Ladies and gentlemen, thank you for standing by, and welcome to the WEX 4th Quarter 2019 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer I would now like to hand the conference over to your speaker today, Mr. Steve Alder. You may begin.
Thank you, operator. Good morning, everyone. With me today is Melissa Smith, our President and CEO and our CFO, Roberto Simon. The press release we issued earlier today and a slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our website at wexinc.com. A copy of the release and the slide deck have also been included in 8 ks's we submitted to the SEC.
As a reminder, we will be discussing a non GAAP metric, specifically adjusted net income attributable to shareholders, which we refer to as adjusted net income or ANI. Adjustments for this year's Q4 and full year to arrive at this metric include unrealized gains and losses on financial instruments, net foreign currency remeasurement gains and losses, acquisition related intangible amortization, other acquisition and divestiture related items, stock based compensation, restructuring and other costs, debt restructuring and debt issuance cost amortization, non cash adjustments related to our tax receivable agreement and similar adjustments attributable to non controlling interests and certain tax related items as applicable. The company provides revenue guidance on a GAAP basis and earnings guidance on a non GAAP basis as we are unable to predict certain elements that are included in reported GAAP results. Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income attributable to shareholders to GAAP net income attributable to shareholders. I would also like to remind you that we will discuss forward looking statements under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those forward looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our annual report on Form 10 ks filed with the SEC on March 18, 2019 and subsequent SEC filings. While we may update forward looking statements in the future, we disclaim any obligations to do so. You should not place undue reliance on these forward looking statements, all of which speak only as of today. With that, I'll turn the call over to Melissa Smith.
Good morning, everyone, and thank you for joining us today. I'm pleased to report that we had a very strong end to the year, and our performance this quarter capped another record year for WEX. We finished 2019 with strong momentum, highlighted by growth and effective execution in each of our business segments. Solid organic growth, combined with our recent strategic acquisitions, has further strengthened our foundation for sustainable growth and sets us up nicely as we enter 2020. Turning first to our quarterly performance on Slide 3.
We delivered earning results at the top end of our guidance range for Q4. Revenue grew 15% to $440,000,000 compared to last year, driven by another quarter of very strong growth in our Travel and Corporate Solutions and Health segments. A revenue adjustment in the Fleet segment that did not impact earnings, which Roberto will discuss later, led to a 5% reduction in revenue growth. This adjustment reflects the difference between reported revenue and the top end of our previous guidance range. From a segment perspective, Fleet Solutions grew 3%, which included an 8% reduction in growth caused by the revenue adjustments, driven by volume growth, increased late fees and incremental revenue from EG Fuel, partially offset by lower fuel prices, unfavorable FX headwinds and a softer market environment.
Payment processing transactions were up 9%. Turning to Travel and Corporate Solutions. We closed out the year with an impressive 23% increase in revenue during Q4, with purchase volume up more than $1,400,000,000 to $9,600,000,000 We continued the strong momentum in our Corporate Payments segment, which was boosted by meaningful contributions from Noventis. Finally, in our Health and Employee Benefit Solutions segment, revenue was up an impressive 69% in the 4th quarter. This was driven by double digit growth in our U.
S. Healthcare business with 18% organic growth and better than expected contributions from Discovery Benefits. Strong top line growth continued to drive operating leverage in the 4th quarter. On a per diluted share basis, GAAP net income attributable to shareholders was $1.24 per diluted share and adjusted net income was $2.61 up 24% over the prior year. Now looking at the full year, 2019 was another record year for WEX, as noted on Slide 4.
Revenue increased 15% to $1,720,000,000 better than expected performance from our recent acquisitions, including Noventis, Discovery Benefits and EG Fuel contributed just over half of our growth this past year. When compared to our long term revenue guidance range, which assumes flat fuel prices and FX rates, we outperformed the top end of our 10% to 15% range when including acquisitions, and we performed well within our 8% to 12% range excluding them. Highlights from the year include solid revenue growth across all of our businesses, particularly in our U. S. Health business, which grew an incredible 62% year over year.
We also achieved notable results from the integration and ramp up of the Shell and Chevron portfolios, which were a major focus during the year and from the acquisitions that we completed. From a profitability standpoint, GAAP net income per diluted share was $2.26 per diluted share, while adjusted net income per diluted share increased 11% to $9.20 Similar to the revenue growth, we had solid organic growth throughout the business, the ramp of Shell and Chevron and a nice contribution from the businesses we acquired during the year. In addition, our adjusted net income growth in 2019 was solidly within our long term target range, which assumes flat fuel prices and foreign exchange rates. Turning to Slide 5. Our strong performance in 2019 aligns with the strategic pillars set years ago that still serve as the guidepost for our business.
We remain committed to building upon our best in class growth engine, leading through superior technology, driving scale through execution and leveraging our culture to attract and retain the best employees. Executing against these pillars has allowed us to post another outstanding year, underscored by double digit revenue profitability growth, achieving technology milestones and successful integration of strategic M and A across all of our business segments. As part of our best in class growth engine, a significant growth driver for us in 2019 was our ability to win in the marketplace. As you can see on Slide 6, we've highlighted some of the most significant wins in contract renewals of 2019, most notably the Shell and Chevron portfolios and a number of accounts across all of our segments. These wins are made possible by the superior execution of the WEX team, our best in class products, a market leading technology.
On the technology front, 2019 was a landmark year for us as we migrated our North American fleet platform to the cloud, marking our 3rd significant technology platform migration. Recall this is one of our main goals outlined during our 2018 Investor Day with the objective of gaining increased speed to market, driving more efficient scalability and enhancing our stability and functionality. This is one of the largest and most complex platform migrations WEX has ever done and it was completed with very little customer disruption. We remain focused on the migration and development of cloud technologies, including building new capabilities and continue to migrate existing technology platforms in 2020 beyond. 1 of our platforms of focus is the internal transaction processing system for our travel and corporate payments customers.
In addition to cloud migrations, our other achievements this year included consolidating OTR platforms, implementing one of the largest product releases for our Healthcare business ever, including more than 135 new features and deploying a host of tools internally to help us scale. Our commitment to innovation remains one of the cornerstones of our business, and we will continue to drive industry leading technological advancements on all fronts in 2020. As we look ahead to 2020, we expect our momentum to continue, building off a tremendously successful 2019. Once again, we expect our business will achieve results in alignment with our long term targets of 10% to 15% top line growth and 15% to 20% adjusted net income growth in 2020. Roberto will take you through the details of our guidance this year, but I'd like to provide some color on the key assumptions we have underpinning our expected performance.
1st, similar to last year, our fleet business is expected to generate solid growth in line with the longer term growth targets we outlined at our Investor Day last year. However, unlike last year in which our performance progressively ramped throughout the year due to Shell and Chevron, 2020 will likely see the inverse trajectory as we begin to anniversary the migration of these large portfolios. We're also assuming the softer market environment discussed last quarter will continue into 2020. 2nd, we expect robust double digit growth from our North American travel and corporate payments businesses. Contributions from our recently announced acquisitions of the ENET and Optal have not been factored into our guidance, but will provide meaningful lift in growth and profitability when these acquisitions close, which we expect to be mid-twenty 20.
As a reminder, these acquisitions advance our long term global growth strategy, provide geographic diversification and reduce WEX's exposure to macroeconomic fluctuations as well as complement WEX's technology and product portfolio. We're excited about the new OTA opportunities that this combination will bring, which is key to driving our next phase of growth. And lastly, we expect another record performance from our U. S. Health business.
As I look back at 2019, I am pleased with the extraordinary progress we've made this year and the steps taken towards achieving sustainable growth as we continue to execute against our strategic pillars. We have established a strong platform that is more resilient and more diversified than ever before, which is reflected in our performance this past year. We'll continue to leverage the strength of our customer and partner relationships, our market leading positions across core markets as well as the underlying technology that serves as the bedrock of our business. Lastly, I want to take a moment to thank all of the employees who make WEX's success possible and are truly the backbone of our business. I would now like to turn the call over to our CFO, Roberto Simon.
Roberto?
Thank you, Melissa, and good morning, everyone. Strong results for the Q4 and the full year 2019 highlight the momentum in the business. I will start my remarks with a review of the full year at a high level, then moving to the details of Q4 and finally on to 2020 guidance. Starting with the results for the full year, WEX outperformed the long term revenue target and was solidly in the range on adjusted net income. When compared to 2018, revenue grew 15% and adjusted net income grew 12%.
Fuel prices and FX rates had a $35,000,000 negative impact on revenue and approximately $19,000,000 impact on adjusted net income. We had significant revenue growth in each of the segments. For the year, fleet revenue grew 6%, travel and corporate solutions grew 21%, and health and employee benefits grew 48%. Each of these growth rates met or exceeded the long term organic growth target outlined at Investor Day. We are very satisfied with these results.
Now let's move on to Q4 and our results on Slide 9 and 10. We had a strong revenue and adjusted net income growth, driven by another quarter of double digit top line growth in the travel and healthcare segments. The 3% fleet segment revenue growth reflects a $20,900,000 correction to revenue, as Melissa previously mentioned, that reduced revenue growth by 8%. There was no impact to earnings due to an equal reduction in the sales and marketing expenses. From an earnings point of view, we continue to benefit from revenue growth and the acquisitions made during the year.
Overall, we are pleased with the 4th quarter performance on both top and bottom line results. For the Q4 of 2019, total revenue was 440,000,000 dollars a 15% increase over prior year. Non GAAP adjusted net income was $114,700,000 or $2.61 per diluted share,
up 24%
and at the high end of guidance. Breaking down the 15% revenue growth, approximately 11% came from acquisitions, 6% from organic and a 2% decline due to headwinds from macroeconomic factors. The 6% organic revenue growth was negatively impacted by 5% from the revenue correction I mentioned earlier. Moving to segment results, beginning with Slide 11. Compared to the prior year, Fleet Solutions achieved $260,900,000 in revenue, an increase of 3%.
The gains were led by the North American fleet business, which grew 17% and another solid quarter from over the road. Additionally, we continue to benefit from the Go Fuel Card transaction. Within the Fleet segment, we continue to see solid organic payment processing transaction growth of 9.3%, driven by new sales. At the same time, we continue to maintain very low attrition rates. Finally, same store sales were 3.1% negative due to a slowdown in the industrial economy.
We anticipate this trend to continue into 2020. Finance fee revenue increased 42%. The net late fee rate continued to increase this quarter to 65 basis points in comparison to the 44 basis points in Q4 2018 and the 58 basis points last quarter. The increase was in line with expectations and was due to seasonality, the Shell and Chevron portfolios, a mix of new business wins and small rate increases. The net payment processing rate in Q4 was 110 basis points, which was down 28 basis points over last year.
The decrease was due primarily to the revenue adjustment, which reduced the rate by 22 basis points. In addition, it also declined due to the Shell and Chevron portfolios and negative impacts from spreads in Europe. To finish in fleet, the average domestic fuel price in Q4 was $2.80 versus $2.94 in 2018. Turning to Travel and Corporate Solutions segment on Slide number 12. We finished 2019 with the same strong momentum that we had all year.
Total revenue for the quarter was $95,700,000 an increase of 23%. Approximately $11,000,000 relates to the acquisition of Noventis. In North America, the corporate payment revenue grew 38%. Outside of the U. S, travel grew 48% in Latin America, and we saw double digit increases in Europe.
Total purchase volume issued by WEX reached 9,600,000,000 dollars This represents 17% growth versus prior year. To conclude this segment, the net interest change rate in the 4th quarter was 84 basis points, which was 20 basis points higher than Q4 last year. Like in past quarters, the increase was due to a contract change with a sizable travel customer, the Noventis acquisition and the continued strong performance in the U. S. Corporate payments.
Moving on to Slide 13, for Health and Employee Benefit Solutions, we surpassed expectations again. Revenue for the quarter was up an impressive 69% compared to last year. The U. S. Health revenue, which includes the legacy business plus discovery benefits, grew 75%.
To break this down, the legacy WEX Health grew a substantial 18% and the acquisition of Discovery Benefits added $26,000,000 The average number of SaaS accounts was up 17%, continuing the trend we have seen throughout the year. We are well positioned to capture additional growth in the U. S. Health market and continue to expect middle to high teens growth in the long run. From an integration point of view, we successfully delivered more than $5,000,000 in synergies from the Discovery Benefits acquisition and are on track to deliver another $5,000,000 by the end of 2020.
Now let's move to expenses on Slide 14. For the quarter, total cost of service expenses were $180,100,000 up from 1 $137,600,000 in Q4 last year. Total SG and A, depreciation and amortization expenses were $156,100,000 which is up $6,300,000 versus 2018. Breaking down the line items within these categories, processing costs increased $33,900,000 primarily due to acquisitions. Service fees and operating interest were flat compared to the prior year.
Credit loss during the quarter was $18,200,000 up from $16,100,000 a year ago. In the Fleet segment, credit loss was 18.5 basis points of spend volume within guidance. Consistent with prior quarters, the North America fleet business performed well, and we continue to see challenges in the trucking market with higher losses in the small fleet over the road business. G and A expenses were up $14,600,000 due to the recently announced acquisition of VNET and OTTAL and higher performance based compensation. Finally, sales and marketing expenses were down $11,200,000 largely due to the previously mentioned revenue adjustment.
This was offset by the recent acquisitions and the challenged Chevron costs. Changing gears on to Slide 15 to discuss taxes. On a GAAP basis, the effective tax rate this quarter was 26.9%. On a non GAAP basis, the ANI tax rate was 24.7%, down 30 basis points from a year ago. Looking now to the balance sheet on Slide 16.
We ended the quarter with $811,000,000 in cash, up from $541,000,000 at the end of last year. From a liquidity perspective, the corporate cash balance was approximately $370,000,000 This balance increased approximately $150,000,000 from Q3 due to a strong cash flow generation. Additionally, there were $769,000,000 of available borrowings under the company's credit agreement. Also, at year end, we had a total balance of $2,800,000,000 on the revolving line of credit, term loans and notes. The leverage ratio, as defined in our credit agreement, stands at approximately 3.5 times at the end of 2019, up from 3.1 times at the end of last year.
As expected, the increase reflects the acquisitions we completed during 2019. Looking forward and assuming at July 1 closing date for ENET and Opto, we expect leverage to be less than 4.5 times. After closing, we expect to delever half a turn to a full turn per year. Finally, as of today, we have approximately 2 thirds of the financing debt essentially at fixed rates. Now let's look to guidance on Slide 17.
We had an exceptional year with notable revenue and earnings growth rates as we continue to benefit from organic growth, the Shell and Chevron portfolios and the integration of the Discovery Benefits, Noventis and the Go Fuel Car acquisitions. We anticipate this growth will continue through 2020. Before we get into the numbers, I want to give you some puts and takes that should be considered when modeling 2020. First and most important, the guidance is in line with our long term targets of 10% to 15% growth in revenue and 15% to 20% growth in earnings. These targets include acquisitions and assume constant fuel prices and FX rates.
Starting with the Fleet segment, our 2020 plans are within the long term targets of 4% to 8%, driven by consistent transaction growth rates and the continued outperformance of the Shell and Chevron portfolios. However, due to macroeconomic factors in the over the road trucking business, we expect to see a slowdown in growth when compared to 2019. Moving into the Travel and Corporate Solutions segment, revenue is expected to grow in the middle of the long term target range of 10% to 15%. We expect volume growth to be in the mid teens and a small decrease in the interchange rate. To clarify, this does not include the impact of the INET and OPTAL transaction.
Regarding the Health and Employee Benefits segment, we expect our U. S. Health business to continue the momentum we have seen over the past several years and grow revenue in the low 20% range. This will be driven by new customers, a successful open enrollment season and meaningful contributions from discovery benefits. Now for guidance, which is made on a non GAAP basis and reflects our business as of today.
The expectations for the full year are revenue in the range of $1,860,000,000 to 1,901,000,000 dollars and adjusted net income in the range of $447,000,000 to 464,000,000 dollars On an EPS basis, we expect adjusted net income to be between 10.15 dollars $10.55 per diluted share. For the Q1, revenue expectations are in the range of $445,000,000 to $455,000,000 and adjusted net income expectations are in the range of $95,000,000 to $99,000,000 On an EPS basis, adjusted net income is expected to be between $2.15 $2.25 per diluted share. Now let me walk you through a few more assumptions. Exchange rates are based as of mid February 2020. Domestic fuel prices will average at $2.69 in the 1st quarter and $2.70 for the full year.
This assumption for the U. S. Is based on the applicable NYMEX futures price from the week of February 3. The fleet credit loss will be between 15 20 basis points for the Q1 and 13 to 18 for the full year. The company expects its 2020 adjusted net income tax rate for the full year to be between 24.5 percent 25.5 percent.
Finally, there will be approximately 44,000,000 shares outstanding for the year. To conclude, we are very confident about 2020 guidance and are looking forward to a successful year. And now we will open the line for questions.
Your first question comes from the line of Sanjay Sakhrani from KBW. Your line is now open.
Thanks. Good morning. I wanted to dig in a little bit more into the fuel segment and I appreciate it's a challenging macro backdrop. However, when we look at the deceleration in same store sales versus the decel in some of the transaction growth numbers, it seemed like the latter was a little bit more than the same store sales. So I was wondering if you could just help us think about that relationship going forward?
So Sanjay, it's Melissa. Are you talking about the growth, the 9% growth we saw in the quarter?
Right. Like year over year, like that year over year growth rate decelerated a decent amount.
Yes. So we've talked about the last couple of quarters of we've seen a slight deceleration in same store sales. And so you can see that coming through about 0.5 percentage point from Q3 to Q4. So it's incremental, but yes. So a little bit over 3% in same store sales degradation in Q4 compared to the prior year.
If you look at the rest of what's happening across the business, there were changes in business days sequentially. So you look at number of business days that were in Q3 and number of business days in Q4, we get a little bit of a benefit that in Q3. We're getting hit a little bit in that in Q4. But if you normalize that, there really isn't anything new to talk about that's sitting in the base of the business. Growth rates look similar, excluding what's happening from a macro and what's happening with business days that are happening within those two quarters.
Okay. And I guess, when we think about that macro weakness, how much of it is related to some of the trade stuff that we saw ahead of the virus news? And I guess specific to the virus, I'm just wondering when we look at the E net accretion numbers, do you feel like there's any risk to those given they have a little bit more Asia impact or exposure, sorry?
Yes. And actually, let me clarify. That's a question. On same store sales, we're talking about North American fleet. So those are numbers are specific to the fleet portfolio.
And what we've seen for changes sequentially, it's led to the biggest impact is what's happening in the transportation segment. So that's got the biggest drag to us. If you look in Q4, sequentially everything's a little bit worse, but slightly worse from period to period. And the only thing that was positive is public administration compared to all the other SSAUs. So that's what's happening with same store sales in North American fleet.
And remember, if you look at the type of customers that we have in our North American fleet business, they're across many different industries. They're setting in admin and mining and manufacturing. So it's so many different SICs and it's an indicator really of what's happening with the businesses because they are fueling where they need to fuel and when they don't need to, if they don't have deliveries to make or if they don't have service calls to make, then we don't see that coming through in our spend volume. So I put that aside and say, we've seen that, I would say, stabilize. It's been slightly negative in Q3, a little bit worse in Q4, but in the ballpark, they're looking pretty similar.
And that's what we assumed would continue into 2020. And then put that aside and talk about the coronavirus, which is a totally different thing that is in our fleet, in our travel business. Just recall in our travel business, most of our spend volume is in the United States. The second for us is Europe. We have a very little amount that's happening in Asia.
In January, we didn't see an impact to our business because of coronavirus. We did see slight softness in Hong Kong and Australia, but you're talking about since Asia is a relatively small part of business and you're talking about a couple of regions that sit within that, it had really no impact on our business. And because we have such little business in Asia, we're really not seeing much of an impact to us within WEX. And if we look at what we assumed in our guidance on a go forward in 2020, we contemplated that when we set up our guidance range. But if you look at our midpoint, we're assuming minimal impact, again, because of the dynamics of who we have, where our spend volume happens in our portfolio.
And then you asked a third question there, which was around the impact to ENET and Optal. Their business is 40% of their volume is in Asia, 60% is in Europe. When we've looked at market research in that, there's a couple of things that I want to call out. Wall Street Journal just put out an article this week where they had travel economists looking into impact. If you look at hotels, what they're saying is they're predicting a 0.3% impact to hotel volume and globally.
If you look at some of the research that has been done by Morgan Stanley on this front, they looked at previous coronavirus like events, so pandemic issues. What they showed is regional impact, which was relatively brief. And I think if you step back at a macro level, we feel for those that are impacted by the virus, and we know that this is a very fluid situation. But what we've looked at that helps us box this leads us to believe that the impact should be relatively minor to WEX's core business and relatively short term to the extent that would impact ENET and Optil. And remember, we're assuming at this point in time that we would have a midyear close.
Okay. Thank you. Maybe Sanjay, what I will add is to put some numbers for you on what Melissa said. If you take our travel business overall and we do a bit more than $30,000,000,000 of spend. So for every percentage point on a full year basis, you are talking a couple of 1,000,000 dollars in revenue on a full year basis.
So it gives you also a flavor on what could be the impact. But as Melissa said, our volume today, most of it is in North America.
Got it. Thanks.
Your next question comes from the line of Ramsey El Assal from Barclays. Your line is now open.
Hi, thanks for taking my question today. And forgive me if you addressed this already in the prepared remarks, I've been hopping between a couple of calls. Can you give a little more color on the adjustment you made in that Fleet Solutions segment? What is it exactly? And that would be helpful.
Yes, of course, this is Roberto. So let me explain it to you. The ASC 606 revenue standard that we adopted in January 2018 allow certain agreements with customers to be presented on a gross basis in the P and L, where you record the revenue on the top line and then the related commission you recorded on the sales and marketing line. And then there are other arrangements that you only report now the net amount and we keep all in the revenue side with no amounts in sales and marketing. So as we were closing Q4 and we're doing our internal reviews, we identified certain partner arrangements where the accounting didn't properly reflect the economics.
And as a result, we fixed the P and L classification. We've reduced the revenue and the sales and marketing costs by approximately $21,000,000 relative to the Q4 guidance. And then of this $21,000,000 approximately $14,000,000 relate to the prior 3 quarters of 2019. And what I want to clarify as well is that there was no impact to operating income or net income on a GAAP basis or on an ANI basis.
Okay. Thank you. That's helpful. And lastly, and this is a quick 2 parter. The first is, any impact to call out from that?
There were some press reports about an outage in EFS. It seemed pretty minor and transitory, but I thought I'd ask about it. And then the second part of the question is just on the E and D liability shift later in the year. You just help us think through the impacts on your business, your most updated thinking in terms of where your fraud loss rates would go after the switch occurred, which presumably is down or whether you could would it permit you to do anything like loosening credit lines or any general impact on the business would be helpful? And then I'll get back in the queue.
Sure. I'll answer the first one. So EFS and Fleet 1 cards did experience a really short outage earlier this month. And we obviously took immediate steps to minimize the disruption. We were actively communicating with other customers, which actually is like a picked up in the press.
We want to make sure that it's clear that the outage was due to a glitch with our 3rd party database vendor. So it was something that we rectified. And just further for us reinforces the move that we're going into the cloud. This is a platform that is scheduled to go into the cloud this year, which is important to us for all the reasons we talked about on the call with the migrations that we've had. We've had 3 so far.
This is one of the ones we have scheduled to move in, in 2020. We had very minimal impact. Transaction volume, if you look at it over the period of time, was very similar to what we've seen in other periods. And Roberto was going to answer your second question.
Yes. So if you recall, a couple 3 years ago, we had a significant fraud losses, and we implemented a couple of systems, and we invested significant amount of money. So the pro losses today are minimal. I mean, as you know, we don't report them any longer, but they are within the fleet credit loss. They are less they are approximately 20% of the total credit losses.
And as you're seeing on the migration in Q4 this year, we do not expect a meaningful impact not on our financials. And the other thing on top of doing the system and the investments that we have done, we are also working and doing more investments on developing some artificial intelligent tools that are helping us to detect fraudulent transactions and to perform better on this area. So overall, we do not expect not to see a huge benefit because the numbers are already low.
Your next question comes from the line of Stephen Wold from Morgan Stanley. Your line is now open.
Yes, good morning. Thanks for the shout out to Morgan's Yamal, though I wish we were on a better topic. Maybe just going back to the fleet, I think you guys were just talking about how the fraud is kind of not really the moving piece here, but if I look at the trajectory you're sort of talking about in terms of the credit losses, looks like you're expecting that to sort of crescendo into this upcoming quarter and then sort of improve over the back half of the year. But with the comments about OTR being weak and remaining into 2020, could you just talk about how you think you see that progressing? I think last time we talked about it, it sounded like it would sort of progress for better part of a year and then likely year over year improvement just because of the lower base.
But could you just give us updated thoughts there?
Yes, absolutely. The first thing I would say is that 2019, we closed at 15.1 basis points. And earlier in the year, we gave a range. So we were within the range. If you compare that to prior year to 2018, there were a couple of percentage points increases, but a big portion of that relates to the Shell and Chevron portfolios.
As you know, they are small fleets, and those small fleets carry more credit loss. You make more money on a late fees, but at the same time, now your credit loss is a bit higher. And also recall that we had on the shelf side, there's a revolver portfolio. And then what is different now from what we thought earlier in the year is that in the past two quarters on the over the road, we have seen some deterioration on the economy and it was also in Q3. And that's why you have seen a small spike compared to where we were in 2018.
When we model 2020, and I have here the numbers in front of me, we are modeling a full year similar to what we have in 2019 around the on the midpoint around the 15, 16 basis points. And obviously, we have modeled on the first half of the year a bit higher credit losses than last year because of the annualization of the Over the Road segment.
Got it. Okay. That's helpful. And then, maybe just shifting gears towards talking about M and A, putting ENET and Optal to the side as a reference point, and obviously, you guys gave a lot of commentary the other week there. FleetCor was out the other week talking about moving towards channels like software on the front end of corporate payments.
Could you just remind us in terms of your stacking of priorities, where you're thinking of in terms of M and A and where you would use that remaining dry powder? I know you said you're going to be below the 4.5 leverage room leverage ratio. So you're going to have some room either way even as you're closing it in Optal?
So when we think about capital and how we allocate capital, we go across each of our core verticals. And when I think about the core verticals, it's travel, it's corporate payments, fleet and health. And we're looking for geographic expansion, scale plays or product extensions that we can add in and in. You can look back this last year 2019 And so we did a little bit of each of those in the acquisitions that we made. And so if they fit where we're going strategically, then we really run a mix of those different options.
And then there's a combination between what becomes available from a timing perspective. So we've got a strategic roadmap of what we want to acquire. We're working on relationships on an ongoing basis. Some of these things take years to come to fruition. And we execute them when they meet all of those criteria.
So when they say we want to do strategically, they are on our roadmap. They hit one of those 3 areas scale, product extension or geographic extension. They hit financial criteria and we have the ability to absorb So we have a whole host of filters that we go through. So as we're looking into the future, we're going to continue to do that same process that we've done over the past 5 years. And so it will be a mix that you'll continue to see that come through and it's going to be a combination of what we want to do strategically and what's happening in the marketplace at prices that we think makes sense for us.
Awesome. Thank you very much.
Your next question comes from the line of Bob Napoli from William Blair. Your line is now open.
Thank you for taking my question. I'd like to dig a little bit more into the Corporate Payments and Healthcare business with 2 separate questions. First on the mid teens growth in payment volume in the travel and corporate payments business for 2020. What does that how would you break that down between the travel portion and the corporate payments portion? And you did have a nice increase in the net interchange rate, which you attributed to corporate payments.
Is there more upside on that?
So Bob, good morning. So the way we see our corporate or Travel and Corporate Payments segment, so we guided on the within our long term range in the segment of 10% to 15% at midpoint. We expect volumes to be slightly higher than that, so on the 15%, call it, on the mid teens. Slightly similar to this year, slightly down. The way I will look at it, if you remember at the Investor Day, we break down the segment between travel, where the market is growing around 9% overall and the corporate payments that is growing on the 15% to 20%.
So you could think directionally that the volume growth are going to be split that's similar to what the 2 markets are growing at. And then from a net interchange point of view, this year, there was a big change because of the reasons that I've been saying every quarter. So we got Noventis, we got a customer contract change where we moved just the dollars from other revenue into payment processing. And we've had some customer mix impact as well. If you model into 2020, we probably will see, and I mentioned that a small decrease on the rate because of the mix of the spend more than any other thing, okay?
So there's nothing that we are expecting to be different, but I think you probably will see a small decrease on the rate, but similar to where we are in 2019.
Okay. And then on the Healthcare business, you're lapping the acquisition of Discovery Benefits, but you're still seeing very confident about, I guess, mid- to high teens revenue growth. That industry is not growing that fast, so you're taking a fair amount of market share. So maybe just an update, it sounds like that acquisition integration is going well and how are you gaining the amount of market share? This is a much bigger business now to have confidence in those types of growth rates over the medium to long term.
Yes. If you look at the performance in our Health business this year, it's been just outstanding across the board to new contract wins, what we're bringing and signing the integration of DBI, the ramp of business in DBI, all across the board it's been really very, very strong. And if you look at that business, a lot of those trends you can see happening through enrollment season. So we've had a really strong enrollment season. We feel good about the combined business that we have, the channels that we've established in the health business, the pipelines that we have, and that's leading to our confidence in the growth rates that we've got in our guidance for 2020.
Where is the market share coming from, I guess, is
It's coming from lots of places. I wouldn't describe it as coming from any one place. Some of it continues to be internal systems that are migrating. Some of the market is growing as we've seen growth within the HSA market specifically, but even the FSA market continues to grow. So you see more adoption, growth rates, health care costs keep going off.
All of those things, which were the reasons why we entered the space, they really have come true. And then for taking market away, I wouldn't say it's coming from any one place. I'd say it's coming from a bunch of different places. And we have the benefit of working through some really great partner channels that are in the marketplace with their brands every day, and they're bringing in market share as well. So it's been a combination of adding new partners, those partners continue to grow, healthcare costs go up, and there's more adoption to these programs and all of those things have been creating some really good tailwind for us.
Great. Thank you. Appreciate it.
Your next question comes from the line of Darrin Teller from Wolfe Research.
Your line
is now open.
Thanks guys. When you look at the 4th quarter fleet trends, when you adjust for the $21,000,000 and you adjust for just look at macro, it wasn't really that different of a trend as I think you alluded to earlier. So when we consider going forward, I guess I'd be curious to hear number 1, is there any update to what you're seeing in the sub verticals? You had called out like transportation and wholesale and construction, I think last quarter. I guess any other signs of strengthening or weakening on some of those areas or others?
And then I'd be curious to hear if you're seeing any market share impacts associated with some of the reviews going on, the regulatory reviews at one of your competitors. If you could just comment on market share updates there, if you're seeing any evidence of any changes?
Yes. We continue to win in the marketplace. We feel very good about our competitive positioning, the pipeline that we have, the businesses that we have implemented. And that's been true for years. The addition of EFS into the rest of our North American fleet business has been really strong combination in the marketplace.
And so that's I wouldn't describe that as changing. I think that's been strong for us for years. And we do feel good about the technology that we have, the amount that we're investing. So our ability to continue and win in the marketplace is in part because we start from a product that's superior and we continue to invest in it. In terms of what we're seeing in mix, in change from an economic perspective in same store sales, it really is slightly worse across most SICs, but from sequentially from Q3 to Q4.
But when I say slightly, it's a little bit more than 0.5 point. I don't know that there's any one thing that I would call out. I talked about transportation because it is having a bigger impact. But if I look through the portfolio, in equally big or things like mining, which is not a very big part of the business. It's mining oil extraction that's actually quite negative year over year.
But most of these are a few points negative with a few being higher single digit negative from an SIC perspective. And so we just are seeing continued softness in the industrial segment in that portfolio. Nothing that's for us, there's nothing alarming. It's just soft compared to what we have seen currently.
Yes. Continuation of that is embedded in your guidance, right?
Yes. And theoretically, we'll have better comps when you get into the second half of next year, but we're going in assuming that it continues throughout all of 2020.
I was going to say exactly that. And as we get along into the year, if we see the same store sales improving, obviously, we will have an update on the guidance as we move into 2020.
Okay. Just a quick follow-up on the corporate payment side, given it continues to be one of your gems in your business. Just talk a little more about the blocking and tackling you're doing there and what you think is differentiating you guys right now in the marketplace that's allowing for the growth rate?
Yes. The growth pressure is coming in a couple of ways. It's coming through partner channels. And so we've said it's the technology behind a bunch of both financial institutions and FinTech Companies. We think of us as the payment tech that sits behind that.
That's been the highest growth rate for us. We've also had good growth with cross selling within our existing fleet portfolio. And we think of that as more of a direct sales force. So both of those have been working well for us in the marketplace. I think from a competitive differentiation standpoint, we've got some pretty good tech chops.
And so when we're talking to other companies, both from just a pure technology perspective, the ability to integration into the systems that we have, but also from just a security perspective as we're doing business with banks. That's something that we take very seriously and we have a lot of compliance and security reviews that are happening on an ongoing basis, which creates a little bit of overhead, but actually helps us a lot competitively in the marketplace because we do well on that front.
Makes sense, guys. Thank you.
Your next question comes from the line of Ashish Sabadra from Deutsche Bank. Your line is now open.
Thanks for taking my question. So question on margins. Margins were pretty strong in the quarter. We obviously saw some benefit from the accounting change, but even in other segments, the margins were pretty good. How should we think about margins going into 2020?
Any color on the segment levels? Thanks.
So, hi. Obviously, the Q4 is a bit twisted because of the revenue recognition adjustment on the can exclude fuel prices and FX fluctuations, we have been improving the margins in both years. And if you look at 2020, if you take the midpoint in revenue, excluding again fuel prices and FX fluctuation, the revenue is growing 10% and EPS is growing 15%. Therefore, you should expect another year of improvement overall on the margins. And that's what we have said always.
We want to focus on both growing the business and accelerating the growth, but at the same time, how we can improve margins over time as we continue our investments. And as I said, if you look back to the past 2 years and the guidance we have for 2020, we continue improving the margins from an adjusted operating income point of view.
That's very helpful. And maybe just a quick follow-up on the accounting change. As you mentioned, there was $14,000,000 adjustment for the prior three quarters. I was just wondering if you can give us what the quarterly adjustments were? And should we expect that then going forward as well?
Thanks.
[SPEAKER JOSE RAFAEL FERNANDEZ:] So yes, the $21,000,000 is the full year number. And as I said, dollars 14,000,000 approximately $14,000,000 related to the prior three quarters. They are approximately as we go on Q1, Q2 and Q3, they are slowly increasing. But our 2020 guidance already include that revenue adjustment as if we were doing net revenue. So we have contemplated on our guidance for 2020 that we won't have the adjustment going forward.
That's very helpful. Thanks.
There are no questions at this time. You may continue.
Thank you, everyone. Thanks for joining us today and we look forward to speaking with you in a couple of months and updating you on our progress and that'll conclude our call for the day.
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