Ladies and gentlemen, thank you for standing by, and welcome to the WEX's fourth quarter 2018 earnings call. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at the time. If anyone should require assistance during the conference, please press star, then the number 0 on the telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Steve Elder. You may begin, sir.
Thank you, sir, and good afternoon, everyone. With me today is Melissa Smith, our President and CEO, and our CFO, Roberto Simon. The press release we issued earlier today has been posted to the investor relations section of our website at wexinc.com. A copy of the release has also been included in an 8-K we submitted to the SEC. As a reminder, we will be discussing non-GAAP metrics, specifically adjusted net income during our call.
Adjustments for this year's fourth quarter 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, impairment charges and asset write-offs, a gain on a divestiture, debt restructuring and debt issuance cost amortization, non-cash adjustments related to our tax receivable agreement, 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 one 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-K filed with the SEC on March 18th, 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 which speak only as of today. With that, I'll turn the call over to Melissa Smith.
Good afternoon, everyone, and thank you for joining us today. I'm excited to report a strong finish to 2018. We delivered fourth quarter revenue that exceeded the top end of our guidance range and strong bottom-line results that grew 34% year-over-year. Revenue grew 15% to $381 million compared to last year, making our 10th consecutive quarter of double-digit revenue growth. This includes strong revenue growth in our Fleet Solutions and Travel and Corporate Solutions segments, as well as in our U.S. Healthcare business. The positive impacts of higher fuel prices, foreign exchange rates, and the new revenue recognition standard and M&A activity were 6%. On the bottom line, net income on a GAAP basis was $0.49 per diluted share, and adjusted net income was $2.11 per diluted share. Overall, we executed well this quarter on the backdrop of favorable macroeconomic conditions.
Looking at the full year, 2018 was another record year for WEX. Revenue increased 20% to $1.49 billion. GAAP net income per diluted share increased slightly to $3.86 per diluted share, while adjusted net income per diluted share increased 56% to $8.28. The full year earnings for 2017 and 2018 include adjustments to the preliminary results we announced on February 22nd due to corrections of previously disclosed errors relating to our Brazil operations as well as other immaterial corrections we identified during our review. Roberto will give some more details, but the changes to our preliminary 2019 guidance were not related to the issues we corrected for. Our performance in 2018 was guided by the strategic pillars we set years ago that serve as the guideposts for our business.
Remaining committed to building upon our best-in-class growth engine, leading through superior technology, delivering scale through superior 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 record revenue, new and innovative products, and strategic M&A that has expanded our penetration into the high-growth and dynamic corporate payments and consumer-directed healthcare markets. The progress made in 2018 is a testament to our ability to gain market share by deepening existing relationships, building new partnerships, and delivering high-quality service and innovative technologies to our expanding customer base while executing on our acquisition strategy for long-term growth. We continue to have significant new segment wins and contract renewals in the fourth quarter.
In Fleet Solutions, revenue grew 15%, driven by higher volume growth, increased late fees, and favorable macroeconomic tailwinds, including higher fuel prices. Our strong track record of new contract wins and partnership renewals gained momentum in 2018. For example, we signed new fleet contracts with Railcrew Xpress and Aramark Canada, and also renewed significant contracts with Element Financial and Enterprise Rental. In the over-the-road business, we had one of our best implementation quarters in the history of the business, including Horizon Transport and CFI. We also made significant progress on the implementation and integration of several large prior contract wins, most notably Shell and Chevron portfolios. Both conversions are progressing, and I'm pleased to report that the new WEX cards have been issued to all customers of the two portfolios.
We're now in a transition period as customers convert to the new products and the accounts receivable balances flow over to us, which we expect to be complete within the next several months. We remain well positioned to win new business and generate organic revenue growth. Our best-in-class marketing and sales teams are helping us to capture additional market share. In addition to wins and renewals, the service and support we provide our customers day in and day out truly differentiates us from our peers. One example of this is our ExxonMobil portfolio, which has had one of its best years ever in terms of new account growth in the U.S. In Travel and Corporate Solutions, we closed out the year with an impressive 29% increase in revenue during Q4.
This was driven by strengthening our relationships with industry-leading online travel agencies while penetrating further into the rapidly growing corporate payment space. We had $8.2 billion in purchase volume this quarter, which is an increase of more than $800 million over last year. Approximately 45% of this increase came in our corporate payments business. In addition to our own sales efforts, our partnership strategy has proven to be successful and a strong revenue driver for us. One of these partners is American Express, whom we signed an agreement with in Q3 for the use of our technology platform. Although we're still in the early stages of this relationship, we're beginning to see increasing volumes as we get the program up and running. We also had a handful of significant contract wins and renewals during the fourth quarter.
One that I'm excited to announce is the signing of Swedish-based Etraveli , one of the largest OTAs in Europe, in the top 15 globally. Travel and Corporate Solutions remains an important area for our future growth given the size and underlying growth dynamics in the market. While we've had more than $34 billion in purchase volume during 2018, there's still ample room for growth, and we look forward to these opportunities in the coming year. As I mentioned in the November Investor Day, corporate payments will be a key area of focus for us in 2019 and beyond. Moving on to the Health and Employee Benefit Solutions. Our U.S. healthcare business was robust and posted top-line growth of more than 12% in the quarter and 13% for the full year.
In health, we saw a successful open enrollment season with a volume of transactions up 18% year-over-year, and we closed 2018 with over 65 new or renewed partners. The service we offer our partners sets us apart from our competition, and we continue to see 50% growth in the utilization of our mobile app and online partner portal. These tools continue to enhance the partner experience, and the constant innovation is key to the success in this market. Turning to new signings and renewals, we're pleased to announce that we have signed Associated Bank, Nova, Stanley Benefits, and Boyu Financial in the fourth quarter, in addition to renewing a number of meaningful contracts. We now have more than 28 million consumers on the WEX Health Cloud platform. I'd like to delve a little deeper in our second strategic pillar and the bedrock of our business, WEX's superior technology.
We've spent a significant amount of time over the past year adopting a cloud-first development process, which we talked about at length in November. During Q4, we began migrating our fleet technology platform to the cloud. This is the first of many conversions over the next several years. We're making great progress with little disruption to our customers. Also in the Fleet Solutions segment, we're making progress towards consolidating processing platforms and have eliminated one platform this year. We plan to continue with this consolidation strategy. We're also migrating the processing of our travel product onto an internal cloud-based virtual card platform we call TAG, which was acquired as part of the 2017 AOC acquisition. We're starting to move our U.S. business onto TAG and have already processed over a billion and a half dollars of transactions on a run rate basis in Q4.
This too was completed with little to no disruption to our customers. As we talked about in our Investor Day in November, these moves to the cloud will allow us to improve performance and stability, increase the pace of product development, and eventually deliver significant cost savings, which you're starting to see in our 2019 guidance. Since we last spoke, we've acquired Discovery Benefits, one of the fastest growing benefit solution providers in the marketplace, with operations in all 50 states. We're particularly excited about this transaction as it expands our penetration into the attractive high growth consumer-directed healthcare market, aligns with our growth strategy, including further diversifying the business away from fuel complements and enhances our value proposition in the marketplace and provides significant cost synergies with long-term upside potential. Ultimately, we believe this transaction strengthens WEX's position as a leading provider of innovative healthcare technology solutions.
With greater size, scale, and capability, we plan to successfully leverage our core technologies to improve our competitiveness in the CDH market and a strong platform for future acquisitions. Before I wrap up my remarks, I also want to provide an update on the Noventis acquisition we closed in January. As a reminder, they're an electronic payment network and optimize the payment delivery process through their patented scalable technology. It complements our current offerings with new payment delivery capabilities that enhance AP payments and provide seamless delivery of electronic payments. This acquisition expands WEX reach as a corporate payment supplier and provides more channels to billing aggregators and financial institutions. We're on schedule to fully integrate Noventis into the WEX corporate payments platform by the end of this year. We're very excited about the new opportunities that we expect to capture in the years ahead.
As I look back at 2018, I am very pleased that we'll be able to execute against all of our strategic pillars. We've had revenue and earnings per share growth in line with our long-term targets. We again achieved recognition with Great Place To Work, as rated by almost 90% of all WEX employees who filled out the survey. Finally, this year marked a year of significant technology milestones for WEX. We're excited to see what's next as we expand our capabilities. We've had huge wins in the marketplace like Shell and Chevron. We had a very successful execution of the AOC integration, which surpassed our initial expectations. We've undertaken and made significant progress on digital transformation of our business, all while maintaining a corporate culture that supports our competitive advantage. In summary, I'm very pleased with our performance in 2018.
I'm proud of the foundation we've built through our investments over the past few years that will support long-term growth and value creation. Most of all, I'm thankful to all of our employees who are successfully executing on our strategic pillars and are the backbone of our company. We remain poised for growth in 2019, and I look forward to another successful year for WEX. I'd now like to turn the call over to our CFO, Roberto Simon. Roberto?
Thank you. Good afternoon, everyone. As Melissa mentioned earlier, I would like to provide you with an update on WEX's internal financial statement review. In addition, the recently filed 10-K, 8-K, and press release contain updates to the preliminary results issued on February 22nd, 2019. During the company's 2018 year-end close process, WEX identified immaterial errors in the financial statements of our Brazilian subsidiary, which began before 2015 and are primarily related to accounts receivable and accounts payable. The financial statements have been corrected for these matters. At the same time, we revised the financial statements to correct other immaterial variances impacting prior years that were not previously recorded. WEX believes that the effects of this revision is not material to our previously issued consolidated financial statements. We are actively engaged in the implementation of a remediation plan to ensure that controls are designed appropriately and will operate effectively.
Changing gears to the 2018 results, I want to pause for a moment to discuss the results for the full year. In 2018, WEX outperformed again with revenue growth of 20% and adjusted net income growth of 56% when compared to 2017. We had significant organic revenue growth in the business, supplemented with M&A activity. In the fleet segment, revenue grew 18%. 10% of this relates to macroeconomic factors and revenue recognition. In the travel and corporate solution segment, revenue grew 35%. Approximately half of this growth was due to M&A and revenue recognition. Finally, the U.S. health business grew 14%. Now, let's move to the Q4 results, which had a strong organic revenue and adjusted net income growth driven by robust results from Fleet Solutions and Travel and Corporate Solutions segments. The U.S. healthcare business also performed better than expected with solid revenue growth.
From an earnings point of view, we continue to benefit from this organic growth, positive macroeconomic trends, and a lower tax rate. Overall, we are pleased with the fourth quarter performance on both top and bottom-line results. For the fourth quarter of 2018, our total revenue was $381.2 million, a 15% increase over prior year. Non-GAAP adjusted net income was $91.8 million or $2.11 per diluted share, up 34% from $1.57, in line with guidance. I want to quickly point out that we are still benefiting from the new revenue recognition standards. The total benefit was $10.9 million, which is similar to prior quarters. On to the segment results. The Fleet Solutions segment achieved $253.8 million in revenue, an increase of 15% compared to prior year. Payment processing revenue increased 35%, and finance fee revenue increased 10%.
The gains were led by the North America Fleet business, which grew 14%, followed by the over-the-road, which grew 22%. Both of these growth rates benefited from higher fuel prices and the new revenue recognition standards. We also saw strong growth rates in Asia at 59% and Europe at 15%. Within the Fleet segment, we continue to see solid organic transaction growth of 6.5%, driven by new sales. At the same time, we continue to maintain very low attrition rates. Finally, same-store sales were marginally negative, due in part to the government shutdown. The net interest exchange rate in Q4 was 138 basis points, which was up 20 basis points over last year. There are three items that had a positive impact on the rate. A year-to-date revenue reclassification, higher fuel spreads from the European operations, and the revenue recognition changes.
Finally, in the segment, the average domestic fuel price in Q4 was $2.94 versus $2.68 in 2017. We have approximately $13.5 million of additional revenue versus prior year due to higher fuel prices, including spread impacts in Europe. Turning to our Travel and Corporate Solutions segment, we finished the year with the same strong momentum that we had all year. Total revenue for the quarter increased 29% versus last year, which was almost all organic. Total purchase volume issued by WEX reached $8.2 billion. This represents 11% organic growth and excludes AOC customers. Within the U.S., the travel business remained steady with revenue growth of 13%, and the corporate payment business was very strong with revenue growth exceeding 100%. Lastly, the international business growth was led by Europe, Brazil, and Australia.
The net interest exchange rate in the fourth quarter was 64 basis points, which was 11 basis points higher compared to Q4 2017. The increase was due to customer volume mix, domestic and international spend mix, and lower rebates. Moving on to Health and Employee Benefit Solutions segment, the U.S. business surpassed expectations again, growing 12% year-over-year and continues to support its vigorous growth momentum. The average number of SaaS accounts was up 17%, and total purchase volume was up 12%. The volume of transactions during open enrollment season was up 18% over the prior year, and the pipeline remains strong. In the long term, we continue to expect high teens growth in this business. As expected, we continue to see significant slowdown in the Brazilian benefits business. As a result, revenue in the Health and Employee Benefit Solutions segment decreased 4% in the quarter.
Let's now move to expenses. For the quarter, total cost of service expenses were $137.6 million, up from $126.4 million in Q4 last year. Total SG&A depreciation and amortization expenses were $149.8 million, which is up $18.1 million. Breaking down the line items within these categories, processing costs increased $7.7 million, primarily due to AOC on the onboarding cost for Shell and Chevron. Service fees were down $1.7 million, mainly due to the reclassification of network fees as part of the revenue recognition changes. Credit loss during the quarter was $16.1 million, up from $13.5 million a year ago. We recorded $1.3 million expense related to the Brazil benefit business. In the Fleet segment, credit loss was at the low end of the guidance, coming in at 12.2 basis points of expense volume. Operating interest was $10.1 million.
This is in line with expectations and was up mostly due to higher fuel prices and interest rates. G&A expenses were up $6.3 million for acquisition-related costs and legal expenses. Sales and marketing expenses were up $18.5 million, largely due to the new revenue recognition and the onboarding costs for Shell and Chevron. Now on to discuss taxes. On a GAAP basis, the effective tax rate this quarter was 44.3%. On a non-GAAP basis, the ANI tax rate was 25% compared to 36% a year ago. The company continued to benefit from the tax reform. I will now be discussing our balance sheet. We ended the quarter with $541 million in cash, up from $504 million at the end of last year. Our corporate cash balance at the year-end stands at $181 million after making the payment related to the acquisition of the Chevron portfolio.
We have approximately $666 million available on the revolving line of credit, which give us access to more than $800 million in capital. At year-end, we had a total balance of $2.1 billion on the revolving line of credit, term loans, and notes. The leverage ratio, as defined in our credit agreement, stands at approximately 3.1 times, down from 3.7 times at the end of last year. As a reminder, we have been deleveraging as expected since the time of the ESS acquisition at a rate of half a turn to three-quarters of a turn per year. During January, we announced that we had increased borrowing capacity and improved our financial covenants in order to fund acquisitions. When we pro forma for the Noventis and DBI transactions, we expect the leverage ratio to be approximately four times.
We continue to see unrealized gains on the interest rate hedges we have in place. As of quarter end, the market value of those hedges was $18 million. We have $250 million of hedges rolling off at the end of 2018. During March this year, we executed another $450 million of interest rate hedges, locking in LIBOR at approximately 240 basis points. Including the debt from the DBI and Noventis deals, we expect to have about 65% of our financing debt balance essentially at fixed interest rates. Let's look at our guidance. Note that these expectations reflect our view as of today and are made on a non-GAAP basis with respect to adjusted net income. Before we get into the numbers, I want to give you some puts and takes that should be considered when modeling 2019.
First and most important, the guidance is within our long-term targets of 10%-15% growth in revenue and 15%-20% growth in earnings. These targets assume constant fuel prices and FX rates. Starting with the Fleet Solutions segment, our 2019 plans are notably higher than the long-term targets provided at the investor day for three key factors. First, we look to maintain strong transaction growth rates. Second, we anticipate to fully benefit from the Shell and Chevron portfolios in the second half of the year. Third, we look forward to continued progress in the international businesses. Specific to the Shell and Chevron wins, I want to give you some details around the progression through the year. As Melissa said, we have mailed out cards to all of the customers, and we are beginning to see them transition onto our platform.
It will take several months for this transition to be complete. Meanwhile, we are carrying significant costs as we did at the end of 2018. We expect the two portfolios to be dilutive to earnings for the first half of the year and move to normal profitability when fully converted in the second half of the year and beyond. Finally, in this segment, we anticipate that fuel prices will be lower than 2018, negatively impacting revenue by approximately $50 million. Moving into the Travel and Corporate Solutions segment, revenue is expected to grow in excess of 30%, including approximately $35 million from the Noventis acquisition. Excluding Noventis, we expect the revenue will be within our longer guidance range of 10%-15% growth. We also expect organic volume to grow in the mid- to high teens.
Turning to the net interchange rate for the full year, we expect the rate to increase approximately 10 basis points versus the full-year rate in 2018. The main reasons for the increase are the acquisition of Noventis and the renegotiation of an OTA contract, which will shift revenue from other revenue to payment processing revenue. Regarding the Health and Employee Benefit Solutions segment, we expect our U.S. health business to grow revenue in the high teens, in line with expectations set at Investor Day. Additionally, we expect approximately $75 million in revenue as a result of the DBI acquisition, which closed earlier this month. As we said when we announced the deal, we do not expect a material impact on earnings this year. In the Brazil benefits business, we expect another challenging year.
Moving on to the financing side, we are assuming an increase in LIBOR of approximately 40 basis points on average from 2018. This increase would impact approximately $900 million of floating rates debt, which includes the debt for DBI and Noventis. In addition, we have approximately $1.2 billion in deposits at our bank that will also be impacted by the higher interest rates. For our guidance numbers, we have updated our revenue range by $50 million from our previously issued revenue guidance. This includes an increase of approximately $75 million for DBI. This also includes a $25 million reduction from Noventis after concluding how the new revenue recognition standards will play to this transaction. For the full year, we expect revenue to be in the range of $1.68 billion-$1.72 billion and adjusted net income in the range of $385 million-$403 million.
On an EPS basis, we expect adjusted net income to be between $8.80 and $9.20 per diluted share. For the first quarter, we expect revenue to be in the range of $375 million-$380 million and adjusted net income to be in the range of $72 million-$74 million. On an EPS basis, we expect adjusted net income to be between $1.64 and $1.70 per diluted share. Let me walk you through a few more assumptions. Exchange rates are based as of mid-February 2019. We assume that domestic fuel prices will average $2.60 in the first quarter and $2.63 for the full year. This assumption for the U.S. is based on the applicable nine-month future price from the week of February 18th.
The Fleet Solutions credit loss will be between 13 and 18 basis points, both for the first quarter and the full year. The company expects its 2019 adjusted net income tax rate for the full year to be between 24.5% and 26%. Finally, we are assuming there will be approximately 43.8 million shares outstanding for the year. To conclude, we are very confident about 2019 guidance and are looking forward to a great year. Now we are opening the line for questions.
Ladies and gentlemen, if you have a question at this time, please press star then the number one on your telephone keypad. Again, it's star one to ask a question. Our first question comes from the line of Ramsey El-Assal from Barclays. Your line is open.
Okay. Thanks for taking my question. Can you give us a little more color on the Brazil situation, sort of what happened there exactly? Was it just an accounting error, but there's no indication of any type of malfeasance or anything like that, or willful misstatements of past results? It's just simply an error that you've cleared up and now is completely behind you. If you could provide a little more color there, it'd be appreciated.
This is Roberto. Good afternoon. The majority of the issues we found in the Brazil fleet was in the Brazil fleet business. The processes we have were highly manual, and in the past two years, we have been improving those processes over time. The other thing I would say to you is that finally, the volume on this particular segment has declined significantly in the past two years. This is why as we look into 2019, we feel comfortable on where we are.
Just a second. It's Melissa. I make sure that we respond to your second question, too. One of the things we did as part of this process is we engaged one of the big four firms to perform work for us, and we did not find any evidence of fraud or intent to misstate as part of that process. It says things were absolutely fair.
Okay. That's super helpful. Thanks so much. I wanted to ask also about your corporate payments growth rate, which was extraordinary. Can you give us a little more color in terms of what industry verticals there are driving that or solutions that you have that are driving that? Also just bolted onto that, it looked like your credit loss expectations for 2019 were a little higher than your full year 2018 outlook, and I was just curious as to what is causing that to be elevated a little bit. Is it on the credit side rather than the fraud side or any color there could help as well, and then I'll hop back in the queue.
Yeah, sure. Roberto actually gave some pretty good color on the corporate payment side. If we look across the portfolio, we saw great growth, but we saw oversized growth in some of the areas like the corporate payments itself. More and more when we think about that business, we're segmenting it between travel and corporate payments. Corporate payments, it's a bigger market. It's got higher growth rates, and we've been putting a decreasing amount of capital and effort towards that space. That's a piece of it, that we're going off a relatively small base, which helps. That's a piece of it also growth outside the United States. The businesses we've continued to globalize, that we've added in and really strengthen up our European office, and we've seen the benefit of that.
I talked about one of the wins we just had in that space in Europe, and I think there's a direct correlation between work we've done with product but also the work we've done in that office and making sure that we have really high talent that's focused on globalizing the business.
Great. Just the credit loss.
Yes. This is Roberto. Let me take the credit loss question for you. This is the way we see it. We closed 2018 with a 12.5 basis points of the spend volume on the fleet credit loss. I guided 13 to 18 basis points. We don't expect any change from the 2018 results, with just one exception that is related to the Shell and the Chevron portfolios. Here there are two pieces. Number 1, these accounts have small businesses, which as you know come with higher credit loss than the average North American fleet business. The second thing is specifically to Shell. There is a revolver portfolio that also comes with a higher credit loss than the average of the business we have today.
Our next question comes from the line of Darrin Peller from Wolfe Research. Your line is open.
Thanks, guys. You continuously show mid-single digit growth in your transaction levels in the fleet segment, which I guess just give us a little more update on what you're seeing that's driving that level versus what we see at industry at some of your competitors. Just maybe expand on sustainability to that as we get more organic going forward.
Yeah. When we think about growth in that part of the business, there's a lot of blocking and tackling. As we continue to roll out products, we have sales people that are selling against both our partner portfolios and then directly. Over time, as we've added partners, it might be counterintuitive, but it actually helps build the ability to grow in the marketplace because you have customers that have many different options. There's something unique about each brand, and we market to make sure that we're really being thoughtful about what people are attracted to about that brand. That may be site acceptance, it may be something around brand loyalty, but there's a whole host of reasons that people pick a particular product.
That's an area of expertise of ours, is to really understand what is going to drive somebody to that product and make sure that we're marketing to that. At the same time, we have a WEX offering which gives people universality, if that's something that they're interested in alternatively. If you look across our partner portfolios, we had a really great growth year this year on behalf of our partners working in conjunction with them. Then the universal business has done well on the over-the-road business. I talked about having one of the biggest implementations in the history of the over-the-road business. I think that there's really good momentum behind the fact that the technology was always good, but we've really added onto that with new products and features, and that's resonating in the marketplace.
All right. Thanks, Melissa. You've mentioned I think 800 million gallons expected to roll on associated with Chevron and Shell through the year. First of all, is that still on target? Then just quick update on the overall integration and bringing those clients on. How's it been going?
That is still actually the target for us, we have rolled out the card. What happened with the customer base, they now have two cards in hand. They have cut over periods where we're starting to migrate those customers onto our platform. They have to go through a process if they're interested in using our online tools, which a lot of people are. They have to go through an activation process, but also a process of getting online. We're in the thick of that right now, but we're seeing that migration happen. We talked before about having those tranches executed by the first half of this year, we're still on target to do that. Very much on target. Roberto pointed out this concept of dilution in the first half of the year.
We tried to talk about that at the end of last year, this idea that we've got costs that are going to come in advance of when we see revenue, and that's very normal for us as we go through a private label implementation. It's a little bit abnormal to have two stacked up of this size, and so it's a little bit more accentuated than it normally would be. The costs are there. The sales people are out selling these new products. The customers have cards in, and the tranches are converting over. We're seeing some volume coming through now, and so we feel very much on track to what we had said on our last call.
Okay. All right, guys. Thanks.
Our next question comes from the line of Bob Napoli from William Blair. Your line is open.
Thank you, and good afternoon. First, on the healthcare business. With the acquisition of Discovery Benefits, WEX, as well stated over the years, has increased its investment in healthcare. Now, Discovery Benefits, I think that business was growing at a high rate. It does bring up some questions of whether there's some channel conflict between Discovery Benefits and your other partners. If you could just talk a little bit about the investment in Discovery Benefits and the healthcare business and the high teens growth. Are you seeing more of that from product basis, HSA, FSA? Just kind of a broad question there, conflict of interest and just the overall healthcare business.
Sure.
Sorry.
Sure. No, that's great. I like that I actually tied right after that last question. When we think about multi-channel, that's something that we do in every part of our business, and we're very conscious about how we go into a marketplace and how we make sure that we're transparent. When it comes down to going into a marketplace with partners indirectly, a lot of it's around creating rules of engagement and being transparent with people around what you're going to do and then making sure you follow through that. We have a very rich and deep history of making sure that we are supporting our partners while at the same time having a direct product.
As we think about this space, part of what we were interested in with DBI, you talked about the growth rates, and that's certainly part of what was interesting to us, is they've been growing at a rate higher than our core healthcare business historically. At the same time, it adds a product extension. We can sell some of the products that they have to our existing partners so they have an ability to use that into the marketplace. We can share best practices of some of what they're doing that we think is unique with our partners into the marketplace. Then we have an ability to have an offering that is integrated into the marketplace. We like that as a setup in the background, and we need to be able to show our partners in the marketplace that we can do that.
From a conflict perspective, that's something we intend to continue to work through with our partners in the way that we have in every other part of the business. In terms of our interest in growth in this marketplace, it has some great tailwinds behind it. We like just the market dynamics. We like the size of the market. We think that it is a market that, healthcare in general is big, it's complicated. It's a place that we think that we can help. You asked about growth. It's kind of coming all over the place. People think of FSA accounts as not growing, but they actually do. They just grow at a lower rate. Then you see oversized growth going in the HSA side of the marketplace.
It comes from adding new partners, spend volume going up, and the partners that we have continuing to grow. It's a combination of all of those things.
Thank you. My follow-up question would be just on the economy. You saw FedEx report some weaker news. The Federal Reserve today said they're not going to raise rates anymore. There's signs of global softness, but it doesn't sound like. You certainly didn't call out. I guess same-store sales were a little weaker. What's your view on the economy?
Same-store sales were negative 0.4. I'd say, really didn't see a significant change. That was in a period we had the government shutdown.
Right. Okay.
Currently, we can see it sweating through in some of our volume trends. From our perspective, there hasn't really been much of a change in what we're seeing for our activity in the market. We think that our fleet business is a pretty good view because we view business completely different to FSAs.
Okay, you're not seeing any slowdown in the economy, nothing that's worrying you. If I could just sneak in the first quarter guidance, I know you talked about the dilution, but is that Shell, Chevron? Can you quantify the EPS dilution in the first quarter?
Bob, this is Roberto. Obviously, I'm not going to get specific on how much is Shell and Chevron for the quarter. If you position what we have been saying now in the past few calls, those portfolios, as Melissa said, they are big portfolios. They are going to bring a significant amount of revenue. To get them up to speed, the onboarding cost of this is significant. I wouldn't quantify how much is the amount related to those portfolios, but it's a significant amount, obviously. What I would say, Bob, what is important is the confidence on the guidance that we have for the full year, which is we have a growth within our long-term targets, and that's where we want to reinforce that, and we are working towards that.
Okay. Thank you.
Our next question comes from the line of Jim Schneider from Goldman Sachs. The line is open.
Good afternoon. Thanks for taking my question. I was wondering if you could maybe talk a little bit more about the macro environment you're seeing, maybe by geography. Sounds like things are still pretty strong in Europe. I guess maybe talk about either the difference between the U.S. and Europe and specifically your expectations for new sales in Europe outside of the new portfolio wins you've already talked about in the U.S.
Yes. When we are looking at any of our sales pipeline, we break down our year as we go into executing the year. We look at what retention rates need to be by product and by geo. Then what we need from new sales coming in. As we thought about that across the world, I guess is what your question is. U.S. marketplace, we're right now envisioning, from an economic perspective, it being similar to last year. We know that we have these two major implementations that we're executing on. That's a little bit unusual in the backdrop, but it's not affecting my view of the overall macro. Then in Europe and in Asia, I'd say similarly.
We've had really significant growth in those marketplaces during 2018, albeit off a smaller basis, but we don't envision that changing when we look at how much we're going to bring on in 2019. There's a little bit more lumpiness as you bring in one large account. Like I talked about, that can cause a little bit more lumpiness just because of the size of the business. In terms of new wins and what we're seeing in the pipeline, we feel pretty good across any of these markets. I'm going to talk about Brazil as being the one standout in the fact that we're expecting to have headwinds there this year, which is something we've talked about the last two or three calls. We envisioned that to happen for at least the first half of 2019.
We'd say that again, we still think it's going to happen for at least the first half of 2019.
That's helpful. Thank you. Maybe turning to the corporate payments space for a minute. Clearly, continued strength in the results there. One of the things that we've seen from some of your competitors is the acquisition outright of software portfolios for the accounts payable and accounts receivable-type management software, where you have chosen to rely explicitly on a partner strategy. Can you maybe talk about your appetite for potential additional M&A specifically to have your own software solution in the future?
If you look at our software now, when we bought AOC, the combination of AOC and what we had prior to that, piece of what was sitting in EFS, we actually feel pretty good about the underlying product capability. We like the fact that we've built it using microservices, cloud-based, and we just keep adding to the stack that we have. When we think about acquisitions, I think about it two different ways. I think about them in that space as technology plays, and for us, that becomes a build versus buy analysis. We look at that to say, are there certain things that we need to do in order to build out the product? We like the ability to build on what we've got.
On the more vertical side of that's something we will continue to play in the marketplace. We'll be interested if someone has a piece of a product or a piece of what they're doing that we think is unique that comes with a book of business, then we'll continue to be interested in that as well. We look at both of those things and pretty thoughtfully, but we also feel pretty good about what we can build upon based on what we've already acquired and put together so far.
Great. Maybe just one clarification, if I could. Clearly, there is some dilution on both the new portfolios as well as the acquisitions in the beginning of the year. As you exit Q4 of 2019, would you expect operating margins to be up, flat, or down on a year-over-year basis?
Let me tell you, I mean, specifically to those portfolios, obviously, when you look at 2019, as we said, we expect to be dilutive on the first half, and then on the second half, we expect to be like a fully ramped. What you should expect for 2020 is obviously the full year of portfolios fully combined. Obviously, when you look 2019 to 2020, your margin should be better, no, than 2019 because you will have the two full halves with the revenue and the cost base aligned.
Thank you.
Our next question comes from the line of Sanjay Sakhrani from KBW. The line is open.
This is Sanjay. Thanks for taking my question. I guess first I had a quick question on the travel business. It seemed like you guys announced some good wins there, including the eTRAVELi portfolio. How should we think about the potential opportunity there, and when does that start to ramp in?
Sure. It's starting to ramp now, it will ramp throughout the year. You talked more broadly about what we expect to see in the corporate payments business. I would restate what Roberto Simon said, we expect it to be in line with our 10%-15% guidance range, our long-term guidance range in the course of this year. The acquisitions are going to push it on top of that, but the organic growth rate we expect to be between 10% and 15%. When you aggregate that with acquisitions, we expect it being over 30%.
Thanks for that. I guess a quick clarification on the Shell and Chevron portfolios. We've had quite a bit of discussion on that already, but I guess once you are past the upfront expenses, how should we think about the profitability of these portfolios versus the rest of the fleet business?
I will answer the question for you. Once we have those fully portfolios ramped on a run rate basis, the profitability of those two portfolios is going to be very similar to any of the other oil companies that we operate. You know that within the fleet business, we have the over-the-road on the trucking industry side, then when you get more on the fleet North America side, you have a small fleet, you have larger fleets. When you compare those portfolios within the oil companies, the profitability is going to be very similar to the other oil companies that we run.
Got it. If I can squeeze in a last one on Discovery Benefits. I know it's not contributing to earnings this year, but I guess, going forward, how should we think about the accretion expectation on an earnings basis?
What we've said about DBI, we've talked about it being immaterial from an EPS perspective this year. We obviously think it is going to continue to grow. We talked about it as combined with our healthcare business, we think it will continue to be a high teens grower, and it will continue to scale. We also talked about the fact that we expect to see $20 million worth of synergies that we are going to get over time. If you accumulate all of those things, we do expect it to look more like a margin profile of the rest of their healthcare business.
Got it. Thank you very much.
Our next question comes from the line of Oscar Turner from SunTrust. Your line is open.
Hey, guys. Good afternoon. First question is on fleet. I was wondering, did you guys provide the expected revenue contribution from Shell and Chevron this year? Apologies if I missed that. Just to clarify, it sounds like we should not expect to see a material revenue contribution until the second half of 2019?
This is Roberto. You know we don't disclose revenue or profitability by customer or portfolio. Melissa has just mentioned a while ago, we gave direction on the number of gallons that those two portfolios will add to our business. If you take these gallons and you translate them into revenue, you will have approximately $60 million-$70 million in revenue on a full year basis. This will give you an idea, obviously, on where we should be in 2021 now those two portfolios are fully ramped, and obviously considering the fuel prices that we have today.
Okay, thanks.
Our next question comes from the line of Matt O'Neill from Autonomous Research. Your line is open.
Yeah. Hi, thanks, guys, for taking my question. Actually, almost all of them have been basically asked and answered. I guess if I could try to ask on the sort of travel and corporate momentum we saw in the fourth quarter in another way, maybe what would you characterize, if anything, as not being necessarily repeatable if we wanted to think about that kind of levels going forward, versus maybe not?
One of the things that Roberto talked about in his section was around the idea that we had the rates were elevated. Some of our discount rates on interchange was a little bit higher in the fourth quarter. He talked about the reasons around that. That's something that we didn't expect will repeat throughout the course of this year. In terms of spend volume, some of what we will experience depends on what's going to happen overall in the travel marketplace because that's still a significant part of the portfolio. While we continue to bring on new business, how our existing partners perform has a pretty big impact on what happens to the overall spend volume. As Roberto talked about expecting that to be mid-teens to high teens, and of course, that's 2019, just to kind of give you an indicator.
The rate is expected to be a little bit different than what you've seen before, from a spend volume perspective, we expect to continue to see volume coming through that will be driven based on existing customers and the performance of those portfolios, but also adding in new portfolios. You also saw if you're looking at growth rates year-over-year, just keep in mind that we got the benefit of Brexit in 2018 compared to 2017. There's a little bit of a lift in terms of revenue.
Got it. Thank you for that. I guess just sort of to follow on that and specific to the interchange in that segment, trying to think about the overall bias going forward, higher or lower. I think I'm going to guess that it's probably complex or maybe the organic business or the business prior to Noventis is maybe stable, but then with Noventis, it will weight the average higher as that volume gets internalized. Am I thinking about that conceptually correctly?
Let me put this in context for you. As I said during the call, we expect for 2019 approximately 10 basis points on the net interchange higher than on the average of 2018. There are a couple of reasons. Number one, obviously, the acquisition of Noventis is going to add a few points to our interchange rates. The second thing, as I said, with one of our OTAs, we amended the contract. There's no impact to total revenue, but what we are doing, you will see during the year, a reclassification from other revenue into payment processing revenue. The way we calculate the net interchange is based on the processing revenue. That's another reason why you're going to see the rate to go up.
The final thing that you always see is more difficult now to manage is both the customer spend mix as well as from where the spend comes between domestic and international.
Got it. Thank you very much for that clarification. Appreciate it.
If there are no more questions over the phone, presenters, you may continue.