Apr 30, 2015
Executives
Eric R. Dey - Chief Financial Officer Ronald F.
Clarke - Chairman and Chief Executive Officer
Analysts
David Togut - Evercore Partners Inc. Ramsey El-Assal - Jefferies Group Inc.
Danyal Hussain - Morgan Stanley & Co. Ashish Sabadra - Deutsche Bank AG Philip Stiller - Citigroup, Inc.
James Schneider - Goldman Sachs Group Inc. Matthew Lipton - Autonomous Research LLP Glenn Greene - Oppenheimer & Co Inc.
Timothy Willi - Wells Fargo Securities LLC
Operator
Greetings, and welcome to the FleetCor Technologies, Inc First Quarter Earnings Conference Call. At this time, all participants are in a listen only mode.
A brief question-and-answer session will follow the formal presentation [Operator Instructions] As a reminder, this conference is being recorded. I would now like turn the conference over to your host Eric Dey, CFO.
Thank you, please begin.
Eric R. Dey
Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our first quarter press release.
It can be found at www.fleetcor.com under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income, adjusted net income per diluted share.
This information is not calculated in accordance with GAAP and may be calculated differently than other companies’ similarly titled non-GAAP information. Quantitative reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today's press release and on our website as previously described.
Also, we are providing 2015 guidance on a non-GAAP basis. Finally, before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements.
This includes forward-looking statements about our 2015 guidance, new products and fee initiatives, and expectations regarding business development and acquisitions. They are not guarantees of future performance, and therefore, you should not put undue reliance on them.
These results are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today's press release on Form 8-K filed with the Securities and Exchange Commission.
Others are described in our Annual Report on Form 10-K. These documents are available on our website as previously described and at www.sec.gov.
With our standard disclosures out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO.
Ronald F. Clarke
Okay, Eric. Thanks.
Good afternoon everyone and thanks for joining the call today. Upfront here, I'll plan to cover three subjects: first, I'll comment on Q1; second, I'll provide a general update on Comdata, our Shell Europe outsourcing program, along with some of our new product introductions, and then lastly, I’ll discuss our 2015 guidance.
Okay so onto Q1, we reported earlier Q1 revenue of $416 million, up 64% and cash EPS of $1.45, up 29% so 64% topline, 29% bottom line. We built our plan for the quarter on a number of assumptions fuel price, fuel spread, FX assumptions.
And fortunately we call the environment right and although FX was a bit worse than plan, fuel prices were a bit better than plan and spreads were basically on plan. So in aggregate, the environment’s impact at least versus our plan was effectively neutral for the quarter.
When you look at the macro environment’s impact versus the prior year, it’s quite a different story, and is very negative. So fuel prices in the U.S.
were down about a $1 per gallon versus last year, FX was obviously very weak, we did get a little bit of an offset from positive fuel spreads, but that collection of factors created a cash EPS headwind of about $0.16 of the quarter. So if you thought about our business in a constant environment, like-for-like environment to last year, we would be reporting fleet cash EPS of $1.61 or $0.16 higher which would produce a 44% profit growth, so pretty big environmental impact.
Okay. Let me transition to the drivers for the quarter, there were basically three.
So first, our biggest businesses performed well. Our North America fuel car business was up 17% in the quarter obviously helped by wide spreads.
Our UK businesses grew 10% in local currency and CLC grew 17% in the quarter, so big businesses doing well. Second some of our newer businesses, newer clients came fully online, our Canadian private label clients Ultramar and Husky are basically fully online and our Shell Germany and Shell Austria new contract is basically fully live, so we got help from both of those.
And then third, we had a full quarter of Comdata, which made a massive contribution to our Q1 results and inside of that overall performance Comdata’s corporate payments line of business grew 32% year-over-year, so terrific start there. Our Q1 fundamentals were quite strong.
Our organic revenue growth was approximately 9% in the quarter on a constant fuel price, constant currency and constant spread basis, so solid. So look, given the environment that we’re operating in, we are delighted to report 29% EPS profit growth for the quarter.
Let me now transition over to just a few general updates, starting out with our Comdata. So Comdata had basically an on plan first quarter per our expectations.
We’ve completed most of our cost and price synergy work and we’re now well underway in our growth planning work. We’re also well underway stepping up our sales hiring in both of those businesses adding sales people.
We do want to point out that we expect some rest of the year headwind at Comdata versus our internal plan. One area is higher than planned opt-out rates in our healthcare business, so in our virtual card business, and second we’re experiencing slower adoption of Comdata’s RFID point of sales solutions for truck stops and that will likely impact our second half plan.
So a couple of areas in Comdata that we expect to run behind plan going forward. As it regards our SVS, the gift card company, we’re finally reaching the end of our sales process, the audit work for 2013 and 2014 took a bit longer than planned, but that is now behind us.
So we’re now evaluating final bids for SVS and expect to have a resolution by the end of Q2. The Shell Europe outsourcing contract, we’ve made really good progress there.
As I mentioned Germany the biggest market is now fully operational, the revenue is tracking to plan and the same can be said for the second Shell market Austria. We’re planning to convert three new Shell markets literally next week, France, Belgium and the Netherlands, and again that’s consistent with out internal timing.
So we're off a very good start and getting into new markets in Continental Europe, could be in five new markets by the end of May. Lastly we want to report that we’re going live with some exciting new products, FleetCor products that are central to our long-term growth prospects.
We can report that we are officially live with our new universal MasterCard product in Germany, so we’ve got a small dedicated sales team testing demand for that product right now. Second we’ve gone live with our new electronic toll product in Brazil and we’re beginning to cross sell this new capability to our CTF trucking clients and lastly we’re expecting to go live with our Pac Pride extended network card program here in the U.S.
This product gives us the opportunity to literally double our Pac Pride business overtime, so quite exciting to be going live with a number of new products. Okay, lastly let me transitional over now to our full year guidance, we are maintaining our rest of year guidance at 4.65 in cash EPS at the mid point but we are raising today our full-year guidance $0.05 to 6.10 to reflect our Q1 beat.
We’re obviously remaining cautious on the rest of year, holding that intact and we’re doing that for a few reasons, one, as I mentioned we’re expecting some downward pressure against our Comdata plan from the higher healthcare opt outs and the slower adoption of the RFID solution. Two, Russia in particularly the Russia partner business, our small independent retail clients are, they’re really heard from the Russia slowdown and then third we’re looking at April unfavorable FX rates and I mean by that unfavorable versus our 2015 full year plan so when we estimate that April’s rates would create about an $0.08 incremental headwind for us for the rest of year.
Fortunately we’ve got some offsets that have us keeping our rest of the year guidance intact, we expect that rest of our businesses to perform at our plan or even bit better based on their start and as I mentioned we expect to hold on to SVS at least for Q2, which was unplanned. So these views puts and takes we’re maintaining our rest of year guidance as is, but again raising full-year cash EPS estimates So with that let me turn the call back over to Eric, he will provide some additional detail on the quarter and on our outlook.
Eric.
Eric R. Dey
Thank you, Ron. For the first quarter of 2015, we reported revenue of $416.2 million, an increase of 64% from the first quarter of 2014.
The revenue from our North American segment increased 136% to $298.8 million from $126.4 million in the first quarter of 2014, included in the first quarter results was the impact of Comdata which was acquired on November 14, 2014. Revenue from our international segment decreased $10.2 million or 8% to $117.4 million from $127.5 million in the first quarter of 2014.
For the first quarter of 2015, GAAP net income increased 25% to $94.2 million or $1 per diluted share from $75.1 million or $0.88 per diluted share in the first quarter of 2014. The other financial metrics that we routinely use are adjusted revenues and adjusted net income, which we sometimes also refer to as cash net income or cash EPS.
Adjusted revenues equal our GAAP revenues less merchant commissions. We use adjusted revenues as a basis to evaluate the company's revenues, net of the commissions that are paid to merchants who participate in certain card programs.
A reconciliation of adjusted revenues and adjusted net income to GAAP numbers are provided in Exhibit 1 of our Press Release. Adjusted revenues in the first quarter of 2015 increased 65% to $388.8 million compared to $236.3 million in the first quarter of 2014.
Adjusted net income for the first quarter of 2015 increased 41% to $135.9 million or $1.45 per diluted share compared to $96.1 million or $1.12 per diluted share in the first quarter of 2014. Elements of the macroeconomic environment had a significant impact in our results in the first quarter, specifically market fuel spread margins, fuel prices and foreign exchange rates.
In the aggregate, we estimate that these macro economic items negatively impacted our business in the first quarter of 2015 versus the first quarter of 2014 by approximately $30 million in adjusted revenue or $0.16 in adjusted net income per diluted share. Changes in foreign exchange rates were unfavorable in all geographies for the quarter, and overall we believe negatively impacted adjusted revenue during the quarter by approximately $19 million.
Fuel prices decreased during the quarter and although we cannot pricely calculate the impact of these changes we believe they negatively impacted adjusted revenues by approximately $26 million partially offsetting these negative impacts were fuel spread margins which continue to be very favorable versus prior year levels and resulted in a favorable impact with adjusted revenues in the first quarter. And although we cannot precisely calculate the impact of these changes, we believe it positively impacted our adjusted revenues by approximately $16 million in the first quarter.
To better understand the organic growth for the quarter we calculated revenues using constant currency, fuel price and market spread margins. Based on these criteria we would have reported approximately an 11% organic growth rate for the quarter excluding the Comdata business and 9% on a consolidated basis.
For the first quarter of 2015, transaction volumes increased 392% to 431.3 million transactions compared to 87.6 million transactions in the first quarter of 2014, North American segment transactions grew 851% driven primarily by the acquisition of Comdata on November 2014 and also from organic growth in our U.S. businesses, transaction volumes in our international segment were approximately flat at 46.8 million transactions.
For a discussion on revenue per transaction we are going to exclude the impact of the SVS business, which had approximately 301 million transactions in the quarter at a very low revenue per transaction. Revenue per transaction for the first quarter of 2015 excluding the SVS business decreased 1% to $2.87 from $2.90 in the first quarter of 2014.
Revenue per transaction can vary based on the geography, the relevant merchant and customer relationship, the payment product utilized and the types of products or services purchased. The revenue mix is influenced by our acquisitions, organic growth in the business and fluctuations in the macroeconomic environment as previously discussed.
Revenue per transaction decreased 1.8% in North America due primarily to lower fuel prices during the quarter versus the prior year quarter, partially offset by higher spread margins and the mix impact of the Comdata acquisition, excluding SVS, which has revenue per transaction products lower than the historical FleetCor average. In the International segment, revenue per transaction decreased 7.2% due primarily to unfavorable impact of foreign exchange rates across all of our geographies and lower fuel prices.
This unfavorable impact was partially offset by organic revenue growth in several lines of business. Now let's shift over and discuss some of the other drivers of our first quarter performance.
For our North American segment, most of our lines of business performed well, on a constant currency, fuel spread and fuel price basis we reported approximately 14% organic growth rate in the quarter, excluding the impact of the Comdata acquisition. Some of the positive drivers in North America revenues during the quarter were similar to the last several quarters, including the exceptional performance of our MasterCard product, which had revenue growth of approximately 40% over the first quarter of 2014 measured in constant fuels price.
The increase in revenue was driven primarily by increases in both transactions and revenue per transaction on a constant fuel price basis. The CLC Group, provider of our lodging card programs, had another solid quarter, with 17% revenue growth over the first quarter of 2014.
This revenue growth was driven primarily by increases in our CheckINN Direct product, which targets smaller accounts. As I mentioned earlier, the macroeconomic environment was mixed, very favorable fuel spread margins in the quarter versus the first quarter of 2014 positively impacted our adjusted revenue for the quarter by approximately $16 million, which was more than offset by the impact of lower fuel prices during the quarter of approximately $26 million in adjusted revenue.
And finally, the first quarter also benefited from our acquisition of Comdata. Organic growth in the international segment was approximately 9% for the first quarter measured in constant currency in fuel price.
However, as I mentioned earlier, unfavorable foreign exchange rates in all geographies negatively impacted adjusted revenues by approximately $19 million in the quarter. Results in our International business were impacted by strong organic growth in our UK business, which posted double-digit revenue growth over last year in local currency, the rollout of Shell Germany and Austria.
Strong organic growth in our Mexico business which also posted double-digit revenue growth over the prior year in constant currency and Russia volume remains soft and foreign exchange rates continues to be unfavorable. However, on a constant currency basis our Russia business is approximately flat compared to the prior year quarter.
Now moving down the income statement total operating expenses for the first quarter were $252.4 million compared to $139.8 million in the first quarter of 2014, an increase of 80.6%. As a percentage of total revenues operating expenses increased to 60.6% of revenue compared to 55% in the first quarter of 2014.
Included in operating expenses are merchant commissions, processing expenses, bad debt, selling and general administrative expense, depreciation and amortization expense and other operating net. Included in the first quarter of 2015 operating expense were normal operating expenses related to Comdata for the quarter and significant additional amortization expense related to the acquisition of Comdata.
Credit losses were $8.1 million for the quarter or approximately 13 basis points compared to $5.6 million or 12 basis points in the first quarter of 2014. The slight increase in bad debt was primarily due to the inclusion of Comdata operations in the quarter.
Depreciation and amortization increased 96.9% to $48.1 million in the first quarter of 2015 from $24.4 million in the first quarter of 2014. The increase was primarily due to amortization of intangible assets related to the Comdata acquisition.
Interest expense increased 258% to $19.6 million in the first quarter of 2015 from $5.5 million in the first quarter of 2014. The increase in interest expense was due primarily to additional borrowings to finance the Comdata acquisition.
Our effective tax rate for the first quarter of 2015 was 32.6% compared to 30.5% for the first quarter of 2014. The increase in the effective tax rate was due primarily to the inclusion of the Comdata business, which operates primarily in the U.S.
with a higher overall tax rate versus the average FleetCor rate. Now turning to the balance sheet; we ended the quarter with approximately $509 million in total cash, approximately $129.6 million of which is restricted and are primarily customer deposits.
As of March 31, 2015, we had approximately $1.995 million outstanding on our term A loan, $249 million outstanding on our term B loan and $556 million drawn on our revolver, leaving $479 million of undrawn availability. We also had approximately $679 million borrowed against our securitization facility.
As of March 31, 2015, our leverage ratio was 2.86 times EBITDA, which is well below our covenant level of 4.25 times EBITDA. We intend to continue to use our free cash flow to temporarily pay down the balance on our revolving credit facility and securitization facility and maintain liquidity for acquisitions and other corporate purposes.
Finally, we are not a capital-intensive business and we spent only $8.1 million on CapEx during the first quarter of 2015. Now on to our outlook for the remainder of 2015; we are raising our guidance to reflect our strong first quarter results but continue to be cautious about the reminder of the year for a few reasons.
We are expecting downward pressure in our Comdata business from higher healthcare opt out rates and slower POS sales in our merchant business than expected. Also we are expecting our Russia partner business to be soft and our small independent retail clients are really hurting from the Russian economic slowdown.
And we are also assuming the April’s unfavorable foreign exchange rate versus our internal plan assumptions will create an incremental $0.08 headwind the rest of the year. Fortunately, we have couple offsets that keep our rest of your guidance intact.
We expect the rest of our businesses to perform at plan or a little better based on their start and we expect to keep SVS for another quarter which was on plan. As a result, for fiscal 2015, we are updating our financial guidance for 2015 to be as follows: Total revenues between $1.6 billion and $1,650 million no change from the prior guidance.
Adjusted net income between $565 million and $585 million up from the previous guidance range of between $560 million and $580 million. Adjusted net income per diluted share between $6.00 and $6.20, up from the previous guidance range of between $5.95 and $6.15.
The company's fiscal-year guidance assumptions for 2015 are as follows: Weighted fuel prices up slightly to $2.59 average for the balance of the year in the U.S. compared to $2.58 in the prior guidance and compared to $3.56 per gallon average in the U.S.
in 2014, down approximately 30%. Market spreads assumptions remain approximately the same as the prior guidance.
Foreign exchange rates equal to the average of April 1 through 13, resulting in a negative impact with adjusted revenue of approximately $20 million and a negative impact to adjusted net income of approximately $0.08 in adjusted net income per diluted share compared to previous guidance. SVS business is retained for the entire second quarter of 2015.
Although, we now anticipate owning the SVS business for the second quarter, the SVS business does have some seasonality and second quarter is traditionally the lowest quarter in terms of revenue and profit. Full-year tax rate of 31.8% versus 32.1% in the previous guidance.
Fully diluted shares outstanding of 94.3 million shares and as always no impact related to acquisitions or material new partnership agreements not already disclosed. Our adjusted net come for diluted share guidance at the mid point of the range represents at approximately 18% growth rate over the $5.15 and adjusted income per diluted share reported in 2014.
We expect that in the aggregate foreign exchanges rates market spread margins and fuel prices create an approximate headwind of a 160 million to 170 million in revenues or approximately $1 an adjusted net income per diluted share headwind compared to 2014 averages. On a constant currency fuel price and market spread basis, our 2015 guidance would be approximately $7 and adjusted net income per diluted share or growth rate of approximately 36% over the $5.15 adjusted net income per diluted share reported in 2014.
We don’t know how the environment will actually play out in 2015 but it improves either later this year or next some of this headwind may actually come back as a tailwind. Although we do not anticipate providing quarterly guidance on an ongoing basis we believe it is prudent to do so given the impact of several items just discussed.
For the second quarter we are expecting adjusted net income per diluted share to be approximately the same as the fist first quarter, we are expecting our second quarter adjusted net income per diluted share to be between $44 and $46. Some of the items that are impacting the second quarter compared to the first quarter include the following, owning the SVS business for the entire second quarter, however as I mentioned earlier SVS has some seasonality and we expect SVS to contribute approximately $0.04 less and adjusted net income per diluted share in the second quarter versus the first quarter.
We are expecting FX rates to be unfavorable in the second quarter versus the first quarter and have an unfavorable impact of approximately $0.02 and adjusted net income per diluted share versus the first quarter. And spread should be more normal level and had less of an impact on revenue in the second quarter versus the first quarter.
And finally volumes build throughout the year and our new assets initiatives gain momentum throughout the year resulting in a much higher earnings per share in the third and fourth quarters. We have no plans to provide quarterly guidance going forward but rather to update our annual guidance each quarter.
And with that said, operator we’ll open it up for questions.
Operator
Thank you. [Operator Instructions] thank you.
Our first question comes from the line of David Togut with Evercore. Please proceed.
David Togut
Thank you, good afternoon Ron and Eric.
Ronald F. Clarke
Hi David.
David Togut
Ron, you mentioned a couple of factors at Comdata that were little below plan, I guess higher than expected healthcare opt out and slower than expected POS rollout. As you take a step back and look at Comdata relative to your initial plan from an earnings accretion perspective, how do you stand today versus at the time, I guess the last earnings conference call, let’s say from a one and two year accretion perspective?
Ronald F. Clarke
Hey David I would say we're probably in about the same place that we built an internal plan that had Comdata earnings in the high 20s and our best guess now is I think is still going to land above 20% for the year. So we had said when we did the transaction that we want to grow EBITDA in that business, 20% plus through the mid-term and I think year one will be that.
David Togut
Got it, and then I was pleased to hear that your rolling out direct MasterCard, I thought you were actually going with VISA in Europe, was that, was there last minute to change there?
Ronald F. Clarke
Yeah, if you remember there is two different things, we actually are going with an extended card in the UK with VISA and on the continent we’re actually going with MasterCard.
David Togut
Got it. Okay.
Ronald F. Clarke
So there are two different programs, with two different networks. But it is finally live here, boy, we've been in the kitchen a long time with that product, so to have it “in the market” and start testing it’s great news.
David Togut
How do you assess the revenue potential of a direct MasterCard on the European continent versus what you have seen in the U.S.?
Ronald F. Clarke
Again on paper David it is a giant number, right, again the majority of Europe fuel card penetration again is on private label oil company cards, there are not many independent universal products in any of the countries, and so the potential is enormous, the question is what is going to be the share. Our customers on private label programs in Germany going to want universal card, and so the answer in the U.S.
is we told you is yes almost all new accounts opt for the universal cards but it is too early to call for Europe.
David Togut
Understood. And then on CLC you called out 17% revenue growth there that have been running in the 20s I believe, low to mid 20s, any significant change there that would drive that?
Ronald F. Clarke
No, just - like always the base is getting a little bit bigger and we pumped some additional sales people into the - into that business kind of a little later than we thought, so we are hoping we kind of get back to that 20% as we work our way through the year, so it is really just the asset size of the business getting bigger.
David Togut
Got it. And then just a quick final question from me.
On its earnings call, WEX called out the market share gains in Q1 in the OTR market. What are you seeing in the OTR market at Comdata, are you preserving your share?
Ronald F. Clarke
Yes, again the property that WEX brought was called Fleet One which targets fundamentally smaller, David, smaller fleets thinking 10, 20, 30 vehicle fleets and the majority of Comdata’s business is very large, I think they have 18 or 19 of the top 25 fleets. So the answer is we are kind of in different segments and then (b) I’d say, it’s stable.
We have had very little attrition last year and in fact over the last few years, very little attrition in that business.
David Togut
Understood. Thank you very much.
Ronald F. Clarke
Good to talk to you.
Eric R. Dey
Thank you.
David Togut
You too.
Operator
Thank you. Our next question comes from the line of Ramsey El-Assal with Jefferies.
Please proceed.
Ramsey El-Assal
Hi guys I had a bit of a follow-up on one of David’s questions. What does it mean exactly opt out in the virtual card and Comdata’s virtual card business, what is the context in which customers are opting out?
Ronald F. Clarke
So the way to think about it, Ramsey is the providers of healthcare, so think hospitals, docs, dentist, right, that actually receive the payments ultimately, so let’s say Comdata signs up a TPA who is paying Ramsey’s doctor’s office, he pays all 300 docs that he has, and then you basically call in and say, hey, I don’t want to get paid with a virtual card. So an individual provider will basically tell his TPA, hey I don’t want to get paid that way, I don’t want to get paid by check, I want to get paid by ACH or wire, or whatever the guys says.
And so basically we plan in our business plan some opt out rate, right, because obviously some people that go on just don’t want to be on it and it is running higher than that plan that we built.
Ramsey El-Assal
That makes sense. That helps, thanks.
And can you break out the revenue and earnings contribution from SVS in Q1 and Q2? Just trying to get a better idea of sort of how it fits in.
I know it’s not a huge contributor to the bottom line.
Eric R. Dey
Hi, Ramsey, this is Eric, and in Q1 just to give you some round numbers, I don’t have the exact numbers in front of me, SVS contributed approximately $40 million, $42 million in revenue and $0.08 to $0.09 in cash EPS, and in Q2 again there is a lot of seasonality to the business and Q2 is traditionally the lowest quarter in terms of both revenue and profit by a pretty wide margin, so Q2 is more in the $30 million revenue range and around kind of call it $0.05 in cash EPS.
Ronald F. Clarke
Obviously Ramsey the cost structure is pretty fixed in that business so when revenue flexes down obviously profits flex faster.
Ramsey El-Assal
Okay. And on that business you mentioned that you are evaluating final bids, does that mean that the divestiture here is kind of imminent, or is there still a chance you might hold on to the asset?
Ronald F. Clarke
Yes, I would say we are - you got to always see obviously the final documents and understand where we are, so we’re getting to the end, we are obviously in final documentation with the parties. So I would say we are still going to make a decision but we will be making a call in the next 30 to 60 days.
Ramsey El-Assal
Okay. And then just last one from me, are there any partnership or decent sized partnership or contract renewals that are coming up or are we in a good part of the cycle right now with that?
Ronald F. Clarke
I would say in terms of new business there is a couple of things that we are working on, I think we’ve said historically it’s a long boil, so it’s hard to say when, but we are in conversations with a couple of big people about helping them with their business.
Ramsey El-Assal
Okay. But no existing large contracts that are coming up for renewal?
Ronald F. Clarke
Correct, nothing imminent.
Ramsey El-Assal
Thanks, guys. I appreciate it.
Operator
Thank you. Our next question comes from the line of Smitti Srethapramote with Morgan Stanley.
Please proceed.
Danyal Hussain
Hi, Ron and Eric, this is Danyal Hussain calling in for Smitti. Just another follow-up on the virtual card opt out.
Is this at all related to the change in controller or is this just your typical attrition, and just in light of that, it seems like you’re still seeing very robust growth rate, you had 32% corporate payments growth. So is that you are seeing growth above and beyond what you had expected elsewhere like in construction or is that mostly in line?
Thanks.
Ronald F. Clarke
The short answer is, the second thing you said right, it’s not related to our involvement and yes, you are right. Although we are calling out the opt out rates running higher what you said is right the business still deliver 30 plus in the full year forecast is in that kind of a range.
So I don’t want to give the view that it’s not a terrific business because its one of the core reasons we bought. It is just not quite as super terrific as we thought.
So it’s going to inch back a bit from our plan.
Danyal Hussain
Got it. And then just following up on the direct master card product, and there are some differences I think in functionality just given level three data isn’t prevalent in Europe, so can you just talk about how that functionality compares to maybe what you have in the U.S.
Ronald F. Clarke
There are, I think the major difference again is the tax, is the VAT treatment in Europe, so what we’ve launched kind of version 1.0 that has call it 80% of the capability and we hope to be out with kind of diversion 2.0 call it another quarter that gets us almost all the way there. So we are working to kind of equal the U.S.
functionality.
Danyal Hussain
Great. Thank you.
Operator
Thank you. Our next question comes from the line of Ashish Sabadra with Deutsche Bank.
Please proceed.
Ashish Sabadra
Hey, thanks for taking my question. Quickly on MasterCard, if I heard that number right, it was the growth 40%, that seems like an acceleration from the mid-20s that you’ve seen in the past few quarters.
So I was just wondering if you could provide more color on the front.
Eric R. Dey
This is Eric. We called up at 40%, I want to call that out, that is normalized assuming the same fuel price in 2015 as we had in 2014 so it’s on a apples-to-apples basis.
That product has been growing kind of in the mid 20s I guess if you go back and you look at the last several quarters, our growth rate has accelerated a little bit in the quarter. Again, it does bounce around kind of from quarter-to-quarter.
So we saw growth in both transaction volumes and gallons during the quarter and we also saw growth in revenue per transaction as well which is kind of contributing to that increase. But it does bounce around a little bit from quarter-to-quarter.
Ashish Sabadra
Now that’s great. Just quickly on the international front, looks like the organic growth was pretty good at 9% but the transactions actually declined in the quarter year-on-year.
So I was wondering if you can just provide some color on the transaction growth in international and when do we see that cross and improving going forward.
Eric R. Dey
I mean if you go back and you look at the international business and I think, Ron, actually made some comments around this. I mean, certainly there are some businesses that have softened a little bit, you look at our Russia business as an example, which is kind of flat, the kind of down from prior year.
We’ve also see the economy sharpening in places like Brazil, which have impacted transaction volumes, but we have other places where transaction volumes are actually performing well, I mean, the UK as an example to roll out of Euro Shell into couple markets that we’re already into. But when you add it all, all of that kind of adds to around flat transaction growth but again I think it’s more than anything else is just softened the economy in a couple of places that’s kind of driving the number
Ashish Sabadra
Okay that’s great. Thanks for the color
Operator
Thank you. Our next question comes from the line of Phil Stiller with Citi.
Please proceed. Q - Phil Stiller Hi guys.
Ron I think in the last earnings call, you talked about accelerating some price recovery initiatives in the first quarter, maybe you could talk about how that win, what the customer response was and if there is any additional work to be done for the rest of the year?
Ronald F. Clarke
Yes I would say Phil it’s worked out pretty well not perfectly but I’d say call it 90% of what we’d planned, I think the reaction has been good, we spent a fair amount of time testing our way kind of in the first quarter or so. I would say it’s not much left for us to understand now will start to pick up some of the benefits of that kind of in Q2, Q3 and Q4.
So far so good.
Phil Stiller
Okay great. In terms of Comdata or so, obviously there is a couple of headwinds to deal with these said the earnings growth should be north of 20%, just trying to understand I guess how much of that is from revenue growth versus synergies.
So now that we considered couple of the revenue headwinds, how much should the revenues in that business be up this year?
Ronald F. Clarke
Yes again I think we called out when we did the deal 10 and 20, right there is a lot of operating leverage in that business below the line, so we built an internal plan that had total Compdata without SPS call it in the low teens on the top and as I said earlier kind of mid to high 20s on the bottom and despite the opt out things that I called out, it will still be we think 10 plus on the top and 20 plus on the bottom this year.
Phil Stiller
Okay good to hear, last question I guess on the acquisition pipeline, balance sheet starting to look better, how does the deals look in the pipeline?
Ronald F. Clarke
They look the same, Phil. We are working on a series of things, some early, some kind of in the middle.
And actually we just had a board meeting last week to review our liquidity and we’ve got plenty of liquidity either in our line that we can draw on to do transactions and second we’re coming out of - the other side, lot of Comdata work it’s about what nine months I guess that we signed. So I would say we are eager if we can find the thing that we like.
Phil Stiller
Great, appreciate it.
Ronald F. Clarke
Thank you.
Operator
Thank you. Our next question comes from the line of James Schneider with Goldman Sachs.
Please proceed.
James Schneider
Hello. Thanks for taking my question.
Sorry. I was wondering if you can maybe address the opportunities that you’re seeing from European oil companies and any sense of the timing for when you could see more RFPs come to bid.
Ronald F. Clarke
Yes James its Ron. I don’t think much has changed on that front the same likely suspects are evaluating, some are in RFI mode, some are in RFP mode, and I’d say, as I mentioned we’re grinding along trying to brief them and get them comfortable.
As I said in some of the prior calls, I think, all of them want to see how we and WEX do with Shell and Exxon and make sure we do a good job, have the right proof, the right kind of confidence. So I’d say again that there is big clients with big portfolios that are evaluating the thing and we’ll see when they’ll finally pull the trigger.
James Schneider
And then, that’s helpful. Thanks.
And then on the virtual cards, can you maybe update us on your efforts to expand either different verticals to be on the kind of construction healthcare verticals you’re in now. And maybe any talk about how the sales and marketing investments you’re making in those two verticals are playing out?
Ronald F. Clarke
Yes that’s a great question. We’ve identified a couple of others.
I’m not going to call out what they are but two additional verticals beyond the two that you named that fit our screen in terms of the kind of clients, the kind of merchant network, the economics but the characteristics it make those attractive. And then second, we completed a big growth piece of work that we commissioned a couple of months ago and it started investing, we put millions into the budget, I think I mentioned before to step up spending in a bunch of areas and so for example in construction, we got a good position but it’s tiny against the potential.
So we’re doubling down on that vertical and also in the direct to the horizontal area so we are eager up to build up that business and we’re spend in mind right now to do it.
James Schneider
Great, that’s helpful .thanks guys.
Operator
Thank you. Our next question comes from the line of Mat Lipton with Autonomous Research.
Please proceed.
Matthew Lipton
Hi, thanks for taking my question. Good afternoon, I guess the first one is Brazil, I'm not sure its been mentioned on the call, its the number of other fen tech companies this quarter that do business in Brazil talked about becoming more cautious on the environment there.
You need products in Brazil, so I guess any update either Ron or Eric would just be helpful in Brazil first?
Ronald F. Clarke
I think that callout Matt is right I think the, the thing went from the dialing, when we get in and whatever 3, 4 5 years ago to less so today and obviously data effects employment related products right in the conversion of formal employment, so of the people that the environment is not the greatest but for us, going from having, call it a couple of products including kind of a paper, toll products that having, the market leading food card, market leading fuel card and now on a electronic toll product, I would say that the opportunity and again reporting a lot of money and the opportunity for us to grow these new lines despite kind of the flat economy we still think is terrific, so the core business we had isn’t going anywhere too fast because of those reasons but we think the new lines of business will
Matthew Lipton
Just a quick follow up there, when have you just launched the new lines, in the electronics products are that going for market for while.
Ronald F. Clarke
Yeah, I mean if you kind of run through the three products that we did a deal we got a food card product which we started marketing in a big way in the falls to call it, six or eight months and that the new fuel card product when we call a couple of months ago and literally, as we speaking here the electronic toll product, so everything is call it six months new.
Matthew Lipton
That’s great, thanks and then just a follow up on the M&A, on the last call obviously talked Comdata being what was holding up the corporate debt team play. I think during the quarter you made some comments about this pushed down on the operating unit, I mean I see big enough, also a hurdle for the corporate development didn’t work on deals or can those things happen.
Thanks.
Ronald F. Clarke
Yeah, they obviously can happen at and we’ve got a bank that helping us on the SPS work which is given our guidance some leverage and again we continued to work, the relationships that we have an we are actively looking at a set of things now, we’re back and busy on it.
Matthew Lipton
Alright, great guys thank you.
Operator
Thank you. [Operator Instructions] Our next question comes from the line of Glenn Greene with Oppenheimer.
Please proceed.
Glenn Greene
Thank you. Good afternoon, guys.
Just a couple of questions. Could you give us a sense of the Comdata revenue and margin contribution was in the quarter?
Eric R. Dey
Hey, Glenn, this is Eric. In total, the Comdata revenue was approximately $145 million.
Glenn Greene
Okay.
Eric R. Dey
From a margin contribution perspective, I don’t have that number specifically. We have taken that business in kind of merged certain segment of the business with some of other fleet core businesses so it’s kind of hard to dissect that.
But as a general rule when we bought that business, the margin profile was a little bit lower than fleet cores. And obviously, our objective is through revenue synergies and cost synergies obviously to increase the profitability of that business and make it more in line with the fleet core average.
But to-date it is a little below the fleet core average.
Glenn Greene
Okay. And that $145 million is there a way to frame that growth, was that in 10% or a little bit lower than that and you are going to build to that 10% range overtime.
Eric R. Dey
It’s the latter; we grew that business if you exclude the SVS business. I think that grew organically around 7% in the quarter.
And obviously, it’s our stated objective effectively to get to that business to grow more in the 10% organic range. And again, we just started with the integration process and we’re starting to invest more money in sales and marketing.
And it takes time to actually build up that capability. So we should see hopefully, those numbers increase as we get toward the end of the year and next year.
Glenn Greene
Just remind me the corporate…
Eric R. Dey
Hello
Operator
Mr. Greene we lost your line.
Please, proceed with your question.
Ronald F. Clarke
I think he is gone, operator.
Operator
Certainly. Our next question comes from the line of Tim Willi with Wells Forgo.
Please, proceed with you question.
Q –TimothyWilli
Thanks and good afternoon, Eric and Ron.
Ronald F. Clarke
Hey Tim.
Q – TimothyWilli
First, one sort of housekeeping questions, Eric, then questions to Ron on the virtual card. But just to make sure I have organic growth rates correct, you’ve given out several times, I just want to make sure, you said North American fleet’s constant fuel price was 14% organic, is that correct?
Eric R. Dey
Correct.
Ronald F. Clarke
That is correct.
Q –TimothyWilli
Okay. And the 9% constant currency, constant fuel for international getting to 11% in aggregate for the cooperation, is that all correct?
Ronald F. Clarke
Pre Comdata.
Eric R. Dey
Pre Comdata, the 9% post Comdata.
Q –TimothyWilli
Okay. 11%, 3% and 9% post Comdata.
Okay. Great.
Very helpful, thank you. Going next to virtual card and I got a follow-up I think this is Matt’s question.
Ron, going back to sort of the opt out, in that question obviously that’s a product that costs the recipe and other payments probably 2% plus and the bulk of that I know they are going to get their ACH filed or their check. I guess when you think about the profitability of that business versus the growth, and driving the market, which literally as you go, it’s a different verticals in macro channel.
It is your wet part of the game plan potentially to sacrifice some of those economics either through rebates or people to accept it and or to channel partners to get out there and push the product a lot more or you really are trying to protect the economics as they look now or just take it at whatever pace the market allows you.
Ronald F. Clarke
I think, Tim, it’s probably too early to call, I think you’re on a good point, obviously there is some merchants who reject the payment method outride and then others who take it and then chose to opt out and to your point if you made a different proposal like a Comdata direct, it didn’t have the same interchange requiring rate you might get those people back. But I think again the thing is still roaring its early days, there is tons of markets, there’s tons of merchants taken it, there is a lot of benefits versus taking paper even ACH in terms of weak on and stuff and so I’d say our early view is there is enough interest in the benefits of this thing and it’s growing fast enough that we’re going to kind of leave it as it is for now and take a look a different day.
Q –TimothyWilli
And if I can just follow up, obviously, you guys have shown to be very diligent about innovating and creating product on top of the fleet platforms and other stuff you bought into as you gotten to know this business, you see lots of opportunities around this the quarter product, a product innovation, whether it’s software or data or what have you that would maybe help drive acceptance further.
Ronald F. Clarke
That’s a really good question. In the middle of that project right now, we’ve gone back and underwritten a huge study on both the AR and AP side, to try to understand whether we need a more holistic offering for AP people and then your point is there a different setup of services we could provide on the supply or on the merchant side to make them happier and so we’ve got as you can imagine a number of ideas and so we are kind of working through that.
But the answer is yes, we will clearly broaden the things we do for both sides of the wheel there overtime.
Q –TimothyWilli
Great. That’s all I had.
Thanks very much.
Ronald F. Clarke
Thanks, Tim.
Eric R. Dey
Thanks, Tim. End of Q&A
Operator
Thank you. That is all the questions that we have in queue at this time.
This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.