Feb 4, 2016
Executives
Eric Richard Dey - Chief Financial Officer & Secretary Ronald F. Clarke - Chairman, President & Chief Executive Officer
Analysts
James Edward Schneider - Goldman Sachs & Co. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.
David Mark Togut - Evercore ISI Tien-tsin Huang - JPMorgan Securities LLC Ashish Sabadra - Deutsche Bank Securities, Inc. Darrin Peller - Barclays Capital, Inc.
Operator
Greetings and welcome to the FleetCor Technologies' Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode.
A question-and-answer session will follow the formal presentation. Also as a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Mr. Eric Dey, CFO.
Thank you. You may begin.
Eric Richard Dey - Chief Financial Officer & Secretary
Good afternoon everyone, and thank you for joining us today. By now everyone should have access to our fourth 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, and 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 2016 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 may include forward-looking statements about our 2016 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.
Others are described in our annual report on Form 10-K. These documents are available on our website as previously discussed and at www.sec.gov.
With our disclosures out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO.
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Okay, Eric. Thanks and good afternoon everyone and thanks for joining today.
Up front here, I plan to cover three subjects. First I'll comment on our Q4 results.
Second, I'll review 2015 full year results and a bit on our progress, and finally I'll discuss our 2016 outlook and guidance. Okay.
So, on to the quarter. We reported Q4 revenue of $431 million.
That's up 14% in cash EPS of $1.70 up 22%. So, 14% top line, 22% bottom line.
Q4 presented quite a challenging macro environment for us. You could say we hit the trifecta of low fuel prices, weak FX and even unfavorable fuel spreads versus Q4 2014.
Combined, these factors resulted in approximately a $56 million headwind to revenue in the quarter and a $0.36 headwind to cash EPS in the quarter. And if these three things were not enough, our same-store sales were a bit weak in the quarter as well due to the U.S.
railroad and U.S. oil related industries being quite soft along with the ongoing weakness in both Russia and Brazil.
So, quite a bit of environmental challenge in Q4. If you were to look at FleetCor in the quarter on a like-for-like or constant basis, we actually had a very, very good quarter.
Our organic adjusted revenue growth was approximately 10% for the quarter. Revenue fundamentals, quite sound underneath all this macro noise and, again, with $0.36 of cash EPS headwind, instead of reporting 22% profit growth, we would have reported 48% profit growth in a constant environment.
So, look, the point again is quite healthy underneath all the noise. So, in terms of themes for the quarter, let me start with Comdata.
So Comdata contribute quite a bit of incremental revenue in Q4 given the anniversary date was mid quarter. And inside of that, our Comdata trucking fuel car business was up 12%.
So, 12% for the quarter which is really a terrific exit rate for that business. Our U.S.
MasterCard business continued to perform exceptionally well in the business, up 43% on a constant fuel price. Pac Pride, one of our newest acquisitions, doubled revenue in the quarter on the strength of extended network card.
We got incremental revenue from the Shell Europe outsourcing initiative, entering three new European markets in the quarter. And then lastly we did have some tax favorability which resulted in lower Q4 tax rate.
Eric will expand on the details in his section. So, look, all in all a pretty good Q4 performance.
Okay. Let me transition now over to full year 2015.
So, we reported revenue of $1.7 billion, up 42% and full year cash EPS of $6.30, up 22% versus 2014. So, that makes five years in a row that FleetCor, since it went public in 2010 has reported 20% plus annual profit growth.
So, quite pleased with that. So, in terms of 2015, to say that it was a crazy macro environment would be an understatement.
And the fact that we printed 22% profit growth for the full year, that's quite encouraging. If you were to look at full year 2015 on a like-for-like basis – a constant basis, we would have reported $1.08 of incremental cash EPS.
So instead of a reported number of $6.30, you're looking at a number of $7.38, which would be a 43% profit growth over 2014. You've got the same story on the revenue side.
Underneath all this micro headwind, our business has continued to meet our organic adjusted revenue growth target of 10%, which again, they did for 2015 excluding SVS. So, look, that continues to position the company quite well going forward.
So, beyond the numbers for 2015, we did make a lot of strategic progress in the year. So, first off, Comdata, we progressed in terms of integration, we installed two new executives to run the two main businesses, and obviously we're off to a good start executing against our growth plans.
The trucking business I mentioned a bit ago up 12% in the quarter, and corporate payments business up 13% in the quarter excluding healthcare. So, pleased with Comdata first year.
Our second area of progress in 2015 was with our partners. We're delighted that we renewed our BP relationship for a second time.
We also advanced proof of our European outsourcing capability by implementing five new European markets successfully for Shell. You know, we're hopeful that that builds further trust for other major oils.
Many of our growth businesses kept on going in 2015. Our U.S.
MasterCard business was up 38% on a constant fuel price for the full year. CLC up 13%, despite some big time railroad slowdowns in the second half of the year.
Our Pac Pride business, revenue up about 50% in 2015; and Efectivale, our Mexico business up 14% in local currency. So, again, a number of our growth businesses continuing to do well.
In terms of stability, you know, we're quite pleased with three of our businesses that are in difficult markets. So, our Russia business flat in local currency despite that economy down, our Brazil business flat in local currency, with that market down and our Czech business flat in local currency, which is a bit of a turnaround for that business.
So although it may not seem it good news in terms of three businesses holding their own against the prior year in pretty weak economies. And lastly we're pleased that we did some new things in 2015.
We launched our AllStar One card, which is our new UK chip card. We converted about half of all of our clients to that product by the end of 2015, so good progress there.
We got our European universal card finally live in Germany and continued to work out the bugs of that product. We launched our new Comdata hotel card program for trucking clients which uses the CLC hotel network.
You know, in the first month, we signed up about 100 clients representing about $1 million of annualized revenue, so good start. And then finally, we launched Uber in the spring of 2015 and that has been a really a great success.
So, look, all in all 2015, a very solid financial year. Profit's up over 20% and a decent amount of strategic progress accomplished.
Okay. So, last let me transition over to our 2016 outlook.
Today we're providing 2016 guidance of $1.755 billion in revenue at the midpoint and $6.50 in cash EPS at the midpoint. The story of 2016, again, looks like a macro environment story.
Each of the key macro variables that affect us, fuel price, FX, and interest rates are all in a worse place than they were for the full year or the average for 2015. And if you aggregate these environmental factors, we're estimating approximately $100 million revenue headwind in 2016 versus a constant 2015 and approximately a $0.70 cash EPS headwind in 2016 versus a constant 2015.
So, again, a lot of challenge setting up here. If you were look at our guidance this year on a constant or like-for-like basis, we're still planning adjusted revenue growth of 10% for full year 2016 and again on a constant basis, cash EPS would be $7.20, not the $6.50 in a constant environment.
So, look, the good news in all of this is that we continue to power through a very negative environment for two years in a row and that underneath all this macro noise, we want to reiterate that our growth fundamentals are quite sound. So, with that, let me turn the call back over to Eric.
He'll provide some additional information on the quarter, the year, and our outlook. Eric?
Eric Richard Dey - Chief Financial Officer & Secretary
Thank you, Ron. For the fourth quarter of 2015, we reported revenue of $430.6 million, an increase of 14% from the fourth quarter of 2014.
The revenue from our North American segment increased 27.1% to $313.6 million from $246.7 million in the fourth quarter of 2014. Included in the fourth quarter results was the impact of Comdata, which was acquired on November 14, 2014.
Revenue from our international segment decreased 10% to $117 million from $129.9 million in the fourth quarter of 2014. For the fourth quarter of 2015, GAAP net income decreased 52% to $52.8 million or $0.56 per diluted share from $109.5 million or $1.21 per diluted share in the fourth quarter of 2014.
Included in GAAP net income for the fourth quarter of 2015 was a $40 million non-cash impairment charge related to a minority investment in Masternaut and a $34 million increase in non-cash stock compensation expense compared to 2014. The other financial metrics that we routinely use are adjusted revenues and adjusted net income, which are sometimes also referred 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.
We prepare adjusted net income to eliminate the effects of non-cash items that we do not consider indicative of our core operating performance. A reconciliation of adjusted revenues and adjusted net income to GAAP numbers are provided in exhibit one of our press release.
Adjusted revenues in the fourth quarter of 2015 increased 17% to $403.1 million compared to $343.4 million in the fourth quarter of 2014. Adjusted net income for the fourth quarter of 2015 increased 27% to $160.2 million or $1.70 per diluted share compared to $125.8 million or $1.39 per diluted share in the fourth quarter of 2014.
Elements of the macroeconomic environment had a significant impact on our results in the fourth quarter. Specifically market fuel spread margins, fuel prices and foreign exchange rates.
In the aggregate, we estimated that these macroeconomic items negatively impacted our business in the fourth quarter of 2014 (sic) [2015] (16:13) versus the fourth quarter of 2014 by approximately $56 million in adjusted revenue or approximately $0.36 in adjusted net income per diluted share. In addition, we're also seeing some same-store sale softness in the quarter.
We estimate about 2% to 3% globally. We believe the softness is due primarily to the U.S.
railroad and oil-related industries as you would expect along with ongoing weakness in both Russia and Brazil. On a constant currency fuel price and market spread margin basis, we estimate that we would have reported approximately $2.06 in adjusted net income per diluted share in the fourth quarter of 2015 compared to $1.39 in the fourth quarter of 2014 or a growth rate of approximately 48%.
Changes in foreign exchange rates were unfavorable in all geographies for the quarter and overall we believe negatively impacted adjusted revenues during the quarter by approximately $20 million. Fuel prices and fuel spread margins also decreased during the quarter versus prior year.
And although we cannot precisely calculate the impact of these changes, we believe they negatively impacted adjusted revenues by approximately $36 million. 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 estimate that we would have reported an approximately 9% organic growth rate for the quarter excluding the SVS business and approximately 10% on a consolidated basis. For the fourth quarter of 2015, transaction volumes increased 50% to 568 million transactions compared to 380 million transactions in the fourth quarter of 2014.
The increase in total transactions was due primarily to the acquisition of Comdata on November 14, 2014 and also organic growth in our businesses. Excluding the impact of Comdata, our transaction volumes were 95.4 million in the fourth quarter of 2015 compared to 91.8 million transactions in the fourth quarter of 2014 or a growth rate of approximately 3.9%.
North America segment transactions grew 58%, driven primarily by the acquisition of Comdata and also organic growth in our U.S. businesses.
Transaction volumes in our international segment were down approximately 5.8% to 45.8 million transactions. Transaction volumes in the international segment were impacted primarily by market softness in some of the international businesses.
For a more meaningful discussion on revenue per transaction, we will exclude the impact of the SVS business which had approximately 429 million transactions in the quarter at a very low revenue per transaction. Revenue per transaction for the fourth quarter of 2015 excluding the SVS business decreased 15.2% to $2.79 from $3.29 in the fourth 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 and services purchased. The revenue mix was influenced by our acquisitions, organic growth in the business and fluctuations in the macroeconomic environment as previously discussed.
Revenue per transaction excluding SVS decreased approximately 23.1% in North America due primarily to lower fuel prices and fuel spreads during the quarter versus the prior year quarter. In the international segment, revenue per transaction decreased 4.5%, due primarily to the unfavorable impact of foreign exchange rates across all of our geographies.
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 fourth quarter performance.
For North American segment, most of our lines of business performed well. On a constant currency, fuel spread and fuel price basis we estimate that the organic growth rate in the quarter was approximately 12%, excluding the impact of the Comdata acquisition.
Some of the positive drivers in the North America revenue during the quarter were similar to the last several quarters, including the exceptional performance of our MasterCard product which had estimated revenue growth of approximately 43% over the fourth quarter of 2014 measured in constant fuel price. The growth in MasterCard was driven by increases in both transactions and revenue per transaction measured on a constant fuel price basis.
CLC had another solid quarter with 8% revenue growth over the fourth quarter of 2014. This revenue growth was driven primarily by increases in our CheckINN Direct product which targets smaller accounts.
Our Comdata business, excluding SVS, performed well in the quarter and had an organic growth rate of approximately 8% on a constant fuel price basis versus prior year. And as I've mentioned in prior quarters, the Comdata organic growth rate in 2015 was impacted by lower RFID sales in our trucking business and higher opt-out rates in the healthcare segment.
International segment revenue was down approximately 10% in the fourth quarter of 2015 versus the fourth quarter of 2014. This decrease was driven primarily by unfavorable foreign exchange rates in all geographies which negatively impacted adjusted revenues by approximately $20 million in the quarter versus last year.
On a constant currency and fuel price basis, organic growth was approximately 7% for the quarter. Some of the international highlights for the quarter include the continued conversion of the Shell small business portfolio.
We're now in a total of seven markets with a plan to convert the remainder of the markets in 2016. Our Mexico business continued to perform well and posted double-digit gains and on the downside, economies in Brazil and Russia continue to struggle and are impacting volumes in those markets.
And moving down the income statement, total operating expenses for the fourth quarter were $284.5 million compared to $204.1 million in the fourth quarter of 2014, an increase of 39%. As a percentage of total revenues, operating expenses increased to 66.1% of revenue compared to 54.2% in the fourth quarter of 2014.
Including in operating expenses are merchant commissions, processing expenses, bad debt, selling and general and administrative expense, depreciation and amortization expense, and other operating net. Included in the fourth quarter of 2015 operating expense were additional operating expenses and significant additional amortization expense related to the acquisition of Comdata.
In addition, non-cash stock compensation included in general and administrative expense was $45.7 million in the fourth quarter of 2015 compared to only $11.4 million in the fourth quarter last year. Excluding the impact of the additional non-cash stock compensation expense, we estimate that operating expenses as a percentage of revenue would have been approximately 58%.
Also to remind everyone, we booked approximately $26 million of deal related expenses in the fourth quarter of 2014. Also included in operating expense for the fourth quarter of 2014 was an approximately $29 million gain in unusual items, reflecting a decline in amounts for contingent consideration and tax indemnification for the company's 2013 acquisitions of DB and VB in Brazil.
Credit losses were $6.3 million for the quarter or approximately three basis points compared to $6.3 million or 13 basis points in the fourth quarter of 2014. The 10 basis point decrease in bad debt was due primarily to the inclusion of Comdata in the quarter, which had bad debt as a percentage of its billed significantly below the FleetCor average.
Depreciation and amortization expense increased 27% to $48 million in the fourth quarter of 2015 from $37.8 million in the fourth quarter of 2014. The increase is primarily due to amortization of intangible assets related to the Comdata acquisition.
Also the company booked a loss of $3.7 million in the fourth quarter of 2015, related to our minority investment in Masternaut, compared to a loss of $4.9 million in the fourth quarter of 2014. We regularly evaluate our investments which are not carried at fair value, for other than temporary impairment in accordance with GAAP.
As part of the review, we determined that the performance improvement initiatives implemented in Masternaut will take longer to implement than we originally projected. As a result, we have recorded a $40 million non-cash impairment charge in the equity investment line in the income statement.
Interest expense increased 24.9% to $16.5 million in the fourth quarter of 2015 from $13.2 million in the fourth quarter of 2014. The increase in interest expense was due primarily to additional borrowing to finance the Comdata acquisition.
Our effective tax rate for the fourth quarter of 2015 was 38.4%, compared to 21.9% for the fourth quarter of 2014. However, the non-cash impairment charge resulted in a reduction in basis in Masternaut for book purposes but not tax purposes.
Although this temporary book tax basis difference resulted in the company increasing its deferred tax asset related to its equity investment in Masternaut, the company also increased its valuation allowance against the deferred tax asset. Excluding this non-cash item, our tax rate in the fourth quarter of 2015 would have been 26.2%.
Also included in the fourth quarter was an approximate $6 million favorable adjustment primarily related to the reversal of prior year uncertain tax positions due to the statute of limitations expiring, a reduction in Comdata state tax rate due to Comdata being included in the company's state tax structure and the impact of a reduction in the UK statutory tax rate in 2017 through 2020. The lower statutory rates in the UK resulted in a reduction to the company's net deferred tax liabilities related to its UK subsidiaries.
Excluding the impacts of these unusual items, our income tax rate in the fourth quarter would have been approximately 30.6%. To remind everyone, the 21.9% tax rate in the fourth quarter of 2014 was due primarily to a $9.5 million reversal of a deferred tax liability established in conjunction with the DB acquisition in Brazil as a result of the completion of some entity consolidations.
Now turning to the balance sheet. We ended the quarter with approximately $614.6 million in total cash.
Approximately $167.5 million is restricted and are primarily customer deposits. As of December 31, 2015, we had approximately $1.9 billion outstanding on our Term A loan, $240 million outstanding on our Term B loan and approximately $160 million drawn on our revolver, leaving approximately $875 million of undrawn availability.
We also had approximately $614 million borrowed against our securitization facility. As of December 31, 2015, our leverage ratio was 2.45 times EBITDA, down from 2.49 times in the third quarter which is well below our covenant level of 4.25 times EBITDA.
And finally, we are not a capital-intensive business and we spent only $12.3 million on CapEx during the fourth quarter of 2015. On February 4, 2016 our Board of Directors has authorized a repurchase of up to $500 million of FleetCor's common stock for an 18-month period ending August 1, 2017.
The shares may be purchased from time-to-time in the open market in privately negotiated transactions or in other manners as permitted by federal securities laws and other legal requirements. The timing, manner, price, and amount of any repurchases will be determined by FleetCor in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements, and other factors.
There is no guarantee as to the number of shares that will be repurchased. And the stock repurchase program may be extended, suspended or discontinued at any time without notice at FleetCor's discretion.
The repurchase is expected to be funded by available cash flow from the business and working capital. Now, on to our outlook for 2016.
For 2016, we, again, have a number of macroeconomic headwinds affecting our business, primarily foreign exchange rates, fuel prices and spreads. We are estimating that foreign exchange rates will negatively impact revenue by approximately $40 million compared to the 2015 average and the absolute price of fuel is expected to be a headwind to revenue of approximately $45 million versus the 2015 average.
In addition, we believe market spreads will be better than historic levels, but contribute approximately $15 million less revenue than 2015 spreads. In aggregate, we believe the macroeconomic environment creates approximately a $100 million revenue headwind and approximately $0.70 cash EPS headwind versus the 2015 averages.
That being said, we expect total revenues to be between $1.730 billion and $1.780 billion, adjusted net income to be between $605 million and $625 million, adjusted net income per diluted share to be between $6.40 and $6.60 or $6.50 at the midpoint. We don't know how the environment will actually play out in 2016, but if it improves this year, some of the headwind may come back as a tailwind.
Some of the assumptions that we have made in preparing this guidance include the following; weighted fuel price equal to $1.91 per gallon average for 2016, compared to $2.56 per gallon average in 2015, a reduction of approximately 25%, market spreads returning to more historical levels for 2016 but down approximately $15 million versus 2015, foreign exchange rates equal to the seven-day average ended January 15, 2016, the SVS business is retained for 2016, continued weakness in the company's Russian and Brazilian businesses, a full year tax rate of 32.2%, fully diluted shares outstanding of 94.7 million shares and as always, no impact related to acquisitions or material new partnership agreements not already disclosed. For those of you that are looking for guidance for the quarter, I want to remind everyone that our business has some seasonality and that typically the first quarter is the lowest in terms of both revenue and profit.
First quarter seasonality is impacted by weather, holidays in the U.S., Christmas being celebrated in Russia in January and lower business levels in Brazil due to the summer break and the Carnival celebration occurs in the first quarter. With that said, we are expecting our first quarter adjusted net income per diluted share to be between $1.47 and $1.53 or $1.50 at the midpoint.
Additionally, our volumes build throughout the year and our new asset initiatives gain momentum throughout the year resulting in higher earnings per share in the second through fourth quarters. And with that said, operator, we'll open it up for questions.
Operator
Our first question comes from line of Jim Schneider from Goldman Sachs. Please proceed with your question.
James Edward Schneider - Goldman Sachs & Co.
Good afternoon. Thanks for taking my question.
I was wondering if you could maybe comment on Europe in general, particularly your progress with Shell and some of the proof points you demonstrated there. And then on to the broader question of the environment for more outsourcing deals in Europe now that proof point is established, where do you think the oil companies' heads are at given progress you've made with Shell and what do you think we can expect over the next 12 months?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
So, good question, Jim. Thank God there was a question.
We didn't think there would be any. So, we entered two new markets in Q4.
So, what are we now, Eric?
Eric Richard Dey - Chief Financial Officer & Secretary
Seven.
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Seven, Jim, in total, so, another four or five this year. And it's going well.
So, hopefully it builds some confidence basically that we are reliable and delivering what we say. So, we're hopeful that their confidence will grow.
There are, I mentioned before, a couple of active RFIs over there, so there are people sawing the wood here.
James Edward Schneider - Goldman Sachs & Co.
That's helpful. Thanks.
And then maybe as a follow-up, if you could just maybe comment more broadly on the M&A environment, what you're seeing out there in terms of prices of assets, whether more things are becoming available and whether you're more likely to take a look at something in more of a distressed emerging market versus something more like in the U.S., for example?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah. I'd characterize it as active.
I'd say we're probably as busy now as I can recall. I'd say prices are probably high, but getting a little more realism in the last few months with the market trending down.
But, again, we look at things kind of on a forward year, Jim, year one basis. And so that's more our focus than trailing.
Yeah, so, we're busy and we're late stages on a few deals now.
James Edward Schneider - Goldman Sachs & Co.
And just one quick follow-up if I could, it appears that the equity market seems to be looking rather unfavorably on companies that are doing pretty high levels of leverage. So, is that coloring your view in terms of the size of deal you want to do?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah, I think we're in the same place we've been. We said I think repeatedly we want to run a company in and around three times.
And I think Eric just laid out we were, what, two, three, five on a trailing basis. So, we could spend $1 billion and basically still be, you know, three or under.
So, we're feeling good.
James Edward Schneider - Goldman Sachs & Co.
Thank you.
Operator
Our next question comes from the line of Sanjay Sakhrani from KBW. Proceed with your question.
Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.
Thank you. I guess, I had a question on the same-store sales numbers.
Obviously pretty meaningful downshift per your comments. Can you just talk about the risk it could get worse and kind of what's baked into your guidance?
Eric Richard Dey - Chief Financial Officer & Secretary
Yeah, hey, Sanjay, this is Eric. What I called out is, if you look at our same-store sales globally, we saw softness in the 2% to 3% range.
And that softness is kind of centered in a couple of areas. One, from a domestic perspective, it really is those accounts that do more business in the oil and gas area, as you would expect.
A lot of businesses have cut back in that area and that's reflected in our volumes with accounts that are servicing that sector. We've seen a little bit of negative momentum in the railroad sector in the United States, particularly related to our CLC business.
So, there's been some softness in the fourth quarter. And then mainly internationally it's in the economies you would think of.
It's primarily Brazil, which has seen a pretty dramatic softening kind of in same-store sales and then to a lesser degree in Russia. And then we've got – the remainder of our businesses are pretty good shape, either kind of flat or up a little bit.
Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.
So, in your guidance, are you assuming that conditions persist as is?
Eric Richard Dey - Chief Financial Officer & Secretary
That's correct.
Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.
Okay. A second question, just on SVS, understanding for guidance purposes you guys are leaving it in, but is that how we should think about – how you're thinking about that asset strategically or are there still options on the table?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah. I'd say we're leaving it in and we are still sawing wood on the alternative that I mentioned the last time.
We had a bit of a snag on something that we cleared, so I think we're closer finally to finishing.
Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.
Okay. One final question, Eric, maybe you can help me with, the spreads piece where you've basically assumed a downshift, if gas prices stabilize from here on out, is it fair that there would be no impact going into next year or is there still an impact in terms of normalization of the spreads?
Eric Richard Dey - Chief Financial Officer & Secretary
Yeah. We look at it from a year-over-year basis and spreads have been running at an abnormally high level.
There's always a possibility that could continue to run at an abnormally high level. We just assumed that they kind of have gone back to more of a normal level in 2016.
So, if fuel prices do normalize, I mean, obviously it's kind of unpredictable exactly where it's going to go. We think they're going to remain higher than the long-term historical average but, kind of, a little below where it ran in 2015.
Ronald F. Clarke - Chairman, President & Chief Executive Officer
But, again, our guidance is assuming that we're getting pretty low and, again, spreads widen when absolute fuel prices drop. And so they dropped a ton in the second half of 2015 so we're assuming that we're mostly down and so spreads would be we think more normal.
Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.
Okay. Great, thank you very much.
Operator
Our next question is from the line of David Togut from Evercore ISI.
David Mark Togut - Evercore ISI
Thank you very much. Nice to see you hit the low teens exit rate on Comdata.
I know you wanted a clear 10% in the fourth quarter, so very good to see that. I'm wondering if this is a sustainable growth rate for this business or is there room for some acceleration from where we are?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Hey, David. Yeah, I'd say we're staring at our 2016 plans in front of us and the two main Comdata businesses are planned to be high double-digit, so closing in on 20% for 2016.
So, I'd say that we put some of the things in this year that we'd hoped for and we got some evidence of it exiting Q4 and we're planning good growth for both this year. So, we're pretty pleased.
David Mark Togut - Evercore ISI
And then in connection with that, Ron, is there still room for incremental cost takeout or are you at the run rate that you expect to sustain?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah. That's a good question.
We've taken some additional cost, but we've kind of poured it back in, David, on sales. We've put another $3 million or $4 million incremental into corporate payments and sales and we put another, I don't know, 20, 30 people additional in the plans in the trucking business.
So, some of the costs we did take out we put in with good calories. I'd say the main thing that's left that's probably not this year, but might be next year is IT.
We've got some plans to convert some of the Comdata business on to our global platform and have a bit of a variable cost structure with the supplier there. So, if we're successful in kind of moving some of that business off their platform we will see a pretty substantial IT cost savings.
But probably not this year, it's probably a 2017 number.
David Mark Togut - Evercore ISI
Got it. And then the 43% growth in direct MasterCard revenue was pretty extraordinary in this environment.
How should we think about the growth rate in this product for 2016?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Again, we say this to you all the time. A lot of it is a function of how much we invest.
We're investing another $20 million plus in sales in our 2016 plan. So the volumes, again, continue to be great.
The mix keeps getting better because we're going down market with that product so our rates are better on smaller accounts. And we did put some fees in because the clients are enjoying much lower absolute bill right from us.
So I think we continue to say, David, it's not opportunity limited. It's really investment and execution limited.
David Mark Togut - Evercore ISI
Got it. Quick final question, you're looking at capital allocation big picture, you've announced a $500 million buyback.
I think last time you bought back stock was beginning of 2013. You've got potentially a big acquisition on the table and then SVS you're trying to sell.
How do you look at this altogether and can you give us a sense of how you evaluate buyback versus acquisition at current prices?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
I mean, the first thing I'd say is, we've gotten into a good place. We like, again, where the leverage is now post Comdata would be one.
Two, we're a buyer at this price, at this multiple, an 18 or 19 times price on current year earnings feels low to us, below a one peg on a 20% plus grow or so we like this price as a buyer. And I'd say three, the math that we do says we can do both, that we can basically buyback stock with our cash flow and fund, let's say, $1 billion this year and still be kind of around the three times number.
And so when we concluded that math, we said at this price we're going to do both. But I said this repeatedly, if we get into a place where there's a choice and we have a deal that we like, we're picking the deal and the reason is because we always think we can do more with an asset over a longer cycle.
So we're forced to decide between the two that that's what we'd pick. But fortunately we're kind of not forced to decide and, so our plan is to chase both.
David Mark Togut - Evercore ISI
Understood. Thank you very much.
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Good to talk to you.
Operator
Our next question comes from Tien-tsin Huang from JPMorgan. Please proceed with your question.
Tien-tsin Huang - JPMorgan Securities LLC
Great, good afternoon. As always really helpful comments.
Just wanted to clarify, I guess, the walk to the $7.20 on constant macro, I guess, that's 14% growth versus the $6.30. So what would it take to get to the 20 plus percent?
Would you need some better same-store performance? Is that the key difference?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah, I think Tien-tsin, we've said the organic model is 10% and 14% or 10% and 15% given the margins that the business has gotten to now. So to kind of fill the boat with the other 5 plus percent we either get some kind of big partner deals or we buy.
And so, again, we've said before, if we're generating, what is it, $600 million in free cash flow and again you buy that at 10 times trailing and you improve it like we do, that adds the incremental earnings to basically get us above 20%. So, the goal over one, two, three-year cycle is to do both things, keep growing the top at 10% and organically at 14% or 15% and use the cash flow to buy earnings that we can improve that keeps the thing going above 20%.
And I think the good news despite all the, would have, could have, speech we gave about the macro just to help you guys do the math is the businesses are still growing 10%. So, when we do the estimating for the last couple of years, we're still growing the collective set of businesses 10% on the top and we've built the plan for 2016 that we like to do it again.
And so I think we're comfortable that the organic machine is basically working and we need to pull the trigger on deals that we like to deliver the growth that we promised.
Tien-tsin Huang - JPMorgan Securities LLC
Right. No, look, you're executing well.
I know it's tough macro, certainly stuff we haven't seen in a long time. But maybe a second build-up question, you talked about the high growth in the fourth quarter in 2015 if you adjust for the macro, all helpful.
But how much of that high growth do you think is fueled by maybe actions you took because of a lower fuel environment, right, because you're trying to fight for growth as well. Is there a way to quantify that, Eric and Ron?
Do you follow my question?
Eric Richard Dey - Chief Financial Officer & Secretary
Yeah, I got it, Tien-tsin. I mean certainly there is a mix of the two, right.
I mean if you look at our transaction growth in the quarter, we grew transactions a shade under 4%, that's causing some of the growth. And obviously we are investing in those products that are higher than the line average revenue per transaction.
So, there's certainly a bunch of mix kind of in there as well as we normally have. And there certainly is some favorability associated with some of the pricing actions that we've taken around the world.
I don't have an exact quantification of that, but there is certainly some of it in there.
Tien-tsin Huang - JPMorgan Securities LLC
Got you.
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah, Tien-tsin, some of it would be feathered during the year. So, when you think about things we did, the planet fell apart about the same time last year, kind of Q4 and the beginning of 2015.
So, I'd say that those set of actions were spread during the year, so there's more in the exit rate than in the full year, so we wouldn't have much of an issue. And then, B, we clearly have other things in the kitchen that we've worked on that create more growth in earnings like the Pac Pride thing I referenced, our revenues are double.
Think about it, double in the quarter. And we bought that thing, what, a year and a half ago?
Eric Richard Dey - Chief Financial Officer & Secretary
Year and a half ago, yeah.
Ronald F. Clarke - Chairman, President & Chief Executive Officer
So, there is a number of those things like the Comdata hotel card, there's things in every business that are kind of adding money to stay at the 10%. So, I'd say that the outlook is pretty healthy.
That we're kind of planning just a good tran growth, some good new product growth, some incremental sales investment, probably less rate action here in 2016 than in prior years.
Tien-tsin Huang - JPMorgan Securities LLC
Got it. No, that's great to hear.
Right, because, yeah, Pac Pride and MasterCard was running higher in the fourth than the full. I don't want to hog the call, but just one more, just on – is there a way to comment?
I know there's a lot of press around the Brazil tolling sort of asset, is there anything you can say about that?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Not really. Other than that, you know, we're always looking, as you know, always looking.
Tien-tsin Huang - JPMorgan Securities LLC
Appreciate it. I had to ask.
Thank you.
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Good to talk to you.
Operator
Our next question is from Ashish Sabadra from Deutsche Bank.
Ashish Sabadra - Deutsche Bank Securities, Inc.
Hi. Good results considering such a challenging environment.
My question was around the international business. So you talked about the puts and takes there, Brazil and Russia still being challenging, but Mexico and UK are doing well.
We saw the revenue growth improve there from 4% in third quarter to 7% in the fourth quarter. So can you help us understand what's driving that growth and how should we think about the international growth on a constant currency basis in fiscal year 2016?
Eric Richard Dey - Chief Financial Officer & Secretary
Hey, Ashish, this is Eric. Yeah, I mean, the numbers kind of bounce around a little bit.
We had a reasonably good quarter internationally, I mean, all things considered. Ron called a couple things out on the call.
As an example, our UK business did perform reasonably well. Our Epyx business that we bought now a couple of years ago, we've implemented.
We've added money in the sales and marketing function there. We're starting to see some progress in that business.
We've added a bunch of revenue in Euro Shell. We've added three or four new markets this year.
Don't forget, Shell also awarded us kind of some cross border business there as well. So, we're seeing a lot of incremental revenue associated with that kind of win.
And then unfortunately on the downside it's a few things that Ron called out. Brazil is softening but relatively flat.
Czech Republic is flat and Russia surprisingly is relatively flat as well. So it's a bit of a mixed bag.
Some things are doing kind of well and a couple of things are kind of flat.
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah. Let me just add on to that.
I describe it to you as kind of the international is a tale of two cities. So there is the trouble places like Brazil and Russia and for us even Czech which are basically flat as I said in local currency and kind of out looking flat.
And then the rest of the international like the UK, the Europe outsourcing thing, Mexico, Australia, those businesses are all up, some of them are way up. So, I think it's the lift of the second set of things that are carrying the things that are kind of flat.
Ashish Sabadra - Deutsche Bank Securities, Inc.
That's great.
Ronald F. Clarke - Chairman, President & Chief Executive Officer
If you could turn those economies around for us, we'd be appreciative.
Ashish Sabadra - Deutsche Bank Securities, Inc.
No, that's absolutely – no, that's good to know. And then on CLC that did slowdown in the fourth quarter and again, you called out some headwinds there.
But as you think about cross-selling CLC into the Comdata and the initial success that you've had there, what are your thoughts on acceleration in that particular part of the business?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah, I'd say the first comment, we're quite surprised. The railroad business has always been a pretty big piece of CLC from kind of way back in the day, a big piece of the volume.
And I'd say it's been for years, like way before we bought it, rock solid, steady as she goes, up a few percent, bedrock kind of business. And it really took a hit kind of starting in the second half.
So, it was, again, a big piece of the business. So, that I'd say is a little surprising.
I'd say going forward we like the growth in the CheckINN Direct which is obviously not railroad and we haven't really factored in the Comdata lift, because the program is so new. So, we didn't put a lot into the plan, but I'd say that from when we started the planning process, it is way more exciting in terms of early returns than we would have thought.
And that goes back to just such a large part of the room nights bought in CLC are in this trucking industry. So, call us stupid, but it was natural to obviously to go to our trucking clients and make those offers.
So we'll keep you posted. But that could obviously provide some upside to CLC.
Ashish Sabadra - Deutsche Bank Securities, Inc.
No, that sounds good. And then one final question for me on the virtual card.
I think you mentioned it could be – the growth rate could accelerate in fiscal year 2016, maybe getting close to 20%, that's great news. I was just wondering if you had any update on one of the providers that was expected to come back.
Any update on that front or any update on the healthcare vertical?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah. So, I think it's probably close to a year ago now, we called out the kind of the blip in the healthcare; kind of two accounts quickly kind of went away, one was a big hospital chain another one was a big account.
And, so, we're kind of one of two, the big hospital chain has stayed away and the second account has come back. I think we've booked probably 10% or 15% already in our plan.
Most of that will come back as we work our way through 2016. So, we're expecting that account to kind of be back almost in full as we exit this year.
Ashish Sabadra - Deutsche Bank Securities, Inc.
Okay. No, that's very helpful.
Actually if I can ask one more, the last one would be a follow-up to Tien-tsin's question, would be like when you think about deploying capital in Brazil, especially given the macro weakness and currency weakness, would that even be a consideration for you? I don't know if you can comment on it, but just I might as well ask?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah, I mean, look, we've been in Brazil for three or four years, I think we said it repeatedly. We are long on Brazil.
It sets up very well for what we do, this workforce payments. It's got fuel cards and food cards and commuter cards and toll cards, it's got all kinds of workforce products and it's still kind of early days for a lot of those products and a lot of those products are tax advantaged.
So, we really like the country in terms of potential for our category. And, so, things were good when we get in three or four years ago and things are crummy now, and our guess is they'll be better a different day.
So for the right kind of company, we'd still be long on Brazil.
Operator
Thank you. And our last question comes from the line of Darrin Peller from Barclays.
Please go ahead.
Darrin Peller - Barclays Capital, Inc.
Thanks, guys. Look, I just want to come back to the expenses side, and the margin side.
I mean, you're operating under a – obviously, a pressured macro environment and you're still obviously growing well on a sort of constant macro standpoint. But just recognizing 2016, you're going to still have a lot of these headwinds, can you give us a little more color on how you operate your business?
Like from an incremental margin standpoint, what parts of your business do you think are being impacted the most right now? Is there still the same capability to reinvest the way you want to reinvest across the business and achieve your goals on growth as well at the same time?
And then really what if there is any more opportunity to cut cost, just to revisit that topic one more time?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah, Darrin, hey, it's Ron. I'd say that on the bad calorie side we continue to take cost out and obviously as we scale and as we automate things, I would say some of our cost lines actually decrease going into 2016.
And the good calorie is the two things, we try to spend money on are sales, which we're investing over $20 million incremental in our plan for 2016 and then discretionary IT to build staff and convert staff and so on. And so, I'd say more than 100% of the expense increase in 2016 are these sets of good calorie things and to quote all the rest of the expenses would be flat to down.
And even with the FX, obviously, the FX has got – I don't know what the number is, an $8 million to $10 million expense haircut just moving the FX across.
Darrin Peller - Barclays Capital, Inc.
Okay. All right.
That's helpful. And just one quick follow-up on Europe as well.
You mentioned the universal program kicking off, going live. Look, obviously I think you mentioned that could be – you've mentioned in the past that could be down the road an enormous opportunity comparable to what the U.S.
has been longer term. Can you just give us a little bit of an update on your expectations on the progression of that over the next year or two?
Ronald F. Clarke - Chairman, President & Chief Executive Officer
Yeah. It feels like the Ground Hog Day speech Darrin we give on the major oil.
It's been way lower I'd say than we thought. And good news, bad news, way harder to get set up, to get through all the regs and the tax stuff and the IT and people.
So, the bad news is it's been more complicated and that's we're slower kind of out-of-the-block selling it and getting going. I think the good news is that that's just timing that our view is still of the opportunity to have that kind of a unique offer that's obviously taken over the United States.
I'd say we're still real bullish on the long-term impact of that and we're just going to stay patient and keep pushing and keep reporting back how we're doing with it.
Operator
Thank you. This concludes tonight's conference.
Thank you for your participation and you may disconnect your lines at this time. Have a nice evening.