Ladies and gentlemen, thank you for standing by, and welcome to the WEX Third Quarter 2019 Earnings Call. At this time, all participants' lines are in a listen only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session. I would now like to hand the conference over to your speaker today, Mr.
Steve Elder. Thank you. You may begin.
Thank you, operator, and good morning, everyone. With me today is Melissa Smith, our CEO and our CFO, Roberto Simon. The press release we issued earlier this morning and a slide deck to walk through our prepared remarks have been posted to the Investor Relations section of our website at wexinc.com. A copy of the release and the slide deck have also been included in 8 ks's we submitted to the SEC. As a reminder, we will be discussing non GAAP metrics, specifically adjusted net income attributable to shareholders, which we refer to as adjusted net income or ANI during our call.
Adjustments for this year's Q3 to arrive at these metrics include unrealized losses on financial instruments, net foreign currency remeasurement losses, acquisition related intangible amortization, other acquisition and divestiture related items, stock based compensation, restructuring and other costs, debt restructuring and debt issuance cost amortization, ANI adjustments attributable to the non controlling interests and certain tax related items. The company provides revenue guidance on a GAAP basis and earnings guidance on a non GAAP basis as we are unable to predict certain elements that are included in reported GAAP results. Please see Exhibit 1 of the press release for an explanation and reconciliation of adjusted net income to GAAP net income attributable to shareholders. 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 for the year ended December 31, 2018 and 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. We delivered another quarter of impressive results, reflecting strong growth and execution, including seeing the full benefit of Shell and Chevron. Recent acquisitions and new wins also contributed to our performance this quarter. We gained new customers in each of our core verticals by leveraging our capabilities and bringing innovative products to our markets. Overall, we are very pleased to continue the momentum from last quarter.
Turning to our 3rd quarter performance, revenue grew 19% to $460,000,000 driven by another quarter of double digit growth in each of our 3 segments. This included approximately 11% revenue growth from acquisitions, partially offset by a 3% decline due to lower fuel prices and unfavorable foreign exchange rates. The remaining 11% of the growth this quarter came through our existing partners and customers as well as from new contract wins. GAAP net income attributable to shareholders was $0.33 per diluted share and adjusted net income was $2.59 per diluted share, up 16% over the prior year. Lower fuel prices and unfavorable foreign exchange rates reduced our adjusted earnings growth by 7%, which puts us above the top end of our long term growth targets for the quarter.
As expected, strong top line growth drove improved operating leverage in the 3rd quarter. We'll continue to focus on expanding margins where it maximizes shareholder value in the Q4 and beyond. Turning to Slide 4. Solid execution of our strategy helped us maintain the revenue growth rate and accelerate our adjusted earnings growth rate compared to last quarter. Implementation of the Shell and Chevron portfolios were a significant factor in that.
We're also working closely with both companies to grow the respective programs and global relationships. Both Shell and Chevron are fully ramped with built out sales, marketing and customer servicing teams in place. Importantly, we're now realizing their full contributions, which is reflected in a strong revenue growth and improving margins in the Sleep segment this quarter. Growth was also bolstered by the integration of Noventis, Discovery Benefits and Go Fuel Card. These acquisitions generated $42,000,000 in incremental revenue in the 3rd quarter and are expected to contribute meaningfully to WEX's next phase of growth in the coming years.
The U. S. Healthcare business is currently the fastest growing part of WEX and had a 73% increase in revenue compared to last year. In addition, the Travel and Corporate Payments segment posted a 20% volume growth rate, which is up significantly from prior quarters. We measure our final pillar around corporate culture by the results of the Great Place to Work survey.
For the 3rd consecutive year, we've been certified as a Great Place to Work. Having a great corporate culture is a key part of our success in securing top talent to grow our business, and this talent is a key to winning new business. Slide 5 highlights a few of the new noteworthy business wins and contract renewals we had in the Q3. In Fleet Solutions, we generated revenue growth of 11%, driven by strong transaction volume growth and higher late fee and payment processing rates, partially offset by lower fuel prices. Payment processing transactions were up 15% with Shell and Chevron contributing approximately 60% of the growth.
Year over year volumes from existing customers were down approximately 2.5%, reflecting a softer market environment. Nevertheless, strong execution drove impressive double digit revenue growth for the quarter. Turning to wins during the quarter, we saw the continuation of new wins coming from the SMB market. On the partner front, we renewed 2 major partner portfolios with Sinclair and Gulf and strategic accounts including Pepsi, Lewis Tree and Ferrell Gas this quarter. Moving on to Travel and Corporate Solutions.
The segment saw another quarter of strong performance with revenue growth of 20% year over year. This was driven by a 20% year over year increase in purchase volume. We had very strong growth from our accounts payable products, including contributions from Noventis. During the Q3, we signed several new travel customers, including a major U. S.
Airline. We also signed an agreement with InspireUS, a cutting edge SaaS provider of AP Automation focused on improving AP processes for large global enterprises. We're proud to partner to bring our core payment expertise and technology to help drive accounts payable transformation for Inspireus clients. In addition to these wins, we signed or renewed agreements with a number of APAC customers, including fabstay.com. Lastly, our Health and Employees Benefit Solutions segment maintained the incredible momentum into the 3rd quarter, generating year over year top line growth of 54%.
Revenue from our U. S. Healthcare business grew 73% year over year with organic growth of 17%. This growth was driven by an 18% increase in the average number of SaaS accounts. Discovery Benefits performance continues to be impressive and contributed $25,000,000 of incremental revenue this quarter.
The business ramp and synergy model remain on track and we continue to make operational strides in preparation for a successful upcoming enrollment season. In addition, we added and renewed numerous partners and employer groups this quarter, including Connecture, Denver Health, HR Pro, MEDNAX, Rollins and Schlage. I'm excited to say that WEX Health Solutions platform is now used by over 50% of the Fortune 1,000. Lastly, in the Q3, we held a series of inaugural partner networking and learning events called WexBART Locals in New York, Minneapolis and Denver. We also hosted the 1st Annual National HSA Awareness Day in October, where a significant number of partners joined us in educating the public on financial literacy and the many benefits of an HSA.
These events allow us to stay connected and to support our partners during important times such as open enrollment. Staying on Slide 5. WEX remains committed to developing industry leading technology and innovation, which are integral to our long term growth and serve as the foundation of our business. Within fleet, we continue to receive very positive feedback from customers on our ClearView analytics platform. ClearView is an important contributor to product differentiation and gaining market share, particularly in the large fleet segment.
Adoption and usage also grew from our driver DASH product throughout the year. We're seeing very high repeat usage by drivers and receiving great feedback, which will enable us to continue to augment our offerings. We also completed work on a very large landmark project this quarter, which represents the next milestone in the digital transformation of our business. We moved our North American fleet platform to the cloud, and I'm particularly proud of our team for completing the migration with minimal customer impact. As discussed during our Investor Day last year, this migration has been a goal of ours and would result in increased speed to market, stability, scalability and functionality.
This marks the 3rd significant technology platform to be moved to the cloud and this transformation will continue into 2020. Turning to the Travel and Corporate Payments segment. Our proprietary internal transaction processing platform now hosts more than $3,700,000,000 in transactions annually on a run rate basis. We recently completed a pilot program with a large travel customer with positive results. In the Q3, we also made meaningful improvements to the platform, including enhancements, which improve the customer experience during platform maintenance.
We're also currently in production for the machine learning fraud prevention capability. Finally, this quarter, in the Health and Employee Benefits segment, we continue to invest in technology to ensure both user experience and mobile technology enable employees to better engage with their healthcare spending as well as ongoing product enhancements. To deliver on that commitment, more than 185 enhancements were made to the WEX Health cloud platform with the October product release. The release enhances the mobile experience and increases COBRA and advanced billing administrators efficiency. The release also introduced Smart Commute built for commuter benefits to partners.
Overall, we are very pleased with our performance year to date. Based on the progress we have made so far, we're confident that we're well positioned to meet the long term growth and profitability targets outlined at our Investor Day last year. We've also established a strong platform for growth and are executing our strategy very well. We'll continue to leverage the strength of our customer and partner relationships, market leading positions in our core markets, as well as the underlying technology that serves as the bedrock of our business. As we head into the final quarter of 2019, we do so with a stronger platform and a number of growth drivers in full swing, including Shell and Chevron, our U.
S. Health business and corporate payments. We also expect our recent acquisitions to contribute meaningfully to WEX's next phase of growth. Our business today is more resilient and more diversified than ever before, which is reflected in our performance this quarter. We look forward to a strong closed 2019 and another successful year for WEX.
I am proud of the foundation we have built through our investments over the past few years that will support sustained growth and value creation over the long term. With that, I will turn it over to Roberto.
Good morning, everyone. As you've heard from Alisa, the financial results this quarter were impressive. We continue to execute on the core business, the Shell and Chevron portfolios and the integration of the Discovery Benefit, Noventis and the Go! Field Car acquisitions. Each segment had double digit top line growth, which contributed to the exceptional quarterly performance.
Specifically, I want to emphasize the growth of the Shell and Chevron road business in the U. S, the U. S. Corporate payments and the U. S.
Health businesses. Additionally, we continue to benefit from the acquisitions we made this year. From an earnings perspective, the outstanding revenue growth was partially offset by lower fuel prices and negative impacts from FX rates. These macro factors reduced the adjusted earnings growth rate by 7 percentage points. Now let's take a look at the results on Slide number 7.
Total revenue for the 3rd quarter was $460,000,000 a 19% increase year over year. GAAP net income attributable to shareholders was $14,600,000 Non GAAP adjusted net income was $113,500,000 or $2.59 per diluted share. Slide 8 shows the overall revenue performance by segment. As I just mentioned, total revenue growth was 19%. Breaking it down, health and employee benefit solutions led the growth with 54%.
Travel and Corporate Solutions posted a 20% increase. And finally, the Fleet segment cut an 11% growth rate. Now let's move to segment results, starting with Fleet on Slide number 9. The Fleet Solutions segment achieved $277,500,000 in revenue, an increase of 11% when compared to the prior year quarter. Payment processing revenue was up 8% and finance fee revenue was up 27%.
Looking at the highlights of the fleet segment, the North American fleet business grew 13%, boosted by Shell and Chevron. The over the road business grew 9%, driven by new customer gains. Also, the Asia Pac region had substantial growth and we benefited from the Go Fuel Card transaction. Finally, we want to note that lower fuel prices and FX rates had a negative $10,000,000 impact on revenue compared to last year. The net late fee rate continued to increase this quarter to 58 basis points in comparison to the 43 basis points in Q3 2018 and the 54 basis points last quarter.
The increase was in line with expectations and was due to the Shell and Chevron portfolios, a mix of new business wins and a small rate increases. The net payment processing rate was up 10 basis points from Q3 2018 due to higher diesel fuel spreads in the U. S, the Go Fuel Car acquisition in Europe and lower domestic fuel prices. These positives were partially offset by Shell and Chevron. To finish with this segment, the average domestic fuel price in Q3 2019 was $2.80 versus 3 point $6 in Q3 2018.
Turning to Travel and Corporate Solutions on Slide number 10. Total revenue for the quarter increased 20 percent to $99,100,000 due primarily to the U. S. Corporate payment business and benefits from the Noventis acquisition, which added approximately $10,000,000 in incremental revenue. In North America, the corporate payments business grew 59%, and outside of the U.
S, in Latin America, travel grew in excess of 50%. Purchase volume issued by WEX reached 11,500,000,000 dollars This equates to a 20% growth versus prior year, driven by the ramp up of new business signings. Finally, in the segment, the net interchange rate was 74 basis points, which was up 18 basis points from Q3 last year. Similar to prior quarters, the increase is due to the Noventis acquisition, the contract renegotiation of a large travel customer, which I described last quarter, and the continued strong performance in the U. S.
Corporate Payment Business. Moving on to Slide number 11, for Health and Employee Benefit Solutions, revenue for the quarter was up an impressive 54% compared to last year. Within the U. S. Health Business, which includes the legacy business plus discovery benefits, revenue grew 73%.
The legacy WEX Health business grew a substantial 17% and the acquisition of Discovery Benefits added an incremental $25,000,000 The average number of SaaS accounts was up 18% relative to 2018, continuing the trend we have seen all year long. We believe that the fundamentals are in place for a continued middle to high teens growth trajectory in the long run. From an integration point of view, we are on track this year to deliver at least $5,000,000 in synergies from the Discovery Benefit acquisition and another $5,000,000 by the end of 2020. Changing gears to expenses on Slide number 12. For the quarter, total cost of service expense was $165,700,000 up from $146,800,000 in Q3 last year.
And total SG and A, depreciation and amortization expenses were $176,000,000 which is up $38,800,000 versus 2018. Breaking down the line items within these categories, processing costs increased $17,100,000 primarily due to acquisitions. Service fees went up $1,100,000 Credit loss on a consolidated basis was $14,800,000 versus $22,500,000 in Q3 last year. This is $7,700,000 lower and better than guidance. In the Fleet segment, credit loss was 12.6 basis points of spend volume, which is less than the 14.2 basis points last year.
Operating interest expense was $11,500,000 This is in line with expectations and was at $1,200,000 compared to 2018, mainly due to higher interest rates and volume growth. G and A expenses increased $14,300,000 versus the prior year quarter, mostly due to acquisitions, including integration and restructuring costs. Lastly, the sales and marketing line went up $19,100,000 driven by partner rebates in both the fleet and travel segment, the recent acquisitions and the Shell and Chevron costs. Now for taxes on Slide number 13. On a GAAP basis, the effective tax rate was 31.1% compared to 27.3% for the Q3 of 2018.
On an ANI basis, the tax rate was 25.2% for the quarter and 24% for Q3 last year. Looking now to the balance sheet on Slide number 14. We ended the quarter with $531,000,000 in cash, down from $541,000,000 as compared to the cash position at the end of Q4 2018. From a liquidity perspective, at the end of this quarter, the corporate cash balance was $219,000,000 Additionally, there were 7 $19,000,000 of available borrowings under the company's credit agreement. This gives us immediate access to more than $900,000,000 in capital.
The cash flow generation for the quarter was outstanding and reduced the financing debt balance by approximately $20,000,000 even after the acquisition of the Go Fuel Card portfolio. At quarter end, we cut a total balance of $2,800,000,000 on the revolving line of credit, term loans and notes. The leverage ratio as defined in the credit agreement stands at approximately 3.7 times, up from 3.1 times at year end. As expected, the increase in leverage ratio from Q4 2018 reflects the acquisitions we completed during 2019. We continue to expect to delever half a turn to 3 quarters of a turn per year.
Finally, as of today, we have approximately 65% of the financing debt essentially at fixed rates. This largely mitigates the exposure to changes in LIBOR rates. To close out the call, let's move on to guidance on Slide number 15. We have had an impressive year so far with higher revenue and earnings growth rates each quarter, which we expect to continue in Q4. We will also continue to benefit from the integration of the Discovery Benefits Noventis and the Go Fuel Car acquisitions.
However, when compared to the guidance we gave last quarter, we are forecasting the macroeconomic environment to be weaker, with 2% to 3% lower than anticipated fleet and travel customer volumes growth rates. More specifically, we have seen a deceleration in local fleet and over the road tracking volumes as well as related factoring revenue. For the full year, we expect revenue to be in the range of $1,736,000,000 to $1,746,000,000 and adjusted net income in the range of $399,000,000 to $403,000,000 On an EPS basis, we expect ANI to be in the range of $9.10 to $9.20 per diluted share. For the 4th quarter, we expect to report revenue in the range of $452,000,000 to 462,000,000 dollars and adjusted net income in the range of $110,000,000 to 114,000,000 dollars On an EPS basis, we expect adjusted net income to be between $2.51 $2.61 per diluted share. Now let me walk you through a few more assumptions.
Exchange rates are based as of the middle of October 2019. Domestic fuel prices will average $2.76 per gallon in the 4th quarter and $2.79 in the full year. The assumption for U. S. Fuel prices is based on the NYMEX future price from last week.
The fleet credit loss will be between 14 and 19 basis points for the 4th quarter and 13 to 14 basis points for the full year. The adjusted net income tax rate is expected to be between 24.5% 25.5%, both for the Q4 and the full year. And finally, we are assuming there are approximately 43,800,000 shares outstanding. To conclude, we are proud with the performance year to date and remain confident in the projected guidance for the remainder of the year. And with that, operator, please open the line for questions.
Thank Your first question comes from the line of Tianjin Wang from JPMorgan. Your line is open.
Hey, good morning. Thanks for the time. Just on the I guess the macro comment, it sounded like a little bit of weakness. You mentioned over the road volume. It looks like uptick in fleet credit loss expected in the Q4.
I'm just curious as how it's behaved going month to month and is the uptick in credit loss, is that a macro issue you're seeing or is it isolated to an account or 2?
Yes. Let me start on what we're seeing with same store sales. And then Roberto is going to add in on credit loss. So on same store sales in North American fleet, we saw that it was negative 2.5% and it was if you kind of do one click below that and look at it based on industry, it was fairly pervasive with the kind of the call outs being transportation and wholesale trade were a little bit worse. And when we projected forward, what we're saying, now our assumption is that, that is going to continue into the Q4.
It's something we saw a little bit weak in the second quarter. We talked about it in the last call that was slightly off and it accelerated a little bit in the third quarter. And
if and hi, Tien Tsin. If I give you some color on the credit loss, so this quarter was better than we anticipated. And if you think about the year, and we model that 2018 was 12 point 5 basis points of spend volume. And if you take this full year, it's going to be around 1 basis points higher overall. So we don't see anything different from what we have been seeing in the past 7 quarters.
We just the comment, if you recall, I think it was in Q1, where because of the Shell portfolio that is a revolver portfolio, the credit loss is a bit higher. And obviously, on the other side as well, you have the small fleet businesses that are growing. And obviously, also from a mix point of view, you get an impact on the credit loss. But overall, the Q3 results were better than we expected. And when you look now at the full year, we are going to be what we expected earlier in the year.
Yes. I wouldn't we're not tying those two things together, just to kind of put an explanation point on that. What we're seeing is just volume trends are slightly down year over year, but credit quality continues to look good in the business. And we typically see seasonality in the Q4 with slightly higher.
Yes, very clear. Thank you for that. And then on the Melissa, you mentioned a bunch of renewed accounts and wins again. You had a great year from a perspective. Anything surprising on rates or pricing that is or term on these renewals?
And then just the pipeline, your ability to replenish as we walk into 2020 with your planning, any thoughts there? Thank you for the time.
Sure. No, we feel really good about our pipeline. It's been a good year, as you said, in terms of bringing in new wins and that continues. If you look across each of the parts of the business, the pipelines continue to be full. We're progressing things through.
We've got a bunch of contracts that are sitting in different phases of implementation. So from a forward progress and as we go into 2020, we feel good about their ability to continue to win and bring new business. And in terms of rate structure, the rates are different more around the type of products we have. So if you look across our portfolio, there are different margin profiles, but the margin profiles are holding. So there is some mix that happens depending on what type customers that we bring in at any given point in time, but it's overall pricing has been holding the way that it has historically.
Great. Thanks so much.
Your next question comes from the line of Ramsey El Assal from Barclays. You may ask your question.
Hi, thanks for taking my question. Following up on Tien Tsin's question on the credit loss, really on the fraud side of things. Should we expect given you guys across the business, you're working more with machine learning, but also because of the EMV migration at the fuel pump next year to see the fraud piece at least of that metric trend down or step down at a certain point? Is that something that we should expect?
So hi, this is Roberto. Let me start, you know that a couple of years ago, now we talk a lot about the fraud credit losses. We put in place a system and we have not seen anything major in the past couple of years. In fact, I would say to you in 2019 versus last year, the fraud losses are slightly down. So when you think now about the on the total credit loss, the fraud losses are really minimal.
So as we go into 2020 and if as Melissa said and as I said, we are not seeing any credit differences not from where we have been this year and last year, You should expect to be on the similar range. And obviously, once at the end of next year, the chip and PIN is implemented. As we move into 2021, we expect to see a small improvement. But as I said, if you think about where we this year on the range you have for the full year, the federal losses are approximately 15% of that basis points. So it's a small now.
And a lot of what we're doing on the machine learning side is making sure that we're being ahead of whatever is going to happen. So it's more preventative. So I talked about what we added into the corporate payments, the travel segment. That was really something that we developed internally, because a lot of the external tools were geared towards plastic and it's a card not present, it's a virtual transaction base largely. And so we developed proprietary tools, which we think are best in class, but it is intended to be preventive if we really have seen minimal fraud.
Okay. Thanks. And then a follow-up here, which is a 2 parter and then I'll hop right back in the queue is, Melissa, can you comment on any kind of your read of sort of political sensitivity on your healthcare business as we as the presidential election season plays out? I mean, how sort of politically exposed do you see the business or maybe it's not? And then just a bolt on to that one for Roberto.
In terms of the cloud migration, should we expect to see any OpEx benefits over time from that migration? Thanks guys.
We think that when you look at an HSA account that the likely scenario in any of the plans that end up getting offered that there will be an attached co pay associated with that. And so regardless of whether that's a government based plan or some version in between. We think that most likely you see the prevalence of attached tax deferred accounts associated with it. So we don't envision there being an impact on the business in terms of what ends up happening with the election.
And talking about moving into the cloud, I mean, the way we see and we have talked a couple of times about it. I mean, what we see from moving into the cloud is a couple of things. Number 1 is flexibility and speed to market, that's for us very important. And on the other side also, we expect the cost avoidance of having data centers that are expensive from a fixed cost point of view. So as we look into the future of now, I would say to you cost avoidance is the number one thing, the flexibility and having the ability to move fast into the market are the priorities now and the reason why we are doing this.
Got it. Thanks so much.
Your next question comes from the line of Sanjay Sakhrani from KBW. Your line is open.
Thanks. Good morning. I guess first off, Roberto, maybe you could disaggregate some of the changes you made to guidance. I just want to make sure I understand and I'm following sort of the revenue to the EPS because it seems like the EPS impact was greater than the revenue impact. And I know you guys talked a little bit about more losses, but maybe you could just disaggregate that for me.
Thanks.
Of course, I'm happy to do that. So first of all, let's all remember, the Q3 results were very good. And if you look at Q4, they are I point of view, they are even better than Q3. So we have all to remember that. But let me break you first on the revenue side.
Let me give you a couple of the puts and takes. So on the revenue side, we have on the positive side, we have obviously fuel prices in the U. S, net of spreads in Europe were positive. We also have a better performance from the corporate payments partner channel business that also was positive. We also have on the fuel spreads in the over the road that were also positive.
And then the other thing that you have on the revenue side is the Health segment. The Health segment over performed. We had a very good quarter on the Health side, and that was very positive. On the flip side, you have FX rates that are still putting pressure year over year. And we are seeing a deceleration of the FX impact, but it is still impacting guidance over guidance.
And the final thing is what we talk on the call and Melissa also mentioned is the fleet and travel volumes. So when you put all of these things together, the positives and the negatives, there is a mix impact on A and IPS where the sum of the positives are lower, have lower margin than the sum of the negatives. And if I give you a bit I'm a bit more precise on the A and I EPS, you could summarize as higher fuel prices are mostly offsetting the volume deceleration on the fleet side. And then the majority of the impact comes from the travel volume and the FX rates is slightly offset by the health performance. So that would be the summary from the revenue and from the ANI side.
Okay. That's perfect. And then Melissa, you mentioned this lower same store sales in some of the verticals that you're seeing it. Does it appear that that's a little bit more temporary related to the trade discussions? Or do you feel like what you're seeing might sustain itself?
I know that's the assumption you've made in the guidance, but I'm just curious sort of how we should look at the composition of the weakness and how it typically has played out? And then just a clarification question on the answer related to the cloud migration. Just to be clear, are you running data centers for all of the businesses that you've moved over to the cloud or have some of them been shuttered? Thanks.
Yes. You had a couple of questions in there. So if you look at the same store sales, historically, what we'll see is you don't see rapid changes. So our expectation is that it's going to continue into the Q4, which is what we're seeing so far in October volume as well. Your second question around the data centers, we have shut down some of the data centers that we have.
We are still continuing in the process of doing that. So specifically, if you're talking about the one with the North American fleet, we are close to shutting it down, but we have not yet.
Thank you.
Your next question comes from the line of Tarrin Peller from Wolfe Research. You may ask your question.
Hey, thanks guys. Just curious, I mean, Melissa, I know you've been in some media interviews talking a bit about slower trends on travel. Your overall travel and corporate segment actually accelerated. So was it really all the corporate side? Just can you comment on a bit more on how the travel side has been doing for you guys?
And I know you've had some wins in Europe and what the pipeline is like there as well?
Yes. And when we're talking about deceleration, just to be really specific, we're talking about this concept of same store sales. So when we're looking at volume trends year over year for same customers And we saw them be slightly soft in Q2. And again, we talked about that in the last call, which is what we've been talking about also publicly and elsewhere. But and then Q3, we saw that accelerate a little bit.
We were trying to be very precise in saying it's 2% to 3%. At the same time, we continue to win new business. We continue to see really strong growth trends. And so if you look across all of our metrics, despite that, we grew 15% on our fleet payment and growth. We grew 20% in travel and corporate payments.
And so we are still seeing incredibly strong growth metrics. I think it points to the resilience of the model that despite the fact that we're seeing this deceleration, we're continuing to see incredibly strong growth.
Okay. So travel specifically may have macro wise decelerated, but on the same store sales, but you've been adding enough business to offset?
Yes, that's right. So we added yes, that's exactly the point. And in some of the places, so if you look at travel and corporate payments, corporate payments outperformed. So travel is a little soft, but corporate payments came in stronger than we expected and healthcare came in stronger than what we expected. And so we are seeing lift in other parts of the business as well.
Okay. All right. Thanks. Just a follow-up on the fleet side or the fuel side. I mean, the WEX Edge business is still just can you kind of give us an update on the test of the potential rollout?
We've heard from industry checks, it's gone pretty well, but what kind of opportunity is that that you're seeing? And then maybe just attach to that the driver dash, you called out on repeat usage and increased spend. I guess maybe you can comment on what kind of lift you're seeing on average there and kind of room there?
Yes. Yes, sure. So just to kind of back up a little bit. The WexEdge product is what we are doing is a test and we said we test in second half of this year relating to allowing people to buy more on our fleet products. We have been doing that in the over the road marketplace and really expanding that functionality into other parts of the portfolio.
We're in the early stages of the task. We know that there's interest in the product based on what we've seen for preliminary results, but we won't go into full production until next year. So I'd say put that in the caveat of it's still early for us. EverDASH, we have seen really great repeat usage, which is something that we look for is when someone signs up for the product as they continue to use it. And we're starting to add it into the offering that we have, particularly with customers of ExxonMobil and Shell that are in those portfolios where we've got acceptance of DriverDash.
And so instead of having it be something that's if you're interested in this, this is something that we're rolling out as part of the package because we've got really good metrics back from customers that are using it so far. So we do think you'll continue to see increased adoption and as we continue to add to the network of merchants they're accepting, they think that that will be something that you'll see more and more of over time.
Okay. Thanks guys.
Your next question comes from the line of Robert Napoli from William Blair. You may ask your question.
Thank you and good morning. Just on as we look into 2020 and just thinking about your targets, your I mean, do you feel we're seeing this deceleration in some of the pieces of your business that overall you can be within your target ranges for organic revenue and earnings growth? And if you could comment maybe by segment that would be helpful.
So Bob, good morning. Good morning. Obviously, we are not prepared not to talk about any formal guidance today. We are going through the budgeting process as we speak. But we can talk about what we know.
And let me give you some color that we'll hopefully scaffold for you. So number 1, we have tailwinds on the Shell and Chevron portfolios. But as you know, this year in the second half are fully ramped, but next year, we will have Q1 will be obviously mostly incremental. And then in Q2, we still will have some benefit. And then you have the 3 acquisitions.
Remember, Noventis, we closed at the end of January. We closed Discovery Benefits in March. And now we have the Goldfield card. So we also know that we have tailwinds there. At the same time, and Melissa has been not very specific, we still expect the momentum from each of the businesses will continue on the new sales perspective.
And obviously, we expect to continue driving organic growth. And finally, as we also talked today, we should expect the deceleration of volumes to continue into 2020. We don't have the crystal ball, but this is what we know today. And then if you put everything together and you are trying to model next year, you should expect higher growth rates in the first half than in the second half. So this is what I would say to you we know today.
And when we get into at the end the year, we will have no formal guidance out there.
So what Roberto is saying is you'll see the opposite trend. This year, we saw the investments in the beginning of the year and then the ramp next year. You'll see that annualize as you get through the year. But we still feel really good about what we have in our pipelines, the growth prospects that we have, the new business that's coming in. Okay.
And then just a follow-up. You talked about a partnership in AP Automation, I think with Inspiras. Just on the corporate payments business overall, outside of the travel business, what is the strategy there to get more involved in AP Automation? And I mean that business has been growing at a high rate organically. Do you expect that to continue?
I think one of your competitors acquired a more sizable AP Automation piece. Do you need to own that AP Automation at some point?
We have a history across the business of partnering with lots of different players. We don't feel like we have to own in order to participate in the market. We like the growth trends. We like the size of the market in the AP marketplace. So the concept of having a multichannel approach where you're going in with partners and going in directly resonates with us.
And so the partner channels where we're finding that we play particularly well is working with other fintech companies. We can kind of we can talk tech, tech, tech. And so the idea of being able to be the enabler of the payment that sits behind whatever they do is something that is resonating in the marketplace. And so whether that's with Inspire or with Divvy or some of the other players that we're doing business with there, we want to just make sure that we can enable their business model by being the tech backbone and being able to connect in through APIs, and have the technology be highly resilient and is really important to us. And then the direct channel is important too, but I would say just in terms of speed to market going in through these partner channels, it's been an effective way to see short term growth.
Thank you. And just a quick one on the healthcare business, which is doing so well. I mean, that business, the income that you can earn on the balances, the HSA balances is something that's very material. And I think your partners are and I know you have the partner strategy there, but is there any thought of being able to earn custodial revenue over the long term or is that a too much of a conflict of with your distribution channels?
Well, the distribution channels, we think of it, if we're doing business with a bank, then they're going to keep the deposits associated with that transaction. If we're doing business with someone directly through DBI or through a partner channel that is not bank related, then those are places that we will help with the custodian. And so we do get some incremental revenue associated with that. But because if you look at kind of the grouping of the partners, it isn't hasn't been material for us so far. So we do get a little bit of lift when you see interest rate changes, but it's not and if you look at the revenue stream that's coming from that part of the business, it's the 3rd in the list of where we're getting revenue.
First being SaaS fees, second being payment processing and revenue and then the third being the interest benefit. We do think that it's really important and part of why we worked on this HSA day if you could think that when we really dove into the statistics we had within that customer base, we can see there's still a large population of people that are either setting up an account and not funding it or underfunding it that we think that there's a really big opportunity both in terms of making sure that the consumer is protected when they have a healthcare event as you see more prevalence of high deductible plans, but also around the concept of there's a benefit to us and to our partners as they increase this deposit amount. So I think over time, you're going to see us continue to benefit from it, but the whole industry will as well.
Thank you, Melissa. Thanks, Roberto and Steve. Appreciate it.
Your next question comes from the line of Ryan Kerry from Bank of America Merrill Lynch. Your line is open.
Hi guys. Thanks for taking my question. You've heard commentary from some of the networks this quarter that corporate spend slowed. My guess is this is more along the lines of T and A spend, which would make sense. I would assume there could be some crossover into the AP side of things as well.
So first, while it seems like growth remained very strong in the quarter, did you see any slowdown in demand on the corporate payment side as the quarter progressed? And second, do you think the AP business could ultimately impact it as well by some of these
weaker corporate demand trends? That's a
good question. We if you look at that part of the business, it is relatively small compared to the rest of the business and growing. So it's a little bit harder to look at year over year trends when you're in kind of the beginning stages of a business. So there's nothing notable that we've seen in that market place. And I think even if there was something notable because we're in that early stages, for us, we would grow through it.
Got it. Makes sense. And then just wanted to follow-up on the Shell and Chevron portfolios. I was curious how revenue trended as compared to your initial expectations of $60,000,000 to $70,000,000 on an annualized basis. It sounds like these new portfolios are responsible for 60% of growth in fleet this quarter.
That would get you right towards the middle of the range. Is that fair? And should we look at this as a good run rate for the next several quarters? Or could it possibly accelerate as you do more sales and more initiatives around the new portfolios? Thanks.
Hi, good morning. So you're right. We gave when we closed on those two portfolios the range of $60,000,000 to $70,000,000 And we expect as we progress into next year and the years to come to continue growing those 2 portfolios. Specifically for 2019 and as we expected, So this is Q3 is the Q1 where we have the full run rate revenue of the 2 portfolios. You should expect the same for Q4.
And as we move into next year, as I said before, I think it was with Bob Napoli, you should expect Q1 2020 and then Q2, obviously, will start the overlapping of the ramp ups. But overall, we feel where we expected to be, and that's where our thinking is for 2020. And as we always have said, the reason why those portfolios come to us is because they want to grow and we grow with them. So over time, the idea obviously is that we get revenue growth from both of them.
Great. Thank you for taking my questions.
Your next question comes from the line of Peter Christiansen from Citi. Your line is
open. Good
morning. Thanks for taking my question. Melissa, there were some organizational changes this quarter. You have a new FI vertical in corporate pay and we also have, sounds like some soft patches. Are you has the company changed its thoughts on investment priorities across the whole platform going forward with some of these new developments?
And then as a follow-up, in the Fleet Solutions business, you called out some weakness in transportation wholesale trade. Just trying to get a sense of how isolated that is to that particular end market. Are you seeing similar trends across some other end markets, perhaps even like construction? Thank you.
Actually, I'll start with your last question. Construction actually looked relatively flat year over year, so there really wasn't a big swing. You did see kind of if you go across all of the different markets, there were a number of them that were down. Construction was not one of them. I called that the 2 that were probably more relevant to us and bigger in size.
But if you looked across the different FICs, you'd see probably half of them that were down year over year. So I do think of this as something that you can't isolate and say this one particular industry that's getting impacted. And when we talk to customers, they tend to be a relatively small number. When you think about their overall portfolio, you are seeing it reported by a bunch of other companies like us
that do business with other businesses. I'd say thematically this
kind of concept of business with other businesses, I'd say thematically this kind of concept of slight softness seems to be something I'm reading about as well. In terms of our strategy and say there's no change in our overall strategy. We're very focused on continuing to grow the business, and you can see that in any of our growth metrics year over year that we're delivering, that we're bringing in new business, continuing to grow, we're going to continue to invest from a technology. So if you kind of look across the four places we're focused, we want to make sure we're growing, that we're scaling the business. And you can see that coming through in our earnings numbers this year and what we're projecting in the Q4, what we saw in the Q3.
From a tech perspective, the idea of transformation, we talked about the cloud movement because it's just a milestone for us. But underneath all the work that's been going on the technical side, it's a place that we feel we already have competitive strength. We want to make sure that we're continuing to build upon that, really focused on the future. So a lot of the work that we're doing now is focused on not just this quarter, but making sure that the business can continue to grow and sustain over many years. So I'd say no, there's no change or shift in focus.
And when you saw adding in the concept of making sure that we're have people dedicated to the FI channel. It's really thinking about each of the markets we're in. There's a multichannel that sits behind that. Working with FIs as a partner is a way to reach into that AP marketplace and we think it's an effective way to do so.
Thank you.
I will now turn the call back to Mr. Steve Elder.
Thank you, operator, and just very quickly want to thank everyone for joining us today and we look forward to wrapping this year up next quarter with you most likely sometime in February. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.