Aug 4, 2016
Executives
Eric Richard Dey - Chief Financial Officer Ronald F. Clarke - Chairman & Chief Executive Officer
Analysts
David Mark Togut - Evercore ISI Ramsey El-Assal - Jefferies LLC James Schneider - Goldman Sachs & Co. Darrin Peller - Barclays Capital, Inc.
Tien-Tsin Huang - JPMorgan Securities LLC Oscar Turner - SunTrust Robinson Humphrey, Inc.
Operator
Greetings and welcome to the FleetCor Technologies, Inc. Second Quarter 2016 Earnings Conference Call.
As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.
Eric Dey, Chief Financial Officer with FleetCor Technologies. Thank you.
You may begin.
Eric Richard Dey - Chief Financial Officer
Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our second 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 information appears in today's press release and on our website as previously described.
Also, we are providing 2016 guidance on both a GAAP and non-GAAP basis with a reconciliation of the two. 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 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 on Form 8-K and on our Quarterly Report on Form 10-Q 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 discussed, at www.sec.gov.
With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO.
Ronald F. Clarke - Chairman & Chief Executive Officer
Okay, Eric. Thanks.
And thanks to each of you for joining the call today. Upfront here I'll plan to cover three subjects.
First, I'll comment on our Q2 results. Second, I'll update you on our acquisition and business development progress.
And lastly, I'll provide some updated 2016 full-year guidance. Okay, so on to the quarter.
So earlier we reported Q2 revenue of $418 million and cash EPS of $1.56, so this represents 3% top line and 5% bottom line on a reported basis. On a macro neutral or like-for-like basis, organic revenue growth was 9% and cash EPS growth was 16%.
So 9% top, 16% bottom, which would be spot on our organic growth targets. We did finally get a little bit of help from the macro environment.
U.S. fuel prices averaged $231 to the quarter, which was a bit above our internal plan.
And we get some recovery of the Brazilian real in Q2, which strengthened quite a bit. So, nice to finally see a little macro recovery for FleetCor.
Unfortunately, our same-store revenues continued weak in the quarter, down approximately 2% versus the prior year. The weakness was concentrated in oil and gas, railroads, healthcare and then more generally in the Brazilian and Russian economies.
The growth drivers in the quarter were similar to what they've been. So, first, great U.S.
MasterCard quarter again, up 27% on constant fuel prices. A healthy 9% CLC quarter, that's despite this ongoing softness from our large railroad accounts.
Terrific Comdata performance. Our two biggest businesses, North America trucking and corporate payments, both double-digit growers in the quarter.
And last, we did get some help from the Shell Europe outsourcing program, which continues to move forward. In terms of sales for the quarter, we had a very strong new bookings quarter with bookings growing 18% over the prior year.
That's on top of the 27% sales growth rate that we had in Q1. Inside of that, our Comdata corporate payment sales nearly doubled in the quarter.
So, shows the demand for that product line. So, look, in summary, a very good Q2.
Came in a bit above our internal plan and our previous guidance. And we saw again a bit of a lift, a bit of an improvement in the macro environment.
Okay, let me transition over now to our acquisition and business development update. We've moved a couple of our major initiatives finally over the goal line and we moved closer to completion of our STP deal.
So, starting with STP. We did receive formal CADE antitrust approval without restriction.
That deal is now subject to a 15-day review period, which suggests the deal could close some time later this month. STP's Q1 results, which were released publicly show, their revenues up 11% for the quarter.
So the business continues to perform quite well in a challenging environment. So as you can imagine, we're quite excited about the prospect of closing what will be the second largest transaction ever for FleetCor and continuing really the incredible success of this company.
So we will keep you posted there. Travelcard second update.
We closed the Travelcard acquisition on August 1. We bought that business from LeasePlan.
And Travelcard is a pure universal fuel card issuer based in the Netherlands. It goes to market through both leasing companies, like LeasePlan, and then directly to end clients.
And although it's relatively small, we see a number of upsides in owning it. One, that we could now market more aggressively to some of the other leasing companies now that Travelcard's ownership is separated from LeasePlan.
Two, Travelcard has a network in Belgium, which is adjacent, which gives us an opportunity to expand. And then third, our plans call for stepping up investment in sales and marketing against the direct segment, which is something obviously in the FleetCor wheelhouse.
But, look, the primary motivation, benefit of this transaction is entering another significant and promising European market. We set the goal to enter and build businesses in the top five continental European markets.
So this transaction gets us closer to that goal. Obviously, as we get positioned in these major European markets, it'll better position us to win future European oil outsourcing deals and also give us a better platform to market our universal card.
So, Speedway, let me talk about Speedway. We are delighted to announce the signing of that new fuel card outsourcing contract.
Couldn't be happier. So it was of course a competitive process, and we're just delighted that Speedway selected us to be their partner.
For those of you that don't know, Speedway is actually the fifth largest U.S. fuel retailer and has built really a great commercial card following focusing on commercial.
Speedway will become the third largest U.S. oil relationship that we have once that program is fully rolled out.
And we're hopeful that we could begin conversion of that program as we get to the end of this year. So quite excited to start on that new relationship.
Okay. Last, let me move over to guidance.
So today we're increasing our full-year 2016 guidance from $6.53 to $6.68, so that's up $0.15. That does not include the expected contribution from STP of approximately $0.15 at the midpoint.
That would bring our full-year cash EPS estimates to $6.83. So the bridge on this thing is $6.53, our prior guidance, plus a $0.03 Q2 beat.
We're adding $0.06 for rest of year higher fuel prices, we're adding $0.06 for early adoption of the new FASB stock option policy, which would get us to $6.68. Then assuming we close STP in August, we'd add another $0.15, which again would bring our total potential cash EPS estimate to $6.83.
So, look, quite a bit better than the $6.50 guidance that we opened with in February. So, look, in summary, a good Q2, a bit better than we expected.
9% and 16% organic or like-for-like growth. Again, right on our internal targets.
18% new sales growth in the quarter. Very, very good business development months, increased certainty of the STP close with the CADE opinion.
Completion of the Travelcard acquisition, the new Speedway win. So, all very good news.
And a full-year guidance that's a meaningful raise for us, partly the result of an improving economy. So we think this sets up well for a strong rest of year, maybe more importantly, an improving 2017 outlook.
So with that, let me turn the call back over to Eric. He'll provide more detail on the quarter and on our guidance.
Eric?
Eric Richard Dey - Chief Financial Officer
Thank you, Ron. For the second quarter of 2016, we reported revenue of $417.9 million, up 3% compared to the $404.6 million in the second quarter of 2015.
The revenue from our North American segment increased 6% to $301.1 million from $284.6 million in the second quarter of 2015. Revenue from our international segment decreased 3% to $116.8 million from $120 million in the second quarter of 2016.
For the second quarter of 2016, GAAP net income increased 16% to $114.2 million or $1.21 per diluted share from $98.7 million or $1.05 per diluted share in the second quarter of 2015. 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.
We prepare adjusted net income to eliminate the effects of non-cash or non-recurring 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 1 of our press release.
Adjusted revenues in the second quarter of 2016 were $395.6 million, up 3% compared to $382.9 million in the second quarter of 2015. Adjusted net income for the second quarter of 2016 increased 6% to $147.1 million or $1.56 per diluted share compared to $138.9 million or $1.48 per diluted share in the second quarter of 2015.
Included in the second quarter results was the impact of the macroeconomic environment, which continued to be unfavorable versus prior year. When we talk about the macroeconomic environment, we are referring to the impact that market fuel spread margins, fuel prices and foreign exchange rates can have on our business.
Changing in foreign exchange rates from the second quarter of 2015 were primarily negative and, overall, we believe negatively impacted revenue during the quarter by approximately $10 million. Fuel prices and spreads were also unfavorable during the quarter.
And although we cannot precisely calculate the impact of these changes, we believe negatively impacted revenues by approximately $15 million. In total, the impact of these changes negatively impacted our revenues by approximately $25 million in the second quarter and adjusted net income per diluted share by approximately $0.15.
On a constant macro basis, organic revenues would have been up approximately 9% and adjusted net income per diluted share would have increased approximately 16%. For the second quarter of 2016, transaction volumes increased 7% to 465 million transactions compared to 435.1 million transactions in the second quarter of 2015.
North American segment transactions grew 6%, driven primarily by growth in the MasterCard SVS and corporate payments businesses. Transaction volumes in our international segment grew 17% and were primarily impacted by the addition of new Shell markets in 2015 and a small tuck-in acquisition in the first quarter of 2016.
For a discussion on revenue per transaction, we are going to exclude the impact of the SVS business, which had approximately 312.8 million transactions in the quarter at a very low revenue per transaction. Revenue per transaction for the second quarter of 2016 excluding the SVS business decreased 6.9% to $2.50 from $2.68 in the second quarter of 2015.
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.
Revenue per transaction excluding SVS decreased 1.5% in North America due primarily to the impact of lower fuel prices during the quarter and lower fuel spread margins versus prior year. And although we cannot precisely calculate the impact of these changes, we believe they negatively impacted our revenues by approximately $15 million in the second quarter.
On a constant macro basis, revenue per transaction in North America segment would have been approximately $2.82 versus $2.71 in 2015. In the international segment, revenue per transaction decreased 17%, due primarily to unfavorable foreign exchange rates in most of our geographies and the mix impact of a small tuck-in acquisition.
Foreign exchange rates impacted revenues unfavorably by approximately $10 million in the quarter. On a constant macro basis and excluding the small tuck-in acquisitions which had transactions at a very low revenue per transaction, revenue per transaction in the international segment would have been approximately $2.70 versus $2.63 in 2015.
Now let's shift over and discuss some other drivers of our second quarter performance. For our North American segment, most of our lines of business performed well, resulting in approximately 11% organic growth rate in the quarter at a constant fuel price spread and foreign exchange rate basis.
Some of the positive drivers in North America revenue during the quarter were similar to the last several quarters, including our MasterCard product, which had revenue growth of approximately 27% over the second quarter of 2015 assuming constant fuel prices and spreads. The CLC Group, provider of our lodging card programs, had another solid quarter with 9% revenue growth over the second quarter of 2015.
This revenue growth was driven primarily by increases in our CheckINN Direct product, which targets smaller accounts, primarily offset by softness in some of our larger accounts that primarily do business in the oil and gas sector. Our Comdata business performed well in the quarter.
The trucking business was up about 10% in the quarter and the corporate payments business was up about 13%. Also, our Pac Pride business continues to perform well, with revenue up about 80% in the second quarter of 2016 versus the second quarter of 2015.
International segment revenue was down approximately 2.7% in the second quarter of 2016 versus the second quarter of 2015. This decrease was driven primarily by unfavorable foreign exchange rates in most geographies, which negatively impacted revenues by approximately $10 million in the quarter versus last year.
On a constant currency and fuel price basis, organic growth was approximately 5.4% for the second quarter. Results in our international business were positively impacted by the impact of the conversion of the Shell small business portfolio.
We are now in a total of nine European markets, with a plan to convert the remaining markets during the third quarter. On the downside, the economies in Brazil and Russia continue to struggle and are impacting revenues in those markets.
Now moving down to the income statement. Total operating expenses for the second quarter were $246.7 million compared to $235.5 million in the second quarter of 2015, an increase of 4.8%.
As a percentage of total revenues, operating expenses increased slightly to 59% of revenue compared to 58.2% in the second quarter of 2015. 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 second quarter 2016 operating expense were favorable impacts resulting from foreign exchange rates being down in most of our foreign businesses, which resulted in an approximately $5 million favorable impact on expenses. Also, stock-based compensation expense in the second quarter of 2016 was $17.6 million compared to $14.3 million in the second quarter of 2015.
Credit losses were $6.9 million for the quarter, or 5 basis points, compared to $4.9 million or 3 basis points in the second quarter of 2015. The increase in bad debt was primarily due to bad debt that comes with new euroShell business and normal quarterly fluctuations in some of our other businesses in the quarter.
Interest expense decreased 12% to $15.9 million in the second quarter of 2016 from $18.1 million in the second quarter of 2015. The decrease in interest expense was due primarily to the impact of de-levering over the last year.
Equity method investment increased income of $7.2 million in the second quarter of 2016 from a loss of $5.1 million in the second quarter of 2015. The increase in income was primarily due to an approximately $10 million one-time net recovery of purchase price from the sellers of the business.
Our effective tax rate for the second quarter of 2016 was 29.7% compared to 32.1% for the second quarter of 2015. The decrease in our effective tax rate was primarily due to a one-time recovery of purchase price from our equity method investment that favorably impacted pre-tax earnings but was not subject to income taxes.
In addition, the impact of tax planning initiatives that were implemented late in 2015 favorably impacted our tax rate. Now turning to the balance sheet.
We ended the quarter with approximately $649 million in total cash. Approximately $156 million is restricted and consists of primarily customer deposits.
As of June 30, 2016, we had approximately $1.869 billion outstanding on our Term A Loan, $246 million outstanding on our Term B Loan and $10 million drawn on our revolver, leaving approximately $1.025 billion of undrawn availability. We had approximately $713 million borrowed against our securitization facility.
In addition, we have secured up to an additional $600 million in new Term Loan A by using the accordion feature in our existing term loan facility. The additional Term Loan A will be used to help finance the STP acquisition and for general working capital purposes.
We expect to draw the additional term loan in conjunction with the closing of STP and expect the rate to be approximately LIBOR plus 175 basis points at the time of closing. As of June 30, 2016, our leverage ratio was 2.2 times EBITDA, which is well below our covenant level of 4 times EBITDA, as calculated under our credit agreement.
We intend to use our excess 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. To remind everyone, on February 4, 2016 our Board of Directors authorized a repurchase of up to $500 million of FleetCor's common stock during an 18-month period ending August 1, 2017.
To-date, the company has repurchased approximately 259,000 shares of stock for a total purchase price of approximately $36 million, with $26 million being purchased in the second quarter and the remainder being purchased in July. And finally, we are not a capital-intensive business and we spent approximately $13 million on CapEx during the second quarter of 2016.
Now on to our outlook for the remainder of 2016. Before I begin our discussion on guidance, I want to update you on our latest thinking about the macroeconomic environment.
Foreign exchange rate movements have been a bit mixed lately, with Brazil mostly favorable, but the UK pound trending lower due to Brexit. So in total, we believe that FX rates will be mostly neutral over the balance of the year versus the guidance we previously provided.
In addition, we believe market spreads margins will be worse than last year by approximately $10 million and mostly in line with our prior guidance. And finally, fuel prices have continued to trend favorably since the last earnings call.
And as a result, we have updated our guidance to reflect the higher fuel prices. For the balance of the year, we believe fuel prices could favorably impact our results by $0.05 to $0.07 in adjusted net income per diluted share.
Versus prior year, the macroeconomic environment guidance assumptions create approximately a $28 million revenue headwind and approximately a $0.15 cash EPS headwind for the rest of year versus the same period in 2015. That being said, our financial guidance is as follows.
Total revenues to be between $1.740 billion and $1.780 billion, GAAP net income to be between $475 million and $486 million, GAAP net income per diluted share between $5.02 and $5.12, adjusted net income to be between $627 million and $640 million and adjusted net income per diluted share to be between $6.61 and $6.75, or $6.68 at the midpoint. Some of the assumptions we have made in preparing this guidance include the following: weighted average fuel price of $2.31 for the second half of the year equal to the second quarter of 2016; market spreads returning to more historical levels for the rest of 2016, but down approximately $10 million versus 2015; foreign exchange rates equal to the seven-day average ended July 30, 2016; the SVS businesses retained for all of 2016; expected early adoption of the new accounting rules for stock options effective in this third quarter.
The impact is projected to lower our effective tax rate for the balance of the year, and we believed will impact GAAP and adjusted net income per diluted share positively by approximately $0.05 to $0.07 per share. The favorable impact assumes a normal level of stock option exercises over the balance of the year.
Continued weakness in our company's Russian and Brazilian businesses, a full year tax rate of approximately 30%, fully diluted shares outstanding of approximately 95 million shares. The Travelcard acquisition in the Netherlands that Ron discussed earlier, although strategic in nature, will be immaterial to both revenue and earnings over the balance of the year.
And no impact related to the STP acquisitions or the new Speedway partnership agreement. As Ron stated earlier on the call, we have received unconditional regulatory approval from CADE for our STP acquisition in Brazil.
As a result, we may have upside to our guidance in the range of $0.14 to $0.16 and adjusted net income per diluted share, if we close STP as expected in the third quarter. Also, we expect to start the conversion of our new Speedway partnership agreement by year-end and will include the impact related to this agreement in the 2017 guidance.
And with that said, operator, we'll open it up for questions.
Operator
We will now begin the question-and-answer session. The first question comes from David Togut with Evercore ISI.
Please go ahead.
David Mark Togut - Evercore ISI
Thank you. Good afternoon.
Nice to see the pick-up in CLC revenue growth, 9% up from 7% in Q1. Could you talk about the drivers that led to the acceleration in growth at CLC?
And how will you expect CLC to perform for the balance of the year?
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, David. It's Ron.
It's the same tale of two cities. So the large account business there continues to be a bit of a drag.
The top four or five accounts that are from railroad accounts are still, oh, 20% to 25% down from a year ago. So, what that does is bring down the growth rate of the SME piece, which is in the 20% plus range, down to this 9% or 10%.
So, basically, I think going forward as we lap the big account business, the growth rate should keep picking up.
David Mark Togut - Evercore ISI
That's encouraging to hear. Just shifting gears over to AllStar in the UK.
Last quarter you talked about a transition towards the Visa chip card program. What was the growth in AllStar like in terms of revenue in the quarter and how would you see that progressing?
Ronald F. Clarke - Chairman & Chief Executive Officer
I'd say it's still probably more disappointing. I think I could literally restate, David, what I said last quarter.
So, better, I think it picked up 1 point or 2 points from last quarter, but we're still trying to do two things there, one, move with the rest of the base over to this new product, which we call AllStar One that we have better economics. And then, two, train the users how to use the card at the point of sale, which gives them cents off and gives us better economics.
So those are the two priorities. If we get that done, which the plan is to get it done in the second half, then those numbers will start to tick up.
David Mark Togut - Evercore ISI
Got it. And then if you could update us on the contribution to transaction and revenue from the Uber account, if you could give us a sense of how rapidly you expect that to ramp in the back half of this year and 2017.
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, it's still from a volume perspective growing like a weed sequentially. So every quarter that we look, it's up significantly versus the prior.
We think it'll still grow. Uber has indicated some interest in maybe expanding the driver pool that they offer the program to because the feedback has been so positive.
And we continue in discussions about the idea of maybe offering it beyond the U.S. So I would say those are the couple upsides to really continued growth next year.
But with that said, remember it's not a big revenue per tran kind of account for us. Although it delivers a lot of volume, it delivers a lot less than line average revenue.
David Mark Togut - Evercore ISI
Got it. Quick final question from me.
If you could update us on the pipeline in Europe, particularly with the big oils. And any insight you have into Shell.
I noticed that WEX announced a prepaid card deal with Shell in Europe and Asia. You have the SME business in Europe.
If you could update us on how you see Shell progressing and maybe the broader landscape with the big European oils.
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, that's a good question. So I'd tell you on Shell, the good news is we're coming to the conclusion of this Shell Europe outsourcing program.
So the original idea was to convert 12 markets or 13 of their markets. They ended up selling off a market, so the total ended up being 11.
We're actually live in nine of the 11 and plan late this month, so before August is over, to be in the remaining two. So, call it by September we'll have completed the entire conversion of that program in, what, two years to two and a half years from contract signing or somewhere in that that range.
But I'd say, David, that's the good news that we've done a good job getting the thing over. And if we perform well, both in terms of the technology convergence, which we have, the service level and, probably most importantly, the sale of new business, my guess is they would probably throw more our way.
But they'll want to see the performance first. So I'd say that's a subject to revisit probably next year.
In terms of beyond Shell, I think I mentioned in our prior call that there were a couple of major oil RFPs. Hopefully we've taken the mystery out of one of those, which we announced earlier, which leaves there's still a decision we believe to be made this fall by another company.
So I'd say that's the status, one significant thing still to be decided.
David Mark Togut - Evercore ISI
Understood. Thank you very much.
Ronald F. Clarke - Chairman & Chief Executive Officer
Always a pleasure.
Operator
The next question comes from Ramsey El-Assal with Jefferies. Please go ahead.
Ramsey El-Assal - Jefferies LLC
Hi, guys. What is the Speedway win, was that a competitive takeaway or were they doing it in-house prior?
Ronald F. Clarke - Chairman & Chief Executive Officer
Ramsey, it's Ron. So I guess the answer is both.
So, yes, they were doing it internally and, yes, it was a competitive process among outsourcers.
Ramsey El-Assal - Jefferies LLC
Okay. Okay.
And then I know it's a small part of your business, but Pac Pride revenue is up 80%. That's a big number.
What are the drivers there, how did you guys engineer that?
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah. Again, I think the short story when we bought that is copy in the playbook from CFN to the two companies that are in this card lock business, CFN and Pac Pride.
We proved that by offering a extended network, a more convenient network to these kind of private label card holders, that they would use sometimes the convenient network, if you will. And in the CFN in case, they use it, I don't know, 20% of the time.
And so we did the same thing with Pac Pride. We re-engineered the card so that it could work beyond the 1,500 or so Pac Pride locations and work in a network of an additional, call it, 30,000 locations.
So as the transactions grow in the convenience network, so do our revenues. So we expect that business to continue to grow for the foreseeable future.
Ramsey El-Assal - Jefferies LLC
Okay. Lastly from me, you've spoken about this in the past, but can you remind us what are the revenue synergy opportunities with STP?
Ronald F. Clarke - Chairman & Chief Executive Officer
While there's all kinds. But the most obvious one for us would be both cross-selling of the client base and utilization of their sales force.
So, again, they've got, call it, 100,000 of business clients. So when we look at those, the overlap against our own fuel card and food card business is pretty small.
So the first thing we would do is obviously talk to the existing STP corporate accounts and offer up the other FleetCor products. And then the second one is, they have a field sales group for both consumer and business of about 1,500 people, both field people and people located like in mall kiosks and stuff.
Same idea, it's kind of a single product selling machine today, selling electronic tolls (37:36). So, the idea would be to take some select set of people and locations and again start to offer the rest of the FleetCor product line.
So, I'd say those are the two obvious marketing and sales ideas.
Ramsey El-Assal - Jefferies LLC
And is any of that contemplated in your accretion guidance?
Ronald F. Clarke - Chairman & Chief Executive Officer
It's not.
Ramsey El-Assal - Jefferies LLC
Okay. All right.
Thanks a lot.
Ronald F. Clarke - Chairman & Chief Executive Officer
Yep.
Operator
The next question comes from Jim Schneider with Goldman Sachs. Please go ahead.
Q – [06RPQZ-E Jim Schneider]>: Good afternoon. And thanks for taking my question.
I was wondering if you, separately from the outsourcing deals that you mentioned, can you maybe talk about portfolio sales and whether you see any more asset availability in the market and potential pricing for those assets relative to what you're willing to pay?
Ronald F. Clarke - Chairman & Chief Executive Officer
I'm not sure, Jim. Say the question again.
I'm not sure I got it. Q – [06RPQZ-E Jim Schneider]>: In terms of the potential portfolio of sales, rather than outsourcing [indiscernible] (38:32)
Ronald F. Clarke - Chairman & Chief Executive Officer
But what does that mean, portfolio – or you're saying like the Shell example? Q – [06RPQZ-E Jim Schneider]>: Correct.
Ronald F. Clarke - Chairman & Chief Executive Officer
Yes, okay. Is there an opportunity for more of those?
Q – [06RPQZ-E Jim Schneider]>: Yeah, and do you see any more of those assets on the horizon and what do you think about the valuation levels that you're seeing in the market?
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, so the short answer is yes. In fact, that's really in essence what the Speedway transaction is.
It looks really identical structurally to the Shell outsourcing deal. So I think that's a model that the oil companies are starting to move to.
And, yeah, some of the additional RFPs and interest that's out there in the marketplace is of that same variety.
James Schneider - Goldman Sachs & Co.
Fair enough. And then you mentioned corporate payments up 13% in that Comdata business.
Obviously, you've seen some healthcare headwinds there, but you've also mentioned about the doubling in the sales. So can you maybe talk about how long-dated that backlog is and what you think a normalized growth rate might be in that business as we get a little further out, a year and 18 months in the future?
Ronald F. Clarke - Chairman & Chief Executive Officer
That's a great question. So the first off is, we've lapped the healthcare surprise we had whatever a year ago.
So that healthcare segment is fundamentally stable or flat now. So fundamentally, the rest of our corporate payments businesses is obviously growing faster than 13%.
So that's good news. Two, as I mentioned, we doubled sales.
We've doubled fundamentally the head count in that business from when we bought it, people selling corporate payments. And the install cycle in that is way longer than fuel cards.
I'd say in our models think, oh, six to 12 months maybe a peg, Jim, want to say might be nine. So if we made sales in Q2, think of that converting fully to revenue, call it, three quarters later.
So your last question, that question was growth rate. So we posted 13% now, which is faster without the healthcare business.
So I would say, again, it's fundamentally a function of our investment. But I would say that should be accelerating certainly into the high teens as we move through the year and into next year.
And I think it's a function of how much we elect to invest in 2017. But again, when you double the sales of something, we've said it before, it's an early stage big opportunity that's really just a function of marketing investment and implementation investment.
A lot of demand for the product.
James Schneider - Goldman Sachs & Co.
That's helpful. And then lastly, just on the same-store sales down 2%, a little softer than Q1, I think it was down 1%.
Can you maybe talk about any leading indicators you're watching to see, whether that business could be inflecting or improving in terms of a global basis?
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, again, it's tough, Jim, because it's really incredibly pocketed. So if you looked across all of our segments that add up to that minus 2%, 75% of our clients are flat to up.
So you'd be like, wow, that seems great. But there are a few verticals, like the railroads or oil and gas, that are way down, like 20%, 25% kind of down.
And then you got these two markets, Brazil and Russia, which albeit small, again, are way down. Softness levels literally in the 10% to 15% range across all their clients.
And so it's those kind of crummy economies or crummy verticals that are bringing the line average kind of below the water line. So, I don't know if we have a good guess on either of those, when either those verticals in the U.S.
will recover or, frankly, when those two economies will recover. Your guess is as good as ours.
James Schneider - Goldman Sachs & Co.
Fair enough. Thank you.
Operator
The next question comes from Darrin Peller with Barclays. Please go ahead.
Q – [074XL6-E Darrin Peller]>: Thanks, guys. Good to see the strong trends.
I know I've asked this before, but could you touch just further down the runway around the MasterCard product. Just any reason why that may or may not continue at this pace?
And then I just want to follow-up with the couple – one other one. Thanks.
Ronald F. Clarke - Chairman & Chief Executive Officer
So, Dan. Hey.
It's Ron. I'd say again, I think we've said this the last quarter, we would say that the growth rates that we've shown in Q1 and Q2 will go down.
The main reason is, again, there's some fair amount of price that we put into that product line a year plus ago to combat the headwinds that we had. So that'll decelerate as we lap some of that pricing.
And there's obviously some amount of Uber helping us in there as well. But I'd say the main driver is just, again, sales investment.
That product of all our products is the product like for everybody. Little accounts with five cards like it because it's convenient.
Giant accounts because it works everywhere and is controlled like it. And so.
Unlike some of our other products, you can sell it in every geography to every segment. And so I guess we like the prospects of double-digit for as long as we can see, assuming we can keep investing enough in sales as the base keeps getting bigger.
Darrin Peller - Barclays Capital, Inc.
But even with the anniversary of those price changes, which I'm assuming is second half of this year, is that still going to be well into the double-digits in your view?
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, I'm not sure I've actually looked at that product line in the forecast in and of itself, so I would say probably. But it will step down as we anniversary this pricing, which I think begins this quarter in Q3.
Darrin Peller - Barclays Capital, Inc.
Okay.
Ronald F. Clarke - Chairman & Chief Executive Officer
But again, (44:44) incredibly healthy. It's an incredibly healthy, in-demand product.
Darrin Peller - Barclays Capital, Inc.
Yeah, it seems that way. Thanks.
And then just on the Speedway announcement, I know you mentioned you'd give us an update for 2017, but can you give us any preliminary thoughts on the magnitude and materiality of that?
Ronald F. Clarke - Chairman & Chief Executive Officer
We've got to be a little careful, right, because the client is sensitive. So I tried to guide you little bit with their size as a business.
So they're number five. So you can obviously name like Shell, Exxon, BP, Chevron are the four biggest oil companies.
So they're behind them. And then, too, they've got a really strong commercial card business.
And then the comment that they will be the third largest, got eight or nine different oil company portfolios in our North America business, they'll be number three. So I'd say it's a meaningful, it was kind of a portfolio acquisition, an outsourcing agreement, so it's kind of full value chain.
So it's meaningful for a couple of reasons. One, it will contribute.
You'll see it in our guidance next year. But, two, I think for us it's just really reaffirming as the game plays, we get the call.
And so for us, as more of these come up to try to win our fair share feels pretty good.
Darrin Peller - Barclays Capital, Inc.
Yeah, that's great. So last question.
I know that you're just about barely to close the STP deal. But with that in mind, how far off do you think we are from the next bigger acquisition of meaningful size?
Ronald F. Clarke - Chairman & Chief Executive Officer
We're, like always, in some conversations. But I'd say that over the next six months, Darrin, we're going to really focus on eating that.
It is a big, big financial business and a massive set of assets business for us. And so we've got a pretty bold integration plan.
So starting with myself, I put a large group of people plus some outside consulting people, we're going to spend a lot of time trying to get that trajectory to stay great. So I'd say that, short-term, the next six months, that will be a big part of our focus.
And then second, I don't know if Eric mentioned it, but pro forma STP, we're going to get into the low 3s at the close, so call it 3.2 just to pick a number. And so I think we told you that we want to run this company kind of around 3.
We might spike up temporarily for the right kind of assets. So, I'd say that we're not full, we still have liquidity, we've still got a accordion in this new facility.
So, we're staying out there. But I'd say, it's not our highest priority to go get another $1 billion deal in the next six months.
Darrin Peller - Barclays Capital, Inc.
Okay. All right, guys.
That's helpful. Thanks.
Operator
The next question comes from Tien-Tsin Huang with JPMorgan. Please go ahead.
Q – [05QGSZ-E Tien-Tsin Huang]>: Hey. Good afternoon.
Congrats on the Speedway. Just a follow-up on the Darrin's question.
Just the [indiscernible] (47:49) top four fleet issuer. So is this just an outsourcing contract, guys?
And how much growth potential do you see for the portfolio to grow, either organically or by you doing more with the account?
Ronald F. Clarke - Chairman & Chief Executive Officer
Are you on Speedway, Tien-Tsin? Q – [05QGSZ-E Tien-Tsin Huang]>: Yeah, Speedway, sorry.
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, I mean I'd say a lot. So we obviously have the fact base of how Speedway ran the thing and how they invested and how they priced the thing and did all the different things.
So I'd say that our investment and channels that we have, the ability to use, for example, websites that have six or eight products on it, is an advantage that a clearinghouse company like us has that an independent single brand can't do. And our investment with hundreds of people in card telesales, they've had more of a field group (48:44).
So I'd say that the investment that we plan to make in sales and marketing is behind really a great brand, that they've got great locations in this Midwest footprint. We think we'll step that up a lot.
And then, B, there's clearly opportunities around how we package and price different parts of it. So I'd say that we're quite bullish on the revenue growth potential there.
Tien-Tsin Huang - JPMorgan Securities LLC
Okay. Good to know.
And then I think new sales up 18%, does that include Speedway?
Ronald F. Clarke - Chairman & Chief Executive Officer
No, because again we haven't converted it. We've only (49:22), Tien-Tsin, so no.
Tien-Tsin Huang - JPMorgan Securities LLC
Okay. My bigger question there, because I get the question a lot.
How does the 18% and the 27% in the first quarter in terms of bookings, how can we use that figure to translate that into revenue next year? Is there a rule of thumb of any sort?
Obviously it's a big number, but just trying to contextualize that for.
Ronald F. Clarke - Chairman & Chief Executive Officer
No. Again, I think we've laid this out before.
The math that you really need is the relationship of new to the base. So, if the base of our company were, call it, $2 billion and we told you we were selling 20% of something.
We told you, hey, we're selling $400 million and we told you what were losing, you could kind of model revenue. What I think we're trying to do with the sales thing that we're disclosing here is to give you guys a sense of sales investment that we're making.
I think we told them, what, $20 million to $25 million Eric, incrementally this year?
Eric Richard Dey - Chief Financial Officer
Yeah, I've told them that.
Ronald F. Clarke - Chairman & Chief Executive Officer
So, we're growing sales, Tien-Tsin, almost as fast. If you take the first quarter and second quarter, I think we're 20% or something through the first half up.
So the first headline is we're selling more than we were the prior year. And then the second one, which I think is good for investors, is it's the single best indicator of health.
If you can sell a card program in July of 2016, then your offers are relevant. And so we call out sales to let people know, people still that are making decisions like the product line that we have in the market today.
We're not living off of the past. So those are the couple reasons for the disclosure.
Tien-Tsin Huang - JPMorgan Securities LLC
Understood. No, that's good to have.
Just one more, just the STP. I think you said $0.15 accretive now.
I thought it was $0.10 before. Did something change, or do I just have it wrong?
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, it's the FX. I don't have it in front of me, but I think we guided in March when we announced I believe kind of $0.10 to $0.13 was the range.
And so if you take the FX, which was just under $0.04, I think it was $0.039. I think we used $0.0323 if I recall last week, to model this.
So the range has just moved up to whatever, $0.13 to $0.17, call it, from $0.10 to $0.13. So it's up kind of $0.03 or $0.04 really on FX.
Tien-Tsin Huang - JPMorgan Securities LLC
I see.
Ronald F. Clarke - Chairman & Chief Executive Officer
But the business is where we thought. I disclosed what's out there publicly on the company.
If you think about a company in that economy with that kind of softness that I called out growing revenues 11% in the first quarter. But the thing is just powering through a pretty tough place.
And so we haven't really taken up their core forecast for the balance of the year, just really made the FX adjustment.
Tien-Tsin Huang - JPMorgan Securities LLC
Understood. Yeah, it'd be good to get that closed.
Thank you, Ron. Thank you, Eric.
Ronald F. Clarke - Chairman & Chief Executive Officer
Good to talk to you.
Operator
The next question comes from Ashish Sabadra with Deutsche Bank. Please go ahead.
Q – [0B1XRZ-E Ashish Sabadra]>: Solid quarter. Congrats.
My question was on this. SVS also grew pretty solid this quarter.
If I back in the number, I get it more like 17%. And I thought this was more like a low-single digit grower.
So I was just wondering if you can confirm my numbers were right and what's driving the growth there?
Eric Richard Dey - Chief Financial Officer
Hey, Ashish. This is Eric.
You're in the ballpark. Correct, SVS had a very good quarter.
There's some, there's obviously a lot of seasonality to the gift card business. And effectively what happened in Q2 was there were some card purchases that would normally have taken place in the third quarter that were actually accelerated into the second quarter, which drove the growth in the second quarter.
And fortunately, that will probably impact the growth of that business in the second half of the year. Q – [0B1XRZ-E Ashish Sabadra]>: That's great.
And then once we have STP, post-STP, the way – STP you said grew organically 11%. And so once we have that in the numbers, the pro forma international growth, that should go north?
Is that a way to think about it that we could see that go more in the high single or even low teens like international growth?
Eric Richard Dey - Chief Financial Officer
Are you talking about organic growth as a whole, Ashish? Q – [0B1XRZ-E Ashish Sabadra]>: Yeah.
Including, assuming STP you had in the prior year. So, the pro forma organic growth for the international business.
Eric Richard Dey - Chief Financial Officer
Yeah, I don't know. Again, I think the international business right now growing organically on a constant macro basis probably in the mid-single digits.
This is obviously a meaningful acquisition for us, but it may take some time. Obviously, we are going to spend time integrating the business over the next 12 months, as Ron indicated.
And obviously we want to maintain certainly that double-digit growth into the foreseeable future. So, we're going to try and do that.
Whether the mix impact of that translates to kind of double-digit is who knows. We'll have get through the budget cycle before we can make a judgment on that.
Q – [0B1XRZ-E Ashish Sabadra]>: Again, congrats on the solid quarter. Thanks.
Ronald F. Clarke - Chairman & Chief Executive Officer
Thank you.
Operator
Your next question comes from Oscar Turner with SunTrust. Please go ahead.
Q – [0FB5YV-E Oscar Turner]>: Good afternoon.
Ronald F. Clarke - Chairman & Chief Executive Officer
Hey, Oscar. Q – [0FB5YV-E Oscar Turner]>: Hi.
You mentioned corporate payments revenue was up 13% and bookings nearly doubling. Can you talk about which verticals are driving this growth?
And then also how much of this growth is being driven by new customers?
Ronald F. Clarke - Chairman & Chief Executive Officer
Sure. It's Ron.
I'd say that the construction vertical is gangbusters for us and was a big part of the sales that I called out for Q2. So I'd say the two to three verticals that we target, that that would be the leading for Q2.
Oscar Turner - SunTrust Robinson Humphrey, Inc.
Okay. Thanks.
And also, is all of that growth being driven by new customers?
Ronald F. Clarke - Chairman & Chief Executive Officer
You mean versus same-store, the existing accounts growing?
Oscar Turner - SunTrust Robinson Humphrey, Inc.
Correct. Correct.
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, as I mentioned, the healthcare thing is probably a little bit soft. So yeah, the corporate payments growth is fundamentally just adding more spend from new accounts.
Oscar Turner - SunTrust Robinson Humphrey, Inc.
Thanks. And then also, you have great growth across a number of products, like you mentioned MasterCard up mid-20% range, CLC up 9%, Pac Pride 80%, Comdata I think like low to mid-double digits.
Could you help us understand how fast the closed loop fuel products are growing to get us to the 9% constant macro growth rate?
Ronald F. Clarke - Chairman & Chief Executive Officer
Yeah, I don't think we think about the world in terms of closed loop because in a bunch of markets we'd have products that have both. But I guess what I would say is, yes, we've tried to call out some of the businesses that are growing so you guys can see how the consolidated numbers at 9%.
I guess I'd answer it a bit different way that we have still a set of businesses, particularly the ones in Brazil and Russia, that are still going backwards. And we have some other businesses we called out before, like Check that's inching forward now and our Fuelman business, which is an old U.S.
business kind of inching forward. So we have three or four businesses that are either flattish because they're mature, or the economies are crummy, like Brazil and Russia, which were supposed to be when we did those transactions BRIC markets that we're going to grow double digits.
So, I'd say that's the contributor that's causing the consolidated number to be 9%.
Oscar Turner - SunTrust Robinson Humphrey, Inc.
Okay. Thank you.
Operator
This concludes times allocated for questions on today's call. This also concludes today's conference call.
You may disconnect your lines. I want to thank you for participating and hope you have a pleasant day.