FLEETCOR Technologies, Inc.
Q2 2019 Earnings Call Transcript

Published: 7 Aug 2019

[Operator:]

Greetings, and welcome to the FLEETCOR Technologies Second Quarter 2019 Earnings Conference Call. As a reminder, this conference call is being recorded.I would like to turn the conference over to our host, Mr. Jim Egleseder, Head of Investor Relations for FLEETCOR Technologies. Thank you. You may begin, sir.

[James Eglseder:]

Good afternoon, everyone, and thank you for joining us today for our second quarter 2019 earnings call. With me today are Ron Clarke, our Chairman and Chief Executive Officer; and Eric Dey, our Chief Financial Officer. Following comments from Ron and Eric, the operator will announce an opportunity to get into the queue for the Q&A session. It is only then that the queue will open for questions.Our earnings release and supplement can be found under the Investor Relations section of our website at fleetcor.com. 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 non-GAAP information at other companies. 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. We are also providing updated 2019 guidance on both the GAAP and non-GAAP basis along with reconciliations.Finally, before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. These includes forward-looking statements about our guidance and outlook, 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 upon them. These results are subject to numerous risks and uncertainties, which 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 annual report on Form 10-K filed with the Securities and Exchange Commission. These documents are available on our website and at seC.gov.With that out of the way, I would like to turn the call over the Ron Clarke, our Chairman and CEO. Ron?

[Ronald Clarke:]

Okay. Jim, thanks. Good afternoon, everyone, and thanks for joining our second quarter earnings call. Upfront here, I plan to cover four subjects

[Eric Dey:]

Thank you, Ron, and good afternoon, everyone. For the second quarter of 2019, we reported revenue of $647.1 million, up 11% compared to $585 million in the second quarter of 2018. GAAP net income increased 48% to $261.7 million from $176.9 million. And GAAP net income per diluted share increased 52% to $2.90 from $1.91 in the second quarter of 2018. Both of these reported numbers include the impact of a tax benefit associated with the sale of our Masternaut investment, which was a benefit to GAAP net income of $65 million and GAAP net income per diluted share of $0.72 per share. The sale of our investment in Masternaut allowed the company to offset the capital loss recognized against the previously recorded capital gain from the sale of NexTraq in the third quarter of 2017.Non-GAAP financial metrics that we'll be discussing are adjusted net income and adjusted net income per diluted share, for which the reconciliation to GAAP numbers is provided in Exhibit 1 of our press release. Adjusted net income for the second quarter of 2019 increased 8% to $256.7 million compared to $237.8 million in the same period last year. And adjusted net income per diluted share increased 11% to $2.85 compared to $2.57 in adjusted net income per diluted share in the second quarter of 2018.Second quarter results reflected negative year-over-year impact from the macroeconomic environment of approximately $10 million in revenue, in line with our expectations. The negative macro impact was primarily due to lower foreign exchange rates when compared with the second quarter of 2018, which we believe negatively impacted revenue by approximately $17 million due primarily to unfavorable rates in Brazil and the U.K. Fuel prices were slightly better year-over-year in the second quarter, and although we cannot precisely calculate the impact of these changes, we believe it was a positive $1 million to the quarter. And finally, fuel spreads had about a $6 million favorable impact in the quarter.Organic revenue growth after adjusting out the impact of the macroeconomic environment and the Chevron deconversion was approximately 13% for the second quarter of 2019, and all major product categories performed well during the quarter. Organic growth in our fuel card business was 9%, driven by solid growth in most of our fuel card businesses. Our beyond fuel initiatives contributed about 2 points of growth. The corporate payments category continues to perform well and was up 26% organically during the quarter. The growth in corporate payments was driven by both our cross-border business, which grew in excess of 30% in the quarter, and our virtual card business, which grew approximately 20%. Our toll business was up 17% organically, driven primarily by new toll tag sales, rate initiatives and more beyond toll revenue. Our lodging business was up 13% on a print basis and would have been up approximately 16% if you adjust out the roughly $1 million in emergency-related revenue from the second quarter of 2018. So all in all, another very good quarter for our nonfuel business, resulting in very strong organic growth performance in the quarter.Now moving down the income statement. Total operating expenses were up 9.2% for the second quarter of 2019 to $349.8 million compared with $320.2 million in the second quarter of 2018. The increase was primarily due to acquisitions and normal growth in our operations. As a percentage of total revenues, operating expenses were approximately 54.1% compared to 54.7% in the second quarter of 2018. Included in operating expenses are credit losses of $18 million for the second quarter of 2019 or 7 basis points compared to $14.5 million or 6 basis points in the second quarter of 2018. The higher-than-normal credit losses were due primarily to fraud losses in our U.S. fuel card businesses. Fuel card fraud should improve as U.S. fuel stations begin transitioning to chip and PIN technology in late 2019 and 2020.Depreciation and amortization expense increased 3% to $70.9 million in the second quarter of 2019 from $68.6 million in the second quarter of 2018. The increase was primarily due to acquisitions completed in 2019. Interest expense increased 19% to $39.5 million compared to $33.2 million in the second quarter of 2018. The increase in interest expense was due primarily to the impact of additional borrowing for share buybacks throughout 2018, recent acquisitions and increases in LIBOR. Our effective tax rate for the second quarter of 2019 was a negative 1.7% compared to 23.5% for the second quarter of 2018. And if you adjust out the tax benefit related to the sale of Masternaut, our effective tax rate would have been 23.6%.Now turning to the balance sheet. We ended the quarter with $1.49 billion in total cash. Approximately $318 million is restricted and consists primarily of customer deposits. As of June 30, 2019, we had $3.614 billion outstanding on our term loans and revolver and approximately $478 million in undrawn availability. We also had $974 million borrowed in our securitization facility at the end of the quarter. Subsequent to the end of the quarter, we completed a $700 million upsizing of our Term A loan facility. We will initially use the additional funds to pay down the revolving credit facility and securitization facility. And we now have approximately $1.2 billion in availability. We plan to use these funds for acquisitions or future share repurchases of our stock.As of June 30, 2019, our leverage ratio was 2.1x EBITDA, which is well below our covenant level of 4x EBITDA as calculated under our credit agreement. We intend to use our future 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. Finally, we spent approximately $17.5 million in CapEx during the second quarter of 2019.Now onto the update for the outlook for 2019. First, we are raising our full year revenue guidance $20 million at the midpoint to reflect our second quarter outperformance and the acquisition of SOLE Financial, which closed in early July. We are also raising our GAAP net income and GAAP net income per diluted share guidance to reflect our second quarter beat and the impact of the Masternaut-related tax benefit in the quarter in addition to the acquisition of SOLE Financial. We are also raising our adjusted net income per diluted share guidance by $0.06 to $11.68 at the midpoint to reflect our second quarter results compared to our expectations.Also, we expect a few moving parts in our balance of the year guidance. For the balance of the year, we expect the macro impact to be slightly worse than our prior guidance due primarily to lower fuel prices and unfavorable foreign exchange rates. We also expect a slightly higher share count due primarily to an increase in our share price, which impacts the calculation of fully diluted shares. Partially offsetting these impacts will be favorable interest expense due primarily to interest planning initiatives implemented and lower LIBOR rates and the impact of acquisitions, which will be slightly accretive over the balance of the year.So taken in total, these puts and takes net to zero in terms of financial impact on our balance of the year guidance. Please refer to our second quarter earnings call supplement for additional information regarding our guidance.So with that out of the way, our guidance is as follows

[Operator:]

[Operator Instructions]. Our first question comes from the line of David Togut with Evercore ISI.

[David Togut:]

With 13% organic revenue growth for Q2 and with your 2019 guide staying at 9% to 11%, is that just conservatism? Or are you expecting some deceleration in organic revenue growth in the back half of the year?

[Eric Dey:]

Dave, this is Eric. Yes. I mean, it's a couple of things. One, obviously, we expect our businesses to continue to perform, actually accelerate as we get into the second half. It's more like we have tougher comps. So last year in the second half of the year, our business has accelerated as well. So we're expecting again accelerated growth overall but then just tougher comps from an organic growth perspective.

[Ronald Clarke:]

David, it's Ron. We've also got the gift and the other, which we don't call out, looking those to be not super great in the second half. So probably still double digits for the nonfuel lines, in that 9% to 11% number.

[David Togut:]

Got it. And then any specific assumptions on corporate payments in the back half? It seems like you're just starting to benefit from the cross-border growth there, up 30%.

[Eric Dey:]

Yes. They could probably still start with the two in Q3 and Q4.

[David Togut:]

Got it. And then what was the growth rate for the MasterCard fuel card in the second quarter?

[Eric Dey:]

Hold on one second. We're looking it up, Dave. I think it was in the low 20 percentage, if I...

[Ronald Clarke:]

No. It was still up pretty high.

[Eric Dey:]

So Dave, we'll look at that...

[Ronald Clarke:]

The combo, Dave, we call it our local business. I'm looking at the local business. It was up 13 for Q2, which includes our Fuelman business and MasterCard. I don't have the split in front of me, but it's circa, in that range.

[David Togut:]

Got it. And just a quick final question. The 18% growth in new sales bookings in the second quarter, any key drivers to that acceleration from what we saw in Q1?

[Ronald Clarke:]

I'm looking at the sales page. All look pretty good. The corporate payments again was blockbuster. It was up almost 40% over prior year. And the Brazil, I think I mentioned the new sales channels there that we launched two or three years ago were just rocking again. So that's just way, way up. So I'd say those are the two pulling the rest.

[Operator:]

Our next question comes from the line of Tien-Tsin Huang with JPMorgan.

[Tien-Tsin Huang:]

So with the revenue accelerating, and Ron, like you said, sort of high since you started reporting that organic metric, I'm curious if you can attribute that to anything. It seems like you're hitting on a lot of the right areas. Is it fair to just say it's greater focus across the broader organization with new sales up, retention up, organic growth accelerating? Just what would you point it to, if you want to stay there?

[Ronald Clarke:]

Yes. I think it's a good question, Tien-Tsin. I'd say a couple things. One is it's mix obviously. So having bigger businesses here that have bigger TAMs makes the nonfuel lines grow. And then second, to your point, we have had, starting with me, more focus on the knitting because we've done less big deals right in the last 12 to 24 months. So I think both of those things have brought more focus in today's business.

[Tien-Tsin Huang:]

Cool. Good to know. And then on the bookings front, and I know David just asked it, I'm curious, how much of the bookings could we assign to your beyond initiatives? You have 2% now. Do you have a target for maybe exit rate? Could that get much better?

[Ronald Clarke:]

Yes. We don't actually book keep our sales or new bookings per se into the beyond buckets yet. It's a bit of a manual kind of system. But I'd say again, the hope is for those things to step up, call it another point over the next, call it, two quarters. So they're building, like I mentioned, on the beyond fuel. We're still chasing the first 50,000 clients here. We're up to just under 7,000. We're going to turn our attention to the other 50 as we start to move through the second half. So stay tuned. Hopefully, more, same on the beyond tolls, same on the beyond lodging. So it's definitely picking up. I tried to give a few stats of that progress. But clearly, as those bases keep getting bigger, it should contribute more.

[Tien-Tsin Huang:]

Okay. That's useful. And last one, just quickly on payroll. I think going back to your roots a little bit there, Ron, I'm just curious, is that a bigger focus potentially for the company? Or was it really just enhancing your corporate payments outlook?

[Ronald Clarke:]

Yes, it might be. We like that space, because again, it's another employee payment product. We're not in payroll processing a la ADP, and there's a number of kind of independent assets given all those consolidation. So obviously, I think key to bid into that. There may be some assets that could get loose here. But we like it. I mean this one we pulled the trigger on, we liked it because it's really 100% SMB, which we like, Tien-Tsin. And it's got a sales model to work with processors, payroll processors. So we like the idea of building that payroll card business more in the SMB space than in the mid or large. So we just liked it a lot, and we could afford it really because of the synergies that we could bring being in the business. So it's a nice little add-on that helps us head in a direction that we like.

[Operator:]

[Operator Instructions]. Our next question comes from the line of Jim Schneider with Goldman Sachs.

[James Schneider:]

I was wondering if you could maybe throw a little bit more statistical color on the progress for beyond fuel. I believe you said it was 2 points incremental last quarter. I think this quarter, you said it was 1 to 2 points. Can you give us any kind of sense about -- in terms of the acceptance of the clients that are taking you up on the offer, the uplift on spend relative to kind of the 40% metrics you provided last quarter? And just to confirm that additional point or so of acceleration, is that kind of a statement about exiting this year or more of a statement about 2020?

[Eric Dey:]

Yes. Jim, this is Eric. We continue to add more customers to the base of the beyond fuel bucket. So I guess as an example, if you remember from last call, I think we said we had about 5,000 clients that were actually in that beyond -- using the beyond fuel capability. We've accelerated the acceptance to about 7,000 clients at the end of Q2. And again, we're still looking at accelerating the acceptance of that to about 100,000 customers eventually. So we're slowly getting to do that. So I think as we get into 2020, you'll see that beyond fuel category accelerate by another point or so. At least that's our goal at this point.

[Ronald Clarke:]

Jim, it's Ron, just to add to it. So when we use the term beyond fuel, I think we mentioned before that there's different use cases that we kind of stick under that umbrella. So for example, we call internally the companion card, when we go back to fuel card clients we already have and try to add a card, right, that would let them buy AP. We have a different thing when we try to go to like a construction vertical and sell a twofer product to who want to buy fuel and construction supplies. And we have a third use case when we go out to trucking clients and have the trucking company put the payroll of the driver literally on the card and then use it as debit card.So every one of those use cases creates incremental spend by the client, incremental utility for the client, obviously, incremental revenue. And so the lift of amounts to 40% I referenced in the last call, they vary, if you will, by those applications. So the companion card probably is in the 25% range, the construction card is probably 50% or 60%, and the payroll card probably in that 40% range. So it varies basically by use case.But the message I think we're trying to leave everybody with is it's working, right? We're adding clients. We're keeping clients. Each one of these use cases is building. And so to Eric's point, there's a lot of comparison to the prior period. But I think the headline is that this idea is now working. And it's growing, and it's actually adding, like we're saying, a couple of points to growth. And my comment was as you get into, call it, Q1 of next year, we should think about it going up another point.

[James Schneider:]

That's great color. And then maybe giving comment on the overall corporate payments side of things and particularly the sales activity you're saying there and maybe comment specifically on the kind of sales and lead generation you're seeing through some of your partners, software channels versus the Nvoicepay channel itself and maybe just kind of talk about whether you see the opportunity. Or do you have the desire to kind of acquire additional software assets in that space?

[Ronald Clarke:]

Yes. I mean I think they're all working. Our own direct business, we're getting much better I think on the marketing side. So we're teeing up more softball, more leagues. So that's one of the reasons our direct business is growing. I think our channel partners, some of the ones that you guys know that are private are really doing super. They're investing lots of money in their respective channels. So we're getting the benefit of their growth. Same thing in our FX business. We doubled down on the sales investment and went after larger accounts. So we're seeing that now in our sales numbers that even if the account -- the new account count is the same, the dollars per account are way up.So I'd say that the corporate pay selling machine is working almost across the board. And in this model that we have of working with ERPs, which is part of the whole Nvoicepay pay idea there, their core business, leverage the ADP accounting stuff, car dealers and a couple of big construction packages, and so this idea of working with ERP partners in an integrated fashion to serve our joint clients is working quite well. So it's literally, Jim, across the board, the selling is working there.

[Operator:]

Our next question comes from the line of Bob Napoli with William Blair.

[Robert Napoli:]

A follow-up on the corporate payments business. The Nvoicepay, Ron, I guess, knowing you, not that surprised that Nvoicepay is going to be accretive sooner than you thought at the end of the year. But it is -- to me, it seems like that opportunity is so large. Should it be accretive by the end of the year? I mean are -- the AP automation piece, how big of that be? And are you investing to the level that you should be to drive that business to much -- multiples of what it currently is?

[Ronald Clarke:]

Yes. So I would say, Bob, don't presume that the version from dilutive to accretive is based on flipping sales or marketing or even IT investments. It's not. We're actually spending more as we move into the second half. It's simple, lay down synergies around contracts, for example, that they have and merchant acceleration. We can take our 500,000 or 600,000 merchants and get their car penetration up. It's easy low-hanging fruit money that we're grabbing more than it is that we're trying to grab or dial back on the investment. So that's point one.Point two is, yes, really of all the areas, I mean, the TAM and try to monetize this payable turning AP, which is again half of the business spend, into something that's cardable or we can get it per tran fee if it's ACH or something. It's -- you know this. The opportunity is massive. So you shouldn't read any comments about accretion into what's not understanding that or us not investing a lot on that.

[Robert Napoli:]

Then you mentioned three acquisitions that are, I guess, in the pipeline that are obviously not guaranteed to close. But are they -- I mean on the M&A side, should we expect larger transactions? Or I mean how are you -- do you have visibility on -- do you expect some of those deals to close, I guess, before the end of the year? Or would you be buying back stock?

[Ronald Clarke:]

Again, when we tried to comment on our pipeline, there's a number of dimensions, right? There's the size of the deal. There's the timing. Are they now or later? There's the categories that we're in. So we're trying to just provide a little bit of flavor around the near in things, things where we sign term sheets to where we're way along or far along in. So my comment on the pipeline is we have three, what I would call, close in things that will either kind of close in the next 90 days probably or not that are in the tuck-in kind of size, hundreds of millions of dollars, not $1 billion, not $50 million. And then as always, we have some larger transformational things that we're exploring that are not as near in. So the headline is we've done a couple, like three, Eric, I guess, year-to-date, kind of three.

[Eric Dey:]

Yes, three tuck-ins.

[Ronald Clarke:]

I would think you should think that probably one or two more of those kind of things would happen in the second half. And as you know, given our leverage ratio and enhanced liquidity, we're obviously in a good spot to go after something larger. So we're getting to a place we've had time to focus on the knitting and the basic business, and we're in a game that tries to buy businesses and improve them. So you should expect that we're continuing to try to do that.

[Operator:]

Our next question comes from the line of Ramsey El-Assal with Barclays.

[Ramsey El-Assal:]

I wanted to ask about the beyond tolls performance in Brazil. I mean the statistic you threw about the McDonald's effectively were really impressive. In that subsegment of that offering, just sort of the drive-through QSR business, how should we think about the addressable market there? I mean those are incredibly impressive results of McDonald's. How unique is McDonald's as a partner in that market? And is this the type of thing where we can think of over time that you had multiple merchants like McDonald's ramping like that?

[Ronald Clarke:]

Ramsey, it's Ron. I think you're thinking about it the right way. So the press that we've had on this idea is, hey, we've got this 5 million users and parking and fueling and drive-through are obviously merchants that are pretty interested in our customer base. And so I think of it as this first three years that we've owned the thing has been fundamentally piloting. We've added whatever I mentioned, a couple thousand incremental locations of parking, fueling and McDonald's. And not shockingly, there's more people lined up in every one of those categories.So in parking, we signed up the next biggest parking operator. I think we've added three or four more. And in fueling, we've added Carrefour. And in drive-through, we've got two more things that are teed up that have decent kind of drive-through footprints. We've even signed a thing, which we haven't announced, but we've signed with Nissan where we've got a factory install the stickers in all their new vehicles. And as soon as we sign that and start to talk about it, we now have other manufacturers there reaching out on the same idea.So I think this proof of concept, when you can relay what's happening in a gas station or at a McDonald's to the next set of drive-through people is the key to get nothing built. So we're trying to give you the message that it's really early, but it is -- again, it's working and we expect to keep rolling the thing out.

[Ramsey El-Assal:]

Great. That's terrific. I wanted to ask a completely separate question about -- there's been a lot movement in the industry in terms of alternative networks. You've got the Fed announcement. You've got MasterCard and Visa both moving into kind of alternative rails. Obviously, all the mega merchants are talking about kind of honest type of capabilities meaning FIS and Fiserv and potentially even global payments to some degree. You've alluded in the past that there might be some capabilities that you have in terms of the assets that you possess to run alternative kind of network path, maybe particularly on the corporate payments side. Can you comment on your kind of most updated thinking along those lines?

[Ronald Clarke:]

Yes. I think we said this from the beginning that we want to get merchants digital. And so when we sign up a business and they've got 1,000 merchants to pay, and we realize that only 200 of those are cardable, let's say, on the MasterCard network, we scratch our heads a bit and say, okay, what could we do to digitize some of the other 800? So this idea of what we call internally ACH-plus or creating some rails that provide some incremental data to merchants and maybe some earlier funding and stuff to merchants is something that we're exploring. We've built a bit of a network.And I think what we said is it's a land grab, Ramsey, now. So we're mostly focused on signing up clients and getting the first 200 merchants cardable. But you should think about it as over time and particularly with the Nvoicepay going back and trying to digitize with our own network more of those merchants that are really unserved by Visa or MasterCard.

[Operator:]

Our next question comes from the line of Oscar Turner with SunTrust Robinson Humphrey.

[Oscar Turner:]

My question is on fuel. Are the beyond fuel-related cards typically replacing other cards? And then just wondering if you're seeing existing beyond fuel customers shift more spend to those cards over time.

[Ronald Clarke:]

Yes, Oscar, it's Ron. So on the first part of the question, no. So generally, we simply toggle open the cards. So we have parameters, control parameters on the card programs. If you're a boss and you want us to open up 5 of your 10 employee cards to buy construction supplies, we can flip a switch and open up five of them and keep the other five locked down. Or b, we can give you a new card for your AP add to use to put AP purchases and leave the same 10 cards that are out in the field. So the answer is we tend not to replace the cards. We either "open them up" or add new cards.

[Oscar Turner:]

Okay. And just as far as the -- are you seeing existing customers shift more spend?

[Ronald Clarke:]

Yes. That's, I think, the comment earlier. The different use cases we have were picking up anywhere from 25% to 50% incremental spend with the account as they buy or put payroll on and put construction supplies and put AP. So the total amount of business that we're doing with the client is growing in the 25% to 50% range.

[Oscar Turner:]

Okay. That's helpful. A follow-up is just on -- I guess a high-level question about growth and margins just given some of the longer-term initiatives you're working towards. Do you think any of those initiatives are attractive enough, like maybe it's beyond fuel or tolls, that you would think about stepping up the marketing spend significantly?

[Ronald Clarke:]

Yes. I mean I think it's a really good question. So let me give kind of a two part answer to this. The first one is, if anything, the guidance that Eric gave for the second half anticipates a faster profit growth. So if you look at our first half print, I think our cash EPS print was 9, and I think our macro adjusted print, [indiscernible] print was 13. We expect in the guidance that Eric gave, $11.68, both of those numbers to go up. I think our print output is 13%, which is a step-up in our macro-neutral cash EPS growth of 17. So the first headline is that sitting inside the guidance we gave you, there's an implied acceleration in our profits and our margins. That's point one.Point two, would we spend more if we thought we could sell more? The answer is yes, we would inside of a couple constraints

[Operator:]

Our next question comes from the line of Ryan Cary with Bank of America Merrill Lynch.

[Ryan Cary:]

I wanted to ask on the toll business. When we look at the 17% organic growth in the quarter, is there a way to parse out the contribution from the legacy toll business versus contribution from beyond toll initiatives? While obviously beyond toll is still early, I'm just trying to get a sense if it is large enough to move the needle.

[Ronald Clarke:]

Can you repeat the question again? Sorry, you kind of broke up on us.

[Ryan Cary:]

Yes. I'm just trying to get a sense if all of these -- all these great momentum behind beyond toll, if the growth rate there is large enough to move the needle for overall toll organic revenue growth, and if it's not, when we could potentially see it kind of be large enough to be a needle mover.

[Eric Dey:]

Yes. I mean, we're stepping up our investment continuously in the beyond toll category, as Ron indicated earlier. I mean we now have over -- I think over 1 million people that have toll tags that can actually use those cards to buy other things like fuel as an example. And we're also marketing that product to people that are using the toll product as other than toll first sort of thing, meaning they want to buy fuel but they don't really spend a lot in the toll roads and they want to buy fastfood, and they want to buy parking. So we've got a different universe of customers.And as Ron indicated, we're starting to partner with some major -- with a major car brand, Nissan, who's starting to install the toll tags directly into the vehicle as it's manufactured, which is obviously going to be a boon for us as well. So yes, we're going to start seeing some accelerated growth as acceptance increases over time and as our investment in sales and marketing steps up over time. So we're going to start to sell to more customers. So we're very bullish on the prospects for the beyond toll category.

[Ronald Clarke:]

Ryan, it's Ron. I'd just add to what Eric said. And I'd say if you said, hey, in Q2, it's probably less than 1%, and the reason again simplistically is the company there has really 100% of all the toll locations, been around, whatever, 15, 20 years. It covers every -- primarily every tollbooth in the land, and yet we don't have every parking, obviously every gas station or every drive-through. We have tiny percentage of gas stations and drive-throughs. So I think the question earlier today is the right way to think about it, which is this is almost a pilot period where we're showing that these other networks can matter and can get used in our life by the clients. And as those build and we get larger percentages of drive-through restaurants and gas stations, that growth rate will have -- will become obviously way more material.So I'd say this thing will be a bit slower build because we've got to kind of build the network where as in beyond fuel we have the MasterCard network, right, it can go up a bit faster because the networks are already there. We just have to get clients to spend on it. This one is we're actually a network builder, which I hope everyone gets, is a super sustainable thing once you get it up. And it creates a great barrier to other people trying to kind of copy us. Hey, I have your dad's toll company now. I'm glad you have that built because we built that plus these five things. And so that's the game. We're in a race to build a way more interesting network to these mobility people.

[Ryan Cary:]

Got it. And then switching to kind of the corporate payments side of the business. Clearly, growth of both Comdata and Cambridge were very strong in the third quarter. Was there any contribution to the growth rate of either from Nvoicepay, which I believe is either integrated into both or is in the process of being integrated? Or is this more of the strong performance of the stand-alone assets?

[Ronald Clarke:]

Well, that thing grew like a weed. I mean the problem is it's small, right? So against the other two businesses you talked about, it's tiny. But on the front end, I think it grew 50% or 100%. So it's as a standalone business, and obviously, we've got way more selling capability to help it. So that thing is growing both top and bottom quickly. It was already growing quickly by the way before we bought it, but it's growing faster now. But I'd say most of the headline numbers we're quoting, you are coming from the two core things that you called out just because you're bigger.

[Ryan Cary:]

Got it. But I know you're integrating Nvoicepay. It wasn't like due to integration that caused the growth rates to which expand or accelerate, prior to the Comdata or Cambridge assets?

[Ronald Clarke:]

No. Some of it is. It is both. Again, I think we told you that there's some things we've done like on the merchant side and some things we've done with our ERP people and the sales rates. So we put a number of things in already. The thing has moved from, like I said, the minus three to flat to plus two over the course of sequential quarter. So it's moving quite nicely top and bottom. It's just not driving the overall 26% number that we quoted.

[Operator:]

Our next question comes from the line of Peter Christiansen with Citibank.

[Peter Christiansen:]

Nice outperformance, guys. I have two questions. First, Ron, you talked quite a bit the last couple of quarters about shifting a lot of marketing towards digital. I just wanted to see if you have an update on what kind of productivity or efficiency gains that you're seeing on that front. And could you extend that strategy onto some of the beyond initiatives as well?

[Ronald Clarke:]

That's a great question, Peter, yes. Inside of our sales results, which were up 18%, we had another record global digital contribution. I think digital has now in the U.S. surpassed 40%. I think it's 42% to 44% of all our new sales in the U.S. are coming from digital. And then b, we started to crunch the digital thing into seamless applications that the whole process becomes digital. So I'd say that we're still early in it, but between enabling digital outreach and then digital applications as well as the science around the landing pages or the click-through, I think that our sophistication in B2B digital is up dramatically over the last two, three years. And I'd say there's still way -- to your question, way more room to go. And I think we're still trying to sort how we can invest more in that because unlike the people thing, you can step on that faster and still keep it productive. So getting better, more sophisticated. It's producing more, but I think there's still more runway there.

[Peter Christiansen:]

That's helpful. And then there's been some negative press lately, I guess, on some of the truckers, particularly in the shipping side. Just wondering what you guys are seeing on your OTR. And any pockets of weakness there? That would be helpful.

[Ronald Clarke:]

Yes. It's for sure soft. I'd say we saw some of it in Q1. I'd say we saw more of it here in Q2 and partly because we have the beyond fuel initiative, what we call OnRoad initiative there. It helped our revenue growth in that segment. But I think the underlying same-store sales in our trucking business has actually gone negative. I quoted 1% same-store negative globally for our business or call it a push, call it a zero. If you kick out our gift card business inside of that, I think our trucking was, call it, minus one or minus two. So we're seeing really the same kind of softness that the industry has.

[Operator:]

Ladies and gentlemen, that's all the time we have for questions. And this ends the call. Everyone, have a great day.