timing of the now or later, there's the categories that we're in. So we try to just provide a little bit of flavor around the near end things, things where we signed term sheets and we're way along or far along. And so my comment on the pipeline is we have 3, what I would call, close in things that will either kind of close the next 90 days probably or not, that are in the tuck in kind of size, 100 of 1,000,000 of dollars on a $1,000,000,000 not $50,000,000 And then as always, we have some larger transformational things that we're exploring that are not as near end. So the headline is we've done a couple, like 3, Eric,
I guess year to date kind of 3. We have done 3 Duncans.
I would think you should think that probably 1 or 2 more of those kind of things would happen in the second half. And as you know, given our leverage ratio and enhanced liquidity, we're obviously in a good spot to go after something larger. So we're getting to a place we've had time to focus on the knitting and the basic business. And we're a game that tries buy businesses and improve them. So you should expect that we're continuing to try to do that.
Great. Thanks, Ron. Thanks, Eric and Jim. Appreciate it.
Our next question comes from the
line of Ramsey El Assal with Barclays.
Please proceed with your question.
Hi, guys. Good evening and thanks for taking my question. I wanted to ask about the Beyond Tolls performance in Brazil. Brazil. I mean, the statistics you threw out about the McDonald's effectively were really impressive.
In that sub segment of that offering, just sort of the drive through QSR business, how should we think about the addressable market there? I mean, those are incredibly impressive results with McDonald's. How unique is McDonald's as a partner in that market? And is this the type of thing where we could think of over time that you had multiple merchants like McDonald's ramping like that?
Yes, Ramsey. Hey, it's Ron. I think it's a you're thinking about it the right way. So the press that we've had on this idea is, hey, we've got these 5,000,000 users and parking and fueling and drive through are obviously merchants that are pretty interested in our customer And so I think of it as this first 3 years that we've owned the thing has been fundamentally piloting. We've added whatever I mentioned a couple of 1,000 incremental locations of parking, fueling and McDonald's and not shockingly, there's more people lined up in every one of those categories.
So in parking, we signed up the next biggest parking operator. I think we've added 3 or 4 more. In fueling, we've added Carrefour. And drive thru, we've got 2 more things that are teed up, that have decent kind of drive thru footprints. We've even signed a thing which we haven't announced, but we've signed with Nissan where we're going to factory install the stickers in all their new vehicles.
And as soon as we signed that and started to talk about it, we now have other manufacturers there reaching out on the same idea. So I think this proof of concept when you can relay what's happening at a gas station or at a McDonald's to the next set of drive through people is the key to get nothing built. So we're trying to give you the message that it's really early, but it is again, it's working and we expect to keep rolling the thing
out. Great. That's terrific. I wanted to ask a completely separate question about there's been a lot of movement in the industry in terms of alternative networks. You got the Fed announcement, you've got Mastercard and Visa both moving into kind of alternative rails.
You've obviously all the mega mergers are talking about kind of on us type of capabilities, meaning FIS and Fiserv and potentially even Global Payments to some degree. You've alluded in the past that there might be some capabilities that you have in terms of the assets that you possess to run alternative kind of network paths, maybe particularly on the corporate payment side. Can you comment on your kind of most updated thinking along those lines?
Yes. I think we've said this from the beginning that we want to get merchants digital. And so when we sign up a business and they've got 1,000 merchants to pay and we realize that only 200 of those are carnival, let's say, on the Mastercard network, we scratch our heads a bit and say, okay, what could we do to digitize some of the other 800. And so this idea of what we call internally ACH plus or creating some rails that provide some incremental data to merchants and maybe some earlier funding and stuff to merchants is something that we're exploring. We've built a bit of a network.
And I think what we've said is it's a land grab Ramsey now. So we're mostly focused on signing up clients and getting the first 200 merchants carnival. But you should think about us over time and particularly with the invoice pay going back and trying to digitize with our own network more of those merchants that are really unserved by Visa or Mastercard.
Great. Terrific. That's all for me. Thanks.
Our next question comes from the line of Oscar Turner with SunTrust Robinson Humphrey. Please proceed with your question.
Hey, guys. Good afternoon. My question is on fuel. Are the Beyond fuel related cards typically replacing other cards? And then just wondering if you're seeing existing Beyond Fuel customers shift more spend to those cards over time?
Yes, Oscar, it's Ron. So on the first part of the question, it's no. So generally, we simply toggle open the card. So we have parameters, control parameters on the card program. So if you're a boss and you want us to open up 5 of your 10 employee cards to buy construction supplies, we can flip a switch and open up 5 of them and keep the other 5 locked down or B, we can give you a new card for your AP head to use to put AP purchases and leave the same 10 cards that are out in the field.
So the answer is we tend not to replace the cards. We either open them up or add new cards.
Okay, thanks. And then just as far as the are you seeing existing customers shift more spend?
Yes. That's the I think the comment of earlier, the different use cases we have are picking up anywhere from 25% to 50% incremental spend with the account as they buy or put payroll on it or put construction supplies or put AP. So the total amount of business that we're doing with the client is growing in the 25% to 50 range.
Okay. That's helpful. Follow-up is just on, I guess, a high level question about growth in margins, just given some of the longer term initiatives you're working towards. Do you think any of those initiatives are attractive enough, like maybe it's beyond fuel or tolls, that you would think about stepping up the marketing spend significantly?
Yes. I mean,
I think it's a really good question. So let me get kind of a 2 part answer to this. The first one is, if anything, the guidance that Eric gave for the second half anticipates a faster profit growth. So if you look at our first half print, I think our cash EPS print was 9%, and I think our macro adjusted print profit prints 13. We expect in the guidance that Eric gave the 11.68 dollars both of those numbers to go up.
I think our print outlook is 13%, which is a step up and our macro neutral cash EPS growth to 17%. So the first headline is, that sitting inside the guidance we gave you, there's an implied acceleration in our profits and our margins. That's point 1. Point 2, would we spend more if we thought we could sell more? The answer is yes, we would inside of a couple of constraints.
1, trying to deliver some profit growth. And number 2, the practicality of how we could spend the money and how productive the incremental money can be. We're not interested in just spending money and obviously not producing anything. And so some forms of our marketing investment you can push a button on like search words and emails and things like that. And then other ones that are people intense of like telesales or field take longer to build.
You can't just hire 100 brand new people in a quarter. So I think the answer is it will probably be somewhere in between. Every year, we step up our sales and marketing investment. We step it up faster in corporate pay. And to the extent that we can get this AP thing going better, I think we'll continue to step it up.
But again, we won't go overboard, I guess, is my message.
Okay. That's helpful. Thanks.
Our next question comes from
the line of Ryan Carey with Bank of America Merrill Lynch. Please proceed with your question.
Hi, guys. Thanks for taking my question. I wanted to ask
on the toll business.
When we look at the 17% organic growth in the quarter, is there a way to parse out the contribution from the legacy toll business versus contribution from Beyond Toll initiatives? And while obviously Beyond Toll is still early, I'm just trying to get a sense if it is large enough to move the needle.
Can you repeat the question again? I'm sorry, you kind of broke up on it.
Yes. I'm just trying to get
a sense if although there's all this great momentum behind beyond toll, if the growth rate there is large enough to move the needle for overall toll organic revenue growth? And if it's not, when we could potentially see it kind of be large enough to be a needle mover?
Yes. I mean, we're stepping up our investment continuously in the Beyond Toll category, as Ron indicated earlier. I mean, we now have over I over a 1000000 people that have toll tags that can actually use those cards to buy other things like fuel as an example. And we're also marketing that product to people that are using that the toll product as a other than toll first sort of thing, meaning they want to buy fuel, but they don't really spend a lot on in the toll roads or they want to buy fast food or they want to buy parking. So we've got a different universe of customers.
And as Ron indicated, we're starting to partner with some major with a major car brand Nissan who's starting to install the toll tags directly into the vehicle as it's manufactured, which is obviously going to be a boon for us as well. So yes, we're going to start seeing some accelerated growth as acceptance increases over time and as our investment in sales and marketing steps up over time. So we're starting to sell more customers. So we're very bullish on the prospects for that Beyond Tool category.
Ryan, it's Ron. I'd just add to what Eric said. I'd say if you said, hey, in Q2, I'd say it's probably less than 1%. And the reason again simplistically is the company there has really 100% of all the total locations, been around 15, 20 years. It covers every fundamentally every toll booth in the land and yet we don't have every parking, obviously every gas station or every drive through.
We have tiny percentages of gas stations and drive thrus. So I think the question earlier today is the right way to think about it, which is this is almost a pilot period where we're showing that these other networks can matter and can get used and are liked by the clients. And as those build and we get larger percentages of drive through restaurants and gas stations, that growth rate will become obviously way more material. So I'd say this thing will be a bit slower build because we got to kind of build the network. Whereas in Beyond Fuel, we have the Mastercard network, right?
It can go up a bit faster because the network is already there. We just have to get clients to spend on it. This one is we're actually a network builder, which I hope everyone gets. This is a super sustainable thing once you get it up and it creates a great barrier to other people, trying to kind of copy us. Hey, I have your dad's toll company now.
I'm glad you have that built because we build that plus these five things. And so that's the game. We're in a race to build a way more interesting net work to these mobility people.
Got it. And then switching to kind of the corporate payments side of the business. Clearly growth of both Comdata and Cambridge were very strong in the quarter. Was there any contribution to the growth rate of either from Nvoicepay, which I believe is either been integrated into both or is in the process of being integrated? Or is this more just strong performance of the standalone assets?
Well, that thing grew like a weed. I mean the problem is it's small, right? So against the other two businesses you talked about, it's tiny, but I don't know in front of it. I think it grew 50% or 100%. So it's as a standalone business and obviously we've got way more selling capability to help it.
So that thing is growing both top and bottom quickly. It was already growing quickly, by the way, before we bought it, but it's growing faster now. But I'd say most of the headline numbers we're quoting you are coming from the two core things that you called out just because they're bigger.
Got it. But there isn't, I know you're integrating Nvoicepay. It wasn't like due to the integration that caused the growth rates to expand or accelerate and for either the Combinator or Cambridge assets?
No, some of it is. It is both. Again, I think we told you that there's some things we've done like on the merchant side and some things we've done with our ERP people and the sales rates. So we put a number of things in already. The thing has moved from, I think I said, minus 3 to flat to plus 2 over the course of sequential quarter.
So it's moving quite nicely top and bottom. It's just not driving the overall 26% number that we quoted.
Got it. Thanks for taking my questions.
Our next question comes from the line of Peter Christiansen with Citibank. Please proceed with your question.
Thank you. Good afternoon. Nice outperformance guys. I have two questions. First, Ron, you talked quite a bit the last couple of quarters about shifting a lot of marketing towards digital.
Just wanted to see if you had an update on what kind of productivity or efficiency gains that you're seeing on that front? And could you extend that strategy on to some of the Beyond initiatives as well?
That's a great question, Peter. Yes, inside of our sales results were which were up 18%. We had another record global digital contribution. I think digital is now in the U. S.
Surpassed 40%. I think it's 42% or 44% of all of our new sales in the U. S. Are coming digital. And then B, we started to crunch the digital thing into seamless applications that the whole process becomes digital.
So I'd say that we're still early in it, but between enabling digital outreach and then digital applications, and as well as the science around the landing pages and the click through. I think that our sophistication in B2B digital is up dramatically, call it, over the last 2 or 3 years. And I'd say there's still way to your question, way more room to go. And I think we're still trying to sort how we can invest more in that because unlike the people thing, you can step on that faster and still keep it productive. So getting better, more sophisticated, it's producing more, but I think there's still more runway there.
That's helpful.
And then there's been some negative press lately, I guess, on some of the truckers, particularly in the shipping side. Just wondering what you guys are seeing on your OTR and, any pockets of weakness there? That would be helpful.
Yes. It's for sure, soft. I'd say we saw some of it in Q1. I'd say we saw more of it here in Q2 and partly because we have the Beyond Fuel initiative, what we call on road initiative there. It's helped our revenue growth in that segment.
But I think the underlying same store sales in our trucking business has actually gone negative. I quoted 1% same store negative globally for our business or call it a push, call it 0. If you kick out our gift card business inside of that, I think our trucking was, call it, minus 1 or minus 2. So we're seeing really the same kind of softness as the industry is.
Thank you.
Ladies and gentlemen, that's all the time we have for questions. And this ends the call. Everyone have a great day.